phg-2024-12-31-en

Stakeholder Dialog

Connecting
supply & demand

Sharing knowledge
& best practices

In-region projects for
responsible mining

Supply chains for
responsible sourcing

In-region projects for
responsible mining

Supply chains for
responsible sourcing

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information .


	4


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2024 at a glance

Patient safety and quality

• Patient safety and quality is further

strengthened, and the work continues – it is at

the heart of everything we do

• 83% of employees rate our culture of patient

safety and quality favorably, a five-point

increase since 2023

Social impact

• 1.96 billion lives improved, of which 242

million are in underserved communities

Customer highlights

• New strategic collaboration with Bon Secours

Mercy Health (US) to improve patient

monitoring and help transform care delivery

• Specialized interventional suites are bringing

care closer to patients in partnership with

Carilion Clinic’s Cardiovascular Institute (US)

• Sustainability effort with Champalimaud

Foundation (Portugal) achieves a 24%

emissions reduction in its first year

Innovation

• Next-generation helium-free MRI creates

potential to expand MR access sustainably

• AI-enabled cardiovascular ultrasound platform

helps speed up analysis and reduces burden

on labs with simplified workflow

• OneBlade Intimate is designed for everyone, to

protect the most sensitive skin

Operations

• In second year of our plan, the drive continues

for focused growth, people- and patient-

centric innovation at scale, and improved

execution

• Significant progress is made to fully resolve

the effects of the Respironics recall, with

clarity on the way forward

• More regionalized supply chain is re-shaped

for reliable delivery in line with industry lead

times

Environmental sustainability

• Circular revenues at 24% of sales

• Supplier sustainability approach secures finalist

position in Fortune’s ‘Change the World’

rankings

• CDP ‘A List’ rating for 13th year in a row

People and culture

• Cultural transformation by bringing in impact

with care, centered on patient safety, quality

and integrity

• Employee Engagement Index of 78, a five-

point increase since 2023

• Recognized as one of the World’s Best

Employers by Forbes for sixth consecutive year

Financials

• EUR 18.0 billion sales

• Adjusted EBITA 1 margin: 11.5%

• Free cash flow1: EUR 906 million

• Credit rating outlook improved to stable


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

1Our Management

“We are focused on executing our plan,

improving fundamentals and simplifying

how we work – ensuring we are more

competitive and agile, and delivering

growth and margin expansion, with

patient safety and quality as priority.”

Roy Jakobs CEO Royal Philips


	6


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

* Artificial intelligence, defined in 10.8 Definitions and abbreviations

1.1Message from the CEO

Dear Stakeholder ,

Around the world, patients are facing longer waiting times, and we continue to see rising costs and

staff shortages, among other issues. I have seen the immense pressure healthcare professionals are

under and feel a deep sense of responsibility to help address the challenges and to support them to

care for more patients in a better way. In parallel, we see that people everywhere want to be

empowered to take care of their own health and well-being.

At Philips, we want to contribute to healthcare professionals feeling supported and energized,

instead of overloaded and overworked, and to help people lead healthier lives. As an innovation

company, we are committed to improving healthcare and driving impact with care for patients,

people and the planet through our deep technological insight and our meaningful innovations.

Strong partnerships and advances in AI * -enabled innovation are helping to drive real change –

freeing up space and time for healthcare professionals to focus on their patients and empowering

people to take care of their health and well-being. With our next-generation BlueSeal helium-free

MRI system, for example, we are helping to expand access to quality imaging and improve care

delivery across multiple settings, with SmartSpeed AI powering up to three-times faster scanning

and up to 65% higher resolution images. In the home, our AI-powered Philips Avent Premium

Connected Baby Monitor gives parents peace of mind by allowing them to keep a closer eye on

their children.

We want to help deliver better care for more people across the world. But we know that some

people are facing barriers to better health; in parts of the world the devastating consequences of

ongoing war and conflict are impacting millions of lives every day. It makes me even more

determined to do what we can so people everywhere can access the care they need.

Making progress on our three-year plan

In 2024, we made solid progress on our 2023-2025 operating plan. We believe we are on the right

path, executing our focused strategy to improve people’s health and well-being through

meaningful innovation, with patient safety and quality as our number one priority.

Reflecting our new operating model, Businesses are in the lead, driving quality and making impact

through innovation, design and sustainability. We remain committed to scaling our AI-enabled

innovations through excellence in execution and delivery, focusing on fewer, better-resourced

initiatives. While we have made good progress, we have more to do.

Our results were negatively impacted in 2024 by deteriorated demand in China, due to subdued

consumer confidence, leading to more cautious spending behavior. In addition, ongoing industry-

wide anti-corruption initiatives have contributed to extended hospital procurement cycles. Given

these factors, we adjusted our growth expectations for the year. Managing developments in China

will remain a priority in 2025. Despite global uncertainties and slower growth, we delivered strong

profitability improvement and cash flow, and further strengthened our balance sheet. We also

made important progress on resolving the Philips Respironics recall. As an indication of the progress

we are making, we returned to comparable order intake growth. And, some of our largest

investors further expanded their investment in Philips, showing confidence in our future.

Focusing on our priorities

Our focus on patient safety is at the center of strengthening our fundamentals and fostering a

culture that upholds quality. In our latest engagement survey, colleagues shared that they feel

empowered to speak up and take action to support our commitment to patient safety and quality.

While we acknowledge this progress, we remain diligent in continuing this work.

Looking at other areas of progress in 2024, Philips Respironics signed a consent decree, which,

coupled with other significant milestones, such as the economic loss settlement and the settlement

of personal injury and medical monitoring claims in the US, provided clarity on the way forward.

We remain committed to rebuilding our position in Sleep & Respiratory Care while resolving the

effects of the recall. We continue to work closely with the US Food and Drug Administration (FDA)

and other regulators around the world.

We are concentrating on accelerating momentum, building on our industry-leading innovations,

and continuing to improve execution. In our supply chain, we have made significant progress –

addressing the components shortage and related risks, and reducing our lead times, in support of

our drive to increase customer satisfaction. In addition, we are building in greater agility in our

supply chain so we can respond, for example, to the potential impact of geopolitical tension or

tariffs. We are also further simplifying our catalogs and products, and regionalizing to win locally.

In making sure we become a leaner, more agile and simpler organization – and therefore more

competitive and resilient – we have made important strides with our move to an end-to-end

Business-led model. We reduced approximately 10,000 roles from 2022 through the end of 2024.

We focused on enhancing our team and culture with deep medtech experience and new

leadership. This included the strengthening of our experienced and diverse Executive Committee by

welcoming, among others, our new Chief Financial Officer, Charlotte Hanneman, and bringing in

other proven leaders across Businesses, Regions and Functions.


	7


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

We are reinvigorating our culture of impact with care. We have shifted back to the workplace

following a couple of years when some colleagues worked partly from home, with teams coming

back together to build a stronger social fabric and support our thriving innovation culture. We

believe we drive greater impact when we work together. In 2024, engagement across the

company, as measured in our People Engagement Survey, increased 5 percentage points.

Our plans build on our strong heritage in social and environmental responsibility. In 2024, we

improved the lives of 1.96 billion people and contributed to more sustainable healthcare, while

ensuring a more sustainable consumer experience. This included, among other things, partnering

with hospitals to support them with their own sustainability plans and expanding access to care in

and outside the hospital. We have an enhanced and fully integrated approach to doing business

responsibly and sustainably, for Philips and for our customers. And this is recognized. For example,

our supplier sustainability approach featured in Fortune’s 2024 ‘Change the World’ rankings. In

addition, Forbes recognized Philips as one of the world’s best employers. Our ESG commitments

help drive our business results and our global impact, and create long-term value for our

stakeholders.

Looking ahead

We remain focused on successfully executing our three-year plan and are determined to further

build on our industry-leading innovations, improve our fundamentals, simplify how we work, and

ensure we are more competitive and more agile. We continue to deepen our culture of impact with

care with patient safety, quality and integrity at the heart.

We want to win and deliver better care for more people in a fast-moving, competitive world, where

care provision is under pressure. By doing so, we aim to deliver profitable growth, expand our

margins, and fulfill our cash and ESG commitments.

I would like to thank all our stakeholders for their ongoing trust, support, collaboration, and

confidence. I also want to share special thanks to our employees, who show their passion and

commitment every day, and to their families.

Reflecting the progress we have made in executing our plan, reducing risk and strengthening our

balance sheet, along with the importance we attach to dividend stability, we propose to maintain

the dividend at EUR 0.85 per share, to be in shares or cash at the option of the shareholder.

As I look ahead, I am excited about the opportunity to deliver better care for more people, working

with our many partners for the benefit of patients, customers and consumers.

Roy Jakobs

Chief Executive Officer


	8


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

1.2Members of the Board of Management and Executive Committee

Royal Philips has a two-tier board structure consisting of a Board of Management and a Supervisory Board, each of which is accountable to the General Meeting of Shareholders for the fulfillment of its respective

duties. The Board of Management is entrusted with the management of the company. The other members of the Executive Committee have been appointed to support the Board of Management in the fulfillment

of its managerial duties. Please also refer to Board of Management and Executive Committee within the company's Corporate governance report.

Members of the Board of Management

Roy Jakobs

Born 1974, Dutch and German

Chief Executive Officer (CEO)

Chairman of the Board of Management and the Executive Committee (since October 2022)

Roy joined Philips in 2010 and has held various global leadership positions across the company,

starting as Chief Marketing & Strategy Officer for Philips Lighting. In 2012, he became Market

Leader for Philips Middle East & Turkey, leading the Healthcare, Consumer, and Lighting businesses

out of Dubai. Subsequently, he became global Business Leader of Domestic Appliances, based in

Shanghai, in 2015. In 2018, Roy joined the Executive Committee as Chief Business Leader of the

Personal Health businesses and in early 2020 he started as Chief Business Leader of Connected

Care. As Chief Executive Officer and Chairman of the Board of Management and the Executive

Committee, he also holds direct responsibility for Patient Safety and Quality, Medical Office,

Internal Audit and Brand & Communications. Prior to his career at Philips, he held various

management positions at Royal Dutch Shell and Reed Elsevier.

Charlotte Hanneman

Born 1978, Dutch

Executive Vice President

Member of the Board of Management (since October 2024)

Chief Financial Officer

Charlotte joined Philips in 2024 and is responsible for Finance, including Investor Relations and

M&A, as well as Real Estate and Security. Before joining Philips, Charlotte worked as Controller and

Head of Financial Planning & Analysis at global medical technology company Stryker. Prior to this,

Charlotte held international finance leadership roles at several multinational healthcare companies.

Marnix van Ginneken

Born 1973, Dutch

Executive Vice President

Member of the Board of Management (since November 2017)

Chief ESG & Legal Officer

Marnix joined Philips in 2007 and became Chief Legal Officer of Royal Philips and member of the

Executive Committee in 2014. In 2017 he was appointed to the Board of Management. He is

responsible for driving ESG efforts across the company, including Group Sustainability. He is also

responsible for Legal, Intellectual Property & Standards and Government and Public Affairs. Since

January 1, 2024, he is Chairman of the Board of the Philips Foundation. In 2011, he was appointed

Professor of International Corporate Governance at the Erasmus School of Law in Rotterdam.

Before joining Philips, Marnix worked for Akzo Nobel and as an attorney in a private practice.

This page reflects the composition of the Executive Committee as per December 31, 2024. For a current overview

of the Executive Committee members, see also https://www.philips.com/a-w/about/executive-committee.html


	9


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Other members of the Executive Committee

Willem Appelo

Born 1964, Dutch

Executive Vice President

Chief Operations Officer

Wim joined Philips in 2022, bringing over 30 years of experience in technology and the medical

device technology industry in finance and supply chain management.

Steve C de Baca

Born 1968, American

Executive Vice President

Chief Patient Safety and Quality Officer

Steve joined Philips in 2023 and brings over 30 years of quality and regulatory affairs experience in

the medical technology industry.

Jeff DiLullo

Born 1969, American

Executive Vice President

Chief Region Leader of Philips North America

Jeff joined Philips in 2019, drawing on more than 30 years of leadership experience in the US Army

and the information technology industry.

Deeptha Khanna

Born 1976, Singaporean

Executive Vice President

Chief Business Leader Personal Health

Deeptha joined Philips in 2020. She has over 25 years of leadership experience working across

Europe, US and Asia, on major global brands and across personal care and the consumer health

industry.

Ling Liu

Born 1974, Chinese

Executive Vice President

Chief Region Leader of Philips Greater China

Ling joined Philips in 1998 and has more than 26 years’ experience in leadership roles in Greater

This page reflects the composition of the Executive Committee as per December 31, 2024. For a current overview

of the Executive Committee members, see also https://www.philips.com/a-w/about/executive-committee.html

China, the Netherlands and North America.

Bert van Meurs

Born 1961, Dutch

Executive Vice President

Chief Business Leader responsible for Diagnosis & Treatment

Bert joined Philips in 1985 and has more than 39 years of experience in the medical imaging and

healthcare business.

Edwin Paalvast

Born 1963, Dutch

Executive Vice President

Chief of International Region

Edwin joined Philips in 2020 and brings more than 30 years of leadership experience in the

technology industry.

Shez Partovi

Born 1967, Canadian

Executive Vice President

Chief Innovation & Strategy Officer

Shez joined Philips in 2021 and has more than 30 years of experience leading large health systems,

cloud transformation, and artificial intelligence and machine learning initiatives in the healthcare,

life sciences and genomics industries.

Heidi Sichien

Born 1974, Belgian

Executive Vice President

Chief People Officer

Heidi joined Philips in 2006 and brings over 18 years of experience in leadership roles in HR across

many parts of the company.

Julia Strandberg

Born 1974, American

Executive Vice President

Chief Business Leader Connected Care

Julia joined Philips in 2023 and has 20 years of leadership experience in the medical technology

industry.


	10


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2Strategy

A clear roadmap to help

deliver better care for more

people and deliver value

for our stakeholders

Culture of impact with

care, centered on patient

safety, quality and

integrity, enabling better

collaboration to achieve

our goals and create

impact

Focused growth and value

creation strategy, with

70% of revenue from

accelerating growth in

attractive industry

leadership segments, and

30% from capturing value

upside

Innovating as close as

possible to customers and

consumers with a unique,

needs-driven approach for

scalable, breakthrough

advancements and

incremental progress

Leveraging differentiating

software capabilities and

AI-enabled innovations to

help care providers and

consumers do more with

less

Strengthened supply chain

and simplified operating

model, enabling agility and

cost-efficiency to better

deliver in volatile market

conditions


	11


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2.1Strategic focus

Today, most healthcare systems are struggling to keep up with the ever-rising need for, and cost

of, healthcare, while systemic staff shortages and financial resource constraints increase the

pressure. Climate change is impacting both environmental and human health, compounding the

stress on our healthcare systems and influencing consumer behavior. At the same time, in both the

hospital and the home, emerging technologies and artificial intelligence are affecting our lives like

never before.

At Philips, our purpose is to improve people’s health and well-being through meaningful

innovation. As such, we see huge opportunities to make a difference through innovation, design,

and sustainability – partnering with our healthcare customers to increase productivity and deliver

better care for more people through our innovation platforms of monitoring, imaging,

interventional and enterprise informatics. And, empowering more people to take care of their

health and well-being through our personal health propositions.

Our plan: create value with sustainable impact

As a health technology company, Philips is committed to driving progressive value creation through

a strategy of focused growth, scalable patient- and people-centric innovation, and reliable

execution supported by our culture of impact with care.

Philips has significant strengths to build on. We have a portfolio of innovations in hardware,

software, AI and services, supporting care in the hospital and in the home. We are the preferred

strategic and innovation partner for many customers (including governmental entities) across the

globe. And our strong heritage in environmental sustainability and social impact helps us make a

difference globally and create long-term value for our stakeholders.

A strategy of focused growth

We operate in growing market segments, where attractive margins provide a foundation for

sustainable value creation. To deliver on our strategy, we make clear business choices. We are

concentrating our resources on 70% of our businesses where we have strong positions and believe

we can accelerate growth and expand margins more quickly – Image Guided Therapy, Monitoring,

Ultrasound, and Personal Health. In doing so, we focus on supporting clinical workflows in areas

where we have domain leadership, such as cardiology, and that build on our deep strength in the

intensive care unit and cath lab.

The focus for the remaining 30% of the businesses, such as Diagnostic Imaging and Enterprise

Informatics, is achieving margin expansion by increasing productivity and scale, and by delivering

operational excellence. Additionally, we aim to rebuild our position in Sleep & Respiratory Care

after the progress made to resolve the effects of the Respironics recall.

Scalable patient- and people-centric innovation

At Philips, we’ve been innovating to improve lives for over 130 years. People’s needs are at the very

heart of how we innovate and design for sustainable impact with a ‘safety and quality first’

mindset.

Innovation is our strength and will continue to be our core differentiator. Recent challenges in the

healthcare industry have accelerated the adoption of technology. We are embracing these trends

and have shifted our innovation closer to our customers. This starts with asking: What do people –

in our case, patients and clinicians, nurses and technicians, consumers – really need? And how can

we best support healthcare professionals with their workflow?

Emerging AI innovations have the potential to address pain points across operational and clinical

workflows in healthcare. Philips has AI embedded across our portfolio, and we see significant

opportunities to further leverage this technology to deliver more and better care.

In our Businesses, we focus our efforts and resources on fewer projects offering greater impact on

patient outcomes and care providers’ clinical, operational and sustainability challenges. We take a

long-term view, seeking to ensure the customer has the best experience with Philips throughout

time. We do this by balancing new, breakthrough innovations and continuous optimized life cycle

management, through upgrades and services, of Philips products and systems already deployed in

care settings. With Research & Development mostly led by the Businesses, we bring together

expertise across the product life cycle, from research through serviceability, with the aim of

ensuring our innovations scale to drive maximum impact for our customers and consumers –

delivering a superior experience and value, with minimum environmental impact.

Execution priorities

Enabled by a culture of patient- and people-centricity, accountability and impact, supported by

strong health technology capabilities, we see effective execution as the key value driver of our plan.

We are focusing on:

• patient safety and quality – our highest priority

• end-to-end supply chain resilience

• a simplified operating model with an agile way of working

First, patient safety, quality and integrity is at the heart of our culture of impact with care. All

employees have dedicated patient safety and quality objectives, and the Patient Safety and Quality

organization champions stronger processes and more effective early warning systems in the

Businesses. The topic has high visibility at the Executive Committee level with the leadership of the

Chief Patient Safety & Quality Officer and Chief Medical Officer. We invest in systems, capabilities

and training to facilitate identification of potential patient safety or quality issues. We listen to

patients through our advisory boards. And we are taking the learnings from the Respironics recall

to improve our ability to correctly assess patient safety and provide quality of the highest standard

across Philips and in delivery to patients, customers and consumers.


	12


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Second, alignment of procurement and supply chain to our Businesses has enabled us to improve

the reliability of the delivery of our products, services and orders. A more regionalized supply chain

ecosystem combined with dual sourcing can work effectively even when volatile conditions emerge

in different parts of the world. We are paring down our product portfolio and making our

platforms fit for the future, which includes pruning a long tail of smaller product lines and older

generations of our products. We also have a dedicated team redesigning products and components

to increase our resilience.

Finally, we are in the second year of implementing our simplified operating model to enable us to

better serve patients, customers and consumers, as well as ensuring that our cost of organization

remains competitive in an inflationary and cost-driven environment, and that we are more agile in

responding to changes in the market. Prime accountability has been assigned to the Businesses,

supported by lean Functions and Regions following tailored models, all guided by fewer KPIs and

more focused targets. We will continue to simplify our operating model to adapt to the dynamic

environment.

Driving impact for people and planet

We have operationalized our purpose by adopting a fully integrated approach to doing business

responsibly and sustainably. We partner with stakeholders to drive environmental, social and

governance (ESG) priorities and aim to make a global impact while focusing on three UN

Sustainable Development Goals (SDGs):

• SDG 3 - Ensure healthy lives and promote well-being for all at all ages

• SDG 12 - Ensure sustainable consumption and production patterns

• SDG 13 - Take urgent action to combat climate change and its impacts

Acting responsibly toward the planet and society is part of our DNA. We believe that this is the best

way for us to meet our business goals and create superior, long-term value for Philips’ stakeholders.

Our 2021-2025 ESG program includes key ESG commitments that guide execution of the company

strategy, setting challenging environmental and social targets, as well as the highest standards of

governance. As an example, we aim to positively impact 2.5 billion lives per year by 2030, including

400 million in underserved communities.

Please refer to Environmental, Social and Governance for an overview of all our key ESG

commitments, and for information on how we act and perform in the environmental and social

dimensions and on the main elements of our governance framework.

Our approach to risk management

We approach risk management as a value-creating activity that is integral to innovation and

entrepreneurship. It allows us to analyze the relationship between strategy and risk profile, to

identify the specific risks that we face in executing our strategic plan to create value with

sustainable impact, to analyze these risks, to set our risk appetite, and to implement balanced risk

responses and monitor their effectiveness as an integral part of the Philips business planning and

performance review cycle.

Refer to Risk management and internal control for more information, including our risk appetite

and our risk management governance and process, and to Risk factors and responses for a

description of the material risk factors we have identified.

Delivering on our plan

With our global reach, market leadership positions, deep clinical and technological insights, and

patient- and people-focused innovation, we believe Philips is well-positioned to help deliver real

change across healthcare and personal health. Fueled by our purpose and supported by our culture

of impact with care, we are empowered – and hold ourselves accountable – to create value with

sustainable impact.


	13


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2.2Business

2.2.1Our business structure

Koninklijke Philips N.V. (Royal Philips) is the parent company of the Philips Group. Philips' operating

model grants end-to-end Businesses with single accountability in order to make the company more

agile in its drive to create value with sustainable impact. The segments Diagnosis & Treatment,

Connected Care and Personal Health are each responsible for the management of their business

activity worldwide, and are made up of the six Businesses shown below. Additionally, Royal Philips

identifies the segment Other.



	Philips Group
Segments	Diagnosis & Treatment	Connected Care	Personal Health	Other


Businesses	• Precision Diagnosis • Image Guided Therapy	• Monitoring • Enterprise Informatics • Sleep & Respiratory Care	• Personal Health

Philips Group

Total sales by reportable segment


	2024
Diagnosis & Treatment	49%
Connected Care	29%
Personal Health	19%
Other	3%

Diagnosis & Treatment segment

Our Diagnosis & Treatment Businesses create value through their portfolio of innovative AI-enabled

solutions that support precision diagnosis and minimally invasive treatment in therapeutic areas

such as cardiology, peripheral vascular, neurology, surgery, and oncology. With these solutions, we

enable our customers to enhance care delivery, optimize workflow to improve productivity, and

work toward their sustainability goals.

Serving diagnostic imaging markets globally, our strategy is to focus on more precise and predictive

diagnoses, integrating our intelligent imaging systems with our industry-leading informatics

solutions to optimize workflow efficiency, improve productivity and maximize lifetime value. We do

this through smart diagnostic systems, connected workflow solutions, and integrated AI-supported

diagnostics and pathway informatics that enable clinicians to select tailored care pathways with

predictable outcomes for every patient, both inside and outside the hospital.

We also provide integrated solutions that combine imaging systems and advanced clinical software,

as well as diagnostic and therapeutic devices and services to optimize minimally invasive

interventional procedures with more effective treatment, better outcomes and higher productivity.

Building upon our leading-edge Azurion platform, we address a range of interventional clinical

segments with high procedural growth rates, such as coronary artery disease, peripheral artery and

venous disease, electrophysiology, structural heart disease, interventional neuroradiology, and

interventional oncology. We are driving further innovation to treat new and more complex patient

pools, using clinical and economic evidence to foster the adoption of these solutions, and that

translates into guidelines and reimbursement.

In 2024, we took action to address key optimization and expansion challenges faced by our

Diagnosis & Treatment Business Units. In Diagnostic Imaging, with renewed leadership, we

embarked on a clear strategy with a focus on those customers who are looking to optimize care

delivery in the mid- and high-end segments. Significant progress was made in the execution of our

plans to drive margin expansion in line with the company's strategy. We also streamlined and

focused our portfolio with one cloud-enabled hardware stack.

In Image Guided Therapy (IGT), we continued to take actions to deliver on our ambition to

accelerate growth and expand margins more quickly. The IGT Business Units focused on creating

customer preference for our integrated interventional platform, with Systems, Devices and

Software seamlessly joined in one simple workflow to innovate the procedure.


	14


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The Diagnosis & Treatment segment consists of the following Businesses.

• Precision Diagnosis – This Business offers a range of diagnostic imaging products and solutions

to address some of providers’ biggest challenges, from staff shortages and burnout to workflow,

and ultimately delivering better care for their patients.

• Diagnostic X-ray Business Unit – X-ray and fluoroscopy systems with associated software to

optimize diagnostic imaging quality and improve efficiency and productivity for the hospital.

• Magnetic Resonance Imaging (MRI) Business Unit – comprehensive BlueSeal portfolio with

helium-free-for-life operations, bundled with AI-enabled software to streamline workflows,

optimize diagnostic quality, and improve patient experience.

• Computed Tomography (CT) Business Unit – advanced and efficient systems and software,

including detector-based Spectral CT and systems equipped with advanced AI capabilities,

for diagnosis, interventional procedures and screening, to help expand the standard of care.

• Ultrasound Business Unit – imaging solutions focused on supporting diagnosis, treatment

planning and guidance for cardiac, general imaging, obstetrics/gynecology, and point-of-

care applications enabled by proprietary AI software, advanced imaging technology and tele-

ultrasound to efficiently and confidently deliver diagnostic images for even the most complex

conditions.

• Image Guided Therapy – This Business includes a market-leading portfolio of integrated

interventional imaging systems, smart devices, and disease-specific software as well as services

and consulting.

• Image Guided Therapy Systems Business Unit – integrated interventional X-ray systems (fixed

and mobile surgery) and software solutions, supported by AI, to perform a wide range of

routine and complex interventional procedures, easily and confidently.

• Image Guided Therapy Devices Business Unit – interventional specialty devices and software

to aid in the diagnosis, navigation, treatment and confirmation in minimally invasive

interventional coronary, peripheral vascular and hearth rhythm management procedures.

Complemented by seamless integration with Image Guided Therapy Systems.

Diagnosis & Treatment

Total sales by Business


	2024
Precision Diagnosis1	59%
Image Guided Therapy	41%

1 of which Diagnostic Imaging 40%, Ultrasound 19%

Revenue is predominantly earned through the sale of products, leasing, customer services fees,

recurring per-procedure fees for disposable devices, and software license fees. For certain offerings,

per-study fees or outcome-based fees are earned over the contract term.

Sales channels are a mix of direct sales, especially in the larger markets, third-party distributors and

online sales. This varies by product, market and price segment. Our sales organizations have an

intimate knowledge of technologies and clinical applications, as well as the solutions necessary to

meet the needs of our customers.

Sales in the Diagnosis & Treatment Businesses are generally higher in the second half of the year,

largely due to the timing of customer spending patterns.

At year-end 2024 , Diagnosis & Treatment had 24,544 employees worldwide.

2024 highlights

Precision Diagnosis

• Philips introduced helium-free operations in MRI, and since its launch in 2018, we have installed

more than 1,500 BlueSeal systems globally in wide-ranging settings, including the world’s first

helium-free mobile MRI units. Our next-generation BlueSeal with Smart Reading, launched at

Radiological Society of North America annual meeting in 2024, boosts performance, saves time,

and supports better patient outcomes, all while caring for the planet. With AI applications

seamlessly integrated into our latest 1.5T BlueSeal scanner, we have applied AI to every aspect

of the MRI workflow. BlueSeal magnets are lighter than others, allowing them to be installed in

more places – or even transported in mobile units – creating the potential to expand quality

access to MRI exams for patients in a more sustainable way.

• The next-generation AI-enabled cardiovascular ultrasound platform helps speed up cardiac

ultrasound analysis with proven AI technology and reduces the burden on echocardiography

labs, integrated into EPIQ CVx and Affiniti CVx ultrasound systems. With the latest

transesophageal echocardiography (TEE) transducer, it is designed to serve more patients with

improved overall comfort, with FDA 510(k) clearance. Philips has developed the smaller X11- 4t

Mini 3D TEE transducer to serve more patients with this valuable imaging tool, helping

physicians serve a wider range of patients, from small children to fragile adults.

• In General Imaging Ultrasound we launched the Elevate Release featuring the EPIQ Elite Elevate

and Affiniti Elevate. More than 100 optimized pre-sets across multiple clinical applications deliver

greater precision imaging and intuitive workflows to help boost clinical confidence. These

innovative features also help to deliver an improved user and patient experience by automating

image brightness and uniformity, and reducing button pushes by up to 54% with Next Gen

Auto Scan.


	15


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Diagnosis & Treatment – Precision Diagnosis Philips CT 5300

Philips launched a series of leading AI-driven innovations across the diagnostic imaging portfolio.

• MR SmartSpeed is AI-based imaging technology that can increase imaging speed by up to a

factor of three while providing up to 65% greater resolution to deliver outstanding image

quality. It is compatible with 97% of clinical protocols to address the needs of a broad range of

patients in various conditions.

• AI-powered quantitative reporting software from our partner icometrix was seamlessly

integrated into the latest BlueSeal MR scanners through new Smart Reading capability, providing

consistent and more accurate diagnoses.

• Fully AI-enabled CT 5300 with Precise Image reconstruction software results in reduced reading

time and 80% lower radiation while delivering better image quality. Philips collaborates with

Annalise.ai to evaluate streamlining workflows to prioritize time-sensitive cases.

• Powered with Smart Workflow, AI-enabled productivity features of DXR 7300 C reduce X-ray retakes

with the Eleva Tube Head and enhance confident diagnosis with Philips UNIQUE 2 image processing.

Image Guided Therapy

• Major enhancements to Azurion, our Image Guided Therapy System, were designed to speed up

and improve minimally invasive diagnosis and treatment of neurovascular patients. The new

Azurion neuro biplane system features enhanced 2D and 3D imaging and X-ray detector

positioning flexibility, building on the system’s capabilities to streamline neurovascular

procedures to help care teams make the right decisions faster, treat more patients, and achieve

better outcomes. It has been widely adopted at major healthcare institutions around the world,

such as the Miami Cardiac & Vascular Institute in the United States (US), Osaka Police Hospital in

Japan, and Leiden University Medical Center in the Netherlands.

• Our real-time 3D Intracardiac Echocardiography (ICE) Catheter – VeriSight Pro – is designed to

give physicians more confidence and control during a variety of minimally invasive procedures in

structural heart disease and electrophysiology. In 2024 we launched the first rollout of this

technology outside the US, in Hong Kong, and it is expected to be an innovation to watch.

• Intravascular ultrasound (IVUS) and instantaneous wave-free ratio (iFR) technologies received

top-level recognition in new European Society of Cardiology guidelines, reinforcing their role in

optimizing coronary interventions and patient outcomes. The robust clinical evidence supporting

the use of these technologies shows improved patient outcomes through numerous large-scale

randomized trials like DEFINE FLAIR and iFR SWEDEHEART.

• Philips secured FDA approval for its new LumiGuide Navigation Wire, which uses fiber optic

technology to reduce radiation for both patients and physicians during minimally invasive

surgery. The company’s breakthrough Fiber Optic RealShape (FORS) technology marked the

milestone of more than 1,000 patients treated using FORS technology since the first clinical use

in 2020.

• The Zenition 90 Motorized, designed to deliver state-of-the-art image quality for complex

vascular needs and clinical procedures, was launched. It has intuitive motorization for greater

control and high power, as well as automated workflows for greater clinical efficiency.

Diagnosis & Treatment – Philips Image Guided Therapy System Azurion 7 B20/12

Diagnosis & Treatment partnerships

Philips continues to work with health systems to adopt solutions that can improve workflow and

ease the technology burden on staff, as well as improve patients’ experiences and outcomes and

advance sustainability.

• Carilion Clinic’s Cardiovascular Institute in the US committed to adopt 11 specialized Philips

interventional suites, allowing physicians to treat patients with complex conditions closer to

where they live. Equipped with these new Philips solutions, the highly skilled medical staff will be

able to continue handling complex cases or procedures that may not be available at surrounding

healthcare facilities.


	16


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

• A 2024 analysis confirmed that the collaboration with Champalimaud Foundation (Portugal)

achieved a 24% emissions reduction in its first year. This is equivalent to 40 tonnes CO2e, a

strong start to a strategic partnership aimed at halving the carbon footprint of Champalimaud’s

diagnostic and interventional imaging equipment use by 2028.

• For the Japanese market, where cerebrovascular diseases are on the rise and place a heavy social

burden on society, Philips has launched SmartCT 3.0, an application powered by AI and

specialized for endovascular treatment with high image quality. Additionally, the first MR 7700

with clinical 3.0T scanner has been installed at Hamamatsu University Hospital. With high image

quality and reduced scan time, it provides high accuracy, power, and endurance to support

confident diagnosis for every patient.

Connected Care segment

With technology constantly advancing and becoming increasingly pervasive in healthcare, the

Connected Care Businesses aim to connect and elevate care for all. Philips connects patients and

caregivers across care settings, delivering clinical, operational and therapeutic solutions that help

our customers deliver better health outcomes, improve the patient and staff experience, and lower

the cost of care. In 2024, the global economic situation continued to put additional pressure on

customer budgets, worsened staff shortages, and increased the need for solutions that enable

more effective, sustainable and convenient care in hospital, clinics and the home – especially those

enabled by strong informatics and AI.

With clinical depth and discovery, Philips Connected Care technologies help to cultivate a more

accurate and complete view of the patient that drives better care for more people. The

combination of advanced technological solutions and a co-creation approach allows Philips to be

the clinical technology partner to its customers in their digital transformation, across the enterprise

and at the level of the individual clinician, nurse and patient. As a clinical technology partner, we

help our customers to unlock actionable insights from pools of medical imaging and patient

monitoring data, through the use of advanced AI, to improve outcomes and drive productivity.

Philips’ open, interoperable platforms aggregate and leverage information from clinical devices, as

well as patient and historical data, to support care providers in patient engagement, diagnostics,

and patient monitoring in diverse settings.

The Connected Care segment consists of the following Businesses.

Monitoring – This Business spans in-hospital, ambulatory and home-based monitoring and

diagnosis solutions and services supporting the patient journey, as well as continuous monitoring

and workflow solutions fueled by advanced interoperability and patient insights.

• Hospital Patient Monitoring Business Unit – delivers acute patient management solutions to

improve clinical and patient outcomes and achieve operational and economic efficiencies.

Leveraging a strong presence in the operating theater and intensive care unit, Hospital Patient

Monitoring offers vendor-neutral solutions to enhance customers’ experiences and improve

patient outcomes with seamless patient data – generated from admission to discharge – that is

turned into clinical insights, actionable at the right time and specific to targeted care settings.

• Ambulatory Monitoring & Diagnostics Business Unit – provides patient care management in

ambulatory and home care settings through a suite of cardiac diagnostic and monitoring

solutions to identify heart rhythm disorders, plus other disease states, supported by AI

algorithms that orchestrate workflows and services across care settings to provide care virtually

anywhere.

• Emergency Care Business Unit – plays a critical role in connected acute care management, both

inside and outside the hospital, including cardiac resuscitation (e.g., automated external

defibrillators) and emergency care solutions (devices, services, and digital/data solutions) for

professional and consumer applications. On January 28, 2025, Philips announced an agreement

to sell the Emergency Care Business Unit.

Enterprise Informatics – By combining our informatics propositions into one end-to-end Business,

we can scale our software business, providing vendor-agnostic, integrated workflow solutions that

convert data from our imaging and monitoring systems into clinical and operational insights.

• Radiology Informatics Business Unit – enables enterprise imaging across sites, specialties and

technologies to simplify medical image management, facilitate effective collaboration and

enhance patient care.

• Clinical Integration & Insights Business Unit – offers solutions that are seamlessly integrated into

the customer workflow. These solutions enable vendor-neutral data capture from more than

1,000 device models and make sense of disparate data, providing insights at scale across the

care pathway.

• Clinical Informatics Business Unit – delivers solutions for productivity, diagnostic confidence, and

clinical decision support in the domains of digital patholog y, advanced visualization and disease

management solutions, specifically in radiology, cardiology, pathology and urology .

• Patient Care Informatics – aims to extend the reach of virtual care, support evidence-based

practices, and provide actionable insights for continuous improvement, ensuring better health

outcomes for patients globally. In 2024, we brought together EMR & Care Management and

Cardiovascular Informatics to reflect shifts in the industry to drive not only data, but also to

manage the entire patient journey. This combined portfolio consists of cardiovascular care,

virtual care, electronic medical records, and acute care solutions.

Sleep & Respiratory Care – Working closely with clinical partners and Durable/Home Medical

Equipment providers, Philips Respironics provides sleep and respiratory solutions to customers,

clinicians and patients. This extends from ambulatory patient care solutions for obstructive sleep

apnea, to solutions encompassing diagnostics, people-centric therapy, cloud-based connected

propositions and care management services for patients with Chronic Obstructive Pulmonary

Disease and respiratory conditions. Hospital Respiratory Care provides invasive and non-invasive

ventilators for acute and sub-acute hospital environments; Home Respiratory Care supports chronic

care management in the home.


	17


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Final agreement was reached on the terms of the Philips Respironics consent decree with the US

Department of Justice and the US Food and Drug Administration (FDA), primarily focusing on

Philips Respironics’ business operations in the US, including its manufacturing facilities in Murrysville

and New Kensington, its service center in Mount Pleasant and its Sleep & Respiratory Care

headquarters in the Greater Pittsburgh, Pennsylvania region.

The consent decree provides a clear path forward for the Sleep & Respiratory Care Business with

defined actions, milestones and deliverables to demonstrate compliance with regulatory

requirements and to restore the Business. As part of the agreement, the Business will prioritize

completing the remediation of the sleep and respiratory care devices under Respironics’ voluntary

June 2021 recall. More than 99% of the actionable registered CPAP and BiPAP sleep therapy

devices have been remediated globally, while the remediation of the ventilators is ongoing in

coordination with the relevant competent authorities. The Sleep & Respiratory Care Business must

demonstrate continued compliance with the FDA’s Quality System Regulation. In the US, Philips

Respironics will continue to service sleep and respiratory care devices already with healthcare

providers and patients, and supply accessories, consumables, and replacement parts. Until the

relevant requirements of the consent decree are met, Philips Respironics will not sell new CPAP or

BiPAP sleep therapy devices or other respiratory care devices in the US. Outside the US, Philips

Respironics will continue to provide new sleep and respiratory care devices, accessories,

consumables, replacement parts, and services, subject to certain requirements.

Connected Care – Sleep & Respiratory Care Philips DreamWear mask system

Connected Care

Total sales by Business


	2024
Monitoring	58%
Enterprise Informatics	23%
Sleep & Respiratory Care	19%

In 2024, we took action to address the key challenges faced by the Connected Care Business Units.

We took steps to deploy a global expansion of channel sales and delivery to scale Enterprise

Informatics solutions with partners, and are assessing our approach in areas where this has proven

difficult, particularly in China, and in the Growth geographies in the International Region. We also

worked on implementing the terms of the Philips Respironics consent decree, which includes

defined actions, milestones and deliverables.

In most of the Connected Care Businesses, revenue is earned through the sale of products and

solutions, as well as services and software licenses. Where bundled offerings result in solutions for

our customers, or offerings are based on the number of people being monitored, we see more

usage-based earnings models. In the area of patient care management (Ambulatory Monitoring &

Diagnostics Business Unit and Sleep & Respiratory Care Business), revenue is generated through

clinical services, product sales and through rental models, whereby revenue is generated over time.

Sales channels include a mix of direct sales, partly paired with an online sales portal and distributors

(varying by product, market and price segment). Our sales organizations have an intimate

knowledge of clinical settings and patient-specific diagnosis and treatment. Philips collaborates

with customers and partners to co-create solutions, drive commercial innovation and adapt to new

models such as monitoring-as-a-service and software-as-a-service.

Sales in the Connected Care Businesses are generally higher in the second half of the year, largely

due to customer spending patterns.

At year-end 2024, Connected Care had 16,829 employees worldwide.


	18


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2024 highlights

Monitoring

Philips and Bon Secours Mercy Health (BSMH), one of the largest Catholic health systems in the US,

announced a multi-year strategic collaboration for patient monitoring. Putting BSMH clinicians in

control, the collaboration aims to reduce the digital burden on staff and give them more time to

spend with patients. This 10-year journey is designed to bring innovations that will transform care

delivery. BSMH provides patients care more than 11 million times annually through its network of

more than 1,200 care sites, 60,000 associates and 49 hospitals serving communities in Florida,

Kentucky, Maryland, New York, Ohio, South Carolina and Virginia, as well as Ireland.

Philips signed multi-year partnerships for monitoring with several university hospitals in the

Netherlands and will provide patient monitors for the new Grand Hôpital de Charleroi in Belgium,

as well as roll out its ePatch and AI-driven analytics platform across 14 hospitals in Spain.

Jackson Health System, one of the largest public health systems in the US, announced results of a

collaborative Life Cycle Assessment measuring the sustainability impact of transitioning to Philips’

next-generation monitoring solutions, which can help reduce carbon emissions by 685 tons of

CO2e, or 47%, compared with previous systems. This significant reduction can allow the health

system to save USD 1.2 million over a 10-year device lifetime. These findings suggest that patient

monitoring can become part of an overall carbon reduction strategy for health systems.

Connected Care – Monitoring Philips Patient Monitor – IntelliVue MX750

Enterprise Informatics

In 2024, we expanded our strategic collaboration with Amazon Web Services (AWS) to offer

Philips’ integrated diagnostics portfolio in the cloud, improving access to critical insights and driving

better outcomes across clinical specialties. With more than 150 sites across North America and

Latin America successfully transitioned to Philips HealthSuite Imaging on AWS, Philips and AWS are

accelerating the migration of health systems to the cloud and expanding customer cloud migrations

in Europe.

Also powered by AWS in 2024, Philips announced the launch of the Tasy EMR AI Virtual Assistant,

designed to improve the efficiency and quality of healthcare delivery in Latin America by simplifying

administrative tasks and improving the EMR experience so healthcare professionals can focus on

what really matters – their patients. As part of a five-year partnership with ABC Medical Center in

Mexico, Philips Tasy EMR software is being deployed as part of an interoperability solution,

integrating more than 45 functionalities and 700 licenses and establishing a standardized, unified

point between clinical and enterprise information systems.

Durham and Darlington NHS Foundation Trust, one of the largest integrated care providers in the

United Kingdom, advanced its radiology and cardiology care with Philips PACS. This technology will

provide a single view of patient records, providing more connected and coordinated care across not

just the hospital sites but the entire North East and Cumbria region. This commitment marks yet

another milestone in the 14-year partnership with the Trust, just one year after Durham became

the first NHS Trust to co-develop a sustainability blueprint with Philips.

NYU Langone Health in the US launched a digital pathology program, offering unprecedented

clarity for viewing tissue samples, enhancing collaboration and reducing diagnosis time while laying

the foundation for advanced AI algorithms. This integrated, collaborative approach will serve as

part of a drive to further enhance the patient experience through faster diagnosis and treatment,

and improved outcomes.

Patient care and collaboration have been significantly improved in Vienna, Austria, as part of a

renewed IT service agreement with Philips that includes solutions that centralize data and deliver

insights. The ICCA patient data management system, which integrates patient data from monitors,

laboratory data and other sources, has led to significant improvement in workflows and patient

care in anesthesia, intensive care and general patient care at General Hospital of Vienna

(Allgemeines Krankenhaus der Stadt Wien). At Vienna Health Group (Wiener Gesundheitsverbund),

Philips Cardiovascular Workspace, a vendor-neutral system implemented in the adult and pediatric

departments, helped improve patient care and internal operations.


	19


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Connected Care – Enterprise Informatics Philips Radiology Operations Command

Center (ROCC)

Personal Health segment

Our Personal Health Business plays an important role in enabling healthy individual care routines

with technology and solutions that support people’s long-term health and well-being. Through our

Personal Health Business, we offer a broad range of solutions in various consumer price segments.

Depending on the market, we offer an additional portfolio of locally relevant innovations and

adjust our range to increase accessibility.

We aim to drive profitable growth through a focus on innovation across three key areas:

• reaching more people through consumer-driven product and solutions innovation

• ensuring the highest quality of consumer experience from pre-purchase consideration through

to purchase and unboxing, all the way to end-of-use recycling

• expanding our ecosystem through partnerships with leading retailers and scaling new business

models, such as try-and-buy and subscription services

A notable aspect of our commercial strategy is driving direct-to-consumer relationships and sales

through consumer communities and our online store. We are also leveraging connectivity to enable

new business models, and partnering with key players in the health ecosystem, such as insurance

companies and healthcare professionals, to create more opportunities to support the health and

well-being of consumers across the world. Through social media and digital innovation, we are

engaging consumers in their health journey in new and impactful ways.

In Personal Health, improving lives also means caring for the planet, with a key focus on

environmental sustainability. In 2024, we expanded our Philips Refurb Editions across select

European markets to give products a second life, complete with the same two-year guarantee as

new products. A flagship activation of this initiative took place during Black Friday in the Benelux

region, where the team flipped the Philips.com online storefront to prioritize Refurb Editions

products, only offering new product supply after refurbished items sold out. This effort reflects

Personal Health’s commitment to driving a circular economy and exploring innovative ways to

provide consumers with greater choices to live sustainably.

We offer mobile solutions to support parents and parents-to-be on a more informed, connected,

and healthier journey to parenthood. The Philips Avent Pregnancy+ and Baby+ apps provide

parents with supportive content through the critical first 1,000 days of their child’s life. Pregnancy+

features photo-realistic, interactive 3D fetal models and personalized daily content to enhance the

pregnancy experience. It is the No. 1 worldwide pregnancy app, with more than 6.5 million

monthly active users, available in 22 languages, and offering premium subscription options.

In 2024, we took action to address the key challenges faced by the Personal Health Business Units,

including the external context of a volatile macro environment, especially in China. The Personal

Health strategy focused on driving innovation at the core; improving agility in responding to

market, retail customer and consumer needs; and more integrated planning with its top customers

and in-demand items. In China in particular, Personal Health is not a typical mass consumer

business, as our products offer a more personalized experience for customers, and we are also

impacted by cautious spending behavior. Consumer sentiment in China is unlikely to change in the

near-term. We intend to address the challenging macro-economic environment by building on our

brands that have a strong position with locally relevant accelerators and customer partnerships, and

we aim to complement this effort by expanding our growth outside of China.

The Personal Health segment consists of the following units.

Personal Health – To help people take greater control of their personal health and well-being we

deliver sustainable, meaningful solutions that help them to take care of themselves and their

families, for happier, healthier lives, today and tomorrow.


	20


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

• Oral Healthcare Business Unit – power toothbrushes for a range of price segments, from entry-

level, battery-operated toothbrushes for a young audience to premium power toothbrushes

connected to the Sonicare app with in-app coaching; brush heads, which are also available as a

subscription service; and products for interdental cleaning and for in-office and take-home teeth

whitening.

• Mother and Child Care Business Unit – products to support parents and babies in the first 1,000

days, including infant feeding (breast pumps, baby bottles and sterilizers), connected baby

monitors, and digital parental and women’s health solutions (Pregnancy+ and Baby+ apps).

• Personal Care Business Unit – grooming and beauty products ranging from entry-level to

premium. The grooming portfolio includes shavers, OneBlade, groomers, trimmers and hair

clippers, as well as premium solutions with SkinIQ technology, in-app coaching for a

personalized shave, and blade subscriptions. The beauty portfolio includes devices to support

skin care, hair care and hair removal, including Lumea premium intense pulsed light hair removal

devices and solutions with the latest SenseIQ technology that sense and adapt for personalized

care; these are also available through subscription models.

Personal Health

Total sales by Business


	2024
Personal Health1	100%

1 Of which Personal Care 54%, Oral Healthcare 34%, Mother and Child Care 12%

The revenue model is mainly based on product sale at the point in time the products are delivered

to retailers and online platforms. We continue to increase revenue model diversity by expanding

our business models, including direct-to-consumer, subscriptions, and try-and-buy offerings and

services.

The Personal Health Business experiences seasonality, with higher sales around key events and

holidays.

At year-end 2024, Personal Health employed 7,991 people worldwide.

2024 highlights

Further expanding the successful OneBlade product range, Philips launched OneBlade Intimate –

the first shaving product designed for everyone, to protect the most sensitive skin. Philips also

launched its newest On-The-Go Compact Shaver in Greater China, designed to combine portability

and ease of use without compromising quality. Highlighting the quality of the innovation, the On-

The-Go shaver is accompanying the China Antarctic expedition team on their journey to the South

Pole.

Also in the Greater China market, Philips unveiled a series of new locally relevant innovations,

which are designed to meet consumer needs across the Region, including the first medical-grade

Philips Lumea 8000 Series IPL hair removal device with cooling technology, the limited edition

Transformers-themed 5000, 7000 and 9000 series shavers, and the new Sonicare 5300 power

toothbrush.

In North America, we launched the Philips Sonicare brand’s first at-home teeth whitening kit, a

clinically proven solution developed by dentists, and debuted the new Philips One for Kids

rechargeable toothbrush, helping children between 3 and 12 years old with healthier oral care

routines. In Western Europe, Philips introduced its next-generation Sonicare technology in its new

mid-range Sonicare Series 5000-7000, providing consumers with a superior, gentle and effective

cleaning experience. The new range gives users a choice of features at different price points,

encouraging them to make the switch from a manual toothbrush to achieve improved oral

healthcare results.

The AI-powered Avent Premium Connected Baby Monitor – which offers scientifically proven cry

translation as well as SenseIQ technology to track sleep, breathing and movements to support

parents and give them peace of mind – had its global debut. And, in an effort to support parents in

North America, we partnered with March of Dimes on Mom & Baby Mobile Health Centers,

bringing care to underserved communities, and It Starts with Mom, an educational platform

providing families with pregnancy resources.

SCD92_Connected_Baby_Monitor_Easy_to_use_FIM_Night_Owl_Crop-S.jpg

Personal Health – Mother and Child Care

Philips Avent Premium Connected Baby Monitor


	21


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Segment Other

In Other we report on the items Innovation & Strategy, IP Royalties, Central costs, and other small

items. At year-end 2024, 18,459 people worldwide were working in these areas.

Innovation & Strategy

At Philips, we have set up our innovation teams to be as close to our customers and consumers as

possible. The majority (90%) of our Research & Development (R&D) resources are embedded in our

Business Units, where innovation teams can directly hear customer and consumer needs and work

closely with other stakeholders to turn innovations into actual products. Innovation at Philips is

organized to encourage innovation anywhere along the value chain – not just at the product

ideation stage.

The remaining R&D resources (10%) are part of our central Innovation & Strategy organization.

Within I&S, innovation teams focus on breakthrough ideas that are industry-shifting, and can

advance a core product to fulfill the needs of a broad new customer segment. We do that from our

four main innovation sites – Eindhoven (the Netherlands), Cambridge (US), Bangalore (India) and

Shanghai (China) – and smaller innovation and research sites in the Regions. Our global footprint

enables us to understand, anticipate and react to local markets and needs.

IP royalties

Philips Intellectual Property & Standards (IP&S) proactively pursues the creation of new intellectual

property (IP) in close cooperation with Philips’ operating Businesses and Innovation & Strategy. IP&S

is a leading industrial IP organization providing world-class IP solutions to Philips Businesses to

support their growth, competitiveness and profitability.

Royal Philips’ IP portfolio currently consists of approximately 50,500 patent rights, 30,500

trademarks, 150,000 design rights and 3,200 domain names. Philips filed 700 new patents in

2024, with a strong focus on the growth areas in health technology services and solutions.

Philips earns substantial annual income from license fees and royalties.

Philips believes its business as a whole is not materially dependent on any particular third-party

patent or license, or any particular group of third-party patents and licenses.

Central costs

Philips is present in 71 countries globally and has its corporate headquarters in Amsterdam, the

Netherlands. Our real estate locations are spread around the globe, with key manufacturing and

R&D sites in Europe, the Americas and Asia. The project to move the Philips headquarters to a new

location in Amsterdam in 2025 progressed as planned.

We recharge the directly attributable part of the Functional costs to the Businesses. The remaining

part is accounted for as ’central costs’, and includes costs related to the Executive Committee and

Group Functions such as Strategy, Real Estate, Legal and Audit.

Other small items

Other small items refer to remaining items for intra-group services and legacy items relating to

previously disposed businesses.


	22


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2.2.2Our geographic structure

Our Regions

Geographically, our business is organized in three Regions: North America, Greater China and

International Region (the latter consisting of Europe and Growth areas). Within our Regions, we

further organize by Zones and Countries. The Regions' primary accountability is to manage

customer intimacy, build and maintain relationships, and cultivate an understanding of customer

needs, as well as carry out (strategic) account management, service delivery, and indirect partner

management. They are also accountable for government relations and for providing local

infrastructure needed to support Philips’ presence in a country (license to operate).

For financial reporting purposes, we report in four geographic areas based on similar economic

characteristics: Western Europe, North America, Other mature geographies, and Growth

geographies. Western Europe, North America and Other mature geographies are collectively

grouped as Mature geographies in reporting on sales.

2024 highlights from our Regions

North America

In the biggest healthcare market in the world, our North America team focuses on developing

strategic relationships with major health systems that provide care to hundreds of millions of

people across the Region. We’re working with customers to solve some of the biggest challenges in

healthcare, including the crisis around clinician burnout and improving access to care in rural and

underserved communities. Bon Secours Mercy Health, NYU Langone Health, Northwell Health and

Nicklaus Children’s Hospital are among the customers using solutions from across our industry-

leading portfolio in 2024 to bring better care to more people in the Region.

Our work in 2024 built on our more than 50-year innovation relationship with the US Veteran’s

Administration (VA), which serves 16 million veterans and leads the largest integrated healthcare

delivery network in the country. More than 9 million veterans receive its healthcare services – and

almost one-third of them live in rural areas with limited access to care. Our focus with the VA

expanded the largest tele-critical care network in the US and accelerated the adoption of digital

pathology to speed cancer care. We also continued our longstanding support of healthcare

provided by the Department of Defense, deploying the Rapid Analysis of Threat Exposure algorithm

(RATE), an early detector of pre-symptomatic infection, part of an effort to improve the readiness

monitoring of active-duty military personnel.

Philips brings innovative business models and partnerships to solve specific challenges for

customers, including programs to improve access to maternal care in partnership with federal and

state government agencies and philanthropic organizations such as the March of Dimes. Philips

North America is consistently recognized in third-party surveys as a great place to work.

Greater China

In Greater China Region, we’re committed to the strategy ‘in China, for China’, putting the focus

on local innovation, manufacturing, services and partnership. This enables us to continue to deliver

industry-leading innovations in our home and hospital portfolio. While demand from hospitals and

consumers in China deteriorated in 2024 due to a challenging economic environment, China is a

fundamentally attractive growth market for Philips with strong underlying demand. While in the

long run China is expected to remain an important market and growth driver, we expect the level

of sales in China to take time to recover. With this in mind, new leadership in the Region is putting

emphasis on the strategy to create value to the local healthcare system while also empowering

consumers to manage their health and well-being with locally relevant solutions.

In health systems, Philips advanced efforts in 2024 to deliver benefits to providers and patients,

aligning with the national agenda of improving access and quality of care. With our latest

innovations, we serve the needs identified by the Chinese government to further develop local

hospitals and clinics. Among the offerings introduced in the China market: Spectral CT Plus, which

provides physiology insights for precise diagnosis in cardiology and oncology, and the MR Elition AI,

which triples patient throughput through AI-powered workflow optimization.

Leveraging our clinical insights and research capability in cardiology and neurology, we cemented

partnerships with several hospitals – including Beijing Fuwai (China’s top cardiology hospital) and

Zhangzhou Jiulongjiang Hospital (a top-tier private hospital) – with cross-modality solutions.

International

In 2024, we continued to pursue our global vision while addressing the distinct local needs and

circumstances of our diverse customer base across International Region. We put renewed emphasis

on building sustainable partnerships as we develop value propositions that attract more partners

whose capacity can help better serve our customers. These strategic partnerships drive value

creation and efficiency, as well as enable us to expand our reach into previously untouched

customer territories, ensuring we deliver better care for more people across our Region.

For example, Philips signed a Memorandum of Understanding with Siloam Hospitals Group in

Indonesia to advance AI capabilities and development in the healthcare sector in Indonesia. The

strategic collaboration, in partnership with the Universitas Pelita Harapan (UPH) Medical Sciences

Group, will focus on capacity building, knowledge sharing, and implementing advanced AI

solutions. Leveraging Philips’ AI innovations, the collaboration will help transform clinical care and

digital health, enhance healthcare delivery and make the healthcare infrastructure more

sustainable.

We are advancing our go-to-market strategy for health systems by identifying and seizing new

opportunities, strengthening our competitive positions, and providing improved support for

customers and patients. The Personal Health Business remains vital in empowering individuals to

adopt healthier care routines, providing innovative technologies and solutions that promote long-

term health.


	23


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2.2.3Supply chain and procurement

Philips runs an integrated supply chain tailored to customer needs, which encompasses supplier

selection and management through procurement, manufacturing across all the industrial sites,

logistics and warehousing operations, and customer installation, as well as demand/supply

orchestration.

Like the rest of the industry, we remain exposed to continued geopolitical tensions around the

world, as well as (sudden) changes in tariffs or other trade measures. Labor costs and availability

remained a concern due to continued inflation in 2024 and scarcity of a skilled workforce. On the

other hand, overall macro-economics showed improved availability of materials. As a result, the

cost of key raw materials and energy showed a downward trend compared with 2023. The overall

growth rate of inflation is slowing down.

Driving end-to-end supply chain reliability and agility

The supply chain plays an important role in improving our performance and delivering to our

customers and consumers as promised. As part of our three-year plan, we initiated multiple

interventions and planned longer-term programs to improve our execution capabilities and become

more resilient in navigating volatility.

To further increase our responsiveness and our reliability in delivery, we continue to build a robust

and efficient, more regionalized supply chain ecosystem, prioritizing service level and customer

experience. In this ecosystem we carefully balance our manufacturing capabilities in-house,

focusing on our strengths while leveraging suppliers’ specialized capabilities that support Philips'

ambitions.

When selecting and evaluating supplier partners, we consider not only business metrics such as

quality, on-time delivery performance and cost, but also strategic fit and environmental, social and

governance factors. We use supplier classification models to identify critical suppliers, including

those supplying materials, components and services that could influence the safety and

performance of our products and solutions.

The Philips Supplier Quality Manual outlines Philips’ quality, regulatory, product, process and

customer requirements. The standards outlined in this manual underpin agreements between

suppliers and Philips, and guide compliance with Philips’ quality standards.

In 2024, we continued with our technology re-design, such as the redesign of printed circuit board

assemblies, and dual sourcing efforts to further increase reliability of our supply chain, including

safeguarding material flows and de-risking in a sustainable manner. We aim to maintain close

relationships with our suppliers and conduct an ongoing dialogue with respect to our forecast.

Philips Group

Supplier spend analysis per geographic area in %


	2024
Western Europe	33%
North America	33%
Other mature geographies	5%
Mature geographies	71%
Growth geographies	29%
Philips Group	100%


	24


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3Financial performance


Group sales 18.0 bn EUR in 2024 ( 1% increase on a comparable basis * ) 2023 18.2 billion EUR			Income from operations 529 m EUR 2023 (115) million EUR			Adjusted EBITA* 2,077 m EUR ( 12% of sales) 2023 1,921 million EUR ( 11% of sales)			Operating cash flow 1.6 bn EUR 2023 2.1 billion EUR

* Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information .


	25


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

“In 2024, we expanded our adjusted EBITA margin and delivered on

our cash targets within a challenging growth environment.

This was driven by our industry-leading innovations, as well as

progress on our execution priorities and productivity measures.”

Charlotte Hanneman CFO Royal Philips

3.1Performance summary

The year 2024 *

• Sales amounted to EUR 18.0 billion, a decrease of 1% on a nominal basis. On a comparable

basis*, sales increased 1% , on the back of solid growth in 2023. Growth in Mature Geographies

was partly offset by the decline in China. Comparable sales* showed 1% growth in the

Diagnosis & Treatment segment, 2% growth in the Connected Care segment, and 1% decline

in the Personal Health segment due to the decline in China.

• Income from operations improved to EUR 529 million, mainly driven by higher gross margin and

lower Respironics related items, partially offset by higher impairment charges.

• Net income amounted to a loss of EUR 698 million, mainly due to Respironics litigation provision

charges of EUR 984 million, partly offset by Respironics insurance income of EUR 538 million,

and tax expenses including deferred tax asset derecognition of EUR 941 million, compared to a

loss of EUR 463 million in 2023.

• Adjusted EBITA* amounted to EUR 2,077 million, or 11.5% of sales, compared to 10.6% of

sales in 2023. Connected Care and Personal Health segments showed an increase in Adjusted

EBITA* margin, mainly driven by operational improvements and productivity actions, partly

offset by cost inflation. Diagnosis & Treatment segment remained flat year over year.

• Net cash flows from operating activities amounted to EUR 1,569 million; free cash flow*

amounted to EUR 906 million.

• Philips cancelled approximately 4.4 million shares acquired under its 2021 share repurchase

program for capital reduction purposes.

Philips Group

Key data in millions of EUR unless otherwise stated


	2023	2024
Sales	18,169	18,021
Nominal sales growth	2%	(1%)
Comparable sales growth¹	6%	1%
Impairment of goodwill	(8)
Income from operations	(115)	529
as a % of sales	(1%)	3%
Financial expenses, net	(314)	(282)
Investments in associates, net of income taxes	(98)	(124)
Income tax (expense) benefit	73	(963)
Income from continuing operations	(454)	(840)
Discontinued operations, net of income taxes	(10)	142
Net income	(463)	(698)
Adjusted EBITA¹	1,921	2,077
as a % of sales	10.6%	11.5%
Income from continuing operations attributable to shareholders² per common share (in EUR) - diluted	(0.48)	(0.90)
Adjusted income from continuing operations attributable to shareholders² per common share (in EUR) - diluted¹	1.21	1.39

1 Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.

2 Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been

adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in

respect of 2023.


	26


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.1.1Factors impacting performance

The factors below are believed to have had a significant impact on Philips’ performance during

the year.

Macro-economic landscape

In 2024 , global economic growth is estimated to have improved marginally compared to 2023 ,

but the economic situation in China weighed down growth across 2024. Global real GDP is

estimated to have grown by 3.2% in 2024 , compared with 2.8% in 2023 . Oxford Economics

expects world real GDP growth of 3.3% in 2025 excluding any impact of tariffs.

Simplified operating model

On January 30, 2023, Philips announced its plan to create value with sustainable impact, which

is based on focused organic growth to deliver patient- and people-driven innovation at scale,

with improved execution as a key value driver, prioritizing patient safety and quality, supply

chain reliability and a simplified operating model. The introduction of a simplified operating

model to increase agility and structurally lower the cost base by giving end-to-end accountability

to the segments has continued to contribute positively to the results of operations.

Workforce reduction

By year-end 2024 Philips completed its previously announced plans to reduce its workforce by

10,000 roles globally by 2025. These reductions were focused on Corporate and Functions

optimization and non-core activities. Workforce-related restructuring charges were EUR 106

million in 2024 and EUR 196 million in 2023 .

Supply chain resilience

Limited availability and delays in the supply of certain components and products internationally –

partly a consequence of the COVID pandemic and the Russia-Ukraine war – impacted the

company's results in recent years. These supply chain constraints resulted in an increase in

overall working capital, in particular inventories. In 2023, following significant actions to

increase supply chain resilience and mitigate the impact of disruptions, our sales benefited from

improved material availability and resolved shortages in components.

In 2024 the company stepped up efforts to make its supply chain more agile in order to increase

speed of execution. In addition, the company is increasingly sourcing products in the market in

which they are being sold to make the supply chain more agile, which we believe is an

important part of the company's ability to cater to the demands in the healthcare market and

minimize the impact of potential tariffs and retaliatory trade measures.

Geopolitical environment

The Russia-Ukraine war continues to put pressure on the global commodity landscape and

supply chains, and contribute to higher levels of inflation. Philips’ operations in Russia and

Ukraine on a combined basis represented less than 1% of group sales in both 2023 and 2024.

Having substantially reduced its operations in Russia in 2022, the remaining activities were

focused on the delivery of medical systems, devices, and spare parts to healthcare providers as

well as delivery of a limited range of mother and baby products.

The ongoing situation in the Middle East further increases economic and political uncertainty.

Philips is present in Israel with several subsidiaries, mainly in Diagnosis & Treatment and

Connected Care, that are primarily involved in manufacturing and research and development

activities.

3.1.2Outlook

Philips remains focused on successfully executing its three-year plan to drive operational

improvements and create value with sustainable impact, within a challenging macro

environment. For 2025, Philips expects:

• 1%-3% comparable sales growth, including a mid- to high-single-digit decline in China

• Adjusted EBITA margin increasing 30-80 bps to 11.8%-12.3%

• Free cash flow before payment of the USD 1.1 billion cash-out relating to the US medical

monitoring and personal injury settlements will be at the lower end of the range of EUR 1.4

billion to EUR 1.6 billion. Net of this cash-out, free cash flow will be EUR 0.4 billion to EUR

0.6 billion.

We anticipate comparable sales growth to be back-end-loaded in the year, with a mid-single-

digit decline in Q1 mainly due to lower demand in China and royalties phasing, with

correspondingly lower Adjusted EBITA margin.

The outlook includes the impact of the recently announced US-China tariffs. It excludes ongoing

Philips Respironics-related legal proceedings, including the investigation by the US Department

of Justice.

* Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


	27


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.2Results of operations

Sales

Philips Group

Sales in millions of EUR unless otherwise stated


		2023			2024
	Sales	Nominal sales growth	Comparable sales growth¹	Sales	Nominal sales growth	Comparable sales growth¹
Diagnosis & Treatment	8,825	6%	11%	8,790	0%	1%
Connected Care	5,138	(2%)	1%	5,134	0%	2%
Personal Health	3,602	(1%)	3%	3,486	(3%)	(1%)
Other	604			611
Philips Group	18,169	2%	6%	18,021	(1%)	1%

1 Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information .

Group sales in 2024 amounted to EUR 18,021 million, 1% lower than in 2023 on a nominal basis.

Considering a 2% negative currency effect and consolidation impact, comparable sales growth*

was 1% The negative currency effect was mainly due to depreciation of currencies against the euro,

and affected all segments. In addition, Group sales were negatively impacted by China, mainly as a

result of adverse market developments.

Comparable order intake increased to 1% in 2024, compared to a 6% decline in 2023.

Comparable order intake is not a financial measure, but is presented when discussing the Philips

Group's performance. For further details, refer to the Other Key Performance indicators section.

Diagnosis & Treatment

In 2024, sales amounted to EUR 8,790 million, in line with the nominal sales in 2023 . Considering a

2% negative currency effect and consolidation impact, comparable sales* increased by 1%. This

was driven by mid-single-digit growth in Image-Guided Therapy, partly offset by a decline in

Precision Diagnosis mainly due to the extended hospital procurement cycles as a result of the

ongoing industry wide anti-corruption campaign in China.

Connected Care

In 2024, sales amounted to EUR 5,134 million, in line with the nominal sales in 2023 . Considering a

2% negative currency effect and consolidation impact, comparable sales* increased by 2%. This

growth was mainly driven by mid-single-digit growth in Enterprise Informatics, double-digit growth

in Sleep & Respiratory Care, partly offset by a low-single-digit decline in Monitoring on the back of

double-digit growth in 2023.

Personal Health

In 2024, sales amounted to EUR 3,486 million, 3% lower than in 2023 on a nominal basis.

Considering a 2% negative currency effect and consolidation impact, growth in comparable sales

was (1)%. This was mainly due to deteriorated demand in China due to cautious spending

behavior, which offset growth in other geographies.

Other

In 2024, sales amounted to EUR 611 million, compared to EUR 604 million in 2023, mainly driven

by higher royalty income.

Sales by geographic area

Philips Group

Sales by geographic area in millions of EUR unless otherwise stated


		2023			2024
	Sales	Nominal sales growth	Comparable sales growth¹	Sales	Nominal sales growth	Comparable sales growth¹
Western Europe	3,819	6%	7%	3,978	4%	5%
North America	7,562	0%	3%	7,655	1%	2%
Other mature geographies	1,626	(1%)	7%	1,526	(6%)	(1%)
Mature geographies	13,007	1%	4%	13,159	1%	2%
Growth geographies	5,162	3%	10%	4,863	(6%)	(2%)
Philips Group	18,169	2%	6%	18,021	(1%)	1%

1 Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.

Sales in Western Europe increased year-on-year on a nominal and comparable basis* with double-

digit growth in the Connected Care segment and low-single-digit growth in the Diagnosis &

Treatment and the Personal Health segments. Sales in North America increased year-on-year on a

nominal and comparable basis* with mid-single-digit growth in the Diagnosis & Treatment

segment and low-single-digit growth in Connected Care segment, which was partly offset by a

low-single-digit decline in the Personal Health segment. Sales in Other mature geographies

decreased year-on-year, mainly due to lower sales in segment Other which was partly offset by

low-single-digit comparable sales growth* in the Diagnosis & Treatment and the Personal Health

segments. Connected Care segment sales growth in Other mature geographies was flat.

In Growth geographies in 2024 comparable sales growth* was negative in all segments mainly due

to lower demand from consumers and health systems in China.


	28


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Cost of sales

Philips Group

Cost of sales components in millions of EUR unless otherwise stated


	2023	As a % of sales	2024	As a % of sales
Costs of materials used	4,626	25%	4,213	23%
Salaries and wages	2,381	13%	2,313	13%
Depreciation and amortization	461	3%	609	3%
Other manufacturing costs	3,252	18%	3,113	17%
Cost of sales	10,721	59%	10,248	57%

Philips’ cost of sales decreased by EUR 473 million to EUR 10,248 million in 2024 compared to EUR

10,721 million in 2023, and decreased as a percentage of sales, mainly due to decreased Cost of

materials used by EUR 413 million in 2024, which was driven by productivity actions, lower

restructuring, acquisition-related and other items and a favorable foreign currency impact.

Other key factors influencing cost of sales were as follows:

• Salaries and wages decreased by EUR 68 million, mainly driven by productivity actions, lower

restructuring charges and a favorable foreign currency impact, partly offset by cost inflation;

• Depreciation and amortization increased by EUR 148 million in 2024, mainly due to an

intangible asset impairment charge;

• Other manufacturing costs decreased by EUR 139 million in 2024, driven by productivity actions

and a favorable foreign currency impact, partly offset by cost inflation.

Gross margin

In 2024, Philips’ gross margin was EUR 7,773 million, or 43% of sales, compared to EUR 7,448

million, or 41% of sales, in 2023 . The gross margin increased by EUR 325 million year-on-year,

driven by operational improvements, productivity measures and lower restructuring, acquisition-

related and other items, and a favorable foreign currency impact, partly offset by cost inflation.

Selling expenses

Selling expenses amounted to EUR 4,486 million, or 25% of sales, in 2024, compared to EUR

4,524 million, or 25% of sales, in 2023. Year-on-year selling expenses decreased by EUR 38 million,

mainly driven by productivity actions, lower restructuring, acquisition-related and other items and a

favorable foreign currency impact, partly offset by cost inflation.

General and administrative expenses

General and administrative expenses amounted to EUR 582 million, or 3% of sales, in 2024,

compared to EUR 608 million, or 3% of sales, in 2023. Expenditure decreased year-on-year by EUR

26 million, mainly driven by productivity actions, lower restructuring, acquisition-related and other

items and a favorable foreign currency impact, partly offset by cost inflation.

Research and development expenses

Research and development costs were EUR 1,747 million, or 10% of sales, in 2024, compared to

EUR 1,890 million, or 10% of sales, in 2023. The costs decreased by EUR 143 million year-on-year,

mainly driven by productivity actions, lower restructuring, acquisition-related and other charges and

a favorable foreign currency impact, partly offset by cost inflation.

Philips Group

Research and development expenses in millions of EUR unless otherwise stated


	2023	2024
Diagnosis & Treatment	828	899
Connected Care	663	599
Personal Health	197	190
Other	202	59
Philips Group	1,890	1,747
As a % of sales	10%	10%

Restructuring, acquisition-related charges and other items

Restructuring, acquisition-related charges and other items were EUR 1,156 million in 2024,

compared to EUR 1,739 million in 2023. Respironics related charges were EUR 691 million in 2024

compared to EUR 1,162 million in 2023. 2024 includes Respironics litigation provision charges of

EUR 984 million, partly offset by Respironics insurance income of EUR 538 million.

Philips Group

Restructuring charges in millions of EUR


	2023	2024
Restructuring charges per segment:
Diagnosis & Treatment	73	122
Connected Care	64	29
Personal Health	9	25
Other	139	91
Philips Group	285	268

Cost breakdown of restructuring charges:
Provision for personnel lay-off costs	196	106
Restructuring-related asset impairment	56	134
Other restructuring-related costs	33	29
Philips Group	285	268

In 2024, Philips continued general productivity actions aimed at simplifying the organization to

streamline ways of working and reduce operating expenses. This included the further reduction of

2,000 roles, thereby completing the planned reduction of 10,000 roles globally across the

organization by 2025 ahead of schedule. In addition, other restructuring projects were executed

during the year, of which the most significant impacted the segments Other and Connected Care

and mainly took place in the US and Netherlands.


	29


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

For further information on restructuring, refer to Provisions.

Philips Group

Acquisition-related charges in millions of EUR


	2023	2024
Diagnosis & Treatment	45	34
Connected Care	51	24
Philips Group	96	58

In 2024, acquisition-related charges in the Diagnosis & Treatment segment mainly related to the

acquisition of Spectranetics, due to post-acquisition integration costs. The Connected Care

segment recorded charges mainly related to the acquisition of BioTelemetry, due to post-acquisition

integration costs. In 2023, acquisition-related charges in the Diagnosis & Treatment segment mainly

related to the acquisition of Spectranetics, and in the Connected Care segment mainly related to

the acquisition of BioTelemetry and Capsule Technologies, due to post-acquisition integration costs.

Philips Group

Other items in millions of EUR


	2023	2024
Diagnosis & Treatment	92	45
Connected Care	1,275	765
Personal Health	22	–
Other	(32)	20
Philips Group	1,358	830

Consisting of:
Respironics litigation provision	575	984
Respironics insurance income		(538)
Respironics consent decree charges	363	113
Respironics field-action running costs	224	133
Respironics-related charges	1,162	691
Quality actions	175	123
Provision for a legal matter	31
Investment re-measurement loss	23
Gain on divestment of business	(35)
Remaining items	2	16
Philips Group	1,358	830

In 2024 Respironics-related charges totaled EUR 691 million as the impact of the Respironics

litigation provision was partly offset by Respironics insurance income in the Connected Care

segment. In 2023 Respironics-related charges totaled EUR 1,162 million.

Income from operations (EBIT) and Adjusted EBITA*

The following overview shows Income from operations and Adjusted EBITA* by segment.

Philips Group

Income from operations and Adjusted EBITA1 in millions of EUR unless otherwise stated


	Income from operations	As a % of sales	Adjusted EBITA¹	As a % of sales
2024
Diagnosis & Treatment	592	7%	1,018	11.6%
Connected Care	(466)	(9%)	494	9.6%
Personal Health	544	16%	584	16.8%
Other	(142)		(18)
Philips Group	529	3%	2,077	11.5%
2023
Diagnosis & Treatment	721	8%	1,028	11.6%
Connected Care	(1,199)	(23%)	369	7.2%
Personal Health	552	15%	597	16.6%
Other	(190)		(73)
Philips Group	(115)	(1%)	1,921	10.6%

1 Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.

Income from operations amounted to EUR 529 million, or 3% of sales, in 2024, compared to a loss

of EUR 115 million, or (1)% of sales, in 2023, mainly driven by higher and lower charges in

restructuring, acquisition-related and other items in 2024. Adjusted EBITA* increased to EUR 2,077

million and the margin improved to 11.5%, compared to EUR 1,921 million and a margin of

10.6% in 2023, mainly driven by operational improvements and productivity actions. Amortization

of acquired intangible assets was EUR 392 million in 2024 compared to EUR 298 million in 2023,

which also included goodwill impairment charges of EUR 8 million.

Diagnosis & Treatment

Income from operations decreased to EUR 592 million in 2024, compared to EUR 721 million in

2023 . This was mainly due to a value adjustment on current assets, and partly offset by an increase

from pricing & productivity actions. Adjusted EBITA* remained stable at 11.6% of sales in 2024.

Connected Care

Income from operations improved to EUR (466) million in 2024, compared to EUR (1,199) million in

2023. 2024 was mainly driven by lower charges in relation to Respironics, operational

improvements and pricing & productivity actions. Adjusted EBITA* improved to 10% of sales in

2024.


	30


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Personal Health

Income from operations decreased to EUR 544 million in 2024, compared to EUR 552 million in

2023. This was mainly due to lower sales as a result of the decline in China, partly offset by

operational improvements and productivity actions. Adjusted EBITA* remained stable at 17% of

sales in 2024.

Other

In Other we report on the items Innovation & Strategy, IP Royalties, Central costs and Other.

Income from operations amounted to a loss of EUR (142) million in 2024, compared to a loss of

EUR (190) million in 2023. Adjusted EBITA* amounted to a loss of EUR (18) million, compared to a

loss of EUR (73) million in 2023. The increase in Income from operations and Adjusted EBITA* was

mainly driven by higher royalty income and lower costs.

Financial income and expenses

Financial income and expenses resulted in a net expense of EUR 282 million in 2024, compared to a

net expense of EUR 314 million in 2023, mainly driven by higher interest income on cash and cash

equivalents and higher net foreign exchange losses in 2023, partly offset by higher interest

expenses and provision-related accretion costs.

Income taxes

Income tax expense increased to EUR 963 million in 2024, compared to an income tax benefit of

EUR 73 million in 2023. The income tax expense increased by EUR 1,036 million year-on-year,

mainly due to the de-recognition of deferred tax assets in the US and higher income before tax in

2024, as well as recognition of historical tax credits in 2023.

Investments in associates

Results related to investments in associates declined from a loss of EUR 98 million in 2023 to a loss

of EUR 124 million in 2024. 2024 includes impairments of EUR 103 million and share of results of

associates of EUR 20 million. 2023 includes impairments of EUR 58 million and share of results of

associates of EUR 40 million.

Discontinued operations

In 2024 and 2023, Discontinued operations consisted primarily of the Domestic Appliances business

and certain other divestments that were reported as discontinued operations. In 2024,

Discontinued operations included a tax benefit of EUR 140 million relating to tax audit settlements

of prior years. For further information, refer to Discontinued operations and assets classified as held

for sale.

Net income and earnings per share

Net income amounted to a loss of EUR 698 million in 2024, a decrease of EUR 235 million

compared to 2023, mainly due to higher tax expenses partly offset by higher gross margin and

lower Respironics related items. Net income is not allocated to segments, as certain income and

expense line items are monitored on a centralized basis, resulting in them being shown on a Philips

Group level only.

Income from continuing operations attributable to shareholders per common share (in EUR) -

diluted, was EUR (0.90) in 2024, compared to EUR (0.48) in 2023. Adjusted income from

continuing operations attributable to shareholders per common share (in EUR) - diluted* was EUR

1.39 in 2024, compared to EUR 1.21 in 2023.

Non-controlling interests

Net income attributable to non-controlling interests increased from EUR 2 million in 2023 to EUR 3

million in 2024.

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.


	31


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.3Financial position

3.3.1Acquisitions and divestments

In 2024 , Philips did not make any acquisitions.

In 2024, Philips completed four divestments for net cash consideration of EUR 118 million. The

divestments were not individually material.

In 2023 , Philips completed one acquisition involving a total net cash outflow of EUR 53 million

(total equity price and settlement of debt). The purchase price allocation was finalized in the second

quarter of 2024 .

In 2023 , Philips completed six divestments for a cash consideration of EUR 80 million notably Philips

Pharma Solutions in the US.

For details, please refer to Acquisitions and divestments .

3.3.2Financing

Summary balance sheet information as of December 31, 2023 and 2024 is presented in the

following table. For details refer to Consolidated balance sheets .

Philips Group

Summary balance sheet information in millions of EUR


	2023	2024
Property, plant and equipment	2,483	2,452
Intangible assets	13,067	13,365
Investments and financial assets	1,050	968
Deferred tax assets	2,627	1,916
Inventories	3,491	3,198
Receivables	4,146	3,974
Other assets	672	704
Payables	(3,886)	(3,531)
Provisions	(2,498)	(2,972)
Contract liabilities	(2,278)	(2,130)
Other liabilities	(993)	(661)
Net assets to be financed	17,881	17,280

Cash and cash equivalents	1,869	2,401
Debt	(7,689)	(7,639)
Net debt¹	(5,820)	(5,238)
Non-controlling interests	(33)	(37)
Shareholders’ equity	(12,028)	(12,006)
Financing	(17,881)	(17,280)

1 Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.

3.3.3Debt position

Total debt outstanding at the end of 2024 was EUR 7,639 million, compared with EUR 7,689

million at the end of 2023 .

Philips Group

Total debt outstanding in millions of EUR


	2023	2024
Long-term debt	7,035	7,113
Short-term debt	654	526
Debt	7,689	7,639

Philips Group

Balance sheet changes in debt in millions of EUR


	2023	2024
New lease liabilities	233	167
New borrowings long-term debt	544	710
Repayments long-term debt incl. leases	(754)	(763)
New borrowings (repayments) short-term debt	29	(30)
Forward contracts entered (matured)	(462)	(248)
Currency effects, consolidation changes and other	(102)	114
Changes in debt	(512)	(50)

In 2024, total debt decreased by EUR 50 million compared to 2023. The decrease was primarily the

result of repayment of existing debt and leases as well as the maturity of forward contracts related to

the share buyback program and long-term incentive and employee stock purchase plans, partly offset by

the issuance of principal amount of EUR 700 million fixed rate notes maturing in 2032. The remainder

of proceeds from the new issuance will be used for the repayment of USD bond maturities in 2025.

Changes in payment obligations from forward contracts relate to the maturity of EUR 167 million of

share buyback forwards and EUR 146 million of forwards relating to long-term incentive and employee

stock purchase plans. This was partially offset by new forwards for long-term incentive and employee

stock purchase plans of EUR 65 million (as announced in August 2024).

In 2023, total debt decreased by EUR 512 million compared to 2022. The decrease mainly comes

from maturing forward contracts related to the share buyback program and long-term incentive

and employee stock purchase plans, and repayments of long-term debt including leases, partly

offset by the issuance of EUR 500 million of fixed rate notes that mature in 2031.

At the end of 2024 , long-term debt as a proportion of the total debt stood at 93% with an

average remaining term (including current portion) of 5.9 years, compared to 91% and 6 years,

respectively at the end of 2023. For further information, please refer to Debt.


	32


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.3.4Shareholders’ equity

In 2024 , shareholders’ equity decrease d by EUR 23 million to EUR 12,006 million at year-end. The

decrease was mainly due to the net loss attributable to shareholders of EUR 702 million and

currency translation gain s in equity of EUR 751 million, primarily due to the appreciation of the US

dollar against the euro in 2024.

In 2023, shareholders’ equity decrease d by EUR 1,220 million to EUR 12,028 million at year-end.

The decrease was mainly due to the net loss attributable to shareholders of EUR 466 million and

currency translation reduction s in equity of EUR 604 million, primarily due to the depreciation of

the US dollar against the euro in 2023.

Share capital structure

The number of issued common shares of Royal Philips as of December 31, 2024 was 939,939,384 .

At year-end 2024, the company held 14.9 million shares in treasury to cover obligations under

long-term incentive plans. In 2024 (and earlier years), the company entered into several forward

contracts to acquire its own shares, and as of December 31, 2024, the outstanding forward

contracts related to 6.5 million shares. Philips issued 30.9 million shares in May 2024 in order to

distribute the 2023 dividend. The company cancelled 4.4 million shares in June 2024 .

The number of issued common shares of Royal Philips as of December 31, 2023 was 913,515,966.

At year-end 2023, the company held 7.1 million shares in treasury to cover obligations under long-

term incentive plans. In 2016, Philips purchased call options on its own shares to hedge options

granted to employees up to 2013, and as of December 31, 2023, no such options remained

outstanding. In 2023 (and earlier years), the company entered into several forward contracts to

acquire its own shares, and as of December 31, 2023, the outstanding forward contracts related to

15.5 million shares. Philips issued 39.3 million shares in May 2023 in order to distribute the 2022

dividend. The company cancelled 15.1 million shares in December 2023.

Share repurchase methods for long-term incentive plans and capital reduction

purposes

Historically, Philips uses different methods to repurchase shares in its own capital: (i) share buyback

repurchases in the open market via an intermediary; (ii) repurchase of shares via forward contracts

for future delivery of shares; and (iii) the unwinding of call options on own shares. During 2024,

Philips used methods (i) and (ii) to repurchase shares for share-based compensation plans and

method (ii) to repurchase shares for capital reduction purposes.

The open market transactions via an intermediary allow for buybacks during both open and closed

periods.

For more information on share repurchase transactions entered into 2022, 2023, and 2024, refer

to Equity .

Philips Group

Impact of share acquisitions and cancellations on share count

in thousands of shares as of December 31


	2020	2021	2022	2023	2024
Shares issued	911,053	883,899	889,315	913,516	939,939
Shares in treasury	5,925	13,717	7,835	7,113	14,930
Shares outstanding	905,128	870,182	881,481	906,403	925,009
Shares acquired	8,670	45,486	5,081	15,964	13,718
Shares cancelled	3,810	33,500	8,758	15,134	4,437


	33


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.4Cashflow and liquidity

3.4.1Cash flows

The movements in cash and cash equivalents balance for the years ended December 31, 2023 and

2024 are presented and explained in the following table

Philips Group

Condensed consolidated cash flows in millions of EUR


	2023	2024
Beginning cash and cash equivalents balance	1,172	1,869
Net cash flows from operating activities	2,136	1,569
Net cash flows from investing activities
Net capital expenditures	(554)	(663)
Other cash flows from investing activities	(82)	90
Net cash flows from financing activities
Treasury shares transactions	(662)	(410)
Changes in debt	(181)	(83)
Dividend paid to shareholders of the company	(2)	(1)
Other cash flow items	(81)	43
Net cash flows from discontinued operations	123	(13)
Ending cash and cash equivalents balance	1,869	2,401

Net cash flows from operating activities

Net cash flows from operating activities amounted to an inflow of EUR 1,569 million in 2024,

compared to an inflow of EUR 2,136 million in 2023 . This decrease is mainly due to the payments

in connection with the Respironics economic loss settlement in the US and working capital

outflows, partly offset by the Respironics insurance receipt. Free cash flow* amounted to a cash

inflow of EUR 906 million in 2024 , compared to an inflow of EUR 1,582 million in 2023.

Net cash flows from operating activities amounted to an inflow of EUR 2,136 million in 2023 ,

compared to an outflow of EUR 173 million in 2022. This increase is mainly due to higher cash

earnings and lower working capital, and includes a EUR 141 million payment related to the

previously announced resolution of the economic loss class action in the US. Free cash flow*

amounted to a cash inflow of EUR 1,582 million in 2023, compared to an outflow of EUR 961

million in 2022 .

Net cash flows from investing activities

Net cash flows from investing activities consist of net capital expenditures and other cash flows

from investing activities. In 2024 , other cash flows from investing activities amounted to a cash

inflow of EUR 90 million, mainly due to proceeds from divested businesses and cash receipt with

respect to foreign exchange derivative contracts.

In 2023, other cash flows from investing activities amounted to a cash outflow of EUR 82 million,

mainly due to a new business acquisition and minority investments, partly offset by divestment

proceeds.

Net cash flows from financing activities

Net cash flows from financing activities consist of treasury shares transactions, changes in debt,

dividend paid and other cash flow items.

In 2024, treasury shares transactions mainly includes share repurchases as part of the EUR 1.5

billion share repurchase program for capital reduction purposes that were announced on July 26,

2021 and completed on April 12, 2024 as well as related withholding taxes, and share repurchases

for long-term incentive plans, which resulted in EUR 410 million net cash outflow. Changes in debt

mainly includes the new bond issuance of EUR 700 million and bond redemption of EUR 547

million, partly offset by debt repayments.

In 2023, treasury shares transactions mainly included the share buyback activities, which resulted in

EUR 662 million net cash outflow. Changes in debt mainly includes new bonds issued of EUR 500

million and loan repayments amounting to EUR 500 million. The dividend was distributed fully in

shares.

Other cash flow items

In 2024, Other cash flow item amounted to a inflow of 43 million, is due to foreign currency

impact on the cash balance

In 2023, Other cash flow item amounted to a outflow of 81 million, is due to foreign currency

impact on the cash balance

Net cash flows from discontinued operations

In 2024, net cash provided to discontinued operations was EUR 13 million, mainly related to the tax

claims from the previously divested business.

In 2023, net cash provided by discontinued operations was EUR 123 million, mainly related to a

refund received of advance tax payments of a previously disposed business.

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.


	34


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.4.2Liquidity position

As of December 31, 2024 , the Philips Group had access to available liquidity of EUR 3,405 million

( 2023 : EUR 2,883 million) including cash and cash equivalents and a EUR 1 billion committed

revolving credit facility, compared to gross debt of EUR 7,639 million (2023: EUR 7,689 million).

Philips Group

Liquidity position in millions of EUR


	2023	2024
Cash and cash equivalents	1,869	2,401
Listed equity investments at fair value¹	14	4
Committed revolving credit facility	1,000	1,000
Credit facility
Liquidity	2,883	3,405

Short-term debt	(654)	(526)
Long-term debt	(7,035)	(7,113)
Debt	(7,689)	(7,639)

Net available liquidity resources	(4,806)	(4,233)

1 Philips holds listed equity investments at fair value (level 1) in common shares of companies in various

industries. Refer to Other financial assets and Fair value of financial assets and liabilities.

In 2024, Philips extended the maturity of its EUR 1 billion committed revolving credit facility to

2029. The facility can be used for general group purposes, such as a backstop for its Commercial

Paper Program.

Philips’ Commercial Paper Program amounts to USD 2.5 billion, under which commercial paper can

be issued up to 364 days in tenor, both in the US and in Europe, in any major freely convertible

currency. As of December 31, 2024, Philips had no commercial paper outstanding.

Philips established a Euro Medium Term Note (EMTN) program which facilitates the issuance of

notes for a total amount of up to EUR 10 billion. In 2024, Philips issued EUR 700 million fixed rate

notes due 2032 under the program for general corporate purposes, including the repayment of

existing debt.

The company’s liquidity risk management procedures have not changed significantly during 2024.

The access to existing lines of credit remains intact. These lines of credit, along with other financial

risks to which Philips is exposed, are disclosed in Details of treasury and other financial risks.

Further, with respect to potential claims related to the Respironics recall, please refer to

Contingencies. Management continues to monitor the risks associated with such potential claims

and its impact on liquidity position, if any.

Philips’ existing long-term debt is rated BBB+ (with stable outlook) by Fitch, Baa1 (changed from

negative to stable outlook in 2024) by Moody’s, and BBB+ (changed from negative to stable

outlook in 2024) by Standard & Poor’s. As part of our capital allocation policy, our net debt

position is managed with the intention of retaining our strong investment grade credit rating.

Ratings are subject to change at any time and there is no assurance that Philips will be able to

achieve this goal. Philips’ aim when managing the net debt position is dividend stability and a pay-

out ratio of 40% to 50% of adjusted income from continuing operations attributable to

shareholders. Philips’ outstanding long-term debt and credit facilities do not contain financial

covenants. Adverse changes in the company’s ratings will not trigger automatic withdrawal of

committed credit facilities or any acceleration in the outstanding long-term debt (provided that the

USD-denominated bonds issued by Philips in March 2008 and 2012 contain a ‘Change of Control

Triggering Event’ and the EUR-denominated bonds contain a ‘Change of Control Put Event’). A

description of Philips’ credit facilities can be found in Debt.

Philips Group

Credit rating summary


	Long-term	Short-term	Outlook
Fitch	BBB+		Stable
Moody’s	Baa1	P-2	Stable
Standard & Poor’s	BBB+	A-2	Stable

Philips pools cash from subsidiaries to the extent legally and economically feasible. Cash not pooled

remains available for local operational needs or general purposes. The company faces cross-border

foreign exchange controls and/or other legal restrictions in a few countries, which could limit its

ability to make these balances available on short notice for general use by the group.

Philips believes its current liquidity and direct access to capital markets is sufficient to meet its

present financing needs.

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.


	35


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3.4.3Cash obligations

Contractual cash obligations

The following table presents a summary of the Group’s fixed contractual cash obligations and

commitments as of December 31, 2024 . These amounts are an estimate of future payments, which

could change as a result of various factors such as a change in interest rates, foreign exchange,

contractual provisions, as well as changes in our business strategy and needs. Therefore, the actual

payments made in future periods may differ from those presented in the following table:

Philips Group

Contractual cash obligations1 2 in millions of EUR


		Payments due by period
	Total	Less than 1 year	1-3 years	3-5 years	After 5 years
Long-term debt	7,168		2,006	1,338	3,824
Short-term debt	525	525
Interest on debt	1,792	197	368	325	902
Derivative liabilities	72	64	8
Purchase obligations³	1,161	300	307	210	344
Trade and other payables	1,830	1,830
Contractual cash obligations	12,548	2,916	2,689	1,873	5,070

1 Amounts in this table are undiscounted

2 This table excludes post-employment benefit plan contribution commitments and income tax liabilities in

respect of tax risks because it is not possible to make a reasonably reliable estimate of the actual period of

cash settlement.

3 Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding

for the Group. They specify all significant terms, including fixed or minimum quantities to be purchased,

fixed, minimum or variable price provisions and the approximate timing of the transaction. They do not

include open purchase orders or other commitments which do not specify all significant terms.

Debt includes forward contracts of EUR 142 million (nominal value) relating to the repurchase of

shares to cover long-term incentive and employee stock purchase plans. In 2024, Philips entered

into a forward contract for EUR 65 million that matures in 2026 relating to the repurchase of up to

2.5 million shares for long-term incentive and employee stock purchase plans.

Philips offers voluntary supply chain finance programs with third parties, which provide

participating suppliers with the opportunity to factor their trade receivables at the sole discretion of

both the suppliers and the third parties. Philips continues to recognize these liabilities as trade

payables and settles them accordingly on the invoice maturity date based on the terms and

conditions of these arrangements. As of December 31, 2024, approximately EUR 97 million (2023 :

EUR 114 million) of the Philips accounts payable were transferred under these arrangements.

Other cash commitments

The company and its subsidiaries sponsor post-employment benefit plans in many countries in

accordance with legal requirements, customs and the local situation in the countries involved. For a

discussion of the plans and expected cash outflows, please refer to Post-employment benefits.

The company had various provisions by the end of 2024 which are expected to result in cash

outflows in 2025. Refer to Provisions.

Philips has contracts with investment funds where it committed itself to make, under certain

conditions, capital contributions to these funds of an aggregated remaining amount of EUR 130

million (2023: EUR 153 million). Capital contributions already made to these investment funds are

recorded as non-current financial assets.

Please refer to Dividend for information on the proposed dividend distribution.

Please refer to Equity for information on other Long-term incentive and employee stock purchase

plans.

Guarantees

Philips’ policy is to provide guarantees and other letters of support only in writing. Philips does not

provide other forms of support. The total fair value of guarantees recognized on the balance sheet

amounts to EUR nil million for both 2024 and 2023. Remaining off-balance-sheet business-related

guarantees on behalf of third parties and associates amount to EUR 343 million as of December 31,

2024 (December 31, 2023: EUR 2 million). These mainly include bank guarantees secured for

insurance companies to cover product liability-related cash flows related to the Respironics recall.

3.4.4Dividend

Dividend policy

Philips’ dividend policy is aimed at dividend stability and a pay-out ratio of 40% to 50% of adjusted

income from continuing operations attributable to shareholders * .

Proposed distribution

A proposal will be submitted to the Annual General Meeting of Shareholders, to be held on May 8,

2025, to declare a distribution of EUR 0.85 per common share, in shares or cash at the option of

the shareholder, against retained earnings.

If the above dividend proposal is adopted, the shares will be traded ex-dividend at the Euronext

Amsterdam as of May 12, 2025, and at the New York Stock Exchange as of May 13, 2025. In

compliance with the listing requirements of Euronext Amsterdam and the New York Stock

Exchange, the dividend record date will be May 13, 2025.

Shareholders will be given the opportunity to make their choice between shares and cash between

May 14 and June 2, 2025, for shares traded at the New York Stock Exchange, and between May

14 and June 3, 2025, for shares traded at Euronext Amsterdam. If no choice is made during this

election period, the dividend will be distributed in shares.


	36


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Of the total dividend distribution to all shareholders (up to EUR 786 million), a maximum of 50%

will be available for payment in cash. If shareholders in total elect to receive an aggregate amount

of cash dividend that exceeds the maximum percentage of the total dividend amount, those

shareholders who elected to receive their dividend in cash will receive their cash dividend on a pro-

rata basis, the remainder being distributed in shares.

The number of share dividend rights entitled to one new common share will be determined based

on the volume weighted average price of all traded common shares of Koninklijke Philips N.V. at

Euronext Amsterdam on May 30, June 2 and June 3, 2025. The company will calculate the number

of share dividend rights entitled to one new common share (the ratio), such that the gross dividend

in shares will be approximately equal to EUR 0.85. The ratio and the number of shares to be issued

will be announced on June 5, 2025. Delivery of new common shares and payment of the dividend,

with settlement of fractions in cash, if required, will take place from June 6, 2025.


	Ex-dividend date	Record date	Distribution from
Euronext Amsterdam	May 12, 2025	May 13, 2025	June 6, 2025
New York Stock Exchange	May 13, 2025	May 13, 2025	June 6, 2025

Further details will be given in the agenda with explanatory notes for the 2025 Annual General

Meeting of Shareholders. The proposed distribution and all dates mentioned remain provisional

until then.

Dividend in shares distributed out of retained earnings is subject to 15% dividend withholding tax,

but only in respect of the par value of the shares (EUR 0.20 per share). Shareholders are advised to

consult their tax advisor on the applicable situation with respect to taxes on the dividend received.

Dividends and distributions per common share

The following table sets forth in euros the gross dividends on the common shares in the fiscal years

indicated (from prior-year profit distribution) and such amounts as converted into US dollars and

paid to holders of shares of the New York Registry:

Philips Group

Gross dividends on the common shares (per share)


	2020 ¹	2021 ¹	2022 ²	2023 ²	2024 ¹
in EUR	0.85	0.85	0.85	0.85	0.85
in USD	0.95	1.03	0.90	0.93	0.92

1In cash or shares at the election of shareholder.

2In shares only.

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.


	37


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

4Environmental, Social and Governance

1.96 billion lives improved by our

products and solutions, including

242 million in underserved

communities

First edition of annual disclosures

under the Corporate Sustainability

Reporting Directive in the EU

Driving toward supplier

sustainability targets, and

recognized as a Supplier

Engagement Leader

New culture framework, impact

with care, with patient safety,

quality, and integrity at the heart

of everything we do

Clear management and

independent oversight

responsibilities, and actively

engaging stakeholders to foster

meaningful dialogues


	38


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

“We are proud of the progress we made in 2024 on our ambition to

be a responsible and sustainable company. Our integrated approach

to ESG enables Philips to deliver better care for more people and

create sustainable long-term value for our stakeholders.”

Marnix van Ginneken Chief ESG & Legal Officer Royal Philips

Philips has a long history of doing business sustainably, both in the environmental as well as the

social dimension. This is not only a matter of responsible business, it also drives our company

success and innovation. We have been recognized as a front-runner in the area of sustainability and

for leading the way in, for example, climate action, tax transparency, supplier sustainability and

sustainability reporting.

Our first environmental programs go back to the 1980s and were focused on reducing the

environmental impact of our sites. This was later enhanced by our EcoDesign program, through

which we aimed to reduce the environmental impact of our products. After that, we included the

impact of our value chain, first through our supplier sustainability program, followed by

engagements with our customers. This culminated in our Science Based Targets, and we are proud

that we were the first healthcare company to have its value chain emission reduction plan validated

and approved by the Science Based Target initiative, and to have been included in the Carbon

Disclosure Project's ‘A-list’ for 12 years in a row.

Philips also has a strong social track record, having been a pioneer with its pension plan and health

insurance for its employees in the previous century, paying at least a living wage to its employees,

and being recognized as an employer of choice. Like our environmental programs, we expanded

our programs to include employees in our supply chain more than 10 years ago.

In addition, we can build on a tradition of sustainability reporting, beginning with our first

Environmental Annual Report published in 1999. In 2003, we expanded the Environmental Annual

Report with the launch of our first Sustainability Annual Report. This report provided details of our

social and economic performance in addition to our environmental results. Next, in 2008, we

published our first integrated financial, social and environmental report. Since then, our

sustainability reporting has developed further from year to year, now covering the Environmental,

Social and Governance (ESG) dimensions.

This Annual Report is our 17th annual integrated financial and sustainability report. Although the

Corporate Sustainability Reporting Directive ((EU) 2022/2464) has not been implemented into

Dutch law yet, the sustainability report included herein has been written to comply with disclosure

requirements of the underlying European Sustainability Reporting Standards (ESRS). Refer to

General basis for preparation to see which chapters and sections together constitute our

sustainability statement.

In this chapter, we explain how we act and perform in the environmental and social dimensions,

and we describe the main elements of our governance framework. The ESG information in this

chapter is further explained and underpinned in greater detail in Sustainability statement.

Following our Double Materiality Assessment, we report in this chapter on these material topics on

which ESRS have been published:

• Climate change (ESRS E1)

• Resource use and circular economy (ESRS E5)

• Own workforce (ESRS S1)

• Workers in the value chain (ESRS S2)

• Consumers and end-users (ESRS S4)

• Business conduct (ESRS G1)

Our reporting is aligned with the comprehensive and integrated Environmental, Social and

Governance (ESG) commitments we have adopted for the period 2020-2025.


	39


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Our key ESG commitments


Environmental We act responsibly toward our planet in line with UN SDGs 12 and 13.	Social Our purpose is to improve people’s health and well-being through meaningful innovation, in line with UN SDG 3. We act responsibly toward society and partner with our stakeholders.	Governance We aim to deliver superior long-term value for our customers and shareholders, and seek to live up to the highest standards of ethics and governance in our culture and practices.
• We will maintain carbon neutrality and use 75% renewable energy in our operations by 2025. We have set ambitious targets to reduce CO₂ emissions in our entire value chain in line with a 1.5 °C global warming scenario (based on Science Based Targets). • We will generate 25% of our revenue from products, services and solutions contributing to circularity, and offer responsible take-back on all professional medical equipment by 2025. • We will embed circular practices at our sites and put zero waste to landfill by 2025. • We will design all new product introductions in line with our EcoDesign requirements by 2025, with ‘EcoHeroes’ accounting for 25% of hardware revenues. • We work with our suppliers to reduce the environmental footprint of our supply chain in line with a 1.5 °C global warming scenario (based on Science Based Targets). • We engage with our stakeholders and other companies to drive sustainability efforts addressing the United Nations Sustainable Development Goals.	• We aim to improve the health and well-being of 2.5 billion people per year by 2030, including 400 million people in underserved communities. • It is our strategy to lead with innovative solutions to deliver real change – helping our customers achieve better health outcomes, a better experience for patients and staff, and lower cost of care, as well as helping people take better care of their health. • We aim to be the best place to work for our employees, providing opportunities for learning and development, promoting an inclusive workplace that reflects the diversity of our community through fair hiring and promotion practices, and assuring a safe and healthy work environment. We pay at least a living wage and aim for employee engagement above the high-performance norm. • Through our supplier development program we will improve the lives of 1 million workers in our supply chain by 2025. • We actively engage with and support the communities in which we operate, e.g., through volunteering, internships, and STEM (Science, Technology, Engineering, Mathematics) initiatives. • We contribute to the Philips Foundation, an independent foundation (stichting) organized under Dutch law, which aims to provide access to quality healthcare for disadvantaged communities. • We consider our tax payments as a contribution to the communities in which we operate, as part of our social value creation.	• Our management structure and governance combine responsible leadership and independent supervision. • Our integrated operating model defines how we work together to delight our customers and achieve our company goals, leveraging our global scale and capabilities. • Enabling the delivery of patient-centric, safe, and high- quality care – the essence of patient safety and quality – is foundational to Philips’ purpose to improve the health and well-being of people through meaningful innovation. • Our remuneration policy is designed to focus employees throughout the Philips Group on pursuing our purpose and delivering on our strategy, and to motivate them to create superior, long-term stakeholder value. Our executive annual incentives and long-term incentive plan are partly based on ESG objectives. • Our General Business Principles set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and serve as a reference for the business conduct we expect from all our business partners. • Our risk management is designed to provide an appropriate level of assurance that strategic and operational objectives are met, legal requirements complied with, and the integrity of the company’s reporting and related disclosures are safeguarded. • We are transparent about our plans, activities, results and contributions to society (e.g., tax reporting, and engaging with shareholders, customers, business partners, governments and regulators through a variety of platforms).


	40


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

ESG governance

The above is an overview of our current key ESG commitments. Through these commitments and the

underlying ESG programs, metrics, road maps, goals and targets we specify and operationalize the

ambitions in our 2020-2025 ESG plan. The Board of Management, including the Chief ESG & Legal

Officer, is responsible for the design and management of our 2020-2025 ESG plan and typically

convenes the Group Sustainability team and (where relevant) Business, Region or Function leaders four

times per year on ESG matters. During these meetings, the Board of Management defines Philips’ ESG

strategy, commitments, programs, action plans and policies, as well as oversees major transactions,

monitors progress on ESG priorities, and takes corrective action where needed. Progress on ESG is

communicated internally and externally on our results website on a quarterly basis and at least annually

to the Executive Committee and the Supervisory Board. The ultimate oversight of the ESG dimensions,

and their integration into the company’s overarching strategy, is a responsibility of the Supervisory Board

as a whole because of the significance of ESG matters. While retaining this overall responsibility, the

Supervisory Board is supported by the Audit Committee, which meets quarterly to discuss significant

developments in impacts, risks and opportunities, developments in ESG reporting, and other relevant

topics. Please refer to the Supervisory Board report for the Supervisory Board members with specific ESG

and sustainability expertise, and the Supervisory Board's ESG-related activities during the year. The

Supervisory Board as a whole has sufficient ESG and sustainability-related expertise relevant to the sector

in which the company is operating, also considering the way we address impacts, risks and

opportunities with respect to the material topics identified through our Double Materiality Assessment.

Furthermore, both our Board of Management and our Supervisory Board leverage all relevant expertise

through their direct access to the Group Sustainability team and (where relevant) external experts.

In our sustainability statement we explain the progress made in the execution of our ESG plan.

However, nothing in our statement should be read or construed to represent or imply a guarantee

or any other legally enforceable obligation vis-à-vis our stakeholders. We do what is reasonable and

practical, and we actively partner with our stakeholders to achieve our aspirational goals and

targets, while acknowledging and weighing economic and practical constraints and other external

factors that may limit our ability to control environmental and social impacts, in particular beyond

our own operations. It is furthermore noted that our ESG efforts and our globally applying

aspirational goals and targets, including but not limited to those related to diversity, inclusion and

well-being, are subject to our compliance with local rules and regulations, some of which may

conflict across jurisdictions.

4.1Environmental

Our global operations and supply chain impact the environment, yet our greatest potential impact

is in our downstream value chain through the sustainable design of our products and solutions.

Through this work, we contribute to UN Sustainable Development Goals (SDG) 12 and 13.

This section provides an overview of key environmental indicators relevant to our ESG

commitments. Our focus is on the material topics identified through our Double Materiality

Assessment – climate change and resource use and circular economy – but we also address

Biodiversity and Ecosystem Services as some rating agencies expect us to provide information on

this. Further details are available in Sustainability statement .

4.1.1Measuring our environmental impact

Philips has been performing Life Cycle Assessments (LCAs) since 1990. These LCAs provide insight

into the lifetime environmental impact of our products. They are used to steer our EcoDesign

efforts by reducing the environmental impact during the lifetime of our products and to grow our

Green/EcoDesigned/EcoHero and Circular portfolio. Beyond that, for the eighth year, we have

measured our environmental impact on society at large via an Environmental Profit & Loss (EP&L)

statement, which includes the hidden environmental costs associated with our activities and

products. It provides insights into the main environmental hotspots and innovation areas to reduce

the environmental impact of our products and solutions.

The EP&L statement is based on LCA methodology, in which the environmental impacts are

expressed in monetary terms using conversion factors developed by CE Delft . As we gain new

insights and retrieve more and better data in the future, we will be able to enhance the

methodology, use-cases and accuracy of results. For more information and details refer to our

methodology document .

Environmental Profit & Loss statement 2024

Philips reduced its EP&L impact in 2024 to EUR 3.82 billion, compared with the EP&L impact of EUR

4.21 billion in 2023. This is mainly due to differences in sales mix.

The most significant environmental impact, 48% of the total, is related to the use of sold products,

which is due to electricity consumption. Human toxicity (mainly linked to electricity generation),

particulate matter formation, and climate change are the key environmental impact categories

contributing to this result. The environmental costs include the environmental impact of the lifetime

of the products that we put on the market in 2024, e.g., 10 years in the case of an MRI machine or

five years in the case of a Sonicare toothbrush. Products identified as rentals are the only exception,

with an energy consumption of one year. As we expand our EcoDesign activities, with the aim to

have all our new product introductions in line with our EcoDesign requirements by 2025, we expect

to better report on the environmental impact in the years to come.

Of the total 2024 impact, just EUR 272 million (7%) is directly related to Philips’ own operations,

mainly driven by outbound logistics, followed by business travel. This impact is similar to 2023 (EUR

261 million) with the slight increase due to increased business travel.

Our materials and components supply chain, including raw materials supply, processing, waste,

volatile organic compounds, and water, as well as packaging, has an environmental impact of

some EUR 1.71 billion, which is 45% of our total environmental impact. The main contributors are

the electronic components (including printed circuit boards), cables and metals used in our

products. Through our Circular Economy and Supplier Sustainability programs we continue to focus

on reducing the environmental impact caused by the materials we source and apply in our

products. With the insights gained through the EP&L, we aim to optimize our climate impact by

providing our Businesses with actionable insights.


	41


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Environmental Profit & Loss statement in EUR

2024

Notes on the EP&L statement

• The definition of the use-case scenarios has a significant impact on the result, especially for

consumer products, which have large sales volumes, long lifetimes and typically high energy

consumption.

• The current EP&L statement only includes the hidden environmental costs. It does not yet

include the benefits to society that Philips generates by improving people’s health and well-

being through our products and solutions. We have a well-established methodology to calculate

the number of lives we positively touch with our products and solutions. We aim to look into

valuing these societal benefits in monetary terms in the future.

• The EcoInvent 3.9.1 data set was used for 2023 and 2024 reporting .

4.1.2Climate change

Climate change has been a material topic for Philips for many years. Research from the Potsdam

Institute for Climate Impact Research shows that over 4% of global Greenhouse Gas (GHG)

emissions are caused by the healthcare sector. Therefore, we are taking action to rethink our

business models and decouple economic growth from the impact we have on the environment. We

believe large corporations should lead the transition to a low-carbon economy. This will not only

reduce the impact on the environment but will also positively impact social and economic aspects.

For example, transitioning from air to ocean freight frequently leads to cost savings, and designing

energy efficient products can help hospitals reduce their operational expenditure.

Carbon neutral operations since 2020

During the COP21 United Nations Climate Conference in Paris in 2015, we committed to become

carbon-neutral in our own operations, pursue all efforts to reduce our operational emissions,

source all our electricity from 100% renewable sources, and offset all unavoidable emissions by

year-end 2020. We delivered on a comprehensive program that included energy-efficiency

improvements, on-site renewables, and Power Purchase Agreements, as well as transport mode

shifts to low-carbon-emitting alternatives. As a result, we have significantly reduced our operational

carbon footprint compared to the baseline 2020.

Since 2020, Philips has been carbon-neutral in its own operations (Scope 1, Scope 2, and Scope 3 -

business travel and transportation & distribution). Although we prioritize carbon reduction, our

comprehensive carbon offsetting program is still necessary to ensure carbon neutrality in our own

operations.

Philips Group

Net operational carbon footprint in kilotonnes CO 2 -equivalent


Metric	2020	2021	2022	2023	2024
Gross operational carbon footprint	518	519	438	418	474
Carbon credits cancelled	518	519	438	418	474
Net operational carbon footprint	-	-	-	-	-


	42


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

In 2024, we experienced an increase in our operational carbon footprint compared with 2023. This

has primarily been driven by increased air travel of our employees, for example to meet with

customers, as well as a significant uplift of the air freight emission factors. This is further explained

in Climate change . We have introduced key performance indicators with the aim to reverse this

development.

Reducing our value chain emissions

The majority of our environmental impact either resides downstream during the use phase or

upstream as part of our purchased goods and services. Therefore, we are teaming up with both

internal and external stakeholders to ensure we reduce our climate impact, not only in our

operations, but throughout our value chain.

In 2024 we reduced our value chain emissions by 596,769 tonnes CO 2 -equivalent (CO 2 -e)

compared with 2023 and 2,994,720 tonnes CO 2 -e compared with our 2020 Scope 3 baseline. This

is primarily driven by differences in sales mix (reduction in sales of impactful products), energy

efficiency improvements and reduction in purchased goods emissions.

Philips Group

Carbon emissions across Philips value chain in kilotonnes CO 2-equivalent

2024


	43


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

To continue to drive down our emissions across our value chain we remain focused on the

following objectives:

• designing energy-efficient products and collaborating with our customers to reduce emissions

during the use-phase

• minimizing our purchased goods emissions by adopting circular economy practices and

transitioning to more sustainable materials

• collaborating with our suppliers to reduce emissions in our supply chain

• reducing emissions from logistics by optimizing route planning and exploring sustainable

alternatives

• transitioning to lower carbon energy at our sites

Emissions are monitored and managed on at least a quarterly basis and reviewed on a Business-by-

Business basis through key performance indicators.

Philips reports all its emissions in line with the Greenhouse Gas Protocol.

Recognition

Our efforts are acknowledged by CDP (formerly known as the Carbon Disclosure Project), a global

NGO that assesses the greenhouse gas emission performance and management of reporting

companies. In 2024, we were ranked on the CDP Climate Change ’A’ List for our continued climate

performance and transparency for the 13th consecutive year.

Actions related to the achievement of our targets are governed by our Environmental policy , which

incorporates input from Philips' regulatory, design, sustainability, supply chain, and operations

stakeholders, as well as the voice of our customers.

For more information on our Climate Action progress in 2024, please refer to Climate change.

4.1.3Resource use and circular economy

A circular economy aims to decouple economic growth from the consumption of natural resources

and ecosystems by optimizing their use, eliminating waste and pollution, and circulating products

and materials for as long as possible, while giving natural systems the opportunity to regenerate

themselves. The way we take, make and use materials not only impacts resource scarcity, but also

has a significant impact on both climate and nature, as 45% of global GHG emissions come from

the way products are made and used , and more than 90% of biodiversity loss stems from

extraction and processing. Electronic waste is one of the fastest growing waste streams in the

world. At the same time, the healthcare industry is also a resource-intense industry which,

according to the Circularity Gap Report 2020 , uses 10% of materials extracted globally, every year.

Bringing this back to Philips’ impact on the planet, our use of materials accounts for 40% of our

total environmental impact based on our EP&L methodology, which includes raw material supply,

manufacturing, waste and packaging. Therefore, in addition to the use of renewable energy and

energy efficiency, the transition to a circular economy will be essential to meet our global climate

goals and to protect nature.

The Circular Economy program at Philips ran for the 12th year in 2024, building on more than 30

years’ experience of applying resource efficiency through our sustainability programs. Our ambition

is to help our customers and consumers to ‘do more with less’ and drive the circular transformation

across the value chain together with our partners. We apply Philips’ circularity principles ‘use less,

use longer and use again’ across five strategic areas.

Circular Economy program: five strategic areas


	44


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Across these strategic areas for circularity, we have set ambitious targets to help us deliver on our

commitments to generate 25% of our revenue from products, services and solutions contributing

to circularity; design all new product introductions in line with our EcoDesign requirements; embed

circular practices at our sites and put zero waste to landfill; and offer responsible take-back on all

professional medical equipment by 2025.

In 2024, Philips increased its circular revenues to 24%, a step-up of 4 percentage points compared

with the previous year, mainly driven by contributions from circular design. Philips also achieved

100% EcoDesigned new product introductions (NPIs). This is the first year of disclosing the results

of this target.

In 2024, Philips achieved 94% circular materials management, compared with 91% in 2023. This is

because of improved operational waste management, for instance through reuse of materials and

through establishing new partnerships for previously non-recycled materials. We achieved our zero

waste to landfill commitment in 2024 as we did in 2023, with 0.0% waste to landfill.

In 2024, Philips continued to ‘close the loop’ on large medical equipment while also extending the

commitment to small medical equipment. As a result, Philips has reclaimed more than 8,600

systems and pieces of equipment in 2024. This is a decrease compared with 2023, mainly affected

by fewer Philips systems and equipment made available, influenced also by market conditions.

Beyond Philips' 2025 circularity targets, we also look at the impact of the targets on our material

flows. There, we do not only look at the total weight of materials from products, parts and

packaging that we deliver to customers and consumers, but also how we help to optimize products

while in use and what happens to them at end-of-use (see accompanying visual). Philips leverages

partnerships to help scale the circular economy globally. For example, we are a key member of the

Global Circularity Protocol (GCP) led by the World Business Council for Sustainable Development.

Together with UN Environment Program One Planet Network, we use a global business framework

to set targets, measure and disclose progress on circularity. We are also a long-standing partner of

the Ellen MacArthur Foundation.

Philips’ circular journey is furthermore closely connected with the developments around regulations,

metrics and reporting. Together with other companies, Philips is actively supporting global and

national governments in creating impactful and practical laws, regulations, and guidelines. For

instance, we have a leading role in the Dutch Circular Economy Agenda.

EcoDesign

We see a growing demand from our customers, including hospitals and retailers, to help them

reduce the environmental impact of their own operations and beyond. To support their

environmental ambitions, we are working to reduce the environmental impact of our products over

the total life cycle. As a product’s environmental impact is influenced by decisions made at the

design stage, embedding EcoDesign in our product development cycle is essential.

The EcoDesign program focuses on four areas – energy, substances, circularity and packaging –

aiming to increase energy efficiency, avoid the use of hazardous substances, optimize the use of

materials and improve packaging across the product life cycle.

In 2024, 100% of our NPIs were EcoDesigned, driven by full adoption of the EcoDesign

requirements for hardware NPIs in our Business Units. Our EcoHero revenues amounted to 21.9%

compared with 15.9% in 2023. Historically, most EcoHero contributions relate to improvements in

energy use. In 2024, packaging and circularity (weight reduction and sustainable materials) were

the fastest growing contributors.

In addition to these target metrics, we also measure Green Innovation Spend and Green Revenues.

Investments in Green Innovation in 2024 amounted to EUR 263 million compared with EUR 142

million in 2023, driven by projects that develop new EcoDesigned products and technologies, and

by innovation projects that maintain existing EcoDesigned products. Green Revenues amounted to

EUR 13.8 billion in 2024, or 76.4% of sales (compared with 70.5% in 2023). The results reflect the

growth of our portfolio of Green and EcoDesigned products and services, and reporting

improvements.


	45


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Please refer to Resource use and circular economy, EcoDesign and Sustainable Operations for more information.

4.1.4Other environmental information

Biodiversity and ecosystem services

Philips recognizes the importance of healthy ecosystems and biodiversity for our company, our

employees, and society, even though we have not identified this as a material topic through our

Double Materiality Assessment. Since 2021, Philips has a natural capital program, focusing on

reducing our chemicals footprint and water consumption, and on improving biodiversity and

ecosystem services. For more details related to our own operations, see Sustainable Operations.

By creating healthy ecosystems, the biodiversity and ecosystem services (BES) program supports the

mitigation of nature and climate-related risks for our sites, as assessed in the Task Force on

Climate-Related Financial Disclosures (TCFD) report.

In 2024, as part of the (BES) program, Philips evaluated the total area and ecological value of each

manufacturing site, establishing a baseline to measure improvements in future years. Together with

our partners, we are working to develop more advanced BES metrics suitable for industrial areas.

Philips Group

Biodiversity and ecosystem service improvements


Year	BES improvement
2022	• BES Ambassador training at our manufacturing sites • Manufacturing sites delivered some 80 potential measures to enhance biodiversity on-site • Tracked BES performance at our manufacturing sites with a ecosystem services mapping tool to identify ecosystems that provide services to our facilities
2023	• Implemented 23 biodiversity improvement measures selected for manufacturing sites • Completed activities, as planting native trees in India, creating flower gardens in China, and creating habitats for endangered bee species in Central America
2024	• Established an internal metric to drive biodiversity activities in manufacturing sites based on land-use • Implemented 16 BES improvements on 21,000 m 2 in our manufacturing sites • Implemented four BES improvements impacting 35,000 m2 • Supporting and engaging with local communities

Activities in and around our manufacturing sites consider the biome, endangered ecosystems,

climate risks, local restrictions and needs of the community and employees. For example, in 2024,

we re-designed the customer-facing entrance at our Colorado Springs site to only include drought

resistant, native plants, as the site is in a water-stressed area. Our site in Zhuhai, China, we

unsealed the parking lots to improve water permeation during heavy rains and therefore reduce

flood and drought risks and improve soil health. Our site in Batam, Indonesia, engaged its


	46


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

employees and management in planting trees, which provide fruit to employees, blossoms to

pollinators, and shade, and help reduce air pollution. The manufacturing site in Costa Rica

supported a sanctuary for endangered wildlife, to combat biodiversity loss in rainforests. Employees

around the world also engaged in clean-ups, and biodiversity workshops. Such efforts contribute

not only to environmental goals but also to making Philips a 'best place to work', one of our ESG

commitments.

Philips considers improving biodiversity on its own land as a important first step toward reducing

biodiversity impact in other parts of its value chain.

By systematically quantifying and reducing the environmental impact of our operations, our supply

chain and the use-phase of our products, we aim to actively protect and restore biodiversity loss.

We will publish our second Taskforce on Nature-related Financial Disclosures (TNFD) report in 2025

following the LEAP approach.

For more information refer to Resource use and circular economy.

4.2Social

As a leading health technology company, it is our purpose to improve people’s health and well-

being through meaningful innovation. Our people are key to delivering on our promise of impact

with care – we aim to be the best place to work for people who share our passion.

4.2.1Improving people’s lives

Lack of access to affordable, quality care is one of the most pressing issues of our time. Climate

change is exacerbating this situation and putting the lives of millions of people at risk. At Philips,

we are conscious of our responsibilities toward society and the planet. We aim to improve the lives

of 2.5 billion people a year by 2030, including 400 million medically underserved individuals.

To ensure we remain on track to achieve this goal, we have developed an integrated approach that

tells us how many lives have been improved by our products and solutions in a given year. We call

this our lives improved model, and it helps us to track our performance on a country-by-country

basis in line with UN SDG 3, allowing us to shape strategies 'to ensure healthy lives and promote

well-being for all at all ages'. In 2024, we improved the lives of 1.96 billion people, of which 242

million were in medically underserved communities. The increase in lives improved was mainly

driven by our Monitoring, Enterprise Informatics and Image Guided Therapy businesses, as well as

efforts by the teams in Greater China, Latin America, the Indian Subcontinent and the Middle East,

Türkiye and Africa.

Philips understands that it is necessary to have a deep understanding of the relationship among all

stakeholders and their specific needs in order to support underserved communities. By combining

the strengths of Philips, Philips Ventures, Philips Foundation, and its partners, we aim to make a

positive impact by providing access to effective and affordable healthcare for those in greatest

need, and improve health outcomes for all. Philips' reported Lives improved results only include

contributions by Philips Group.

For more information, please refer to Lives Improved methodology .

Philips Group

Lives improved per Region/Zone


	Lives improved (million)	Population (million)	Saturation rate (as % of population)
Asia-Pacific	132	1,036	13%
Belgium, the Netherlands, Luxembourg	25	30	83%
Central Eastern Europe	78	155	50%
Germany, Austria, Switzerland	83	102	81%
France	44	69	64%
Greater China	551	1,441	38%
Iberia	46	58	79%
Italy, Israel, Greece	46	81	57%
Indian Subcontinent	106	1,652	6%
Japan	52	125	42%
Latin America	193	645	30%
Middle East, Türkiye, Africa	120	1,805	7%
Nordics	20	28	71%
North America	367	375	98%
Russia, Central Asia	53	252	21%
UK & Ireland	41	74	55%

4.2.2Our organization, people and culture

In 2024, we have built upon the foundation laid in 2023. We have made significant strides in

refining our operating model, and inspiring and generating commitment among our workforce.

Our dedication to patients, customers, consumers and our people has strengthened, and we have

evolved our organizational culture and capabilities.


	47


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Our People transformation goals for 2024 were threefold: renew our culture, increase leadership

and people capabilities, and continue to simplify our ways of working to deliver our purpose and

plan to create value with sustainable impact.

Our culture

In 2024, we introduced a new culture framework centered on 'impact with care' for patients,

people and the planet. This framework focuses on patient safety, quality, and integrity, supported

by four cornerstones: Clarity and Simplicity, Execution and Performance, Accountability and

Empowerment, and Learning and Collaboration. We remain committed to our transformation

journey. We will continue to refine and strengthen our approach, ensuring that 'impact with care'

becomes deeply ingrained in every aspect of our operations.

We recognize that embedding our culture happens by living it, and that small changes catalyze

systemic shifts. A key achievement in this process was engaging 3,000 people leaders on our

purpose, strategy, and culture, laying a strong foundation for organizational alignment. To support

our transformation, we increased the visibility of key performance metrics across the organization,

fostering transparency and accountability. We also launched a company-wide performance

management system aligned with our new cultural cornerstones, improving goal clarity and

accountability.

We attach great importance to the health and well-being of our workforce and to creating an

environment of inclusion and belonging, where all employees feel psychologically safe. This is not

only a matter of responsible business, it also drives our company success and innovation. When we

embrace diverse perspectives and attract and retain engaged employees from a wide range of

backgrounds, we create better products, services and solutions for our customers and communities.

We are also committed to being an equal-opportunity employer, ensuring that all hiring,

promotions, and pay decisions are based solely on merit, qualifications and performance. We do

not discriminate on the basis of factors as race, color, age, gender, religion, or any other status in

our recruitment, hiring, training, promotion, compensation or employment practices.

Our People Engagement Survey saw increased participation, with a response rate of 84% (almost

58,000 employees). Despite the ongoing changes within the organization, we observed a positive

trend in our Employee Engagement Index, with an increase of 5 percentage points to 78% in

2024. While this improvement is encouraging and indicates that the organization is adapting well

to the changes, it is worth noting that this figure is still 2% below the high performance norm.

At Philips, we strive for an injury-free and illness-free work environment. Since 2016, the Total

Recordable Cases (TRC) rate and Lost Workday Injury Case (LWIC) rate have been defined as key

performance indicators. A recordable case is defined as a case where an injured employee

undergoes medical treatment or sustains an occupational illness. LWICs are defined as occupational

injury cases where an injured person is unable to work for one or more days after the injury. We set

yearly TRC rate targets for the company, Businesses and manufacturing and R&D sites. We

recorded 151 TRCs in 2024, a 12% reduction compared with 2023. The TRC rate decreased from

0.24 per 100 FTEs in 2023 to 0 .21 i n 2024. We also recorded 77 LWIC. This represents a 14 %

decrease compared with 90 in 2023. The LWIC rate decreased to 0. 11 per 100 FTEs in 2024,

compared with 0.12 in 2023.

Please refer to Social information for further information.

Leadership and people capabilities

In terms of talent development, we have made significant progress. Internal mobility reached 30%,

demonstrating our commitment to developing internal talent. Women now represent 33% of

senior leadership positions, where our 2025 target is 35%. Overall employee turnover decreased to

14.8%, down from 17.6% in 2023, indicating improved retention strategies. Notably, we

increased retention of top talent, with turnover in this group decreasing from 12.3% in 2023 to

6% in 2024 (see Workforce details) . We also increased hiring for medtech and functional expertise

to bolster our capabilities in critical areas. From a learning, engagement, and growth perspective,

3,164,129 hours of personal and professional development were formally registered in 2024 (see

Workforce of the future ).

Simplifying how we work

Nearing the end of the second year of our operating model, we made significant strides in refining

our approach and addressing key areas for improvement. We remain focused on successfully

executing our three-year plan and are determined to further build on our industry-leading

innovations, improve our fundamentals, simplify how we work, and ensure we are more

competitive and more agile. Our efforts focused on fine-tuning resources and decision rights,

improving portfolio management, implementing integrated and customer-driven product

management, advancing commercial excellence, and accelerating our service capabilities.

Innovation and impact remained at the forefront of our efforts. We initiated cross-functional

innovation teams focused on patient-centric solutions.

Our focus on patient safety, quality, and integrity, coupled with our commitment to empowering

our people and driving innovation, positions us strongly to achieve our goal of improving the lives

of 2.5 billion people a year by 2030.

4.2.3Human rights

Philips believes that companies have both the responsibility to respect human rights and the ability

to protect them. Philips’ Human Rights Policy, General Business Principles, Supplier Sustainability

Declaration and other relevant policies guide our actions, in line with the International Bill of

Human Rights and the International Labor Organization’s Declaration on Fundamental Principles

and Rights at Work.

Philips also follows the guidance in the UN Guiding Principles on Business and Human Rights and

the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational

Enterprises.


	48


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The Philips Board of Management is ultimately responsible for setting the human rights strategy

and managing human rights. It is supported by a cross-functional project team, composed of a

human rights manager and professionals from several Businesses, and it drives initiatives with

oversight from the Human Rights Steering Committee, consisting of senior leaders from Integrated

Supply Chain, Legal, People, and Group Sustainability.

In 2024, we continued to develop our due diligence strategy by conducting Human Rights Impact

Assessments (HRIAs). Philips conducted HRIAs at its sites in China and Indonesia, living up to its

commitment of conducting regular HRIAs at 100% of its at-risk sites. Philips intends to monitor the

progress and findings from at-risk sites and take them on a continuous improvement journey

regarding human rights topics.

Although the HRIA of selected sites is primarily focused on Philips' own operations, a derived deep-

dive approach for certain suppliers has been established since 2022. For five suppliers, a focused

assessment on human rights was conducted in 2024; this is distinct from the broader supplier

sustainability assessment approach, which covers sustainability more holistically as indicated in

Supplier sustainability & Workers in the value chain .

Our Human Rights Report contains detailed information regarding our progress, targets, and plans

for continuous improvement.

4.2.4Supplier sustainability

Sustainability is a focus for the Integrated Supply Chain Function, which is actively collaborating

with our partners, whether these be component suppliers or energy or logistics providers. Close

cooperation with our suppliers not only helps us deliver health technology innovations, but it also

supports new approaches that help us minimize our environmental impact and maximize the social

and economic value we create.

In 2024, our programs focused specifically on improving supplier sustainability performance,

advancing human rights, responsibly sourcing minerals, and reducing the environmental footprint

of our supply base by driving the adoption of Science Based Targets.

The sustainability performance of our suppliers is fully embedded in our procurement strategy and

ways of working. We have a direct (tier 1) business relationship with approximately 4,400 product

and component suppliers and 15,100 service providers. Social and environmental issues deeper in

our supply chain also require us to intervene beyond tier 1 suppliers. We want to make a difference

through sustainable supply management and responsible sourcing. This is more than just managing

compliance – it is about collaborating with our supply partners to make a positive and lasting

impact.

Through the Supplier Sustainability Performance program, our maturity-based approach to drive

continuous improvement, we improved the lives of approximately 936,000 workers in our supply

chain in 2024 (2023: 723,000). Collaborating with our strategic partners, we increased the number

of deep-dives at tier 2 suppliers, actively supporting them to become more effective in their own

sustainability engagement approaches toward their suppliers.

Detailed information on our supplier sustainability programs is available in Supplier sustainability &

Workers in the value chain of this Annual Report.

4.2.5Philips Foundation

Stichting Philips Foundation , an independent foundation organized under Dutch law, is a registered

charity established in 2014. In 2024, Royal Philips supported Philips Foundation with a contribution

of EUR 6.7 million and provided the operating staff as well as the expert assistance of skilled

volunteers in the execution of the Foundation’s programs.

Philips Foundation’s mission is to reduce healthcare inequality by providing access to quality

healthcare for underserved communities through meaningful innovation. It does this through the

provision and application of Philips’ healthcare expertise, innovation power, talent and resources, as

well as through financial support. Together with key partners around the globe (e.g., nonprofit

organizations, academic partners, and entrepreneurs), Philips Foundation seeks to identify

challenges where a combination of healthcare technology expertise and partner experience can be

used to create meaningful solutions that have a positive impact on people’s lives.

Philips Foundation works in projects (grant-based) and through impact investments (e.g., loans or

equity). The instrument depends on the status and self-sustainability of the respective healthcare

technology in serving more disadvantaged communities.

For more information on the Philips Foundation, please refer to Philips Foundation .

4.3Governance

As reflected through our key commitments in the governance dimension, we aim to deliver

superior long-term value for our customers and shareholders, and we seek to live up to the highest

standards of ethics and governance in our culture and practices. Building on those commitments,

this chapter describes the main elements of our governance framework that enable us to

operationalize our purpose by adopting a fully integrated approach to doing business responsibly

and sustainably.

4.3.1Corporate governance

Management and oversight responsibilities and accountability within our company are ultimately

guided by the corporate governance of the parent company of the Philips group, Koninklijke Philips

N.V. (Royal Philips). Royal Philips is a company organized under Dutch law and its shares have been

listed on the Amsterdam stock exchange (Euronext Amsterdam) and on the New York Stock

Exchange.


	49


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Royal Philips has a two-tier board structure consisting of a Board of Management and a Supervisory

Board, each of which is accountable to the General Meeting of Shareholders for the fulfillment of

its respective duties. The members of the Board of Management, supported by the other members

of the Executive Committee, drive the company’s management agenda and share responsibility for

the continuity of the Philips group, focusing on sustainable long-term value creation. Our

independent Supervisory Board supervises the Board of Management and the Executive Committee

and advises them on general policies related to the activities of the company, including setting and

executing the strategy of the Philips Group.

The company is governed by Dutch corporate and securities laws, its Articles of Association, and

the Rules of Procedure of the Board of Management and the Executive Committee and of the

Supervisory Board, respectively. Its corporate governance framework is also based on the Dutch

Corporate Governance Code (dated December 20, 2022) and US laws and regulations applicable to

Foreign Private Issuers.

In its Corporate governance report , the company addresses the main elements of its corporate

governance structure, reports on how it applies the principles and best practices of the Dutch

Corporate Governance Code, and provides the information required by the Dutch governmental

Decree on Corporate Governance ( Besluit inhoud bestuursverslag ) and governmental Decree on

Article 10 Takeover Directive ( Besluit artikel 10 overnamerichtlijn ). When deemed necessary in the

interests of the company, the company may deviate from aspects of the company’s corporate

governance structure, and any such deviations will be disclosed in the company’s Corporate

governance report.

4.3.2The Philips integrated operating model

Our operating model is designed to enable us to deliver on our purpose, driving impact and

creating value for our stakeholders. And to do so responsibly and sustainably, ensuring patient

safety, quality, compliance and integrity in everything we do. The model is intended to promote

accountability and agility, based on the following fundamentals:

• We serve our customers and consumers with patient safety and quality at the core of everything

we do.

• Our Business Units are in the lead and accountable for value creation through their value

streams.

• Our Regions and Functions enable value stream execution.

• Our leaders and teams are empowered to prioritize and allocate their resources for impact.

Our operating model integrates five organizational elements. We ensure alignment of the elements

to deliver on our strategic objectives, with clear accountability to drive flawless execution.

• Strategy

• Structure & Governance

• People & Culture

• Performance Management

• Policies, Processes, Systems & Data

The main governance aspects of our operating model are further explained below. More

information on our strategic focus, as well as our approach to people and culture, can be found in

Strategic Focus and Our Organization, people and culture , respectively.

Structure and governance

In order to meet the needs of patients, customers and consumers, our empowered Business Units

are supported by the Regions and Functions.

Business Units, Businesses and segments

Our Business Units are in the lead accountable for value creation through their value streams. Our

Business Unit leaders have full accountability for meeting customer needs and their end-to-end

P&L, including patient safety and quality and supply chain performance. Business Units are broken

down into business categories, where relevant.

The Businesses are lean, and their leaders ensure consistent alignment among the Business Units’

strategies and goals. They also execute performance management toward the Business Units,

including target setting.

Our segment leaders ensure strategic execution and focus cross-Business, and they are held

accountable by the Board of Management for the results of their underlying Businesses/Business

Units. The three segments are Diagnosis & Treatment, Connected Care and Personal Health, as also

disclosed in our external reporting.

Regions

We are organized in three Regions: North America, Greater China and International Region (the

latter consisting of Europe and Growth areas). Within our Regions, we further organize by Zones

and countries. The Regions’ primary accountability is to manage customer intimacy, build and

maintain relationships, and cultivate understanding of their needs, as well as carry out (strategic)

account management, service delivery, and indirect partner management. They are also

accountable for government relations and for providing the local infrastructure needed to support

Philips’ presence in a country (license to operate).

Functions

Our Functions’ core objective is to drive excellence (for reasons of skill, scope and scale) across the

organization. Functions deliver cost-effective services, ensure legal and regulatory requirements are

met, and propose enterprise policies, standards, guidance and infrastructure, as well as build and

share capabilities and expertise.

Performance management

We set ambitious targets and closely manage performance through a disciplined and focused

operating cadence. Our performance management system is based on an annual planning cycle, in

which we translate our vision and strategy into objectives and plans. The cycle starts with strategic

planning, where we define our long-term ambitions, both financial and non-financial, and set our

long-term priorities. Each year, Philips’ strategic plan is translated into an annual operating plan,


	50


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

underpinned with Business Unit plans. Detailed plans to achieve the company’s targets are

cascaded into the organization and, ultimately, people’s personal objectives, making clear what

performance and behaviors are expected from them.

Policies, processes, systems and data

The 'freedom within a frame' we offer our Business Units provides a framework of policies,

processes, systems and data principles that apply throughout the organization. It allows them

flexibility to adapt to specific requirements in order to meet specific Business Unit needs.

Enterprise-wide policies provide high-level mandatory rules that are applicable across the company

and apply to all Philips employees. All enterprise-wide policies are maintained through a standard

process and approved by the Board of Management. Function leaders can set more specific policies

and standards within their mandate.

Philips’ processes are captured in our process framework, where we manage end-to-end

connections and define the critical process elements (including the ‘what’ and ‘how’, roles and

responsibilities, systems and data, and compliance requirements). The process framework provides

the foundation for all our management systems, including quality, environmental, and health and

safety, to ensure a compliant approach for processes, systems, data and competencies for a specific

management area.

4.3.3Patient safety, quality and regulatory

Enabling the delivery of patient-centric, safe, and high-quality care – the essence of patient safety

and quality – is foundational to Philips’ purpose to improve the health and well-being of people

through meaningful innovation. The Patient Safety and Quality organization brings together the

quality and regulatory affairs functions as one unified team in close coordination with the Medical

Office. This team is positioned to support the Philips organization in fostering the quality culture and

implementing the capabilities, processes, and tools required for operating in the highly regulated

healthcare technology industry. This structured approach promotes non-conformance management,

high standards of product quality, and compliance. The Chief Patient Safety and Quality Officer is a

member of the Philips Executive Committee and reports directly to the Chief Executive Officer.

Our processes are designed to address specific or potential negative impacts to patients, customers

or consumers and include:

• maintaining effective Quality Management Systems

• tracking Corrective and Preventive Action (CAPA) performance and supporting those who are

accountable for the performance and reporting results ultimately to the Board of Management

• performing external audits for compliance and standards certification

• performing internal audits

• having quarterly reviews by the Quality & Regulatory Committee of the Supervisory Board

As part of the complaint management framework, Philips investigates customer feedback as

necessary, utilizing the CAPA approach to help address and resolve complaints. A centralized

system collects, manages, addresses and stores feedback from customers.

Teams in all Businesses, Regions, and Functions foster a quality culture and mindset, where all

employees are encouraged to speak up and share ideas for improving the safety and efficacy of our

products. In October 2024, our employees took part in a dedicated Timeout for Patient Safety and

Quality to solidify this personal commitment and planning. We also continued to strengthen the

Patient Safety and Quality performance review meetings with each Business individually and in the

aggregate. We set Patient Safety and Quality key performance indicators for the company in 2024,

and Quality performance metrics are part of the remuneration of all Philips executives. Additionally,

every Philips employee has a Patient Safety and Quality goal as part of annual people performance

management.

Quality

We strive to continuously raise our performance to deliver safe and high-quality products, services,

and solutions, which are compliant with quality and safety standards and all applicable laws. In

2024, we continued to simplify how we work and improve accountability and ownership, and

further strengthened our engineering capabilities for product development in areas such as quality

systems engineering, reliability and software design.

We further reduced the number of Quality Management Systems (QMS) in which we operate and

continued our investment in systems, capabilities and training to reduce complexity and improve

execution effectiveness.

Regulatory Affairs

Regulatory Affairs, with representation on the leadership team of each Business and Region, further

strengthened internal governance and requirements for engagements with national government

regulatory authorities, such as the US Food and Drug Administration (FDA), European Medicines

Agency (EMA), China's National Medical Products Administration, notified bodies, and national

competent authorities in the European Union (EU).

As a global business in a dynamic regulatory environment, Regulatory Affairs bolsters Philips’

compliance with evolving regulations related to innovations in areas such as artificial intelligence,

healthcare informatics, and software design. Sought as strategic partners, the Regulatory Affairs

team participated in international consensus standards groups alongside regulators and engaged

with international regulators as invited experts and speakers at the International Medical Device

Regulators Forum, Global Harmonization Working Party, and other meetings. Regulatory Affairs is

working with the National Institutes of Health in the US to establish ethical applications of artificial

intelligence in medical devices.

Medical Office

The Medical Office is a global team of medical and scientific experts working within and across

Philips Businesses and is led by the Chief Medical Officer, who reports directly to the Chief

Executive Officer. The role of the Medical Office is to help drive meaningful innovation through

excellence in medical safety, medical affairs, health economics, and clinical research.


	51


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The Medical Office focuses on supporting our Businesses, navigating the intricacies of addressing

patients’ and customers’ unmet needs across a variety of ecosystems, and looking across the entire

product life cycle to help teams develop solutions that are safe, effective, and relevant for patients

and healthcare providers.

The team is responsible for the design, generation, and sharing of clinical and economic evidence

to show the value of our innovations in terms of enhancing the patient and care provider

experience, improving patient outcomes, and increasing healthcare system productivity. The team

collaborates with healthcare providers, and medical and scientific communities, as well as with

private healthcare payers, governments and policy makers, to expand access to, and ensure

widespread use of, our innovations.

In 2024, we expanded the Philips Medical Office, further enhancing our expertise in medical affairs,

clinical research, medical safety and health economics and strengthening the voice of the patient

and healthcare providers in the company. We implemented the Philips Safety Board as an

independent cross-functional forum chaired by the Philips Chief Medical Officer to guide and

support the Businesses on pre- and post-market product safety and risk evaluations.

The team continued our advocacy and investment combating non-communicable diseases,

including cardiovascular disease and stroke, as well as radiation safety, medical device testing, and

improved access to physician and staff training, among others. Our health economics team

continued to contribute economic evidence to support innovation and expand access to high-

quality care.

4.3.4General Business Principles (GBP)

While pursuing our business objectives, we aim to be a responsible partner in society, acting with

integrity towards our employees, customers, patients, business partners and shareholders, as well

as the wider community in which we operate. To that end, our GBP – part of the Philips operating

model – and their underlying policies incorporate and represent the fundamental principles by

which all Philips Businesses and employees around the globe must abide. They set the minimum

standard for our business conduct as a health technology company, for our individual employees

and for our subsidiaries, and Philips rigorously enforces compliance. Our GBP also serve as a

reference for the business conduct we expect from all our business partners. The GBP and

underlying policies, including the Financial Code of Ethics and Procurement Code of Ethics, are

published on the company website at www.philips.com/gbp.

The GBP were updated in 2024 to include legal developments and input from stakeholders,

including internal Functions (e.g., Group Sustainability, People, Legal). The Universal Declaration of

Human Rights, the UN Convention against Corruption and other standards served as a reference.

The GBP include principles of doing business with integrity at work, integrity in the market, and

professional integrity outside work. They set our integrity standard on inside information, aiming to

prevent trading on or disclosure of non-public information, the publication of which would likely

have a significant influence on the trading price of Philips securities or securities of companies that

Philips is seeking to acquire. More specifically, Philips has adopted rules of conduct, governing the

purchase, sale and other dispositions of Philips securities, that we believe are reasonably designed

to promote compliance with applicable insider trading and other market abuse laws, rules and

regulations (in particular the EU Market Abuse Regulation) and applicable listing standards. The

rules of conduct apply to all employees, the members of the Board of Management and the

Supervisory Board of Royal Philips. The GBP also include principles on conducting business with

honesty and integrity, and they explicitly prohibit corrupt practices, acts of bribery and facilitation

payments. More detailed guidance is included in the policy on Anti-Bribery and Anti-Corruption,

which is explicitly referenced and forms an integral part of the GBP.

The GBP form an integral part of labor contracts and business partner agreements. Translations of

the GBP are available in 30 languages, allowing almost every employee to read the GBP in their

native language. Detailed underlying policies, manuals, training, and tools are in place to give

employees practical guidance on how to apply and uphold the GBP in their daily work

environment. Each year, employees reconfirm their commitment to the code of conduct after

completing their GBP e-learning, and there is an additional annual signed commitment for

executives. A similar signed commitment is in place for finance and procurement staff for their

respective codes of conduct. The Philips Supervisory Board is trained annually on Philips GBP

through a dedicated online course.

The Executive Committee is responsible for the effective deployment of the GBP and for promoting

a culture of compliance and ethics within the company. At least twice a year, the Executive

Committee and Audit Committee of the Supervisory Board are informed on relevant GBP metrics,

cases, trends and learnings. Furthermore, each quarter, all of our key Regions convene market

compliance committees dealing with GBP-related matters in the local context. They are also

responsible for the design and execution of localized compliance plans that are tailored to their

risks and organizational set-up, and regularly review the relevant compliance metrics for their

respective market through dashboards delivered by the legal compliance monitoring team. The GBP

program office, together with a worldwide network of GBP compliance officers, supports the

implementation of GBP initiatives.

As part of our continuous effort to raise GBP awareness and foster dialogue throughout the

organization, each year a global GBP communications and training plan is deployed, including

structured dialogues led by managers where quality, integrity and speaking up are discussed. This is

part of a company-wide initiative aimed at reinforcing a culture of dialogue using ethical dilemma

case studies that are relevant to our workforce. Almost 54,200 (97%) of our assigned employees

completed their yearly GBP e-learning. All Functions at risk (including those with customer-facing

roles, such as sales and marketing, clinical and technical consultants and employees that provide

customer-facing training) also receive, via tailored case studies, annual training. The training

includes content on anti-bribery and anti-corruption practices and healthcare compliance.


	52


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The GBP monitoring and reporting program, part of our internal control framework, measures

implementation of our GBP. In addition, we continue to expand the capabilities of our legal

compliance monitoring team, serving our business customers as well as our compliance networks

with actionable data, thus further improving our internal control framework. The results of the

monitoring measures in place are given in Philips SpeakUp (Ethics Line).

The GBP are supported by Philips SpeakUp program. Philips SpeakUp program, and its underlying

policies and procedures, aligns with relevant legislation on whistleblowing (including but not

limited to Directive (EU) 2019/1937) to ensure reporters are protected from (attempted) retaliation.

SpeakUp ensures standardized reporting and enables employees and third parties to escalate

concerns 24/7. Concerns raised through this SpeakUp program are registered consistently in a

single database hosted outside of Philips servers to ensure confidentiality and security of identity

and information. Further details on how Philips ensures the protection of reporters of potential GBP

violations, and ensures an independent and impartial review of concerns, can be found in the

Philips SpeakUp Policy. Encouraging people to speak up through the available channels if they have

a concern will continue to be a cornerstone of our GBP training, communications and awareness

campaigns.

GBP compliance officers and SpeakUp investigators receive training on following up on SpeakUp

concerns in line with Philips SpeakUp Policy and investigation guidelines. Specifically in 2024, we

again focused on increasing awareness about integrity and on emphasizing the importance of

speaking up. This built on the deployment in 2023 of our biennial Business Integrity Survey, in

which more than 22,500 employees trusted us with their views and opinions on integrity within

Philips. The results showed 79% of the respondents feel comfortable addressing concerns related

to the GBP. The next Business Integrity Survey will be deployed in 2025, along with an updated

GBP e-learning.

In 2024, a total of 805 concerns were reported via Philips SpeakUp (Ethics Line) and through our

network of GBP compliance officers. This represents an increase of 5% from the total of 764

concerns in the previous reporting period (2023). This is a continuation of a year-on-year upward

trend. See Philips SpeakUp (Ethics Line) for further details.

Through the Audit Committee of the Supervisory Board, the company also has procedures in place

for the receipt, retention and treatment of complaints specifically relating to accounting, internal

accounting controls, or auditing matters, enabling the confidential, anonymous submission of

complaints.

4.3.5Cybersecurity

Failure to meet cybersecurity standards may cause patient harm, negatively impact customer

operations and their ability to provide healthcare, or provide unauthorized access to patient records

and medical devices. Philips relies on information technology to operate and manage its Businesses,

as well as store and process confidential data (relating to patients, employees, customers,

intellectual property, suppliers and other partners). For a discussion of cybersecurity risks facing our

business, see “Products and services may fail quality or security standards, which could adversely

affect patient safety or customer operations" and “Philips could be exposed to a significant

enterprise cybersecurity breach” in section Operational risks . As of the date of this Annual Report,

we have not identified any breaches of cybersecurity or other related risk threats that have

materially affected or are reasonably likely to materially affect our business .

The aim of our security risk management is to protect the confidentiality, integrity, and availability

of Philips products and services, and it is part of our broader risk management and internal control

framework described in Risk management and internal control . The Board of Management is

responsible for the design and management of Philips’ cybersecurity, which is ultimately overseen

by the Supervisory Board (and specifically its Audit Committee). Quarterly reports on cybersecurity

risks and incidents are prepared by the IT Audit & Risk Committee (consisting of representatives

from the Group Security and Group IT Functions, Philips Internal Audit and the external auditor)

and submitted to the Board of Management and the Supervisory Board. This reporting includes the

overall risk level, relevant changes in the risk environment, challenges in reaching and/or

maintaining current risk levels, and actual risk responses in the form of actions and owners.

The Group Security Function maintains a security management framework, which includes

processes, requirements and controls for the assessment, identification and management of

material risks from, among others, cybersecurity threats. The framework, including cybersecurity

policies and procedures, is designed to promote implementation of security requirements in all

applicable processes, information processing systems and infrastructure pertaining to our products

and services and our supporting and enabling Functions. The framework includes risk, vulnerability

and penetration assessments; mandatory yearly security training for all employees (including

phishing simulations for all employees multiple times a year); and monitoring and response

activities for vulnerabilities identified in products, services and infrastructure.

Our Head of Group Security, reporting to our Chief Financial Officer, leads the Group Security

Function in supporting the Board of Management in evaluating and setting the security strategy,

issuing security policies, and evaluating the progress and effectiveness of the deployment of the

company’s security management framework. Our Chief Information Security Officer, reporting to

our Head of Group Security, has nearly 27 years of technology and information security

management experience in the industry, including prior roles with the Dutch Government and

multinationals in the consumer goods, manufacturing, chemical and food processing industries, in

various roles ranging from chief information security officer to IT security officer and security

architect. Our Chief Information Security Officer is informed of and monitors the prevention,

detection, mitigation and remediation of cybersecurity incidents through the Global Security

Operations Center.


	53


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Group Security is also responsible for addressing security risks, including monitoring cybersecurity

threats and responding to cybersecurity incidents. The Philips Global Security Operations Center,

with the leadership of the Chief Information Security Officer, is the hub for the prevention,

detection, mitigation and remediation of cybersecurity incidents on global enterprise systems,

supported by certain external services and periodic/intermittent assessments. The severity and

materiality of incidents are assessed through a dedicated security incident reporting process and, if

necessary, incidents are escalated to the major event team that may hand off to central crisis

management and (potentially) to the Philips Disclosure Committee, which assesses the need for

public disclosure of (material) incidents. When needed, incidents are further escalated to Global

Crisis Management.

Additionally, in order to address the security risks associated with our suppliers and the services

they provide, security controls are embedded in our procurement and supplier management

processes, covering due diligence when engaging with new suppliers; contracting, monitoring and

managing existing supplier relationships; and terminating supplier relationships. These security

controls include assessing existing security certificates and assurances reports for the services in

scope, validating suppliers’ answers to security questionnaires in due diligence, and ensuring that

security schedules are part of the signed contracts.

4.3.6Remuneration framework

Aligned with one of our key ESG commitments, the objectives of our remuneration framework are

to focus employees throughout the Philips Group on pursuing our purpose and delivering on our

strategy, and to motivate them to create superior, long-term stakeholder value. Thus, our

remuneration framework is designed to support the company’s overall performance and our

commitment to drive progressive value creation through a strategy of focused organic growth,

scalable patient- and people-centric innovation, and reliable execution.

We aim to attract, retain and motivate world-class talent by offering market-competitive and fair

compensation. We position ourselves competitively against our peers through external

benchmarking, and we offer ranges that enable us to reward exceptional performance. We also set

fair and internally consistent pay levels by taking into account internal relativities, and we are

committed to equal pay and ensuring that all employees receive at least a living wage.

Employee share ownership is stimulated through our employee share purchase plan, to create

alignment with shareholder value and to encourage employees to act as stewards and ambassadors

of the company.

A part of remuneration of Philips executives is variable and linked to achieving our strategic

imperatives through the criteria and targets included in the Annual and Long-Term Incentives. The

achievement/payout of the Annual Incentive is partly based on a financial element (70% weight),

with financial performance metrics that are aligned with the strategic priorities for the year. The

non-financial element of the Annual Incentive (30% weight) reflects the importance of factors

relating to the company’s priorities (patient safety and quality, strengthening supply chain

reliability, and the simplification of our operating model), as well as our Environmental, Social and

Governance (ESG) performance. The achievement/vesting of LTI is also partly based (20% weight)

on ESG objectives, reflecting the importance of ESG to our company and its increasing relevance to

our stakeholders (as a strategic matter and in the context of our risk management), and to

incentivize management’s focus on our policy objective to deliver superior, long-term value to our

stakeholders, while acting responsibly towards our planet and society.

With respect to variable compensation, our employment contracts include claw back provisions.

These allow us to recoup variable remuneration in case of (among others) violations of the Philips

General Business Principles. This is one of the means to uphold ethical behavior.

The remuneration and benefit arrangements applicable to the broader executive and/or employee

population in the Netherlands largely also apply to the members of the Board of Management. The

remuneration of the individual members of the Board of Management is determined by the

Supervisory Board, taking into account the Remuneration Policy for the Board of Management

adopted by the General Meeting of Shareholders in 2024. A description of the composition of the

remuneration paid and owed to the individual members of the Board of Management (and the

Supervisory Board) is included in the Remuneration Report 2024 .

4.3.7Tax contribution

To fulfill our company purpose, a responsible tax approach is required. We fully acknowledge our

societal role when it comes to paying taxes in the geographies where value is created. We consider

our tax payments as a contribution to the communities in which we operate, and part of our social

value creation.

Our approach to tax sets the standard for our conduct, by which individual employees, the

company and its subsidiaries must abide. We consider tax in the context of the broader society,

inspired by our stakeholder dialogues, human rights advocacy, international tax laws and

regulations, relevant codes of conduct, and global initiatives of the Organization for Economic

Cooperation and Development and the United Nations.

The Chief Financial Officer annually reviews, evaluates, approves and, where necessary, adjusts

Philips’ approach to tax. Part of our approach is to acknowledge the importance of transparency in

respect of our tax contributions. Philips supports and participates in transparency initiatives such as

the Dow Jones Sustainability Index and the Tax Transparency Benchmark of the Dutch Association

of Investors for Sustainable Development (VBDO). For the second year in a row, Philips scored full

marks and has been awarded the winner of the Tax Transparency Benchmark by VBDO. The team

had assessed the tax transparency practices of 51 Dutch companies and 65 EU listed companies

from Belgium, Denmark, France, Germany, Italy, Spain, and Sweden. The expert jury appointed by

VBDO especially complimented us for publishing a full Country Activity and Tax Report, including a

narrative linking Philips’ business and activities to taxation. For example, Philips is one of the only

companies in this year’s benchmark that explicitly mentioned the governance aspect of ESG in

relation to tax. The jury also noted that in this report we have explicitly linked to the GRI 207 Tax

Standard and went beyond to include information on environmental and social factors.

Furthermore, the jury commended Philips for the clear description of the role taxes play within its


	54


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

value creation model. In addition, Philips scored a top score (100 out of 100) in the Tax Strategy

section of the 2024 Dow Jones Sustainability Index.

The 2024 Country Activity and Tax Report is published on our website in addition to, and

simultaneously with, the disclosures on tax included in this Annual Report.

Philips has a tax control framework that forms part of its standard set of Internal Controls over

Financial Reporting (ICFR). Philips' tax position is therefore reflected in its financial statements and

covered by the Board of Management's report on ICFR. For more on the board's conclusion

regarding the effectiveness of ICFR refer to Risk management and internal control .

Philips also endorses the ambitions expressed in the Tax Governance Code published by the Dutch

employers organization VNO-NCW. We comply with the principles prescribed in the code, available

at VNO-NCW, and we have touched upon the elements of this code in our Country Activity and

Tax Report.

In 2024, Philips contributed to the communities where we operate through taxes paid (e.g.,

corporate income tax) and taxes collected (e.g., VAT). Philips' total tax contribution in 2024,

amounting to EUR 3,263 million, is presented by tax type in the accompanying table. Please refer to

our 2024 Country Activity and Tax Report for more details.

Philips Group

Total contribution 2024 per tax type in millions of EUR


	Corporate income tax paid	Customs duties	VAT¹	Payroll tax	Other taxes	Total
Western Europe	62	8	176	854	50	1,150
North America	42	39	122	796	9	1,007
Other mature geographies	18	3	69	117	1	208
Growth geographies	63	81	350	387	17	898
Philips Group	186	131	717	2,154	76	3,263

1Includes VAT, GST and sales tax.

4.3.8Working with stakeholders and advocacy

Our stakeholder engagement helps us deliver on one of our key ESG commitments: to be

transparent about our plans, activities, targets, results and contributions to society, and to engage

with shareholders, customers, business partners, employees, academics, governments and

regulators through a variety of platforms. Through our engagement efforts we pursue and foster

an open, meaningful, effective, and informed dialogue regarding our activities and our internal and

external stakeholders’ needs, concerns and expectations. We derive significant value from our

stakeholders across all our activities and engage with, listen to and learn from them. We

incorporate feedback on specific areas of our business into our planning, actions, targets, policies

and disclosures. Please also refer to the Philips Stakeholder Engagement Policy available at our

website.

The purpose of our advocacy efforts is to contribute to policy development and legislative processes

and to support business opportunities in the areas relevant to Philips and its Businesses, for

example: health system resilience policies and investment plans; ESG, particularly climate, circularity

and green procurement; and digital health, such as AI, data protection, interoperability,

cybersecurity, and technological sovereignty.

We participate in meetings and task forces as a member of organizations including the World

Economic Forum, World Business Council for Sustainable Development (WBCSD), Responsible

Business Alliance (RBA), European Financial Reporting Advisory Group (EFRAG), Dutch Sustainable

Growth Coalition, the Ellen MacArthur Foundation, European Round Table for Industry, and the

European Partnership for Responsible Minerals.

In organizing ourselves around customers and markets, we conduct dialogues to explore common

ground for addressing societal challenges, building partnerships and jointly developing supporting

ecosystems for our innovations around the world. We engage with the leading Dutch labor union

(FNV) and a number of NGOs, including Enough, GoodElectronics, the Chinese Institute of Public

and Environmental Affairs, UNICEF, Amnesty International, Greenpeace, Friends of the Earth, and

WageIndicator. We also engage with a variety of investors, analysts, rating agencies, institutional

advisory and other organizations, such as Eumedion, ISS, Glass Lewis, VEB and VBDO. Please also

refer to Investor information . Customers (including consumers and end-users) are able to voice their

concerns and indicate their trust during engagement processes.

We invite our stakeholders to engage with us through our website, and we offer dedicated support

for consumers and for healthcare professionals. On sustainability matters, including our

sustainability reporting in this Annual Report, stakeholders may share their comments and

questions via email ( philips.sustainability@philips.com). Finally, Philips SpeakUp is available to all

stakeholders when they believe their concern relates to a violation of the Philips General Business

Principles and underlying policies. More information about Philips SpeakUp, including how Philips

protects reporters from retaliation, can be found in General Business Principles (GBP) and Philips

SpeakUp (Ethics Line).

For more information on our stakeholder engagement please refer to the Stakeholder engagement

overview.


	55


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

4.3.9Risk management and internal control

Risks related to our strategy

Philips’ exposure to risks is directly impacted by our strategy, as shown in the accompanying table.

A more detailed description can be found in Risk factors and responses . We do not classify these

risk categories in order of importance. It should be noted that although our risk management and

internal control systems are designed with the intent to manage risks within our appetite, they

cannot provide certainty that this is being achieved.


	56


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Risk appetite

We have set different levels of risk appetite, ranging from an averse to a seeking approach.

For more information on our risk appetite, refer to Risk factors and responses .

Key elements of our framework

The purpose of our risk management is to identify and analyze the risks Philips faces in executing its

strategy and activities, to set the risk appetite of the company, to take appropriate risk responses,

and to monitor the effectiveness of responses. Please refer to Risk factors and responses , for a

description of each material risk factor that we have identified in four main categories: strategic,

operational, compliance and financial and reporting. The objective of our internal control

framework is to maintain integrated management control of the company’s operations and

reporting, and to safeguard compliance with applicable laws and regulations. As such, risk

management and internal control form an integral part of our strategy-setting, business planning

and performance review cycles.

The governance and process that lie at the core of our enterprise risk management are described in

more detail in the following sections. Complementary to our enterprise risk management process,

Functions and departments (such as Accounting Reporting and Internal Controls, Legal,

Sustainability, Patient Safety and Quality, Operations and Integrated Supply Chain, Finance, Tax,

and Group Security) support the Executive Committee and management in specific risk areas.

These Functions maintain and deploy designated frameworks, to manage, for example, risks related

to business continuity, privacy compliance, environmental matters, insurance and tax.

It is important to note that our risk management and internal control framework cannot provide

certainty as to the realization of our objectives, nor can they prevent all misstatements,

inaccuracies, errors, fraud or non-compliance with rules and regulations. Also, we note that we

may not be successful in deploying some or all of our mitigating actions effectively, or these actions

may not achieve the anticipated effect.

Risk management governance

The Board of Management is ultimately responsible for identifying, analyzing and managing the

risks Philips faces in executing its strategy and activities, for setting the risk appetite of the

company, and for the design, implementation and maintenance of a fit-for-purpose risk

management and control system. The system balances risk and opportunity in line with risk

appetite, including the monitoring of its effectiveness. The Executive Committee, several experts,

enterprise Functions and committees support the Board of Management in the discharge of its

responsibilities.

The risk appetite is set by the Board of Management, reviewed at least annually and included in the

Philips risk management policy. Risk-taking guidance is operationalized through tone from the top,

our culture frame, our General Business Principles and our operating model – such as our strategic

plans, performance targets, budgets, accountabilities and authority schedules, policies,

management systems, process standards, control standards and our performance review cadence.

Furthermore, risk appetite is effected through the risk management process described in this

chapter.

The Executive Committee is primarily responsible for identifying and mitigating material risks to

Philips. The Executive Committee is supported by the Enterprise Risk Management Support Team,

consisting of experts on various categories of risk, through regular analysis of the enterprise risk

profile and enhancement of the risk management framework. In addition, management across the

company is responsible for identifying critical risks and implementing appropriate risk responses

within their areas of responsibility.

Functions maintain and deploy frameworks and activities to structurally manage specific risk areas.

To ensure clarity and alignment on the status of, and to make recommendations on, key risk areas

these Functions have recurring items on the meeting agenda of the Board of Management. The

Board of Management discusses the relevant topics with participation from relevant members of

the Executive Committee and other senior executives and subject matter experts. Furthermore,

dedicated reports on our key risk areas are shared and discussed with the Supervisory Board and

external auditors in the relevant Audit & Risk Committees facilitated by Internal Audit.

The Internal Audit Function has an independent role to evaluate and improve the effectiveness of

the organization's governance, risk management and internal controls. The Function assesses the

quality of risk management and controls through the execution of a risk-based audit plan, as

approved by the Board of Management and the Audit Committee of the Supervisory Board. The

Board of Management and leadership from Businesses, Regions/Zones and key Functions meet

quarterly with Internal Audit in Audit and Risk Committees to discuss strengths and weaknesses of


	57


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

risk management and controls – as evaluated by internal and external auditors and by means of

other (self) assessments – and take corrective action where necessary.

The Disclosure Committee seeks to ensure that the company implements and maintains internal

procedures for the timely collection, evaluation, and disclosure of information potentially subject to

public disclosure under legal, regulatory and stock exchange requirements.

The Supervisory Board oversees and advises the Board of Management and the Executive

Committee with respect to Philips’ risk management, including the identification of material risks in

relation to the risk appetite of the company, the maintenance of internal business controls and risk

management, and the compliance with applicable laws and regulations. At least once a year, the

Supervisory Board discusses the general strategy of the company and the Philips Group, as well as

the main risks associated with their business activities, and the results of the assessment by the

Board of Management and the Executive Committee of the structure and operation of the systems

of internal business controls and any significant changes therein. The Audit Committee and the

Quality & Regulatory Committee of the Supervisory Board assist the full Supervisory Board in

fulfilling its risk management oversight responsibilities. The Audit Committee reviews the quality of

risk management and controls, and the reported findings of internal and external audits. The

Quality & Regulatory Committee’s role particularly relates to the compliance of the company’s

products (including software), services, and systems throughout their life cycle.

Enterprise risk management process

To develop a comprehensive overview of Philips’ risks, structured risk assessments take place

according to the Philips risk management process standard, applying a top-down and bottom-up

approach. Our process standard is designed based on Enterprise Risk Management: Integrating

with Strategy and Performance (2017) from the Committee of Sponsoring Organizations of the

Treadway Commission (COSO) and on ISO 31000 - Risk Management.

Philips enterprise risk management process

• At least once a year, senior management from Businesses, Zones/Regions and key Functions

perform a risk assessment as part of their strategic plan update. Risk workshops are facilitated

by Internal Audit with senior management across the company to further support these risk

assessments. Twelve such risk workshops were held in 2024.

• At least quarterly, senior management discusses and monitors the risk profile and risk response

effectiveness in its performance reviews and during Audit and Risk Committees, which cover all

Businesses, Zones/Regions and selected Functions.

• During the quarterly Audit and Risk update session, the Board of Management discusses

developments in the enterprise risk profile and management’s initiatives to improve risk

responses.

• Each year the Executive Committee assesses the enterprise risk profile as an integral part of its

strategy review and the potential risk impact versus risk appetite. The assessment also covers the

effectiveness of the risk management framework and potential improvements ther eto.

• Once a year, the updated risk profile and the risk management framework, including the

outcomes of the annual Executive Committee risk workshop, are presented to the full

Supervisory Board. The underlying risks and response plans are discussed at the end of the year

with the Audit Committee of the Supervisory Board.


	58


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Next to our enterprise risk management, various Functions as referred to earlier in this section

support the management of specific risk areas. In alignment with the Philips risk management

process standard, these Functions maintain and deploy designated frameworks. Examples include

but are not limited to security, privacy compliance, trade compliance, business continuity,

occupational health, and safety and quality. Through specialist teams at the global, regional or local

level, standards and requirements are defined and continuously improved, deployed, and

monitored to ensure our employees are aware of and comply with these requirements.

We continuously seek to improve our risk management. The measures taken during 2024 to

further strengthen risk management include:

• improved alignment or our risk dialogues with strategy execution and performance review

dialogues

• further embedding of our governance and process, system and data requirements in the Philips

operating model

• review of our enterprise policy framework

• strengthened our risk management capabilities via upgrades to our risk management tooling

and use of data analytics

• created additional insights in risk dynamics, e.g., through risk interdependency analysis and risk

velocity analysis using statistical scenario modelling

• continued efforts to standardize and simplify Philips' process standards, including controls.

Additionally, further development of our regulatory landscape intelligence to enhance foresight

in, and internal communication on, upcoming regulatory change.

• further automation of screening of business partner integrity and of transactions to ensure

Export Control compliance

• continued analysis of global warming and weather scenarios on the geographical footprint of

our facilities as well as suppliers’, in line with the recommendations of the Task Force on

Climate-Related Financial Disclosures

Financial reporting and sustainability reporting

As part of its internal control framework, Philips has implemented a standard set of Internal

Controls over Financial Reporting (ICFR). Philips has designed its ICFR framework based on the

COSO Internal Control-Integrated Framework (2013). Together with Philips' established accounting

procedures, this standard control framework is designed to provide reasonable assurance that

assets are safeguarded, that the books and records properly reflect transactions necessary to permit

preparation of financial statements, that policies and procedures are carried out by qualified

personnel, and that published financial statements are properly prepared and do not contain any

material misstatements.

A structured monitoring process is deployed company-wide to assess, document, review and

monitor compliance within ICFR. In each reporting unit, management is responsible for assessing

the controls set for their business, risk profile and operations, and for completing the internal

control statement certification statement. Deficiencies noted in the design and/or operating

effectiveness of ICFR that were not remediated at year-end are reviewed by the Board of

Management and the outcome is reported to the Supervisory Board. The Board of Management’s

report on ICFR, including its conclusions regarding the effectiveness thereof, can be found in this

report in Management’s statements and report.

Since 2012, Royal Philips engaged an external provider of assurance, currently EY Accountants B.V.,

with respect to its sustainability reporting. Originally, our sustainability reporting and the audit

thereof was referencing GRI Universal Standards and Philips-specific criteria. Over the years, Philips

continued to develop its internal framework and included sustainability-related risks in its risk

management processes. While preparing for the publication of a sustainability statement complying

with the Corporate Sustainability Reporting Directive ((EU) 2022/2464) and related European

Sustainability Reporting Standards, we leveraged the established ICFR framework and processes,

and new sustainability related controls are being designed for internal and external sustainability

reporting. We expect to fully implement such new controls in 2025.


	59


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5Supervisory Board


Focus on Patient Safety and Quality, performance and outlook, long-term value acceleration strategy and succession planning			Charlotte Hanneman appointed as Chief Financial Officer			Changes in Supervisory Board composition			Reports of Supervisory Board committees


	60


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5.1Letter from the Chairman of the Supervisory Board

Dear Stakeholder,

Nearing the end of the second year of the three-year plan to create value with sustainable impact,

Philips has made solid progress on its execution priorities, returned to order intake growth, and

delivered strong margin and good cash performance, although sales growth was slower than

initially expected. We remain confident in the company’s strategy and dedicated to ensuring Philips

delivers patient safety and quality.

Within a challenging macro environment, Philips is focused on creating value out of its portfolio of

leadership positions by driving operational improvements and scaling innovation leadership. Philips

remains a preferred strategic and innovation partner for its customers, and as a result, has closed a

number of sizeable innovation and technology partnerships across the world. Significant progress

was made in resolving litigation, and Philips continues to be recognized for its ESG leadership.

Strengthening growth remains at the forefront of the agenda, but even as we see positive

developments, we are mindful of the geopolitical landscape, and the impact the external

environment has on the company’s performance. For this reason, it’s critical that Philips is

sufficiently prepared to weather volatile conditions. Simplification efforts to strengthen agility and

competitiveness are essential to achieving this.

The Supervisory Board remains fully committed to its responsibilities to supervise and advise

management in leading the company toward a future of progressive value creation with

sustainable impact. As explained in our Report, in 2024 we focused on patient safety and quality,

the company’s performance and outlook, the long-term value acceleration strategy, and succession

planning. We spent significant time on the company’s strategic focus on growth out of its

portfolio, with leadership positions and scalable innovation, and improved execution as key value

driver. China and North America markets received specific attention – China, given the

uncertainties there that are expected to continue, and North America, given its size and strategic

nature.

We see that Philips has a clear path forward for sustainable value creation, after reaching an

important milestone with the agreement in the Respironics litigation. Under the settlement, Philips

Respironics has agreed to pay a total of USD 1.1 billion. Philips Respironics also signed a consent

decree, which was court-approved, and Philips concluded an agreement with insurers to cover

Respironics recall-related product liability claims. This resolves the personal injury litigation and the

medical monitoring class action to end the uncertainty associated with litigation in the US.

After welcoming Exor N.V. as a long-term minority investor in 2023, we were pleased to see Exor

increase its stake in Philips in 2024, along with some other significant shareholders. As part of the

relationship agreement formed in 2023, Philips also welcomed Benoît Ribadeau-Dumas as a new

member of the Supervisory Board, with a four-year term beginning at the 2024 Annual General

Meeting of Shareholders.

Looking to the future, we believe Philips is well-positioned to capture growth in attractive markets,

enabling better care for more people through sustainable innovation. We remain committed to the

plan to create value with sustainable impact and have confidence in the abilities of CEO Roy Jakobs

and the management team to deliver on the full potential of the Businesses. The new member of

the Board of Management, Chief Financial Officer Charlotte Hanneman, as well as the new

Executive Committee members – Ling Liu, Chief Region Leader, Philips Greater China; Jie Xue,

Chief Business Leader Precision Diagnosis; and Özlem Fidanci, Chief of International Region and

Leader Growth Region – are already generating fresh energy and ideas, helping to build upon

Philips’ strong foundation.

Together with my fellow members of the Supervisory Board, I look forward to providing continued

oversight as Philips delivers on its purpose of improving people’s health and well-being through

meaningful innovation. Thank you to our shareholders and key partners for your support, in 2024

and in the years to come.

Feike Sijbesma

Chairman of the Supervisory Board


	61


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5.2Members of the Supervisory Board

In the two-tier corporate structure under Dutch law, the Supervisory Board is a separate body that is independent of the Board of Management and the company. The Supervisory Board supervises the policies,

management and general affairs of Philips, and assists the Board of Management and the Executive Committee with advice where required or requested. Please also refer to Supervisory Board within the company's

Corporate governance report.

Feike Sijbesma 2 3

Born 1959, Dutch

Chairman of the Supervisory Board since May 2021

Chairman of the Corporate Governance and Nomination & Selection Committee

Member of the Supervisory Board since 2020; second term expires in 2028

Former CEO of Koninklijke DSM NV (Honorary Chairman) and former non-executive Director of

Unilever NV. Co-Chair of the Global Climate Adaptation Center and Member of the Board of

Trustees of the World Economic Forum.

Chua Sock Koong 1

Born 1957, Singaporean

Member of the Supervisory Board since 2021; first term expires in 2025

Former Group CEO of Singapore Telecommunications Limited and currently member of the Board

of Directors of Prudential plc, Bharti Airtel Limited, Bharti Telecom Limited and Ayala Corporation.

Member of the Council of Presidential Advisors of Singapore, the Securities Industry Council and

the Dubai Financial Services Authority, Deputy Chairman of the Public Service Commissi on of

Singapore.

Liz Doherty 1

Born 1957, British/Irish

Chairwoman of the Audit Committee

Member of the Supervisory Board since 2019; second term expires in 2027

Currently, member of the Supervisory Board and Chairwoman of the audit committee of Novartis

AG and of Corbion N.V. Member of the advisory committee of Freya Holdco S.à r.l. Fellow of the

Chartered Institute of Management Accountants. Former CFO and board member of Reckitt

Benckiser Group PLC, former CFO of Brambles Ltd, former non-executive director and audit

committee member at Delhaize Group, Nokia Corp., SABMiller PLC and Dunelm Group PLC.

Former non-executive board member of the UK Ministry of Justice and of Her Majesty’s Courts and

Tribunals Service (UK) and advisor to GBfoods SA and Affinity Petcare SA (subsidiaries of Agrolimen

SA).

1Member of the Audit Committee

2Member of the Remuneration Committee

3Member of the Corporate Governance and Nomination & Selection Committee

4Member of the Quality & Regulatory Committee

Marc Harrison 4

Born 1964, American

Member of the Supervisory Board since 2018; second term expires in 2026

Former President and Chief Executive Officer of Intermountain Healthcare and former Chief of

International Business Development for Cleveland Clinic and Chief Executive Officer of Cleveland

Clinic Abu Dhabi. Currently CEO HATCo (Health Assurance Transformation Company) at General

Catalyst.

Peter Löscher 1 4

Born 1957, Austrian

Member of the Supervisory Board since 2020; second term expires in 2028

Former President and CEO of Siemens AG, President of Global Human Health and Member of the

Executive Board of Merck & Co., President and CEO of GE Healthcare Bio-Sciences and member of

GE’s Corporate Executive Council, CEO and Delegate of the Board of Directors of Renova

Management AG. Currently member of the Board of Directors of Telefónica S.A. and CaixaBank

S.A. and Chairman of the Supervisory Board of Telefónica Deutschland Holding AG, Non-Executive

Director of Thyssen-Bornemisza Group AG and Doha Venture Capital LLC.

Indra Nooyi 3

Born 1955, American

Member of the Supervisory Board since 2021; first term expires in 2025

Former CFO, President, Chairman and CEO of PepsiCo. Currently member of the Board of Directors

and Chair of the Audit Committee of Amazon, Inc. Member of the International Board of Advisors

of Temasek, member of the Board of Trustees of the Memorial Sloan Kettering Hospital, trustee of

the national gallery of art.

Sanjay Poonen 2

Born 1969, American

Member of the Supervisory Board since 2022; first term expires in 2026

Former Chief Operating Officer at VMware and President at SAP. Currently CEO and President of

Cohesity and member of the Board of Directors of Snyk.


	62


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

David Pyott 4

Born 1953, British/American

Chairman of the Quality & Regulatory Committee

Member of the Supervisory Board since 2015; third term expires in 2025

Former Chairman and Chief Executive Officer of Allergan, Inc. and former Lead Director of Avery

Dennison Corporation. Currently member of the Board of Directors of Alnylam Pharmaceuticals

Inc., BioMarin Pharmaceutical Inc. and Pliant Therapeutics. Chairman of the Governing Board of

London Business School, member of the Board of Trustees and Executive Committee of the

California Institute of Technology, Vice President of the Ophthalmology Foundation and President

of the Advisory Board of the Foundation of the American Academy of Ophthalmology.

Benoît Ribadeau-Dumas 3

Born 1972, French

Member of the Supervisory Board since 2024; first term expires in 2028

Former deputy CEO at SCOR, former Chief of Staff to the French Prime Minister, former CEO of

Aerosystems, member of the Management Board of Zodiac Aerospace, former SEVP CGG Veritas

and former CEO of Thales Underwater Systems. Currently Managing Director at Exor, member of

the Board of Directors of Stellantis, Institut Merieux, Merieux Nutrisciences, bioMerieux, TagEnergy

and Welltec. Member of the Board of Directors of Galileo Global Education and Cerba Healthcare.

Paul Stoffels 2 3

Born 1962, Belgian

Vice-Chairman and Secretary

Chairman of the Remuneration Committee

Member of the Supervisory Board since 2018; second term expires in 2026

Former CEO of Virco, Chairman of Tibotec, worldwide Chair of Pharmaceuticals at Johnson &

Johnson and Chief Scientific Officer & member of the Executive Committee at Johnson & Johnson.

Currently CEO and Chairman of the Board of Directors of Galapagos NV.

Herna Verhagen 1 2

Born 1966, Dutch

Member of the Supervisory Board since 2022; first term expires in 2026

CEO of PostNL, member of the Supervisory Board of ING Groep N.V., member of the Supervisory

Board of Het Concertgebouw N.V. and member of the Advisory Board of Goldschmeding

Foundation.

For a current overview of the Supervisory Board members, see also

https://www.philips.com/a-w/about/supervisory-board.html

1Member of the Audit Committee

2Member of the Remuneration Committee

3Member of the Corporate Governance and Nomination & Selection Committee

4Member of the Quality & Regulatory Committee


	63


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5.3Supervisory Board report

The Supervisory Board supervises, advises and challenges the Board of Management in performing

their management tasks as well as setting and executing the strategy of the Philips Group with a

focus on long-term and sustainable value acceleration and securing its business leadership

positions. The members of the Supervisory Board act in the interests of Philips, its Businesses and all

its stakeholders in accordance with good governance practices. This report includes a description of

the Supervisory Board’s activities during the financial year 2024 and other relevant information on

its composition and its functioning.

2024 focus areas and activities of the Supervisory Board

In 2024, the Supervisory Board’s focus was on patient safety and quality, the company’s

performance and outlook, the long-term value acceleration strategy, and succession planning. The

related near-term and longer-term actions were extensively reviewed and discussed with

management, against the geopolitical background and the external environment in which the

company operates, and the impact that the macro-economic outlook has on the company’s

performance.

Patient safety and quality – Compared to 2023, the Supervisory Board gradually expanded its

focus from the Respironics recall to the risks and challenges related to patient safety and quality

across all Businesses. Patient safety and quality was a recurring agenda item for each of the

(regular) meetings. The Supervisory Board challenged management to remain focused on the safety

of patients as the main priority and driver, despite operational and supply challenges. In that

context, the Supervisory Board reviewed the process framework for product design and production

controls in the company (and other mitigation of quality related risks and challenges) and

monitored progress on resolving product quality issues, site inspections, ongoing engagements

with the US Food & Drug Administration (FDA) and other competent authorities globally, and the

execution of the company-wide program to improve and foster a culture, behaviors and a mindset

that puts patient safety and quality first.

The Supervisory Board was regularly updated on the management of the consequences of the

Respironics recall. This oversight included, among other things, the settlement of personal injury

and medical monitoring claims in the US; the agreement with the US Department of Justice (DOJ)

and FDA on the Respironics consent decree; the continued execution of the economic loss class

action settlement; the ongoing criminal and civil investigation by the DOJ’s Consumer Protection

Branch and Civil Fraud Section; and the investigation by more than 30 US state Attorneys General

into possible violations to state deceptive practices statutes; as well as the securities claims in the

US and the Netherlands, and the SEC investigation.

Performance and outlook – The Supervisory Board reviewed and tracked progress on 2024

performance, including relevant key performance indicators, such as comparable order intake,

comparable sales growth * , Adjusted EBITA * and fre e cash flow * . Despite the challenging

geopolitical and macro-economic environment, the company delivered on its commitments

regarding profitability, free cash flow and ESG, in line with guidance and consensus. The

Supervisory Board engaged with management on the quarterly performance and outlook, in

particularly on phasing and predictability of sales, the quality of earnings and margin improvement .

Value acceleration – In the course of 2024, the focus of the Supervisory Board moved from value

creation to a strategy of value acceleration. The Supervisory Board reviewed and tracked progress

on the execution of this strategy. In parallel, the Supervisory Board and management engaged in

multiple deep-dive sessions on the company’s strategic focus on organic growth and scalable

innovation with improved execution as key value driver, as well as the main priorities for each of

the segments, Regions and Functions. Specific attention was given to the role of North America

and China in the strategy moving forward, given the dynamics of these markets.

Succession planning – The Supervisory Board spent time in 2024 considering its composition, as

well as the composition of the Board of Management and the Executive Committee. Attracting

candidates with expertise in (consumer) health tech and artificial intelligence continues to be part

of the Supervisory Board’s succession planning. Our report includes information on the composition

of the Supervisory Board.

The Supervisory Board is very pleased with the appointment of Charlotte Hanneman, at the 2024

AGM, as member of the Board of Management, succeeding Abhijit Bhattacharya as Chief Financial

Officer from October 1, 2024, and she has deepened the industry expertise of the Board of

Management. The Supervisory Board is grateful to Mr Bhattacharya for his long-term service and

leadership. Ling Liu (Chief Greater China Region) has been appointed as new member of the

Executive Committee, effective July 1, 2024. Also Özlem Fidanci (Chief of International Region and

Leader Growth Region) and Jie Xue (Chief Business Leader Precision Diagnosis) were appointed as

new members of the Executive Committee, both effective January 1, 2025. Refer to Report of the

Corporate Governance and Nomination & Selection Committee for more information.

Other key matters that were reviewed and/or discussed during one or more meetings in the course

of 2024 include

• Capital allocation, including the dividend policy and pay-out and the M&A framework, and

specifically the company’s flexibility under its capital structure and credit ratings to pay dividends

and to fund capital investments, including share repurchases and other corporate finance

initiatives.

• The company’s liquidity position and leverage, including the measures taken to strengthen it in

light of the financial performance of the company. These measures include the issue of bonds

through the Euro Medium Term Note program in May 2024 with the purpose to repay EUR 700

million in existing debt due in 2024 and 2025.


	64


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

• Geopolitical developments and their impact on Philips’ business, in particular the impact of the

Russia-Ukraine war and the situations in Israel and the Middle East, on Philips employees and the

(potential) implications on the continuity of Philips’ business in these countries, and the impact

of additional tariffs proposed by the new US administration.

• The deterioration in market developments in the China consumer and professional health

businesses.

• Regular review of the key performance indicator dashboard, tracking the performance of the

2024 indicators for the Executive Committee versus target.

• Philips’ annual management commitments, including the 2024 key performance indicators for

the Executive Committee, the performance on such indicators, and the annual operating plan

for 2024.

• Patient safety and quality compliance, systems and processes. The Supervisory Board was

regularly updated on past and upcoming FDA inspections at various company sites, including the

preparations for and outcomes of such inspections.

• Oversight of the adequacy of the company’s Internal Control over Financial Reporting.

• Enterprise risk management, including updates on and improvements to the relevant processes;

the outcome of the annual risk assessment dialogue with the Executive Committee; and an

update of the top risks faced by the Philips Group, including the possible impact of such risks, as

well as control and mitigation measures. Refer to Risks related to our strategy.

• Engagements with shareholders and institutional advisory firms on the revised Remuneration

Policy for the Board of Management and the revised Remuneration Policy for the Supervisory

Board as adopted at the 2024 Annual General Meeting of Shareholders.

• The company’s People strategy and priorities, employee engagement and retention of

employees, review of talent management, leadership and talent development, leadership

culture, and equal opportunities for all employees.

• Evaluation of the Board of Management and the Executive Committee and its members, based

on the achievement of specific group and individual targets approved by the Supervisory Board

at the beginning of the year, as well as the assessment of the main findings and conclusions of

last year’s evaluation and the related follow-up.

• Philips’ Environmental, Social and Governance (ESG) approach, including an update on progress

made with respect to the 2025 ESG key programs and sustainability commitments. The

Supervisory Board was also further educated on requirements related to the company’s

sustainability reporting, as well as relevant Dutch and EU regulatory developments. These

include but are not limited to the impact on Philips of the EU Corporate Sustainability Reporting

Directive (CSRD) and its pending implementation into Dutch law, and the European Corporate

Sustainability Due Diligence Directive (CSDDD).Refer also to ESG governance regarding the

Supervisory Board's responsibility for the oversight of the ESG dimensions.

• The (re-)appointment of the external providers of assurance on the company’s sustainability

statements for the years 2024 and 2025, respectively.

• Significant civil litigation claims against, and public investigations into, Philips.

• The agenda for the 2024 AGM (held on May 7, 2024) and the proposed agenda for the

upcoming 2025 AGM (to be held on May 8, 2025).

The market environment for global M&A activities that offered limited opportunities in 2024 driven

by growing macro-economic challenges, inflationary pressure and elevated interest rates, as well as

the company’s selective approach toward M&A going forward and the (business) performance of

companies previously acquired by the company.

• The overall Philips IT landscape and related strategy, including IT simplification and experience

improvement.

• The approach to information security, focused on protecting the company, its research and

development, and production.

• The updated Tax policy, the expected impact of the OECD pillar One and pillar Two models, and

the US Base Erosion and Anti-Abuse Tax (BEAT) liability on the company, as well as the Effective

Tax Rate (ETR) over the period 2018-2023.

• The innovation and artificial intelligence strategy and roadmap of each Business.

The Supervisory Board reviewed Philips’ annual and interim financial statements, including

information related to ESG, prior to publication.

Supervisory Board meetings and attendance

In 2024, the members of the Supervisory Board convened for seven regular meetings and three

extraordinary meetings. Moreover, the Supervisory Board members collectively and individually

interacted with members of the Board of Management, with members of the Executive Committee

and with senior management outside the formal Supervisory Board meetings. The Chairman of the

Supervisory Board and the CEO frequently had bilateral discussions about the company’s progress

on a variety of matters.

The Supervisory Board meetings held in 2024 were generally very well attended. The committees of

the Supervisory Board also convened regularly (see the separate reports of the committees below)

and the committees reported back on their activities to the full Supervisory Board. In addition, the

Supervisory Board and Committees held private meetings. The members of the Supervisory Board

concluded that they devoted sufficient time to engage (proactively, if the circumstances so

required) in their supervisory responsibilities.

In March 2024, two Supervisory Board members visited the European Congress of Radiology in

Vienna, Austria, and in August 2024, one Supervisory Board member visited the European Society

of Cardiology in London, UK. In June 2024, the Supervisory Board members visited Philips’ Personal

Health site in Stamford, Connecticut, US. In September 2024, some Supervisory Board members

visited Philips’ Diagnosis & Treatment manufacturing site in Best, the Netherlands.

Supervisory Board: composition, diversity and self-evaluation

The Supervisory Board is a separate corporate body that is independent of the Board of

Management and the company. Its independent character is also reﬂected in the requirement that

members of the Supervisory Board can be neither a member of the Board of Management nor an

employee of the company. The Supervisory Board considers all its members to be independent

under the Dutch Corporate Governance Code, except for one member (i.e., 91%), Benoît

Ribadeau-Dumas, to whom the independence exception of best practice provision 2.1.7(iii) of the


	65


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Dutch Corporate Governance Code is deemed to apply. Furthermore, the members of its Audit

Committee are independent under the rules of the US Securities and Exchange Commission

applicable to the Audit Committee.

The Supervisory Board currently consists of 11 members and retained critical knowledge and

capabilities with the re-appointments of Feike Sijbesma (Chairman) and Peter Löscher, both for a

term of four years as per the end of the 2024 AGM. Following a proposal from long-term

shareholder Exor N.V., Benoît Ribadeau-Dumas was appointed at the 2024 AGM as a new member

of the Supervisory Board, also for a term of four years as per the end of the 2024 AGM.

Anticipating the expiry of the third term of appointment of David Pyott, and his retirement from

the Supervisory Board at the end of the 2025 AGM, the Supervisory Board was tasked with

identifying a candidate with equivalent medtech and quality and regulatory affairs expertise. As a

result, the agenda of the upcoming 2025 AGM will include a proposal to appoint Bob White as

new member of the Supervisory Board. The first term of both Indra Nooyi and Chua Sock Koong

will expire at the end of the 2025 AGM, and the agenda for that meeting will include proposals to

re-appoint them.

The selection of candidates for appointment is always based on merit. The Supervisory Board also

attaches value to diversity and has adopted a Diversity Policy to promote diversity at board level. For

more information, please refer to Report of the Corporate Governance and Nomination & Selection

Committee . The composition of the Supervisory Board furthermore follows its profile as included in

the Rules of Procedure of the Supervisory Board. The profile aims for an appropriate combination of

knowledge and experience among the members of the Supervisory Board, encompassing general

management, international business, ESG and sustainability, (consumer) health and medical

technology, patient safety, quality and regulatory, product development, finance and accounting,

human resources, manufacturing and supply chain, information technology and digital, marketing,

and governmental and public affairs, all in relation to the global character of Philips’ Businesses.

The Supervisory Board also aims for having members with different nationalities and (cultural)

backgrounds, working experiences or otherwise diverse qualities, as well as one or more members

who have held an executive or similar position in business or society no more than five years ago.

The composition of the Supervisory Board shall furthermore be in accordance with the Dutch

Corporate Governance Code best practice provisions on independence, and each member of the

Supervisory Board shall be capable of assessing the broad outline of the overall policy of the

company. The size of the Supervisory Board may vary as it considers appropriate to support its

profile.

Any (re-)appointments of members of the Supervisory Board must meet the gender quota, as

required by Dutch law, requiring that of the Supervisory Board members at least one-third are

women and at least one-third are men. (For calculation purposes, a total number of board

members that cannot be divided by three must be rounded up to the next number that can be

divided by three.) Currently, the statutory quota is met, as out of 11 Supervisory Board members,

four members are female and seven members are male. The quota will also be met upon the

proposed re-appointments of Indra Nooyi and Chua Sock Koong, and appointment of Bob White

as members of the Supervisory Board at the 2025 AGM.

In 2024, each member of the Supervisory Board completed a questionnaire to verify compliance

with the applicable corporate governance rules and the Rules of Procedure of the Supervisory

Board. The outcome of this survey was satisfactory. An independent external party facilitated the

2024 self-evaluation process for the Supervisory Board and its committees. This included drafting

and submitting relevant questionnaires, interviewing members of the Supervisory Board and

aggregating and reporting on the results. The members of the Board of Management also provided

their input. The questionnaires covered various topics such as composition, size, skills and

experience, geographical coverage and diversity of the Supervisory Board, the effectiveness of the

Supervisory Board’s oversight of various aspects such as strategy, business performance, risk

management, succession planning and people, and engagement with management. In addition,

the questionnaire reflected on the company’s strategy, innovation, digital and AI developments,

understanding of the market and stakeholder landscape, and continuous education. All members

of the Supervisory Board were invited to share recommendations to improve the Supervisory

Board’s functioning and ways of working going forward. Furthermore, the performance of the

Chairman, of the other Supervisory Board members individually, and of the Supervisory Board’s

committees was evaluated separately.

The reports on the evaluation were discussed in a meeting of the Supervisory Board and resulted in

a collection of positive points to maintain as well as priorities for further improvement. The results

of the self-evaluation indicated that the Supervisory Board is a well-functioning team of appropriate

size that benefits from different expertise, background and international geographical

representation. Progress has been made on all domains, in particular in terms of stakeholder

understanding, risk and safety, oversight and the proximity to top talent and succession. The

Supervisory Board has been bolstered by its relationship with long-term investor Exor N.V. as a

strategic investor and the new member of the Supervisory Board that was appointed in 2024

following Exor’s proposal. The Supervisory Board members assessed they have struck the right

balance between supporting and challenging management on the company's focus areas, which

include setting the foundation and aspirations for the future and execution of the value

acceleration strategy, patient safety and quality, culture, and senior executive succession planning.

The Chairman of the Supervisory Board had several meetings with individual members of the

Supervisory Board to discuss ways to further enhance the functioning of the Supervisory Board and

its individual members going forward. The Chairman also discussed the evaluation of his own

functioning with the Vice-Chairman.


	66


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Supervisory Board composition


	Feike Sijbesma	Paul Stoffels	Chua Sock Koong	Liz Doherty	Marc Harrison	Peter Löscher	Indra Nooyi	Sanjay Poonen	David Pyott	Herna Verhagen	Benoît Ribadeau- Dumas
Year of birth	1959	1962	1957	1957	1964	1957	1955	1969	1953	1966	1972
Gender	Male	Male	Female	Female	Male	Male	Female	Male	Male	Female	Male
Nationality	Dutch	Belgian	Singaporean	British/Irish	American	Austrian	American	American	British/American	Dutch	French
Initial appointment date	2020	2018	2021	2019	2018	2020	2021	2022	2015	2022	2024
Date of (last) (re-)appointment	2024	2022	n/a	2023	2022	2024	n/a	n/a	2023	n/a	n/a
End of current term	2028	2026	2025	2027	2026	2028	2025	2026	2025	2026	2028
Independent	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes	No
Committee memberships¹	RC & CGNSC	RC & CGNSC	AC	AC	QRC	AC & QRC	CGNSC	RC	QRC	AC & RC	CGNSC
Attendance at Supervisory Board meetings	10/10 (100%)	10/10 (100%)	10/10 (100%)	10/10 (100%)	10/10 (100%)	9/10 (90%)	9/10 (90%)	9/10 (90%)	7/10 (70%)	9/10 (90%)	5/10** (50%)
Attendance at committee meetings	RC 3/3 CGNSC 6/6 (100%)	RC 3/3 CGNSC 6/6 (100%)	AC 6/6 (100%)	AC 6/6 (100%)	QRC 5/5 (100%)	AC 6/6 QRC 5/5 (100%)	CGNSC 6/6 (100%)	AC 3/6* (50%) RC 2/3* (66.67%)	RC 1/3* (33.33%) QRC 5/5 (100%)	RC 3/3 (100%) AC 3/6*** (50%)	CGNSC (4/6)** (66.67%)
General management	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes
International business	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes
ESG & sustainability	yes					yes	yes			yes
(Consumer) health and medical technology	yes	yes		yes	yes	yes			yes
Patient safety, quality & regulatory and product development		yes			yes	yes			yes
Finance and accounting	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes	yes
Human Resources	yes	yes	yes		yes	yes	yes	yes	yes	yes	yes
Manufacturing and supply chain	yes	yes		yes		yes	yes				yes
Information technology and digital	yes	yes	yes	yes	yes	yes	yes	yes		yes
Marketing	yes	yes				yes	yes	yes	yes	yes
Governmental and public affairs	yes	yes	yes	yes	yes	yes	yes			yes	yes

1CGNSC: Corporate Governance & Nomination and Selection Committee; AC: Audit Committee; RC:

Remuneration Committee; QRC: Quality & Regulatory Committee

* Mr Pyott left the RC on June 1, 2024

** Mr Ribadeau-Dumas joined the Supervisory Board as observer as per March 1, 2024 and was appointed on

May 7, 2024

***Ms Verhagen joined, and Mr Poonen left the AC as per June 1, 2024. Mr Poonen joined the RC as per June

1, 2024

Supervisory Board committees

While retaining overall responsibility, the Supervisory Board has assigned certain tasks to the three

long-standing committees, also referred to in the Dutch Corporate Governance Code: the

Corporate Governance and Nomination & Selection Committee, the Remuneration Committee and

the Audit Committee. In 2015, the Supervisory Board also established the Quality & Regulatory

Committee. The separate reports of these committees are part of this Supervisory Board report and

are published below. The function of all of the Supervisory Board’s committees is to prepare the

decision-making of the full Supervisory Board, and the committees currently have no independent

or assigned powers. The full Supervisory Board retains overall responsibility for the activities of its

committees.


	67


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

In light of the significance of the ESG dimensions to Philips and their integration into the company’s

overarching strategy, the Supervisory Board as a whole is conducting oversight and advising

executive management on the company’s ESG approach.

Financial statements and sustainability report 2024

The financial statements of the company for 2024, as presented by the Board of Management,

have been audited by EY Accountants B.V., the independent external auditor appointed by the

General Meeting of Shareholders. We have approved these financial statements, and all individual

members of the Supervisory Board have signed these documents (as did the members of the Board

of Management). We have also approved the company’s sustainability statement for 2024, which

has also been audited by EY Accountants B.V.

Finally, we would like to express our thanks to the members of the Board of Management, the

Executive Committee and all other employees for their continued contributions throughout 2024.

The Supervisory Board

Feike Sijbesma

Paul Stoffels

Chua Sock Koong

Liz Doherty

Marc Harrison

Peter Löscher

Indra Nooyi

Sanjay Poonen

David Pyott

Benoît Ribadeau-Dumas

Herna Verhagen

5.3.1Report of the Corporate Governance and Nomination & Selection Committee

The Corporate Governance and Nomination & Selection Committee is chaired by Feike Sijbesma. Its

other members are Paul Stoffels, Indra Nooyi and Benoît Ribadeau-Dumas. The Committee is

responsible for the review of the overall corporate governance, and the selection criteria and

appointment procedures for the Supervisory Board, Board of Management, the Executive

Committee, and certain other key management positions. In 2024, the Committee held six

meetings and all Committee members attended these meetings.

The Committee devoted time to the appointment or reappointment of candidates to fill current

and future vacancies on the Supervisory Board. Following those consultations, it prepared decisions

and advised the Supervisory Board, which resulted in the re-appointments of Feike Sijbesma and

Peter Löscher and the appointment (following the proposal from long-term investor Exor N.V.) of

Benoît Ribadeau-Dumas as members of the Supervisory Board at the 2024 Annual General Meeting

of Shareholders (AGM). This also resulted in the proposal to appoint Bob White as new member of

the Supervisory Board, to be included in the agenda for the upcoming 2025 AGM.

Under its responsibility for the selection criteria and appointment procedures for Philips’ senior

management, the Committee reviewed the functioning of the Board of Management and its

individual members, the Executive Committee succession plans, and emergency candidates for key

roles in the company. The review and evaluation consist of periodical performance review meetings

with the individual members of the Board of Management and the Executive Committee, and

evaluation of the results of these meetings by the Committee. The main findings and conclusions

from these reviews were also shared with the Supervisory Board and the Remuneration Committee

and were taken into account in the performance evaluation of the Board of Management and

Executive Committee members and the selection of succession candidates. Reference is made to

2024 Annual Incentive , setting out the performance review of the Board of Management members

by the Remuneration Committee.

The Committee devoted time in 2024 to the selection and/or appointment of candidates to fill

other current and future vacancies on the Board of Management and the Executive Committee.

This resulted in the appointment of Charlotte Hanneman as incoming Chief Financial Officer and a

member of the Executive Committee as per June 1, 2024, and (at the 2024 AGM) her appointment

as a member of the Board of Management as per October 1, 2024. This also resulted in the

proposal, to be included in the agenda for the upcoming 2025 AGM, to re-appoint Marnix van

Ginneken as a member of the Board of Management.


	68


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The Committee’s work furthermore resulted in the appointment of Ling Liu as a member of the

Executive Committee, succeeding Andy Ho, in the role of Chief Region Leader, Philips Greater

China, effective July 1, 2024. And effective January 1, 2025, two other new members of the

Executive Committee were appointed. Özlem Fidanci succeeded Edwin Paalvast as Chief of

International Region and Leader Growth Region. Jie Xue was appointed Chief Business Leader

Precision Diagnosis, which had been under the extended leadership of Bert van Meurs (Chief

Business Leader Image Guided Therapy). Bert and Jie are now jointly responsible for the Diagnosis &

Treatment segment. The Committee also devoted time in 2024 to the selection and appointment

of Filip Koek as the Head of Internal Audit as per September 1, 2024.

With respect to corporate governance matters, the Committee discussed recent developments in

the Netherlands, and ESG reporting and due diligence developments in Europe. Finally, the

Committee reviewed the Charter of the Corporate Governance and Nomination & Selection

Committee and concluded it remains appropriate.

With respect to the productivity initiatives and other actions to improve the company’s

performance (including the unfortunate but necessary reduction of roles), the Committee was

updated by management on the impact on employees and the phased deployment approach, and

members reviewed the simplification of the organization.

Diversity

The Diversity Policy for the Supervisory Board, Board of Management and Executive Committee was

adopted in 2017 and revised in February 2023, and it is published on the company website. The

Committee periodically assesses the Diversity Policy and the size and composition of the Supervisory

Board and makes recommendations, if relevant, relating to the profile for the Supervisory Board.

Pursuant to the Diversity Policy, the selection of candidates for appointment is based on merit and

its criteria aim to ensure that the Supervisory Board, the Board of Management and the Executive

Committee have a sufficient diversity of views and the expertise needed for a good understanding

of current affairs and longer-term risks and opportunities related to the company’s business. The

nature and complexity of the company’s business is taken into account when assessing the optimal

mix of perspectives, as well as the social and environmental context in which the company

operates.

Effective 2022, Dutch law requires listed companies to set appropriate and ambitious gender

diversity targets for the Board of Management and for a management level of a seniority to be

determined by the company. To this end, the Diversity Policy includes the Supervisory Board’s aim

that at least one-third of the members of the Board of Management and of the Executive

Committee are women, and at least one-third are men. The composition of the Board of

Management and the Executive Committee, respectively, currently meets this aim.

5.3.2Report of the Remuneration Committee

The Remuneration Committee is chaired by Paul Stoffels. Its other members are Feike Sijbesma,

Herna Verhagen and Sanjay Poonen, who replaced David Pyott on June 1, 2024. The Committee is

responsible for preparing decisions of the Supervisory Board on the remuneration of individual

members of the Board of Management and the Executive Committee, as well as the policies

governing this remuneration. The annual cycle of the Remuneration Committee enables it to have

an effective decision-making process supporting the determination, review and implementation of

the Remuneration Policy. The Committee met three times in 2024. All Committee members were

present during these meetings .

In performing its duties and responsibilities, the Remuneration Committee is assisted by an external

consultant and an in-house remuneration expert. For a full overview of the responsibilities of the

Committee, please refer to the Charter of the Remuneration Committee, as set forth in Chapter 3

of the Rules of Procedure of the Supervisory Board (which are published on the company’s

website).

Following preparations that started in May 2023 and stakeholder engagements through a

dedicated remuneration roadshow and other interactions, the Remuneration Committee submitted

proposals at the AGM 2024 to adopt an amended Remuneration Policy for the Board of

Management and an amended Remuneration Policy for the Supervisory Board. The Remuneration

Committee was very thankful for the shareholders’ support, as these proposals were approved by a

96.07% and a 98.94% majority, respectively.

Please refer to the Remuneration report 2024 where the Supervisory Board provides a

comprehensive overview, as prepared by the Remuneration Committee, of the remuneration paid

and owed to the individual members of the Board of Management and the Supervisory Board in

the year 2024.

5.3.3Report of the Audit Committee

The Audit Committee is chaired by Liz Doherty. Its other members are Peter Löscher, Chua Sock

Koong and Herna Verhagen, who replaced Sanjay Poonen on June 1, 2024. The Committee assists

the Supervisory Board in fulfilling its supervisory responsibilities, including ensuring the integrity of

the company’s financial statements, reviewing the company’s internal controls and overseeing the

enterprise risk management process.

In 2024, the Audit Committee held five regular meetings and one extraordinary meeting, which

were attended by all Audit Committee members and the Chairman of the Supervisory Board. The

CEO, CFO, Chief ESG & Legal Officer, Head of Internal Audit, Chief Accounting Officer and external

auditor (EY Accountants B.V.) were also invited and attended all regular meetings.

The Committee met separately in private sessions with the CEO, CFO, Head of Internal Audit and

external auditor after the regular quarterly meeting of the Committee. Prior to the Committee

meetings, the Audit Committee chair met one-on-one with the Group Treasurer as well as with

each member of the management who regularly attend the Audit Committee meetings and with

the external auditor.


	69


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The following overview highlights matters that were reviewed and/or discussed during Committee

meetings in the course of, or with respect to, the financial year 2024:

• The company’s 2024 annual and interim financial statements and non-financial information

(prior to publication), the restructuring provision, the FCO provisions, the goodwill impairment

tests, deferred tax assets and legal matters. In each of the regular quarterly meetings of the

Committee, the Committee reviewed the draft of the press release on the company’s annual or

interim financial statements.

• Matters relating to accounting policies, financial risks, reporting, and compliance with

accounting standards. Key accounting judgments were discussed in-depth, and treatments were

challenged, as were quality of earnings. Compliance with statutory and legal requirements and

regulations, particularly in the financial domain, was also reviewed. Furthermore, the Committee

reviewed the goodwill impairment tests performed in the fourth quarter, risk management, tax

matters, legal compliance, and developments in regulatory investigations, as well as legal

proceedings, including antitrust investigations and related provisions. Important ﬁndings, Philips’

top and emerging areas of risk (including the internal auditor’s reporting thereon, and the Chief

ESG & Legal Officer’s review of litigation and other claims, as well as material investigations,

including those related to the Philips Respironics voluntary recall), and follow-up actions and

appropriate measures were examined thoroughly.

• The company’s policy on business controls, legal compliance and the General Business Principles

(including deployment). The Committee reviewed, discussed and monitored closely the

company’s internal control certification processes, and in particular, compliance with section 404

of the US Sarbanes-Oxley Act and its requirements regarding assessment, review and monitoring

of internal controls. It also discussed on a regular basis the developments in, and findings

relating to, conduct resulting from investigations into alleged violations of the General Business

Principles and, if required, any measures taken.

• The company’s cash ﬂow generation, liquidity and financing headroom, and its ability under its

capital structure and credit ratings to pay dividends and to fund capital investments, including

share repurchases and other corporate finance initiatives.

• Specific finance topics, capital spending and the company’s debt financing strategy (including

the issue of bonds through the Euro Medium Term Note program in May 2024 with the purpose

to repay the EUR 700 million existing debt due in 2024 and 2025).

• A post-investment review of projects in the areas of information technology, Research &

Development, real estate, operations and restructuring, and assessment of the actual spend and

timing of such projects against the original budget and timing.

• The quarterly Internal Audit reports in which the Head of Internal Audit highlighted key findings

of internal audits and fraud investigations by the Internal Audit Function in the previous quarter.

The Committee discussed the adequacy of the remediation actions agreed with management

and accountabilities for executing on these actions. In each meeting the Head of Internal Audit

also presented the audit schedule for the upcoming quarter . Review and approval of the revised

Internal Audit charter, annual audit plan and budget, audit scope, and its coverage in relation to

the scope of the external audit, as well as the stafﬁng, independence, performance and

organizational structure of the Internal Audit Function. This includes the succession of the

Internal Auditor in September 2024.

• The proposed 2024 external audit scope, including key audit areas, approach and fees, and non-

audit services provided by the external auditor in conformity with the Philips Auditor Policy.

Review and challenge of the independence as well as the professional ﬁtness and good standing

of the external auditor and its engagement partners. For information on the fees of the Group

auditor, please refer to Audit fees in the note Income from operations . The Committee reviewed

the transition plan as proposed by PricewaterhouseCoopers Accountants N.V. (PwC) to take over

from EY Accountants B.V. as the company’s new external auditor of the financial report, starting

on January 1, 2025, for a term of four years, and the appointment of the company's external

assurance provider on the 2025 sustainability statement.

• The company’s structure and system for compliance with export controls and international

sanctions.

• Reviewing the quarterly reports on sustainability-related developments, including EU Corporate

Sustainability Reporting Directive and EU Sustainability Reporting Standards, the company's

progress on the implementation thereof, and the impact thereof on reporting by the Philips

Group. The committee also discussed the level of assurance to be provided through the external

audit of the sustainability statement.

• Philips’ information security risk approach (including cybersecurity), at an enterprise level as well

as at product and service levels, comprising an update on the mitigation of cybersecurity risks

and actions taken to comply with relevant laws and regulations including the Cybersecurity Risk

Management, Strategy, Governance, and Incident Disclosure requirements issued by the US

Securities and Exchange Commission (SEC).

In February 2025, the Committee reviewed, together with the other members of the Supervisory

Board, the draft of the Annual Report 2024, as well as the key audit matters and the critical audit

matters identified by the external auditor in relation to the 2024 financial statements included in

the Annual Report 2024 and the Annual Report on Form 20-F, respectively. In February 2025, the

Committee also reviewed the draft of the company’s 2024 Country Activity and Tax Report.

During each regular quarterly Audit Committee meeting, the Committee reviewed the quarterly

report from the external auditor, in which the auditor set forth its ﬁndings and attention points

during the relevant period. The Annual Audit Letter was circulated to the full Supervisory Board,

and planned actions to address the items raised were discussed with management in the

subsequent Audit Committee meetings as well as in private sessions with management.

Finally, the Committee reviewed and updated the Audit Committee Charter.


	70


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5.3.4Report of the Quality & Regulatory Committee

The Quality & Regulatory Committee was established in view of the importance of patient safety

and the quality of the company’s products, systems, services and solutions. The Committee

provides broad oversight of compliance with the regulatory requirements that govern the

development, manufacturing, marketing and servicing of the company’s products, systems, services

and solutions. The Committee assists the Supervisory Board in fulfilling its oversight responsibilities

in these areas. It is chaired by David Pyott and its members are Marc Harrison and Peter Löscher. As

of June 1, 2024, Paul Stoffels also attended the meetings.

In 2024, the Committee held five meetings, and all Committee members attended these meetings.

Quality related matters were a regular item on the agenda of the Supervisory Board meeting. The

CEO, the Chief ESG & Legal Officer, the Chief Operations Officer, the Chief Patient Safety & Quality

Officer and the Chief Medical Officer were present during these meetings. The following overview

indicates some of the matters that were discussed during meetings in the course of 2024.

• The progress on the company’s Quality & Regulatory strategy was tracked and reviewed. The

Committee focused on the strategy to ensure the safety and efficacy of the company’s products

and solutions for patients and customers. In that context, the Committee reviewed the status

and progress of the company’s Patient Safety and Quality program, which includes

enhancement of the engagement with regulators, ensuring sustainability and predictable

performance, and the Patient Safety & Quality Culture Intervention. Specific attention was given

to the Quality Management System (QMS) transformation to drive process simplification in a

tailored manner and Product Quality Reviews (PQRs) to ensure the installed base meets patient

safety and design control standards, as well as compliance requirements. For more information,

please refer to Patient safety, quality and regulatory .

• The Philips Respironics voluntary recall notification related to the sound abatement foam in

certain sleep and respiratory care products (announced on June 14, 2021) in the company’s

Sleep & Respiratory Care Business. Management regularly updated the Committee on the trend

of the number of devices registered for remediation and on the progress of the repair-and-

replace program for the affected devices, as well as actions taken to accelerate the remediation.

The Committee reviewed aspects of this issue, such as the program governance to enable

effective execution, and ongoing engagements with the FDA and the DOJ, among others, with

respect to the 518(a) Notification order issued by the FDA on March 10, 2022, the investigation

initiated by the DOJ to which Philips Respironics is subject, and the execution of the agreed

consent decree. The Committee reviewed the engagements with other regulatory authorities

globally. Furthermore, the Committee reviewed and discussed with management the

engagement with and communication efforts to patients, physicians, customers and durable

medical equipment providers; the testing program and its outcomes; and health hazard

evaluations. The Committee also discussed the level of related field action provisions, as set out

in more detail in the report of the Audit Committee above.

• Management updated the Committee regularly with respect to other quality issues (other than

the Philips Respironics voluntary recall notification mentioned in the previous bullet), and the

Committee reviewed the progress made with solving and closing such other issues.

• Review of progress in the transformation of the company’s Patient Safety & Quality Function,

aimed at further strengthening expertise and capabilities within the Function, including

upscaling Patient Safety & Quality talent at mid-level leadership positions.

• Review of the progress made with global initiatives around the transformation, standardization

and simplification of the company’s structure and organizational processes relating to QMSs (the

reduction of the current QMSs to one quarter versus the baseline), management systems,

regulated manufacturing sites (legal manufacturers), Corrective and Preventive Action (CAPA) and

complaint management.

• Review the implementation of a Patient Safety & Quality IT roadmap and ensure adoption of the

IT and data enhancements.

• The status and outcome of Quality & Regulatory-related investigations and inspections by

regulatory authorities and notified bodies globally across the organization. Management also

regularly provided the Committee with an overview of upcoming scheduled inspections across

company sites by the FDA, other regulatory authorities and notified bodies, and the actions

taken to prepare for such inspections.

• Review of the product risk per Business based on a product assessment approach and

remediation across the company, including findings resulting from internal audits.

• Review of the 2024 dashboard of Quality & Regulatory key performance indicators, showing the

trend of performance. The Committee also reviewed the Quality & Regulatory key performance

indicators for 2025.


	71


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5.4Remuneration report 2024

Letter from the Remuneration Committee Chair

Dear Stakeholder,

On behalf of the Remuneration Committee, I am pleased to present the 2024 Remuneration

Report, providing a comprehensive overview of the remuneration paid and owed to the individual

members of the Board of Management and the Supervisory Board, respectively, in the financial year

2024. Charlotte Hanneman succeeded Abhijit Bhattacharya as CFO as of October 1, 2024, after

having joined Philips on June 1, 2024, as a member of the Executive Committee, to start her

introduction into the role. This Remuneration Report includes their respective remunerations in their

capacity as members of the Board of Management .

Company performance in 2024 and incentive plan realization

Despite declines in demand in both consumer and health systems in China we returned to positive

order growth and continued to drive margin expansion and cash-flow generation. Nearing the end

of the second year of the three-year plan to create value with sustainable impact, Philips has made

solid progress on its execution priorities, returned to order intake growth, and delivered strong

margin and good cash performance, although sales growth was slower. Philips reached important

milestones in the Respironics litigation, resolving the personal injury litigation and the medical

monitoring class action. We believe this progress is being acknowledged, where long-term investor

Exor increased its stake in Philips, along with some other significant investors.

For the awards granted under our Long-Term Incentive Plan in 2022, the company performance

resulted in a realization above target for the sustainability objectives. For the relative Total

Shareholder Return (TSR) and adjusted Earnings Per Share (EPS) metrics in our Long-Term Incentive

Plan, however, there was a below-threshold performance since the start of the performance period

in 2022. With respect to the financial metrics of the 2024 Annual Incentive, performance was at

target for the Adjusted EBITA metric, below target for the free cash flow * metric, and below

threshold for the comparable sales growth * metric. Please refer to our 2024 Remuneration Report

for more details.

Other remuneration matters prepared by the Remuneration Committee

In 2024, we successfully introduced new remuneration policies for the Board of Management and

the Supervisory Board, respectively. This process commenced in October 2023 with extensive

engagement with stakeholders, including shareholders representing approximately 55% of the

issued share capital, institutional advisory organizations, employees, and employee representative

bodies. Their feedback was carefully incorporated to design policies that are competitive in the

market and aligned with our strategic priorities and societal responsibilities. The 2024

Remuneration Policy for the Board of Management enhances the alignment between performance

and remuneration, emphasizing both financial and non-financial outcomes, with an increased focus

on patient safety and quality.

Looking ahead

The 2024 Remuneration Policy includes a potential increase of the Annual Incentive target to 120%

(from 100%) for the CEO, and to 100% (from 80%) for the CFO and CLO enabling to reward at

market median level for the Annual Incentive. As noted in the 2024 Remuneration Policy for the

Board of Management, the Supervisory Board applied unchanged target levels for 2024, but it

could (gradually) increase the Annual Incentive target levels as of 2025, subject to a performance

trajectory by 2024 that gives the company a clear outlook to deliver on its 2025 targets. The

Supervisory Board notes that in 2024, the company delivered on its commitments regarding

profitability, free cash flow and ESG. Nevertheless, the Supervisory Board decided to maintain the

current target levels for the Annual Incentives 2025 as well. The Supervisory Board notes that it

intends to increase the Annual Incentive target levels towards the policy target maximum as of

2026.

I look forward to presenting our Remuneration report 2024 at our upcoming Annual General

Meeting of Shareholders.

On behalf of the Remuneration Committee,

Paul Stoffels

Chairman of the Remuneration Committee


	72


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Introduction

In this Remuneration Report, the Supervisory Board provides a comprehensive overview, in

accordance with article 2:135b of the Dutch Civil Code, of the remuneration paid and owed to the

individual members of the Board of Management and the Supervisory Board, respectively, in the

financial year 2024. The report will also be published as a stand-alone document on the company’s

website after the 2025 Annual General Meeting of Shareholders, the agenda of which will include

an advisory vote on this Remuneration Report.

Board of Management

Summary of the 2024 Remuneration Policy

The Remuneration Policy, which includes a Long-Term Incentive Plan, for the Board of

Management (BoM) has been adopted at the Annual General Meeting of Shareholders held on

May 7, 2024.

The objectives of the Remuneration Policy for members of the Board of Management are in line

with those for Philips Executives throughout the Philips group: to focus them on pursuing our

purpose to improve people’s health and well-being through meaningful innovation, and on

delivering on our strategy, to motivate and retain them to create superior, long-term stakeholder

value.


	73


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Main elements of the Remuneration Policy


Compensation element	Purpose and link to strategy	Operation	Policy Level
Total Direct Compensation	To support the Remuneration Policy’s objectives, the Total Direct Compensation includes a significant variable part in the form of an Annual Incentive (cash bonus) and Long- Term Incentive in the form of performance shares. As a result, a significant proportion of pay is ‘at risk’.	The Supervisory Board ensures that a competitive remuneration package for Board-level executive talent is maintained and benchmarked. The positioning of Total Direct Compensation is reviewed against benchmark data on an annual basis and is recalibrated if and when required. To establish this benchmark, data research is carried out each year on the compensation levels in the Quantum Peer Group.	Total direct remuneration is aimed at or close to, the median of the Quantum Peer Group.
Annual Base Compensation	Fixed cash payments intended to attract and retain executives of the highest caliber and to reflect their experience and scope of responsibilities.	Annual Base Compensation levels and any adjustments made by the Supervisory Board are based on factors including the median of Quantum Peer Group data and performance and experience of the individual member. The annual review date for the base salary is typically before April 1.	The individual salary levels are shown in this Remuneration Report.
Annual Incentive	Variable cash incentive of which achievement is tied to specific financial and non-financial targets derived from the company’s annual strategic plan.	The payout in any year relates to the achievements of the preceding year. Metrics and their weighting are disclosed ex-ante in the Remuneration Report and there will be no retroactive changes to the selection of metrics used in any given year once approved by the Supervisory Board and disclosed.	Policy (maximum) level: President & CEO On-target: 120% Maximum: 240% of Annual Base Compensation. Other BoM members On-target: 100% Maximum: 200% of Annual Base Compensation.
Long-Term Incentive	Variable equity incentive of achievement is tied to targets reflecting long-term stakeholder value creation and delivered in the form of performance shares.	The annual award size is set by reference to a multiple of base salary. The actual number of performance shares to be awarded is determined by reference to the average closing price of the Royal Philips share measured over the last month of the quarter preceding the actual grant of performance shares (the day of publication of the relevant quarterly results). Dependent upon the achievement of the performance conditions, cliff-vesting applies three years after the date of grant. During the vesting period, the value of dividends will be added to the performance shares in the form of shares. These dividend-equivalent shares will only be delivered to the extent that the award actually vests.	President & CEO Annual grant size: 200% of Annual Base Compensation. Other BoM members Annual grant size: 150% of Annual Base Compensation. Maximum vesting opportunity is 200% of the number of performance shares granted.
Mandatory share ownership and holding requirement	To further align the interests of executives to those of stakeholders and to motivate the achievement of sustained performance.	The guideline for members of the Board of Management is to hold at least a minimum shareholding in the company. Until this level has been reached the members of the Board of Management are required to retain all after-tax shares derived from any Long-Term Incentive Plan. The shares granted under the Long-Term Incentive Plan shall be retained for a period of at least 5 years or until at least the end of their contract period if this period is shorter. The guideline does not require members of the Board of Management to purchase shares in order to reach the required share ownership level.	The minimum shareholding requirement is 400% of Annual Base Compensation for the CEO and 300% for other members of the Board of Management.
Pension	Participation in the Philips Flex ES pension plan in the Netherlands (applicable for all executives) combined with a fixed pension contribution intended to result into an appropriate level at retirement.	Defined Contribution plan with fixed contribution (applicable to all executives in the Netherlands – capped at EUR 137,800). Gross allowance of 25% of Annual Base Compensation exceeding EUR 137,800.
Additional arrangements	To aid retention and remain competitive within the marketplace	Additional arrangements include expense and relocation allowances, medical insurance, accident insurance, Philips product arrangements and company car arrangements. The members of the Board of Management also benefit from coverage under the company’s Directors & Officers (D&O) liability insurance. The company does not grant personal loans to members of the Board of Management.	Cash value (grossed up) of the benefits received, which are in line with other Philips executives in the Netherlands.


	74


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Peer Groups

We use a Quantum Peer Group for remuneration benchmarking purposes, and therefore we aim to

ensure that it includes business competitors, with an emphasis on companies in the healthcare,

technology-related or consumer products area, and other companies we compete with for

executive talent. The Quantum Peer Group consists of predominantly Dutch and other European

companies, plus a minority (up to 25%) of US-based global companies, of comparable size,

complexity and international scope.

Philips Group

Quantum Peer Group 2024


European companies		Dutch companies	US companies
Alcon	Lonza	Ahold Delhaize	Baxter
BAE Systems	Nokia	AkzoNobel	Becton Dickinson
Dräger	Reckitt Benckiser	ASML	Boston Scientific
Ericsson	Roche	Heineken	GE Healthcare
Fresenius Medical Care	Siemens Healthineers		Medtronic
Getinge	Smith & Nephew		Stryker
GSK	Thales

In addition, we use a TSR Performance Peer Group to benchmark our relative Total Shareholder

Return performance for LTI purposes and against our business peers in the health technology

market and other markets in which we compete. The companies we have selected for this peer

group include predominantly US-based healthcare companies. Given that a substantial number of

relevant competitors are US-headquartered, the weighting of US-based healthcare companies is

more notable than for the Quantum Peer Group.

Philips Group

TSR Performance Peer Group 2024


US companies	European companies	Japanese companies
Baxter	Alcon	Canon
Becton Dickinson	Elekta	Terumo
Boston Scientific	Fresenius Medical Care
Danaher	Getinge
GE Healthcare	Reckitt Benckiser
Hologic	Siemens Healthineers
Johnson & Johnson	Smith & Nephew
Medtronic
Resmed
Stryker

The Remuneration Policy and the LTI Plan allow changes to the peer groups to be made by the

Supervisory Board without further approval from the General Meeting of Shareholders in respect of

up to three companies on an annual basis (for instance: following a delisting of a company or a

merger of two peer companies), or six companies in total during the four years following adoption

and approval of the Remuneration Policy and the LTI Plan respectively (or, if earlier, until the

adoption or approval of a revised Remuneration Policy or revised LTI Plan).

Services agreements

The members of the Board of Management are engaged by means of a services agreement

(overeenkomst van opdracht). Termination of the contract by either party is subject to six months’

notice period. The severance payment is set at a maximum of one year’s Annual Base

Compensation. No severance payment is due if the agreement is terminated early on behalf of the

Board of Management member or in the case of urgent cause (dringende reden) as defined in

article 7:678 and further of the Dutch Civil Code. The term of the services agreement is aligned

with the term for which the relevant member has been appointed by the General Meeting of

Shareholders (which is a maximum period of four years, it being understood that this period expires

no later than at the end of the Annual General Meeting of Shareholders (AGM) held in the fourth

year after the year of appointment).

Philips Group

Contract terms for current members 2024


	end of term
Roy Jakobs	AGM 2026
Charlotte Hanneman	AGM 2028
Marnix van Ginneken	AGM 2025

Remuneration of the Board of Management in 2024

The Supervisory Board has determined the 2024 pay-outs to the members of the Board of

Management, upon the proposal of the Remuneration Committee, in accordance with the 2024

Remuneration Policy.

The Remuneration Committee annually conducts a scenario analysis. This includes the calculation of

remuneration under different scenarios, whereby different Philips performance assumptions and

corporate actions are examined. The Supervisory Board concluded that the relationship between

the strategic objectives and the chosen performance criteria for the 2024 Annual Incentive, as well

as for the 2022 LTI grants, were adequate.


	75


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Annual Base Compensation

As part of the regular remuneration review, Annual Base Compensation for the members of the

Board of Management is being reviewed every year. No increase was applied in 2023. This year,

however, the Annual Base Compensation has been increased per April 1, 2024: for Roy Jakobs

from EUR 1,200,000 to EUR 1,250,000, for former CFO Abhijit Bhattacharya from EUR 810,000 to

EUR 840,000 and for Marnix van Ginneken from EUR 630,000 to EUR 660,000, respectively. This

increase was made to move the total compensation level closer to the market median level, as well

as to reflect internal relativities. The Annual Base Compensation of Charlotte Hanneman as new

CFO was set at EUR 700,000.

2024 Annual Incentive

The Annual Incentive performance has been assessed based on company financial results as well as

non-financial results. Details are as follows:

Financial element (70% weighting)

In line with the 2024 Remuneration Policy, the company sets financial performance metrics and

targets in advance of the year for all members of the Board of Management. For the year 2024, the

financial targets set at Group level cover Comparable Sales Growth*, Adjusted EBITA* and Free

Cash Flow*. For the Comparable Sales Growth metric, the realized performance was below

threshold performance level, which resulted in a 0% payout for this metric. For the adjusted EBITA

metric, the realized performance was at target performance level, which resulted in a 100% payout

for this metric. For the Free Cash Flow metric, the realized performance of 906 million EUR results

in a 177.0% payout for this metric. The Supervisory Board and Board of Management have jointly

decided to adjust for insurance reimbursements received and to lower the payout from 177.0% to

73.6% of target.


Financial performance metric	Weighting as % of target Annual Incentive	Assessment of performance					Weighted pay-out as % of target Annual Incentive
Financial performance metric	Weighting as % of target Annual Incentive	threshold performance	target performance	maximum performance	realized performance	resulting payout as % of target	Weighted pay-out as % of target Annual Incentive
Comparable Sales Growth¹	25%	2.0%	4.0%	6.0%	1.2%	0.0%	0.0%
Adjusted EBITA margin¹	25%	10.5%	11.5%	13.5%	11.5%	100.0%	25.0%
Free Cash Flow¹	20%	375	675	975	906	73.6%	14.7%
Total	70%						39.7%

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


	76


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Non-financial element (30% weighting)

The non-financial performance categories and objectives were set at the beginning of the year and

disclosed in the 2023 remuneration report. As per remuneration policy, each selected performance

category received an equal weighting. The Supervisory Board has assessed performance and

granted a pay-out between 0% and 200% per selected category.


Member of Board of Management	Performance category	Performance objective	Assessment of performance	Weighted pay-out as% of target Annual Incentive
Roy Jakobs	Patient Safety & Quality	Drive Patient Safety & Quality as highest priority in the organization	Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.	34.5%
	Customer	Improve customer experience	Customer NPS significantly improved.
	Customer	Improve supply chain reliability	On-time delivery of orders as per customer expectations significantly improved.
	Strategy and Execution	Drive focused strategy to win in the market	Market share gains achieved in some Businesses. Solid progress on execution priorities, with opportunities to accelerate growth strategies.
	Strategy and Execution	Establish simplified, more agile operating model	Targets for operating model simplification and the headcount reduction plan were responsibly achieved.
	ESG	Deliver on ESG Commitments	ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.
Charlotte Hanneman	Patient Safety & Quality	Drive Patient Safety & Quality as highest priority in the organization	Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.	30.3%
	Customer	Improve customer experience	Customer NPS significantly improved.
	Customer	Improve financial forecasting	n/a
	Strategy and Execution	Drive focused strategy to win in the market	Delivered on Cash- and Productivity programs as per plan
	Strategy and Execution	Establish simplified, more agile operating model	Targets for operating model simplification and the headcount reduction plan were responsibly achieved.
	ESG	Deliver on ESG Commitments	ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.


	77


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Abhijit Bhattacharya	Patient Safety & Quality	Drive Patient Safety & Quality as highest priority in the organization	Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.	30.3%
	Customer	Improve customer experience	Customer NPS significantly improved.
	Customer	Improve financial forecasting	Accuracy of sales forecast was insufficient.
	Strategy and Execution	Drive focused strategy to win in the market	Delivered on Cash- and Productivity programs as per plan
	Strategy and Execution	Establish simplified, more agile operating model	Targets for operating model simplification and the headcount reduction plan were responsibly achieved.
	ESG	Deliver on ESG Commitments	ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.
Marnix van Ginneken	Patient Safety & Quality	Drive Patient Safety & Quality as highest priority in the organization	Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.	40.3%
	Customer	Manage legal issues	Significant milestones achieved, such as the economic loss settlement and the resolution of the personal injury and medical monitoring litigation in the US related to the Respironics recall.
	Strategy and Execution	Drive focused strategy to win in the market	Delivery on our value creation plan and legal & compliance commitments ahead of target.
	Strategy and Execution	Establish simplified, more agile operating model	Targets for operating model simplification and the headcount reduction plan were responsibly achieved.
	ESG	Deliver on ESG Commitments	ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.

Overall, this leads to the following total Annual Incentive realization:

Annual Incentive realization 2024

in EUR unless otherwise stated


	Annual incentive opportunity		Realized annual incentive
	Target as a % of base compensation	Target Annual Incentive	Financial performance (weighted pay-out %)	Individual performance (weighted pay-out %)	Payout as % of target Annual Incentive¹	Realized annual incentive
Roy Jakobs	100%	1,250,000	39.7%	34.5%	74.2%	927,750
Charlotte Hanneman	80%	140,491	39.7%	30.3%	70.0%	98,372
Abhijit Bhattacharya	80%	502,619	39.7%	30.3%	70.0%	351,934
Marnix van Ginneken	80%	528,000	39.7%	40.3%	80.0%	422,374

1Note that figures may not add up due to rounding.

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


	78


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2025 Annual Incentive

Financial element (70% weighting):

For the year 2025, the following financial performance metrics are selected to ensure alignment

with the key (strategic) priorities in the year:

• 35% weighting: Comparable Sales Growth *

• 20% weighting: Adjusted EBITA* margin

• 15% weighting: Free Cash Flow*

Non-Financial element (30% weighting):

At the start of each year, two to four performance categories are selected from the following list,

whereby each selected category receives an equal weighting:

• Patient Safety & Quality

• Customer

• Strategy and Execution

• ESG

For each selected category, one or more performance objectives are determined at the start of the

year for each of the members of the Board of Management.

For the year 2025, the following categories and objectives were selected to ensure alignment with

the key (strategic) priorities in the year:


Performance category	Performance objective	Applicable for	Weighting	Measurement description
Patient Safety & Quality	Drive Patient Safety & Quality as highest priority in the organization	All members of Board of Management	7.50%	This objective measures delivery on our company-wide program to strengthen our Patient Safety & Quality culture, capabilities and performance. Additionally, we measure the progress on the Respironics recall and delivery of the proposed consent decree commitments.
Customer	Improve market share and customer experience	Roy Jakobs	7.50%	This objective is measured by the market share gain and by the on-time delivery of orders as per customer expectations.
	Improve market share and customer experience	Charlotte Hanneman		This objective is measured by the market share gain and by a reliable forecast as per plan.
	Manage legal issues	Marnix van Ginneken		Develop and manage litigation strategy and potential liabilities.
Strategy and Execution	Drive focused strategy to win in the market and simplify the operating model	All members of Board of Management	7.50%	This objective measures delivery on our value creation plan and delivery on our operating model simplification plan.
ESG	Deliver on ESG Commitments	All members of Board of Management	7.50%	This objective measures: - Performance on our ESG index (which includes various elements such as emission- and diversity targets) - Our capacity to grow talent and further improve employee engagement

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


	79


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

2022 Long-Term Incentive

The 3-year performance period of the 2022 LTI grant, consisting of performance shares, ended on

December 31, 2024. The realization of this grant is based on TSR achievement, adjusted EPS

growth and sustainability objectives. The following performance achievement and vesting levels

have been determined by the Supervisory Board in respect of the 2022 grant of performance

Philips Group

Performance achievement and vesting levels


	achievement	weighting	vesting level
TSR	0%	50%	0%
EPS	0%	40%	0%
Sustainability objectives	150%	10%	15%
Total			15%

TSR (50% weighting)

A ranking approach to TSR applies with Philips itself included in the TSR Performance Peer Group.

TSR scores are calculated based on a local currency approach and by taking a 3-month averaging

period prior to the start and end of the 3-year performance period. The performance incentive pay-

out zone is outlined in the following table, which results in zero vesting for performance below the

40th percentile and 200% vesting for performance levels above the 75th percentile. The incentive

zone range has been constructed such that the average pay-out over time is expected to be

approximately 100%.

Philips Group

Performance-incentive zone for TSR in %


Position	20-14	13	12	11	10	9	8	7	6	5-1
Vesting %	0	60	80	90	100	120	140	160	180	200

The TSR achieved by Philips during the performance period was (18.07%), using a start date of

October 2021 and end date of December 2024. This resulted in Philips being positioned at rank 17

in the TSR performance peer group shown in the following table, resulting in a TSR achievement of

0%.

Following Oracle’s acquisition of Cerner (completed June 2022), the Supervisory Board adopted the

approach of recognizing Cerner’s performance through the delisting date. As a proxy for future

performance, reinvestment in an index of the remaining 19 peer companies was assumed

(effectively retaining a peer group of 20 companies).

LTI Plan TSR realization 2022 grant: (18.07%)


	total return	rank number
General Electric	188.13%	1
Canon	109.69%	2
Boston Scientific	109.49%	3
Stryker	45.83%	4
Terumo	25.61%	5
Cerner	16.03%	6
Hologic	6.28%	7
Alcon	5.30%	8
Johnson & Johnson	3.09%	9
Becton Dickinson	0.82%	10
ResMed	(4.69%)	11
Danaher	(9.68%)	12
Reckitt Benckiser	(11.29%)	13
Siemens Healthineers	(12.07%)	14
Smith & Nephew	(12.55%)	15
Medtronic	(17.81%)	16
Philips	(18.07%)	17
Fresenius Medical Care	(23.62%)	18
Elekta	(30.87%)	19
Getinge	(49.05%)	20

Adjusted EPS growth (40% weighting)

The LTI Plan EPS payouts and targets set at the beginning of the performance period were as

follows:

Philips Group

LTI Plan EPS payouts


	Below threshold	Threshold	Target	Maximum	Actual
LTI plan EPS (euro)	<1.19	1.19	1.47	1.69	(0.26)
Vesting %	0%	40%	100%	200%	0%


	80


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

In respect of the 2022 LTI grant, the LTI plan EPS is calculated based on a reported net income

attributable to shareholders divided by the number of common shares outstanding (after deduction

of treasury shares) on the day prior to the beginning of the performance period (to eliminate the

impact of any share buyback, stock dividend, etc.), resulting in an EPS of EUR (0.97). Furthermore,

as per the 2020 LTI Plan, the LTI Plan EPS includes adjustments to account for events that were not

planned when targets were set or were outside management’s control such as the profit and loss

impact of acquisitions and divestments (balance is neutral), the profit and loss impact of unhedged

foreign exchange variations versus plan (positive adjustment), the profit and loss impact of legacy

legal proceedings (positive impact) and the profit and loss impact of Respironics related charges

(positive impact). Overall, this resulted in an LTI Plan EPS of EUR (0.26) based on adjusted net

income from continuing operations, leading to a realization of 0% of target.

Philips Group

LTI Plan EPS realization in millions of EUR unless otherwise stated


	Net income	EPS (euro)
Income from continuing operations attributable to shareholders	(843)	(0.97)
Profit and loss impact of:
- Acquisitions and divestitures¹	1	0.00
- Foreign exchange variations versus plan²	108	0.12
- Legacy legal proceedings³	327	0.38
- Respironics related charges⁴	180	0.21
Adjusted net income from continuing operations	(226)	(0.26)

1Profit and loss impact of acquisitions and divestments made after the start of the performance period is

excluded.

2Impact of variations of unhedged volatile currencies compared to the performance period plan.

3Impact of Respironics litigation provision and Respironics legal insurance proceeds.

4Impact of Respironics field-action running costs and consent decree charges.

Sustainability objectives (10% weighting)

In order to further align the remuneration package for the Board of Management with our purpose

and our ESG commitment, a sustainability criterion was introduced in the 2020 LTI Plan. Philips

believes that ESG performance will improve the company’s performance as a whole and, therefore,

that it should be explicitly linked to (long-term) remuneration. The criteria are based on three

Sustainable Development Goals (SDGs) as defined by the United Nations that are included in

Philips’ strategy on sustainability (no. 3, 12 and 13). These three SDGs are translated in five

underlying objectives, which are measured against a specific target range.

At the beginning of the performance period, challenging target ranges are set for each of the five

objectives. Based on a point-to-point method, performance achievement is measured at the end of

the performance period (i.e., 3 years) versus the beginning of the performance period. The vesting

level is determined based on the following scheme:


No. of measures achieved on or above target	Vesting %
1	0%
2	0%
3	50%-100%
4	100%-150%
5	150%-200%

The realized performance is described in the following table. As four out of five objectives are

achieved within or better than target range, the vesting % lies between 100% and 150% of

target. Based on the outperformance of the four objectives, the Supervisory Board has assessed

that a vesting level of 150% would reflect an appropriate position within the vesting range.

For more information on the realized performance on all five objectives please refer to our

Environmental, Social and Governance.


Sustainability category	Underlying objective	Target range	Realized performance
Ensure healthy lives and promote well-being for all at all ages (SDG3) Lives Improved	Targeted # of Lives Improved in year 3 1	1.75 – 1.91 million	1.96 million	Better than target range
Ensure sustainable consumption and production patterns (SDG12) Circularity	Targeted circular revenue in year 3 ²	16.0% – 21.0%	24.4%	Better than target range
	Targeted waste to landfill in year 3 ³	3.5% – 0.1%	<0.01%	Better than target range
	Targeted closing the loop in year 3 ⁴	28.0% – 36.0%	19.5%	Below target range
Take urgent action to combat climate change and its impacts (SDG13) Carbon footprint	Targeted CO2 -equivalent (in kilotonnes) in year 3	612 – 549 kilotonnes CO 2	474 kilotonnes CO 2	Better than target range

1Lives Improved by Philips products, solutions and services and care to those in underserved markets.

2Revenue from products, services and solutions contributing to circularity (e.g. optimizing and re-using

materials)

3Avoiding production of waste materials.

4Taking back healthcare equipment.

2025 Long-Term Incentive

The 2025 Long-Term Incentive grant consists of 100% performance shares of which vesting is

subject to performance over a period of 3 years, whereby performance is measured based on the

following performance metrics and weighting:

• 40% weighting: Relative Total Shareholder Return (‘TSR’)

• 40% weighting: Adjusted Earnings per Share growth* (‘EPS’)

• 20% weighting: ESG performance


	81


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

ESG Performance (20% weighting)

At the start of each performance year, we select four ESG objectives in line with our long-term

strategic priorities. There is no exhaustive list of objectives that can be selected. To ensure that all

objectives are material, auditable and measurable, we only select objectives which are reported in

our Annual Report (in preparation for the Corporate Sustainability Reporting Directive) and

therefore are subject to assurance from our external provider of assurance with respect to the

company's sustainability reporting. Furthermore, we make sure that in any measurement year, the

ESG objectives do not overlap with our non-financial performance objectives for the Annual

Incentive.

The objectives selected for the 2025 LTI grant are shown in the following table, including the

rationale for selecting these objectives and more details on the measurement approach.

2025-2027


ESG objective	Rationale	Measurement approach
Targeted # of Lives Improved in year 3 1	Ensure healthy lives and promote well- being for all at all ages (SDG3) Lives Improved	Please refer to section 4.2.1 Improving people’s lives for more details.
Targeted circular revenue in year 3 2	Ensure sustainable consumption and production patterns (SDG12) Circularity	Please refer to section 4.1.3 Resource use and circular economy for more details.
Targeted full value chain CO 2 -equivalent (in kilotonnes) in year 3	Take urgent action to combat climate change and its impacts (SDG13) Carbon footprint	Please refer to section 4.1.2 Climate Change for more details.
Targeted People Engagement Score in year 3	Retain an engaged workforce People Engagement Score	The People Engagement Score is the single measure of the overall level of employee engagement at Philips, measured on a bi-yearly basis.

1Lives Improved by Philips products, solutions and services and care to those in underserved markets.

2Revenue from products, services and solutions contributing to circularity (e.g. optimizing and re-using

materials)

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.

Pension

The following pension arrangement is in place for the members of the Board of Management

working under a services agreement governed by Dutch law:

• Flex ES Pension Plan in the Netherlands, which is a Collective Defined Contribution plan with a

fixed contribution of (currently) 30.3% (including an own contribution of 2% - this was changed

to 8% as of October 1, 2024) of the maximum pensionable salary of EUR 137,800 (effective

January 1, 2024) minus the offset. The Flex ES Plan has a target retirement age of 68 and a

target accrual rate of 1.85%;

• A gross Pension Allowance equal to 25% of the base compensation exceeding EUR 137,800.


	82


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Total remuneration costs in 2024

The following table gives an overview of the costs incurred by the company in 2024 and 2023 in

relation to the remuneration of the Board of Management. Costs related to performance shares are

based on accounting standards (IFRS), which prescribe that costs for each LTI grant are recognized

over the full (multi-year) vesting period, proportionate to the relevant fiscal year. Therefore, the

costs for any year reflect costs of multiple LTI grants, as opposed to the actual value for the holder

of an LTI grant at the vesting date. Please refer to section 2022 Long-Term Incentive for more

details on the actual vesting of the performance shares.

Philips Group

Remuneration Board of Management1 in EUR


			Accounting costs in the year
	reported year	annual base compensation²	base compensation	realized annual incentive	performance shares³	pension allowances⁴	pension scheme costs	other compensation⁵	total cost	Fixed-variable remuneration⁶
R. Jakobs	2024	1,250,000	1,237,500	927,750	1,692,087	274,925	32,218	83,870	4,248,350	38%-62%
R. Jakobs	2023	1,200,000	1,200,000	2,004,480	968,922	267,798	31,891	109,256	4,582,347	35%-65%
Charlotte Hanneman	2024	700,000	175,545	98,372	104,606	35,247	7,775	23,089	444,633	54%-46%
Abhijit Bhattacharya	2024	840,000	622,500	351,934	1,424,219 ⁶	129,788	25,478	963,596 ⁷	3,517,514	50%-50%
Abhijit Bhattacharya	2023	810,000	810,000	1,075,939	793,429	197,133	31,891	94,516	3,002,907	38%-62%
Marnix van Ginneken	2024	660,000	652,500	422,374	740,101	128,675	32,218	74,227	2,050,095	43%-57%
Marnix van Ginneken	2023	630,000	630,000	846,922	614,840	125,298	31,891	53,446	2,302,397	37%-63%
Total	2024		2,688,045	1,800,429	3,961,013	568,635	97,689	1,144,781	10,260,593	44%-56%
Total	2023		2,640,000	3,927,341	2,377,191	590,228	95,673	257,218	9,887,650	36%-64%

1Reference date for board membership is December 31, 2024.

2Annual Base Compensation as incurred in the year, base compensation increases are reflected

proportionally.

3Costs of performance shares are based on accounting standards (IFRS) and do not reflect the value of

performance shares at the vesting/release date.

4The stated amounts mainly concern (share of) allowances to members of the Board of Management that

can be considered as remuneration. In a situation where such a share of an allowance can be considered as

(indirect) remuneration (for example, private use of the company car), then the share is both valued and

accounted for here. The method employed by the fiscal authorities is the starting point for the value stated.

5Fixed remuneration is determined as the sum of base compensation, pension allowances, pension scheme

costs and other compensation. Variable remuneration is determined as the sum of realized annual incentive

and performance shares.

6Accounting costs for 2024 include the additional costs for the accelerated accrual of the 2022 and 2023 LTI

grant.

7Other compensation costs include the one-time severance payment of €840,000, which Abhijit

Bhattacharya received in accordance with his employment agreement.


	83


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5-year development of CEO and Board of Management versus average employee

remuneration costs compared to company performance

Internal pay ratios are a relevant input factor for determining the appropriateness of the

implementation of the Remuneration Policy, as recognized in the Dutch Corporate Governance

Code. Following the European Sustainability Reporting Standards (ESRS), this disclosure enhances

transparency in income distribution and aligns with our commitment to fair remuneration practices.

For the 2024 financial year, the ratio between the annual total compensation for the CEO, which is

the highest paid individual, and the average annual total remuneration for an employee was 43:1.

The ratio decreased from 46:1 in 2023. Furthermore, the ratio between the CEO and median

annual total remuneration for all employees (excluding the highest-paid individual) was 48:1.

Further details on the development of these amounts and ratios over time can be found in the

following table. Please note that the amounts presented in the table reflect total remuneration

costs to the company which differ from the actual payouts to the members of the Board of

Management.

Philips Group

Remuneration costs in EUR


	2020	2021	2022	2023	2024
Remuneration
CEO Total Remuneration Costs (A)¹	6,153,067	5,452,299	5,133,659	4,582,347	4,248,350
CFO Total Remuneration Costs	3,007,990	2,652,864	1,896,081	3,002,907	3,517,514
CLO Total Remuneration Costs	2,203,160	2,029,054	1,416,837	2,302,397	2,050,095
Average Employee (FTE) Total Remuneration Costs (B)²	91,455	86,853	93,373	99,866	99,091
Ratio A versus B⁴	67:1	63:1	55:1	46:1	43:1
Median Employee Total Remuneration Costs (C)³					89,103
Ratio A versus C⁴					48:1
Company performance
Annual TSR⁵	6.2%	(14.5)%	(60.0)%	42.9%	43.3%
Comparable Sales Growth%⁶	2.9%	(1.2)%	(2.8)%	6.0%	1.2%
Adjusted EBITA%⁶	13.2%	12.0%	7.4%	10.6%	11.5%
Free Cash Flow⁶	1,635	900	(961)	1,582	906

1For 2022, CEO refers to Frans van Houten for the period up to October 15, 2022, and to Roy Jakobs for the

period from October 15, 2022, onwards. For 2020 and 2021, CEO refers to Frans van Houten.

2Based on Employee benefit expenses (EUR 6.6 billion) divided by the average number of employees (67,014

FTE) as reported in Income from operations. This results in an average annual total compensation cost of

EUR 99,091 per employee.

3Median Employee Total Remuneration Costs are based on the full salary & wage expenses to the company,

including base salary, social security, benefits in cash, benefits in kind, Annual Incentive and Long Term

Incentives.

4A consideration when interpreting the ratios between CEO (i.e., highest paid individual) and average- and

median employee remuneration is that the remuneration of the CEO is more heavily dependent on variable

compensation than the remuneration of the typical employee at Philips. Furthermore, the costs of

performance shares are based on accounting standards (IFRS) and the specific allocation of these costs to

the year. As such, the total remuneration level and costs applicable to the CEO will vary more with Philips’

financial performance than the remuneration level and costs applicable to the typical employee. As a

consequence, the ratio will increase when financial performance is strong and conversely decrease when

financial performance is not as strong.

5Annual TSR was calculated in line with the method used for the LTI plan (i.e., based on reinvested dividends

and 3-month averaging)

6Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.


	84


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Historical LTI grants and holdings

Number of performance shares (holdings)

Under the LTI Plan the current members of the Board of Management were granted 246,822

performance shares in 2024. The following table provides an overview at end December 2024 of

performance share grants.

Philips Group

Number of performance shares (holdings) in number of shares unless otherwise stated


	grant date	number of shares originally granted	value at grant date	vesting date	end of holding period	unvested opening balance at Jan. 1, 2024	number of shares awarded in 2024	(dividend) shares awarded	number of shares vested in 2024 ¹	value at vesting date in 2024	unvested closing balance at Dec. 31, 2024
Roy Jakobs	4/30/2021	15,812 ²	750,000	4/30/2024	4/30/2026	17,443	-	0	3,052	77,227	0
	4/29/2022	37,630 ²	930,000	4/29/2025	4/29/2027	40,754	-	1,394	-	-	42,148
	10/28/2022	24,279	314,137	10/28/2025	10/28/2027	25,365	-	868	-	-	26,233
	4/28/2023	124,538	2,400,000	4/28/2026	4/28/2028	130,109	-	4,451	-	-	134,560
	7/5/2024	131,443	2,500,000	7/5/2027	7/5/2029	-	131,443	4,496	0	0	135,939
Charlotte Hanneman	7/29/2024	25,346	613,934	7/29/2027	7/29/2029	-	25,346	0	-	0	25,346
Charlotte Hanneman	7/29/2024	37,982	920,000	7/29/2027	7/29/2029	-	37,982	0	-	0	37,982
Abhijit Bhattacharya	4/30/2021	25,141	1,192,500	4/30/2024	4/30/2026	27,734	0	0	4,853	122,790	-
	4/29/2022	49,162	1,215,000	4/29/2025	4/29/2027	53,244	0	1,821	-	-	55,065
	4/28/2023	63,047	1,215,000	4/28/2026	4/28/2028	65,867	0	2,253	-	-	68,120
Marnix van Ginneken	4/30/2021	19,448	922,500	4/30/2024	4/30/2026	21,454	0	0	3,754	94,985	-
	4/29/2022	38,237	945,000	4/29/2025	4/29/2027	41,412	0	1,417	-	-	42,828
	4/28/2023	49,037	945,000	4/28/2026	4/28/2028	51,231	0	1,752	-	-	52,983
	7/5/2024	52,051	990,000	7/5/2027	7/5/2029	-	52,051	1,781	0	0	53,832

1The shares vested in 2024 are subject to a 2-year holding period.

2Awarded before date of appointment as a member of the Board of Management

Share ownership guidelines

To further align the interests to those of stakeholders and to motivate the achievement of sustained

performance, the members of the Board of Management are bound to a minimum shareholding

requirement. The following table shows the minimum shareholding requirement, Annual Base

Compensation, (vested) shares held and share ownership ratio of each Board of Management

member as per December 31, 2024. Until the minimum shareholding requirement is reached, the

members of the Board of Management are required to retain all after-tax performance shares that

have vested, but they are not required to make additional share purchases.

Philips Group

Share ownership Board of Management


	Minimum shareholding requirement¹	Annual Base Compensation	(Vested) shares held	Ownership ratio²
Roy Jakobs	4.0x	1,250,000	134,298	2.6x
Charlotte Hanneman	3.0x	700,000	0	0x
Marnix van Ginneken	3.0x	660,000	137,753	5.1x

1As ratio of Annual Base Compensation

2The Ownership ratio is calculated by multiplying the total shares held by the share price of EUR 24.40

(based on the closing share price of December 31, 2024) and dividing this by the base compensation.


	85


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Remuneration of the Supervisory Board in 2024

Summary of the 2024 Remuneration Policy

Also the Remuneration Policy for the Supervisory Board has been adopted at the Annual General

Meeting of Shareholders held on May 7, 2024.

The overarching objective of the 2024 Remuneration Policy for the Supervisory Board is to enable

its members to fulfill their duties, acting independently: supervising the policies and management

and the general affairs of Philips, and supporting the Board of Management and the Executive

Committee with advice. Also the members of the Supervisory Board are guided by the company’s

long-term interests, with due observance of the company’s mission, vision and strategy, taking into

account the interests of shareholders and all other stakeholders.

As reflected in the profile of the Supervisory Board (as updated early 2024 and included in the

Rules of Procedure of the Supervisory Board), the selection of candidates for appointment to the

Supervisory Board will be based on merit. The profile aims for an appropriate combination of

knowledge and experience among its members, encompassing a wide range of proficiencies and

capabilities, all in relation to the global character of Philips’ Businesses. The Supervisory Board

furthermore aims to have members with a diverse set of qualities, including different nationalities

and (cultural) backgrounds.

To support the objectives mentioned above, the 2024 Remuneration Policy is aimed at attracting

and retaining Supervisory Board members internationally, of the highest caliber and with

experience and expertise relevant to our health technology Businesses.

To enable more gradual increases in the future, the 2024 Remuneration Policy includes the

Supervisory Board’s intention to review the fee levels in principle every two years to monitor and

take account of market developments and manage expectations from our key stakeholders. In

these reviews we will in principle apply a consistent approach using the same Quantum Peer Group

for our Supervisory Board as is used for the Board of Management.

The following table provides an overview of the current remuneration structure. The fee levels were

set below median market levels (and below the 25th percentile market level for the Chairman) paid

in the Quantum Peer Group used in the 2024 Remuneration Policy for the Board of Management.

Philips Group

Remuneration Supervisory Board in EUR


Fee type (amounts in EUR)	Chairman		Vice Chair		Member
	2024	As of 2025	2024	As of 2025	2024	As of 2025
Supervisory Board (annual fee)	166,500	175,000	123,500	130,000	107,500	113,000
Audit Committee	29,000	30,500	n.a.		19,250	20,250
Remuneration Committee	22,500	23,750	n.a.		15,000	15,750
Corporate Governance and Nomination & Selection Committee	22,500	23,750	n.a.		15,000	15,750
Quality and Regulatory Committee	22,500	23,750	n.a.		15,000	15,750

In accordance with the Dutch Corporate Governance Code, the remuneration for the members of

the Supervisory Board is not dependent on the results of the company and does not include any

shares (or rights to shares). Nevertheless, members of the Supervisory Board are encouraged to

hold shares in the company for the purpose of long-term investment to reflect their confidence in

the future course of the company. The company does not grant personal loans to members of the

Supervisory Board.

Attendance fees, entitlement to Philips product arrangements and fixed net expense allowances are

as follows:


Fee and reimbursement type (amounts in EUR)	Chairman	All members
Attendance fee per inter-European trip	2,750	2,750
Attendance fee per intercontinental trip	5,500	5,500
Entitlement to Philips product arrangement	2,000	2,000
Annual fixed net expense allowance	11,345	2,269
Other travel expenses	As reasonably incurred

The members of the Supervisory Board benefit from coverage under the company’s Directors and

Officers (D&O) liability insurance.


	86


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Remuneration of the Supervisory Board in 2024

The individual members of the Supervisory Board received, by virtue of the positions they held, the

following remuneration in 2024:

Philips Group

Remuneration of the Supervisory Board in EUR


	membership	committees	other compensation¹	total
F. Sijbesma	166,500	37,500	28,945	232,945
P.A. Stoffels	123,500	37,500	13,269	174,269
S.K. Chua	107,500	19,250	26,107	152,857
M.E. Doherty	107,500	29,000	20,289	156,789
A.M. Harrison	107,500	15,000	7,769	130,269
P. Löscher	107,500	34,250	18,769	160,519
I. Nooyi	107,500	15,000	20,154	142,654
S. Poonen	107,500	16,771	19,267	143,538
D. Pyott	107,500	28,750	18,769	155,019
B. Ribadeau-Dumas	70,390	9,822	17,986	98,198
H. Verhagen	107,500	26,229	16,267	149,996
Total	1,220,390	269,072	207,592	1,697,054

1The amounts mentioned under other compensation relate to the fee for intercontinental travel, inter-

European travel, the Philips product arrangement and the annual fixed net expense allowance.


	87


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6Group financial statements


6.1Consolidated statements of income	88
6.2Consolidated statements of comprehensive income	89
6.3Consolidated balance sheets	90
6.4Consolidated statements of cash flows	91
6.5Consolidated statements of changes in equity	92


6.6Notes to the Consolidated financial statements	93
1General information to the Consolidated financial statements	93
2Information by segment and main country	95
3Discontinued operations and assets classified as held for sale	98
4Acquisitions and divestments	99
5Interests in entities	100
6Income from operations	101
7Financial income and expenses	106
8Income taxes	106
9Earnings per share	111
10Property, plant and equipment	112
11Goodwill	115
12Intangible assets excluding goodwill	117
13Other financial assets	119
14Other assets	120
15Inventories	120
16Receivables	121
17Equity	122
18Debt	126
19Provisions	128
20Post-employment benefits	131
21Accrued liabilities	135
22Other liabilities	136
23Cash flow statement supplementary information	136
24Contingencies	137
25Related-party transactions	140
26Share-based compensation	141
27Information on remuneration	143
28Fair value of financial assets and liabilities	146
29Details of treasury and other financial risks	150
30Subsequent events	154


	88


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6.1Consolidated statements of income

Philips Group

Consolidated statements of income in millions of EUR

for the year ended December 31,


		2022	2023	2024
Sales	6	17,827	18,169	18,021
Cost of sales		(10,633)	(10,721)	(10,248)
Gross margin		7,194	7,448	7,773
Selling expenses		(4,621)	(4,524)	(4,486)
General and administrative expenses		(671)	(608)	(582)
Research and development expenses		(2,091)	(1,890)	(1,747)
Impairment of goodwill	11	(1,357)	(8)
Other business income	6	127	112	590
Other business expenses	6	(109)	(645)	(1,019)
Income from operations	6	(1,529)	(115)	529
Financial income	7	58	63	105
Financial expenses	7	(258)	(376)	(387)
Investments in associates, net of income taxes		(2)	(98)	(124)
Income before taxes		(1,731)	(526)	123
Income tax (expense) benefit	8	113	73	(963)
Income from continuing operations		(1,618)	(454)	(840)
Discontinued operations, net of income taxes	3	13	(10)	142
Net income		(1,605)	(463)	(698)

Attribution of net income:
Net income attributable to shareholders of Koninklijke Philips N.V.		(1,608)	(466)	(702)
Net income attributable to non-controlling interests		3	2	3

Amounts may not add up due to rounding.

Philips Group

Earnings per common share attributable to shareholders of Koninklijke Philips N.V. in EUR

for the year ended December 31,


	2022	2023	2024
Basic earnings per common share attributable to shareholders of Koninklijke Philips N.V.¹
Income from continuing operations	(1.70)	(0.48)	(0.90)
Net income	(1.69)	(0.49)	(0.75)
Diluted earnings per common share attributable to shareholders of Koninklijke Philips N.V.¹
Income from continuing operations	(1.70)	(0.48)	(0.90)
Net income	(1.69)	(0.49)	(0.75)

1 Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of

shares for the share dividend in respect of 2023.


	89


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6.2Consolidated statements of comprehensive income

Philips Group

Consolidated statements of comprehensive income in millions of EUR

for the year ended December 31,


		2022	2023	2024
Net income for the period		(1,605)	(463)	(698)

Pensions and other-post employment plans:	20
Remeasurement, before tax		101	(26)	(18)
Income tax effect on remeasurements	8	(20)	3	12

Financial assets fair value through OCI:
Net current-period change, before tax		(32)	(20)	(21)
Income tax effect on net current-period change		1	3	9
Total of items that will not be reclassified to Income Statement		49	(40)	(17)

Currency translation differences:
Net current period change, before tax		748	(579)	768
Income tax effect on net current-period change	8	2	-	(8)
Reclassification adjustment for (gain) loss realized		-	(26)	(7)
Cash flow hedges:
Net current-period change, before tax		(29)	29	21
Income tax effect on net current-period change	8	(10)	(2)	3
Reclassification adjustment for (gain) loss realized		63	(19)	(29)
Total of items that are or may be reclassified to Income Statement		774	(597)	748

Other comprehensive income for the period		823	(637)	731

Total comprehensive income for the period		(782)	(1,100)	33

Total comprehensive income (loss) attributable to:
Shareholders of Koninklijke Philips N.V.		(786)	(1,101)	27
Non-controlling interests		4	1	6

Amounts may not add up due to rounding.


	90


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6.3Consolidated balance sheets

Philips Group

Consolidated balance sheets in millions of EUR

as of December 31,


			2023	2024
Non-current assets
Property, plant and equipment	2	10	2,483	2,452
Goodwill	2	11	9,876	10,383
Intangible assets excluding goodwill	2	12	3,190	2,982
Non-current receivables		16	193	208
Investments in associates		5	381	257
Other non-current financial assets		13	619	631
Non-current derivative financial assets		28	3	8
Deferred tax assets		8	2,627	1,916
Other non-current assets		14	93	118
Total non-current assets			19,466	18,955

Current assets
Inventories			3,491	3,198
Other current financial assets		15	3	2
Other current assets		13	500	586
Current derivative financial assets		14	45	69
Income tax receivable		28	220	94
Current receivables			3,733	3,672
Assets classified as held for sale	16	25	79	-
Cash and cash equivalents		3	1,869	2,401
Total current assets		29	9,940	10,022
Total assets			29,406	28,976

Amounts may not add up due to rounding.


			2023	2024
Equity		17
Shareholders’ equity			12,028	12,006
Common shares			183	188
Capital in excess of par value			5,827	6,654
Reserves			879	1,925
Other			5,139	3,239
Non-controlling interests		17	33	37
Group equity			12,061	12,043

Non-current liabilities
Long-term debt		18	7,035	7,113
Non-current derivative financial liabilities		28	3	4
Long-term provisions	19	20	1,035	996
Deferred tax liabilities		8	71	81
Non-current contract liabilities		22	469	431
Non-current tax liabilities		8	390	119
Other non-current liabilities		22	54	45
Total non-current liabilities			9,058	8,787

Current liabilities		18
Short-term debt		28	654	526
Current derivative financial liabilities			40	59
Income tax payable		25	83	71
Accounts payable		21	1,917	1,830
Accrued liabilities		22	1,887	1,630
Current contract liabilities	19	20	1,809	1,699
Short-term provisions			1,463	1,977
Dividend payable			11	-
Liabilities directly associated with assets held for sale		22	9	-
Other current liabilities			414	354
Total current liabilities			8,287	8,146
Total liabilities			17,345	16,933
Total liabilities and group equity			29,406	28,976


	91


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6.4Consolidated statements of cash flows

Philips Group

Consolidated statements of cash flows in millions of EUR

for the year ended December 31,


	2022	2023	2024
Cash flows from operating activities
Net income (loss)	(1,605)	(463)	(698)
Results of discontinued operations, net of income tax	(13)	10	(142)
Adjustments to reconcile net income to net cash provided by (used for) operating activities:
Depreciation, amortization, and impairment of assets	1,602	1,261	1,390
Impairment of goodwill	1,357	8
Share-based compensation	95	88	96
Net loss (gain) on sale of assets	(115)	(71)	(19)
Interest income	(25)	(46)	(81)
Interest expense on debt, borrowings, and other liabilities	226	255	270
Investments in associates, net of income taxes	112	107	126
Income tax expense (benefit)	(113)	(71)	964
Decrease (increase) in working capital	(862)	913	(355)
Decrease (increase) in receivables and other current assets	(342)	298	(1)
Decrease (Increase) in inventories	(572)	257	230
Increase (decrease) in accounts payable, accrued and other current liabilities	52	358	(583)
Decrease (increase) in non-current receivables and other assets	1	(33)	(5)
Increase (decrease) in other liabilities	(84)	(38)	(51)
Increase (decrease) in provisions	(199)	422	316
Other items	(39)	129	101
Interest received	15	53	83
Interest paid	(205)	(250)	(261)
Dividends received from investments in associates	12	13	8
Income taxes paid	(333)	(152)	(173)
Net cash provided by (used for) operating activities	(173)	2,136	1,569

Amounts may not add up due to rounding.


	2022	2023	2024
Cash flows from investing activities
Net capital expenditures	(788)	(554)	(663)
Purchase of intangible assets	(105)	(96)	(118)
Expenditures on development assets	(257)	(203)	(241)
Capital expenditures on property, plant and equipment	(444)	(345)	(317)
Proceeds from sales of property, plant and equipment	18	90	13
Net proceeds from (cash used for) derivatives and current financial assets	(72)	(46)	38
Purchase of other non-current financial assets	(116)	(92)	(123)
Proceeds from other non-current financial assets	78	48	57
Purchase of businesses, net of cash acquired	(712)	(73)	(8)
Net proceeds from sale of interests in businesses, net of cash disposed	124	80	126
Net cash provided by (used for) for investing activities	(1,487)	(636)	(573)
Cash flows from financing activities
Proceeds from issuance (payments on) short-term debt	47	29	(30)
Principal payments on current portion of long-term debt	(1,472)	(754)	(763)
Proceeds from issuance of long-term debt	2,516	544	710
Re-issuance of treasury shares	12	0	0
Purchase of treasury shares	(187)	(662)	(411)
Dividends paid to shareholders of Koninklijke Philips N.V.	(412)	(2)	(1)
Dividends paid to shareholders of non-controlling interests	(6)	(3)	(2)
Net cash provided by (used for) financing activities	500	(848)	(496)
Net cash provided by (used for) continuing operations	(1,160)	652	500
Net cash provided by (used for) discontinued operations	(12)	123	(13)
Net cash provided by (used for) continuing and discontinued operations	(1,172)	776	487
Effect of changes in exchange rates on cash and cash equivalents	41	(79)	45
Cash and cash equivalents at the beginning of the period	2,303	1,172	1,869
Cash and cash equivalents at the end of the period	1,172	1,869	2,401


	92


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6.5Consolidated statements of changes in equity

Philips Group

Consolidated statements of changes in equity in millions of EUR

for the year ended December 31,


	Common shares	Capital in excess of par value	Fair value through OCI	Cash flow hedges	Currency translation differences	Retained earnings	Treasury shares	Total shareholders' equity	Non- controlling interests	Group equity
			Reserves			Other
Balance as of January 1, 2022	177	4,646	(344)	(25)	1,117	9,344	(476)	14,438	36	14,475
Total comprehensive income (loss)			(32)	23	749	(1,527)		(786)	4	(782)
Dividend distributed	3	326				(741)		(412)	(6)	(418)
Minority Buy-out									-	-
Transfer of result on disposal of equity investments at FVTOCI to retained earnings			(1)			1		-		-
Purchase of treasury shares						-	(24)	(24)		(24)
Re-issuance of treasury shares	-	(43)				(28)	77	7		7
Forward contracts						76	(140)	(64)		(64)
Share call options						5	(12)	(6)		(6)
Cancellation of treasury shares	(2)					(298)	299			-
Share-based compensation plans		95						95		95
Income tax share-based compensation plans		1						1		1
Balance as of December 31, 2022	178	5,025	(376)	(2)	1,866	6,832	(275)	13,249	34	13,283
Total comprehensive income (loss)			(17)	8	(604)	(488)		(1,101)	1	(1,100)
Dividend distributed	8	741				(816)		(68)	(3)	(70)
Transfer of result on disposal of equity investments at FVTOCI to retained earnings			4			(4)		-		-
Purchase of treasury shares						-		-		-
Re-issuance of treasury shares		(29)				(24)	54	-		-
Forward contracts						465	(608)	(143)		(143)
Cancellation of treasury shares	(3)					(563)	566	-		-
Share-based compensation plans		88						88		88
Income tax share-based compensation plans		2						2		2
Balance as of December 31, 2023	183	5,827	(390)	6	1,263	5,402	(262)	12,028	33	12,061
Total comprehensive income (loss)			(11)	(5)	751	(707)		27	6	33
Dividend distributed	6	762				(799)		(31)	(2)	(32)
Transfer of result on disposal of equity investments at FVTOCI to retained earnings			311		-	(313)		(2)		(2)
Purchase of treasury shares						-	(60)	(60)		(60)
Re-issuance of treasury shares		(36)				(18)	54	-		-
Forward contracts						251	(310)	(59)		(59)
Cancellation of treasury shares	(1)					(166)	167			-
Share-based compensation plans		96						96		96
Income tax share-based compensation plans		5						5		5
Balance as of December 31, 2024	188	6,654	(90)	1	2,014	3,650	(411)	12,006	37	12,043

Amounts may not add up due to rounding.


	93


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

6.6Notes to the Consolidated financial statements

1General information to the Consolidated financial statements

Reporting entity and its operations

Koninklijke Philips N.V. (‘Royal Philips’), incorporated and domiciled in the Netherlands , is a public

limited liability company organized under Dutch Law. Philips is headquartered in Amsterdam, the

Netherlands and has its registered address at High Tech Campus 52, 5656 AG Eindhoven, the

Netherlands . The consolidated financial statements of Royal Philips as of December 31, 2024

comprise Royal Philips and its subsidiaries (together referred to as the 'company’ or ‘Philips’ or the

'Group’). Philips is a leading health technology company primarily involved in diagnostic imaging,

image-guided therapy, patient monitoring and health informatics, as well as in consumer health

and home care.

Basis of preparation

The Consolidated financial statements are:

• prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the

European Union (EU) and comply with the statutory provisions of Part 9, Book 2 of the Dutch

Civil Code. All standards and interpretations issued by the International Accounting Standards

Board (IASB) and the IFRS Interpretations Committee effective 2024 have been endorsed by the

EU; consequently, the accounting policies applied by Philips also comply with IFRS as issued by

the IASB. These accounting policies have been applied by group entities

• authorized for issue by the Board of Management of Royal Philips on February 21, 2025

• prepared under the historical cost convention, unless otherwise indicated

• prepared on a going concern basis

• presented in euro, which is the presentation currency

• rounded to the nearest million euro unless stated otherwise

• subject to rounding, whereby amounts may not add up precisely to the totals provided

Accounting estimates and judgments

The preparation of these financial statements requires management to make a number of

estimates and judgments that affect the application of accounting policies and the reported

amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets

and liabilities. Amounts recognized are based on factors that are by default associated with

uncertainty. Actual results may therefore differ from estimates. Estimates and underlying

assumptions are reviewed on an ongoing basis. Revision to estimates are recognized prospectively.

Where applicable, the estimates and judgments of specific financial statement items are described

in the respective note to the consolidated financial statements.

The areas involving a higher degree of judgment and complexity in applying accounting principles

and for which changes in the assumptions and estimates could result in significantly different

results than those recorded in the consolidated financial statements are the following:

• judgment applied in determining reportable segments involves evaluating the information

reviewed by the Chief Operating Decision-Maker (the Board of Management) to assess

performance and allocate resources (Information by segment and main country )

• assessment of control (below paragraph Basis of consolidation and Interests in entities )

• revenue recognition (Income from operations )

• for acquisitions, the identification and valuation of acquired assets and liabilities including

contingent considerations provisions (Acquisitions and divestments, Provisions)

• determination of deferred tax assets for losses carried forward and uncertain tax positions

(Income taxes )

• assumptions used for impairment testing (Goodwill , Intangible assets excluding goodwill)

• assessments of exposure to credit risk of financial instruments ( Other financial assets ,

Receivables, Debt, Fair value of financial assets and liabilities, Details of treasury and other

financial risks )

• assumptions used to determine the net realizable value of inventories (Inventories)

• actuarial assumptions of future events that are used in calculating post-employment benefit

expenses and liabilities (Post-employment benefits)

• estimates and assumptions regarding the timing and the amount of outflow of resources, as

well as estimating the likelihood of a potential outflow of resources and the ability to make a

reliable estimate of the obligation relating to provisions and contingent liabilities (Provisions,

Contingencies )

The company regularly updates its significant assumptions and estimates to support the reported

amounts of assets, liabilities, income and expenses.

Climate change

In preparing the consolidated financial statements, management has considered the impact of

climate change, specifically the financial impact of Philips meeting its internal and external climate-

related aims, the potential impact of climate- related risks, and the costs incurred to pro-actively

manage such risks. These considerations did not have a material impact on the financial reporting

judgments, estimates or assumptions. The financial impacts considered include specific climate

mitigation measures, such as the use of lower-carbon energy sources, the cost of developing more

sustainable product offerings, and expenses incurred to mitigate against the impact of extreme

weather conditions. To meet its long-term Science Based Targets and reduce its full value chain

emissions in line with a 1.5 °C global warming scenario, Philips has entered into a number of Power

Purchase Agreements. Philips uses 100% electricity from renewable sources, mainly through long-

term Power Purchase Agreements, thereby mitigating the impact of carbon taxes. The development

of more sustainable products are covered through our EcoDesign program and already included in

our R&D expenses. The physical risk related to climate change on our sites resulting from our Task

Force on Climate-Related Financial Disclosures assessment is currently considered limited.


	94


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Material accounting policies

The material accounting policies as generally applied throughout the financial statements are

described below. Material accounting policies relating to specific financial statement items are

described in the respective notes to the financial statements.

Basis of consolidation

The Consolidated financial statements comprise the financial statements of Koninklijke Philips N.V.

and all subsidiaries that the company controls on a consolidated basis. Control exists when the

company is exposed or has rights to variable returns from its involvement with the investee and the

company has the ability to affect those returns through its power over the investee. Generally,

there is a presumption that a majority of voting rights results in control. To support this

presumption and in cases where Philips has less than a majority of the voting or similar rights of an

investee, Philips considers all relevant facts and circumstances in assessing whether it has power

over an investee, including the contractual arrangement(s) with the other vote holders of the

investee, rights arising from other contractual arrangements and the company’s voting rights and

potential voting rights. Subsidiaries are fully consolidated from the date that control commences

until the date that control ceases. All intercompany balances and transactions have been eliminated

in the Consolidated financial statements. Unrealized losses are eliminated in the same way as

unrealized gains, but only to the extent that there is no evidence of impairment.

Foreign currency transactions

The financial statements of all group entities are measured using the currency of the primary

economic environment in which the entity operates (functional currency). The euro (EUR) is the

functional currency of the company and the presentation currency of the consolidated financial

statements. Foreign currency transactions are converted into the functional currency using the

exchange rates prevailing at transaction date or the valuation date in cases where items are

remeasured. Gains and losses resulting from the settlement of foreign currency transactions and

those resulting from the conversion of foreign currency denominated monetary assets and liabilities

at period-end exchange rates are recognized in the Consolidated statements of income, except for

qualifying cash flow hedges, qualifying net investment hedges and equity investments measured at

fair value through OCI which are recognized in other comprehensive income.

All foreign exchange differences are presented as part of Cost of sales, apart from tax items and

financial income and expense, which are recognized in the same line item as they relate to in the

Consolidated statements of income.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair

value are retranslated to the functional currency using the exchange rate at the date the fair value

was determined. Non-monetary items in a foreign currency that are measured based on historical

cost are translated using the exchange rate at the transaction date.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising

on acquisition, are translated to euros at the exchange rates prevailing at the reporting date. The

income and expenses of foreign operations are translated to euros at the exchange rates prevailing

at the dates of the transactions.

Foreign currency differences arising upon translation of foreign operations into euros are

recognized in Other comprehensive income and presented as part of Currency translation

differences in Equity. However, if the operation is not a wholly-owned subsidiary, the proportionate

share of the translation difference is allocated to Non-controlling interests.

When a foreign operation is disposed of such that control, significant influence or joint control is

lost, the cumulative amount in the Currency translation differences related to the foreign operation

is reclassified to the Consolidated statements of income as part of the gain or loss on disposal.

When the company disposes of only part of its interest in a subsidiary that includes a foreign

operation while retaining control, the respective proportion of the cumulative amount is

reattributed to Non-controlling interests. When the company disposes of only part of its investment

in an associate or joint venture that includes a foreign operation while retaining significant

influence or joint control, the relevant proportion of the cumulative amount is reclassified to the

Consolidated statements of income.

New accounting policies effective in 2024

No new IFRS accounting standards or amendments to existing standards, effective in 2024, had a

significant impact on the consolidated financial statements.

New accounting policies effective after 2024

The IASB has issued several IFRS accounting standards, or amendments to standards, with an

effective date after 2024. Considerations relating to IFRS 18 Presentation and Disclosure in Financial

Statements are set out below. The company has not early adopted any standards or amendments

to existing standards. The company does not anticipate that the application of any other standards,

or amendments to standards, will have a significant impact on the consolidated financial

statements upon adoption.

IFRS 18 Presentation and Disclosure in Financial Statements

IFRS 18 was issued in April 2024 and is endorsed by the EU. It will supersede IAS 1 Presentation of

Financial Statements. IFRS 18 introduces new requirements for presentation within the

Consolidated statement of income, including specified totals and subtotals. Even though the new

standard will not impact the recognition and measurement of items in the financial statements, the

new standard requires entities to include additional defined subtotals to the Consolidated

statement of income, disclosures about management-defined performance measures and is adding

new principles for aggregation and disaggregation of information.


	95


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

IFRS 18 is effective for reporting periods beginning on or after January 1, 2027. Retrospective

application is required; therefore, comparative information will be restated in accordance with IFRS

18. Philips is currently assessing the detailed implications of applying the new standard on the

group’s Consolidated financial statements.

Changes in presentation from the prior year

Accounting policies have been applied consistently for all periods presented in these consolidated

financial statements. Certain prior-year amounts have been reclassified to conform to the current

year presentation due to immaterial organizational changes.

Per share calculations have been adjusted retrospectively for all periods presented to reflect the

issuance of shares for the share dividend in respect of 2023.

2Information by segment and main country

Accounting policies

Segment accounting policies are the same as the accounting policies applied by the company.

Operating segments are components of the company’s business activities about which separate

financial information is available that is evaluated regularly by the Chief Operating Decision-Maker

(the Board of Management of the company). The Board of Management decides how to allocate

resources and assesses performance. Reportable segments comprise the operating segments

Diagnosis & Treatment, Connected Care and Personal Health. Besides these reportable segments,

segment Other contains Innovation & Strategy, IP Royalties, Central costs, and other small items.

Accounting estimates and judgments

Determining reportable segments requires significant judgment and involves evaluating the

information which is reviewed by the Chief Operating Decision-Maker (the Board of Management)

to assess performance and allocate resources, in accordance with IFRS 8 'Operating Segments'.

The Philips reportable segments are Diagnosis & Treatment, Connected Care and Personal Health,

each being responsible for the management of its Businesses worldwide.

Philips focuses on improving people’s lives through meaningful innovation. The Diagnosis &

Treatment segment unites the Businesses related to the goal of precision diagnosis and disease

pathway selection, and the Businesses related to image-guided, minimally invasive treatment. The

Connected Care segment focuses on patient care solutions, advanced informatics and analytics,

and patient and workflow optimization inside and outside the hospital, and aims to unlock

synergies from integrating and optimizing patient care pathways, and leveraging provider-payer-

patient business models. The Personal Health segment focuses on healthy living and preventative

care.

Philips has realigned the composition of its reportable segments effective from April 1, 2023. The

most notable change is the shift of the previous Enterprise Diagnostic Informatics Business from the

Diagnosis & Treatment segment to the Connected Care segment. This Business, together with

other informatics solutions in the Connected Care segment, now forms the Enterprise Informatics

Business. Accordingly, the 2022 comparative figures for the affected segments were previously

restated. The realignment did not impact the presentation of the reportable segments or the key

segmental performance measure, which continues to be Adjusted EBITA*.

Transactions between the segments are mainly related to components and parts included in the

product portfolio of the other segments. The pricing of such transactions was at cost or determined

on an arm’s length basis. Philips has no single external customer that represents 10% or more of

sales. Sales by country is presented based on the country of seller.

Philips Group

Information on income statements in millions of EUR


	Sales	Sales including intercompany	Depreciation and amortization¹	Adjusted EBITA
2024
Diagnosis & Treatment	8,790	9,269	(464)	1,018
Connected Care	5,134	5,163	(403)	494
Personal Health	3,486	3,566	(117)	584
Other	611	750	(406)	(18)
Inter-segment eliminations		(726)
Philips Group	18,021	18,021	(1,390)	2,077

2023
Diagnosis & Treatment	8,825	9,269	(306)	1,028
Connected Care	5,138	5,149	(445)	369
Personal Health	3,602	3,685	(115)	597
Other	604	413	(394)	(73)
Inter-segment eliminations		(346)
Philips Group	18,169	18,169	(1,261)	1,921

2022
Diagnosis & Treatment	8,303	8,597	(417)	786
Connected Care	5,268	5,280	(646)	111
Personal Health	3,626	3,684	(132)	538
Other	630	715	(407)	(118)
Inter-segment eliminations		(449)
Philips Group	17,827	17,827	(1,602)	1,318

1 Includes impairments (excluding goodwill impairment); for impairment values please refer to Property, plant

and equipment and Intangible assets excluding goodwill


	96


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The term Adjusted EBITA* is used to evaluate the performance of Philips and its segments.

Adjusted EBITA* represents income from operations excluding amortization and impairment of

acquired intangible assets and impairment of goodwill (EBITA) and excluding gains or losses from

restructuring costs, acquisition-related charges and other items.

Adjusted EBITA* is not a recognized measure of financial performance under IFRS. Presented in the

following tables are the reconciliations of Adjusted EBITA* to the most directly comparable IFRS

measure, Net income, for the years indicated. Net income is not allocated to segments as certain

income and expense line items are monitored on a centralized basis, resulting in them being shown

on a Philips Group level only.

Philips Group

Reconciliation from net income to Adjusted EBITA in millions of EUR


	Philips Group	Diagnosis & Treatment	Connected Care	Personal Health	Other
2024
Net Income	(698)
Discontinued operations, net of income taxes	(142)
Income tax expense (benefit)	963
Investments in associates, net of income taxes	124
Financial expenses	387
Financial income	(105)
Income from operations	529	592	(466)	544	(142)
Amortization and impairment of acquired intangible assets	392	225	141	15	12
EBITA	921	817	(324)	559	(130)
Restructuring and acquisition-related charges	326	157	53	25	92
Other items:	830	45	765	-	20
Respironics litigation provision	984		984
Respironics insurance income	(538)		(538)
Respironics field-action running costs	133		133
Respironics consent decree charges	113		113
Quality actions	123	45	78
Remaining items	16		(4)	-	20
Adjusted EBITA*	2,077	1,018	494	584	(18)

Philips Group

Reconciliation from net income to Adjusted EBITA in millions of EUR


	Philips Group	Diagnosis & Treatment	Connected Care	Personal Health	Other
2023
Net Income	(463)
Discontinued operations, net of income taxes	10
Income tax expense (benefit)	(73)
Investments in associates, net of income taxes	98
Financial expenses	376
Financial income	(63)
Income from operations	(115)	721	(1,199)	552	(190)
Amortization and impairment of acquired intangible assets	290	89	178	14	9
Impairment of goodwill	8	8	-
EBITA	183	818	(1,020)	567	(181)
Restructuring and acquisition-related charges	381	118	115	9	140
Other items:	1,358	92	1,275	22	(32)
Respironics litigation provision	575		575
Respironics field-action connected to the proposed consent decree	363		363
Respironics field-action running costs	224		224
Quality actions	175	81	94
Provision for a legal matter	31		31
Investment re-measurement loss	23			23
Gain on divestment of business	(35)				(35)
Remaining items	2	11	(12)	(1)	3
Adjusted EBITA*	1,921	1,028	369	597	(73)


	97


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Reconciliation from net income to Adjusted EBITA in millions of EUR


	Philips Group	Diagnosis & Treatment	Connected Care	Personal Health	Other
2022
Net Income	(1,605)
Discontinued operations, net of income taxes	(13)
Income tax expense (benefit)	(113)
Investments in associates, net of income taxes	2
Financial expenses	258
Financial income	(58)
Income from operations	(1,529)	536	(2,347)	515	(233)
Amortization and impairment of acquired intangible assets	363	115	226	15	8
Impairment of goodwill	1,357		1,357
EBITA	192	650	(764)	531	(225)
Restructuring and acquisition-related charges	202	3	125	11	62
Other items:	925	133	750	(4)	46
Respironics field-action connected to the proposed consent decree	250		250
Respironics field-action running costs	210		210
R&D project impairments	134	73	59	3
Portfolio realignment charges	109		109
Provision for public investigations tender irregularities	60	60
Quality actions	59		59
Impairment of assets in S&RC	39		39
Remaining items	63	-	24	(6)	46
Adjusted EBITA*	1,318	786	111	538	(118)

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.

Philips Group

Main countries in millions of EUR


	Sales	Tangible and intangible assets¹
2024
Netherlands	2,506	1,662
United States	7,227	11,607
China	1,153	250
Japan	886	396
Germany	653	392
Other countries	5,596	1,509
Total main countries	18,021	15,816

2023
Netherlands	2,390	1,624
United States	7,178	11,410
China	1,408	234
Japan	941	407
Germany	573	348
Other countries	5,679	1,527
Total main countries	18,169	15,550

2022
Netherlands	2,021	1,746
United States	7,226	12,087
China	1,239	260
Japan	1,011	436
Germany	642	323
Other countries	5,688	1,550
Total main countries	17,827	16,402

1 Consists of Property plant and equipment, Intangible assets excluding goodwill and Goodwill


	98


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

3Discontinued operations and assets classified as held for sale

Accounting policies

Assets classified as held-for-sale

Non-current assets (or disposal groups) are classified as held-for-sale if their carrying amounts are

expected to be recovered through a sale transaction rather than through continuing use. Non-

current assets (or disposal groups) classified as held-for-sale are measured at the lower of their

carrying amount or the fair value less costs of disposal. Depreciation or amortization of an asset

ceases when it is classified as held-for-sale. When non-current assets (or disposal groups) are

classified as held-for-sale, comparative balances prior to such date are not represented in the

Consolidated balance sheets.

Discontinued operations

A discontinued operation is a component of the company that has either been disposed of or is

classified as held-for-sale and represents a separate major line of business or geographical area of

operations or is a part of a single coordinated plan to dispose of a separate major line of business

or geographical area of operations. Any gain or loss from disposal, together with the results of

these operations until the date of disposal, are reported separately as discontinued operations in

the Consolidated statements of income.

The financial information of discontinued operations is excluded from the respective captions in the

Consolidated financial statements and related notes for all periods presented. Comparatives are re-

presented for presentation of discontinued operations in the Consolidated statements of income

and Consolidated statements of cash flows.

Accounting estimates and judgments

The determination of the fair value less costs of disposal involves the use of estimates and

assumptions that tend to be uncertain. Circumstances to which these adjustments may relate

include resolution of uncertainties that arise from the terms of the disposal transaction, such as the

resolution of purchase price adjustments and indemnifications, resolution of uncertainties that arise

from and are directly related to the operations of the component before its disposal, such as

environmental and assurance-type product warranty obligations retained by the company, and the

settlement of employee benefit plan obligations provided that the settlement is directly related to

the disposal transaction.

In 2024 discontinued operations consist primarily of the Domestic Appliances business. In 2023 and

2022 discontinued operations consist of certain costs related to other divestments, which were

previously reported as discontinued operations.

Philips Group

Discontinued operations, net of income taxes in millions of EUR


	2022	2023	2024
Domestic Appliances	3	(2)	140
Other	10	(7)	2
Discontinued operations, net of income taxes	13	(10)	142

Discontinued operations: Domestic Appliances

In 2024, Discontinued operations related to the Domestic Appliances business included a tax

benefit of EUR 140 million relating to tax audit settlements of prior years. Discontinued operations

related to the Domestic Appliances business resulted in a net loss of EUR 2 million in 2023 and net

gain of EUR 3 million in 2022.

Discontinued operations: Other

Certain costs related to other divestments, which were previously reported as discontinued

operations, resulted in a net gain of EUR 2 million in 2024, a net loss of EUR 7 million in 2023 and

a net gain of EUR 10 million in 2022 .

Discontinued operations cash flows

The following table presents the net cash provided by (used for) discontinued operations reported

in the Consolidated statements of cash flows.

Philips Group

Net cash provided by (used for) discontinued operations in millions of EUR


	2022	2023	2024
Net cash provided by (used for) operating activities	(27)	123	(13)
Net cash provided by (used for) investing activities	15
Net cash provided by (used for) discontinued operations	(12)	123	(13)

In 2024, net cash used for discontinued operations was EUR 13 million and consisted primarily of

cash flows related to the tax claims from the previously divested business.

In 2023 , net cash provided by discontinued operations was EUR 123 million and consisted primarily

of a refund received of advance tax payments related to a previously divested business.

In 2022, net cash used for discontinued operations was EUR 12 million and consisted primarily of

cash flows related to the tax claims from the previously divested business.

Assets classified as held for sale

As of December 31, 2024, there were no assets held for sale.

As of December 31, 2023 , assets held for sale primarily consisted of assets and liabilities of EUR 69

million, directly associated with a business held for sale.


	99


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

4Acquisitions and divestments

Accounting policies

Acquisitions

The company accounts for business combinations using the acquisition method when control is

transferred to the group. The consideration transferred in the acquisition is generally measured at

fair value, as are the identifiable net assets acquired and the liabilities assumed. Transaction costs

are expensed as incurred. Any contingent consideration is measured at fair value at the acquisition

date and is initially presented in Long-term provisions. When the timing and amount of the

consideration become more certain, it is reclassified to Accrued liabilities. If the contingent

consideration that meets the definition of a financial instrument is classified as equity, it is not

remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the

fair value of the contingent consideration are recognized in the Consolidated statements of

income.

Changes to the initial fair value of the acquired assets and liabilities, based on new information

about the circumstances at the acquisition date, can be made up to 12 months after the acquisition

date.

Divestments

Upon loss of control, the company derecognizes the assets and liabilities of the subsidiary, any non-

controlling interests and the other components of equity related to the subsidiary. Any surplus or

deficit arising from the loss of control is recognized in the Consolidated statements of income. If

the company retains any interest in the previous subsidiary, such interest is measured at fair value

at the date the control is lost. Subsequently it is accounted for as either an equity-accounted

investee (associate) or as a financial asset, depending on the level of influence retained. Further

information on loss of control can be found in Discontinued operations and assets classified as held

for sale .

Accounting estimates and judgments

Intangible assets acquired in a business acquisition and the financial liability related to non-

controlling interest are measured at fair value at the date of the acquisition.

To determine the fair value of intangible assets at the acquisition date, estimates and assumptions

are required. The valuation of the identifiable intangible assets involves estimates of expected sales,

earnings and/or future cash flows and require use of key assumptions such as discount rate, royalty

rate and growth rates.

Estimates are also applied when determining the fair value of legal cases and tax positions in the

acquired entity. The fair value is based on estimates of the likelihood, the expected timing and the

amount of the potential cash outflow. Provisions for legal cases and non-income tax positions are

recognized at fair value even if it is not probable that an outflow will be required to settle the

obligation. After initial recognition and until the liability is settled, cancelled or expired, the liability

is measured at the higher of the amount that would be recognized in accordance with IAS 37

'Provisions, contingent liabilities and contingent assets' and the initial liability amount. For income

tax positions, the company applies IAS 12 'Income Taxes', which requires recognition of provisions

only when the likelihood of cash outflow is considered probable.

2024

Acquisitions

Philips did not make any acquisitions in 2024.

Divestments

During 2024 Philips completed four divestments for net cash consideration of EUR 118 million , of

which EUR 2 million is to be received in 2025. The result of these divestments amounted to a EUR 8

million gain, which is included in Other business income in the Consolidated statements of income.

The divestments were not material.

2023

Acquisitions

On May 5, 2023, Philips completed one acquisition within the Ultrasound Business Unit to

accelerate the growth of its Diagnosis & Treatment segment. The total equity purchase price and

the settlement of debt, net of acquired cash, involved an amount of EUR 53 million . Including final

purchase price adjustments processed in the course of 2024, the company recognized a contingent

consideration of EUR 6 million at fair value, recognized as a Long-term provision, Goodwill of EUR

24 million, Other intangible assets of EUR 40 million and deferred tax asset and liability of EUR 5

million and EUR 2 million , respectively.

From the acquisition date through December 31, 2023, the contributions to sales to third parties

and net income of the acquiree were not material. The sales and net income would not differ

materially if the acquisition date had been January 1, 2023. Acquisition-related costs were

recognized in General and administrative expenses and were not material.

Divestments

During 2023 Philips completed six divestments for net cash consideration of EUR 80 million and a

gain of EUR 50 million, which is included in Other business income of the Consolidated statements

of income. The divestments were not material.


	100


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

5Interests in entities

Accounting policies

Associates are all entities over which the company has significant influence, but not control or joint

control. Significant influence is presumed with a shareholding of between 20% and 50% of the

voting rights.

Investments in associates are accounted for using the equity method of accounting and are initially

recognized at cost. The carrying amount of an investment in an associate includes the carrying

amount of goodwill identified on acquisition. An impairment loss on such investment is allocated to

the investment as a whole.

The company’s share of the net income of these associates is included in Investments in associates,

net of income taxes, in the Consolidated statements of income, after adjustments to align the

accounting policies with those of the company. Dilution gains and losses arising from investments

in associates are recognized in the Consolidated statements of income as part of Investments in

associates, net of income taxes. Impairment losses and gains or losses on sale of investments are

recorded in the Consolidated statements of income, more specifically on the line item ’Investments

in associates, net of income taxes’.

When the company’s share of losses exceeds its interest in an associate, the carrying amount of

that interest is reduced to zero and recognition of further losses is discontinued except to the

extent that the company has an obligation or made payments on behalf of the associate.

The nature of the company’s interests in its consolidated entities and associates, and the effects of

those interests on the company’s financial position and financial performance are discussed below.

Group companies

Below is a list of subsidiaries as of December 31, 2024, that individually exceed 5% of either the

consolidated group Sales, Income from operations or Income from continuing operations (before

any intra-group eliminations) of Group legal entities. All of the entities are fully consolidated in the

Group financial statements.

Philips Group

Interests in group companies in alphabetical order by country

December 31, 2024


Legal entity name	Principal country of business
Philips (China) Investment Company, Ltd.	China
Philips Medizin Systeme Böblingen GmbH	Germany¹
Philips Consumer Lifestyle B.V.	Netherlands
Philips Medical Systems (Cleveland), Inc.	United States
Philips North America LLC	United States
Philips RS North America LLC	United States

1Application of Sec. 264 (3) and Sec. 264b HGB (German Commercial Code) for fully consolidated legal

entities: Philips GmbH, Hamburg; Philips Medical Systems DMC GmbH, Hamburg; Respironics Deutschland

GmbH & Co.KG, München; Philips Medizin Systeme Hofheim-Wallau GmbH, Hamburg; Philips Medizin

Systeme Böblingen GmbH, Böblingen; TomTec Imaging Systems GmbH, Unterschleißheim; PIP

Verwaltungsgesellschaft mbH, Hamburg.

Information related to non-controlling interests

As of December 31, 2024, three consolidated subsidiaries are not wholly owned by Philips

(December 31, 2023: four). In 2024, sales to third parties and Net income for these subsidiaries in

aggregate are EUR 467 million (December 31, 2023: EUR 492 million) and EUR 10 million

(December 31, 2023: EUR 27 million), respectively.

Investments in associates

Philips has investments in a number of associates. During 2024, Philips did not make any new

investments in associates.

In 2024 Philips recognized its share of net results from associates, reporting a loss of EUR 20 million

and an impairment of EUR 103 million. The most significant impairment was related to B-Soft Co.,

Ltd. (EUR 63 million), a Chinese IT provider for the medical and health sectors, largely due to

adverse economic conditions in China. The net results from associates and impairment losses were

recorded as part of Investments in associates, net of income taxes.

Cumulative translation adjustments related to investments in associates were EUR (10) million as of

December 31, 2024 (2023: EUR (21) million).

Involvement with unconsolidated structured entities

Philips founded three Philips Medical Capital (PMC) entities, in the US, France and Germany, in

which Philips holds a minority interest. Philips Medical Capital, LLC in the US is the most significant

entity. PMC entities provide healthcare equipment financing and leasing services to Philips

customers for diagnostic imaging equipment, patient monitoring equipment, and clinical IT

systems.


	101


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The company concluded that it does not control, and therefore should not consolidate, the PMC

entities. In the US, PMC operates as a subsidiary of De Lage Landen Financial Services, Inc. The

same structure and treatment is applied to the PMC entities in the other countries, with other

majority shareholders. Operating agreements are in place for all PMC entities, whereby acceptance

of sales and financing transactions resides with the respective majority shareholder. After

acceptance of a transaction by PMC, Philips transfers control and does not retain any obligations

towards PMC or its customers, from the sales contracts.

As of December 31, 2024, Philips’ shareholding in Philips Medical Capital, LLC had a carrying value

of EUR 31 million (December 31, 2023: EUR 27 million).

The company does not have any material exposures to losses from interests in unconsolidated

structured entities other than the invested amounts.

6Income from operations

Accounting policies

Revenue recognition

The company recognizes revenue when it transfers control over a good or service to a customer, in

an amount that reflects the consideration (i.e., transaction price) to which the company expects to

be entitled in exchange for the good or service. The consideration expected by the company may

include fixed and/or variable amounts which can be impacted by sales returns, trade discounts and

volume rebates. The company adjusts the consideration for the time value of money if the period

between the transfer of the promised goods or services to the customer and payment by the

customer exceeds six months.

Transfer of control varies depending on the individual terms of the contract of sale. For consumer-

type products in the Personal Health segment, control is transferred when the product is shipped

and delivered to the customer and title and risk have passed to the customer (depending on the

delivery conditions) and acceptance of the product has been obtained.

Revenues from transactions relating to distinct goods or services are accounted for separately based

on their relative stand-alone selling prices. The stand-alone selling price is the price that would be

charged for the goods or service in a separate transaction under similar conditions to similar

customers. The transaction price is determined (considering variable considerations) and allocated

to performance obligations based on their relative stand-alone selling prices. These transactions

mainly occur in the segments Diagnosis & Treatment and Connected Care and include

arrangements that require subsequent installation and training activities to make distinct goods

operable for the customer. As such, the related installation and training activities are part of

equipment sales rather than separate performance obligations. Revenue is recognized when the

performance obligation is satisfied, i.e., when the installation has been completed and the

equipment is ready to be used by the customer in the way contractually agreed.

Variable consideration is included in the transaction price to the extent that it is highly probable

that a significant reversal in the amount of cumulative revenue recognized will not occur once

associated uncertainties are resolved. Such assessment is performed on each reporting date to

check whether it is constrained. For products for which a right of return exists during a defined

period, revenue recognition is determined based on the historical pattern of actual returns, or in

cases where such information is not available, revenue recognition is postponed until the return

period has lapsed. Return policies are typically based on customary return arrangements in local

markets. A provision is recognized for assurance-type product warranty at the time of revenue

recognition and reflects the estimated costs of replacement and free-of-charge services that will be

incurred by the company with respect to the products sold. For certain products, the customer has

the option to purchase the warranty separately, which is considered a separate performance

obligation on top of the assurance-type product warranty. For such warranties which provide

distinct service, revenue recognition occurs on a straight-line basis over the extended warranty

contract period. Occasionally, the company may offer a full or partial refund of consideration

previously paid, for example as part of the resolution to warranty related matters. In such instances,

a provision is recognized for the amounts expected to be refunded to customers, and remeasured

at each reporting date to reflect changes in the estimated refunds, with a corresponding

adjustment to revenue.

In the case of loss under a sales agreement, the loss is recognized immediately. Expenses incurred

for sales commissions that are considered incremental to the contracts are recognized immediately

in the consolidated statements of income as selling expenses as a practical expedient under IFRS 15

Revenue from Contracts with Customers.

Sale of goods

Revenues are recognized at a point in time when control of the goods passes to the buyer, based

on the allocation of the transaction price to the performance obligation.

Revenue from services

Revenues are recognized over time as the company transfers control of the services to the

customer, which is demonstrated by the customer simultaneously receiving and consuming the

benefits provided by the company. The amount of revenues is measured by reference to the

progress made toward complete satisfaction of the performance obligation, which in general is

evenly over time. Service revenue related to repair and maintenance activities for goods sold is

recognized ratably over the service period or as services are rendered.

Income from royalties

Royalty income from brand license arrangements and from intellectual property rights, such as

technology licenses or patents, is recognized on an accrual basis in accordance with the substance

of the relevant agreement.


	102


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Shipping and handling

Expenses incurred for shipping and handling are mainly recorded as cost of sales. When shipping

and handling are part of a project and billed to the customer, then the related expenses are

recorded as cost of sales. Shipping and handling related to sales to third parties are partly recorded

as selling expenses. When shipping and handling billed to customers are considered a distinct and

separate performance obligation, the fees are recognized as revenue and costs included in cost of

sales.

Other business income (expenses)

Other business income (expenses) includes gains and losses on the sale of property, plant and

equipment, gains and losses on the sale of businesses, and other gains and losses not related to the

company’s operating activities.

Government grants

Grants from governments are recognized at their fair value when there is a reasonable assurance

that the grant will be received and the company will comply with the conditions. Grants related to

costs are deferred in the consolidated balance sheet and recognized in the consolidated statement

of income as a reduction of the related costs that they are intended to compensate. Grants related

to assets are deducted from the cost of the asset and presented net in the consolidated balance

sheets.

Accounting estimates and judgments

Sales-related accruals

The company has sales promotions-related agreements with distributors and retailers designed to

promote the sale of products. Among the programs are arrangements under which rebates and

discounts can be earned by the distributors and retailers by attaining agreed upon sales levels, or

for participating in specific marketing programs. Management estimates the sales-related accruals

associated with these arrangements based on a combination of historical patterns and future

expectations regarding which promotional targets are expected to be met by distributors and

retailers. Accrued customer rebates are presented as other current liabilities, unless there is a right

to offset against the respective accounts receivable.

A breakdown by nature of the income (loss) from operations is as follows:

Philips Group

Sales and costs by nature in millions of EUR


	2022	2023	2024
Sales	17,827	18,169	18,021
Costs of materials used	(4,320)	(4,626)	(4,213)
Employee benefit expenses	(6,952)	(6,903)	(6,641)
Depreciation and amortization¹	(1,602)	(1,261)	(1,390)
Impairment of goodwill	(1,357)	(8)
Shipping and handling	(756)	(668)	(623)
Advertising and promotion	(739)	(700)	(791)
Lease expenses	(39)	(51)	(54)
Other operational costs	(3,609)	(3,535)	(3,351)
Other business income (expenses)	18	(533)	(429)
Income from operations	(1,529)	(115)	529

1Includes impairments; for impairment values please refer to Property, plant and equipment and Intangible

assets excluding goodwill

Sales composition and disaggregation

For information related to sales on a segment and geographical basis, refer to Information by

segment and main country.

Philips Group

Sales composition in millions of EUR


	2022	2023	2024
Goods	12,139	12,419	12,198
Services	4,878	4,926	5,003
Royalties	419	434	466
Total sales from contracts with customers	17,435	17,779	17,667
Sales from other sources	391	390	354
Total sales	17,827	18,169	18,021

Total sales from other sources mainly relates to operating leases EUR 222 million (2023: EUR 234

million; 2022: EUR 258 million). Sales represent revenue from external customers.

As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining

performance obligations from a sale of goods and services was EUR 15,632 million (2023 :15,571

million ) . The company expects to recognize approximately 56% of the remaining performance

obligations within 1 year . Revenue expected to be recognized beyond is mostly related to longer

term customer service and software contracts.

Sales over time represent services and Other also includes royalties over time (2024: EUR 277

million; 2023: EUR 283 million; 2022: EUR 292 million).


	103


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Sales per geographic area are reported based on country of destination.

Philips Group

Disaggregation of Sales per segment in millions of EUR


	2024
	Sales at a point in time	Sales over time	Total sales from contracts with customers	Sales from other sources	Total sales
Diagnosis & Treatment	5,655	3,070	8,725	65	8,790
Connected Care	2,959	1,886	4,845	289	5,134
Personal Health	3,471	15	3,486		3,486
Other	300	311	611		611
Philips Group	12,385	5,282	17,667	354	18,021

Philips Group

Disaggregation of Sales per segment in millions of EUR


	2023
	Sales at a point in time	Sales over time	Total sales from contracts with customers	Sales from other sources	Total sales
Diagnosis & Treatment	5,768	2,980	8,749	76	8,825
Connected Care	2,970	1,854	4,824	314	5,138
Personal Health	3,586	16	3,602		3,602
Other	245	360	604	-	604
Philips Group	12,569	5,210	17,779	390	18,169

Philips Group

Disaggregation of Sales per segment in millions of EUR


	2022
	Sales at a point in time	Sales over time	Total sales from contracts with customers	Sales from other sources	Total sales
Diagnosis & Treatment	5,295	2,954	8,248	55	8,303
Connected Care	3,079	1,853	4,932	336	5,268
Personal Health	3,615	11	3,626		3,626
Other	274	353	630		630
Philips Group	12,263	5,172	17,435	391	17,827

Philips Group

Disaggregation of Sales per geographic area in millions of EUR


	2024
	Sales at a point in time	Sales over time	Total sales from contracts with customers	Sales from other sources	Total sales
Western Europe	2,698	1,254	3,951	28	3,978
North America	4,958	2,602	7,560	93	7,655
Other mature geographies	893	401	1,294	231	1,526
Mature geographies	8,549	4,256	12,805	353	13,159
Growth geographies	3,836	1,026	4,861	1	4,863
Sales	12,385	5,282	17,667	354	18,021

Philips Group

Disaggregation of Sales per geographic area in millions of EUR


	2023
	Sales at a point in time	Sales over time	Total sales from contracts with customers	Sales from other sources	Total sales
Western Europe	2,552	1,221	3,770	49	3,819
North America	4,859	2,608	7,470	92	7,562
Other mature geographies	980	398	1,378	248	1,626
Mature geographies	8,392	4,227	12,618	389	13,007
Growth geographies	4,177	984	5,161	1	5,162
Sales	12,569	5,210	17,779	390	18,169

Philips Group

Disaggregation of Sales per geographic area in millions of EUR


	2022
	Sales at a point in time	Sales over time	Total sales from contracts with customers	Sales from other sources	Total sales
Western Europe	2,387	1,183	3,572	31	3,603
North America	4,889	2,612	7,502	86	7,588
Other mature geographies	972	399	1,369	274	1,643
Mature geographies	8,248	4,194	12,443	390	12,833
Growth geographies	4,015	978	4,992	1	4,993
Sales	12,263	5,172	17,435	391	17,827


	104


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Costs of materials used

Cost of materials used represents the inventory recognized in cost of sales.

Employee benefit expenses

Philips Group

Employee benefit expenses in millions of EUR


	2022	2023	2024
Salaries and wages excluding share-based compensation	5,594	5,635	5,356
Share-based compensation	104	97	104
Post-employment benefit costs	439	402	388
Other social security and similar charges:
Required by law	590	567	580
Voluntary	225	202	211
Employee benefit expenses	6,952	6,903	6,641

The employee benefit expenses relate to employees who are working on the payroll of Philips, both

with permanent and temporary contracts.

For further information on post-employment benefit costs, refer to Post-employment benefits.

For details on the remuneration of the members of the Board of Management and the Supervisory

Board, refer to Information on remuneration.

Employees

The number (full-time equivalents, or FTEs) of employees by category at year-end is summarized as

follows:

Philips Group

Employees by category in FTEs as of December 31


	2022	2023	2024
Production	30,689	28,640	27,478
Research & development	14,169	12,035	10,843
Other	29,082	26,818	27,795
Employees	73,941	67,493	66,116
Third-party workers	3,292	2,163	1,708
Philips Group	77,233	69,656	67,823

Employees consist of those persons working on the payroll of Philips and whose costs are reflected

in employee benefit expenses. Other consists of employees in commercial, general and

administrative functions. Third-party workers consist of personnel hired on a per-period basis, via

external companies.

Philips Group

Employees by geographical location in average FTEs


	2022	2023	2024
Netherlands	11,180	9,794	8,844
Other countries	67,357	62,471	60,113
Philips Group	78,538	72,264	68,956

Depreciation and amortization

Depreciation of property, plant and equipment and amortization of intangible assets, including

impairments, are as follows:

Philips Group

Depreciation and amortization1 in millions of EUR


	2022	2023	2024
Depreciation of property, plant and equipment	711	689	696
Amortization of software	117	98	102
Amortization of acquired intangible assets	363	290	392
Amortization of development costs	411	184	199
Depreciation and amortization	1,602	1,261	1,390

1Includes impairments; for impairment values please refer to Property, plant and equipment and Intangible

assets excluding goodwill

Depreciation of property, plant and equipment is mainly included in cost of sales. Amortization of

software is mainly included in general and administration expenses. Amortization of other

intangible assets is included in selling expenses for brand names and customer relationships and is

included in cost of sales for technology-based and other intangible assets. Amortization of

development costs is included in research and development expenses.

Impairment of goodwill

There were no goodwill impairment charges in 2024. In 2023, a goodwill charge of EUR 8 million

was recorded for the partial impairment of goodwill allocated to a business that was classified as

held-for-sale as of December 31, 2023. For further information refer to Goodwill.

Shipping and handling

Shipping and handling costs are included in cost of sales and selling expenses in the Consolidated

statements of income.

Advertising and promotion

Advertising and promotion costs are included in selling expenses in the Consolidated statements of

income.

Lease expense

Lease expense relates to short-term and low value leases.


	105


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Other operational costs

Other operational costs contain items which are dissimilar in nature and individually insignificant in

amount to disclose separately. These costs contain, among others, expenses for outsourcing

services, mainly in Information Technology and Human Resources, third-party workers, consultants,

warranty, patents, costs for travelling and external legal services. Government grants of EUR 91

million were recognized as a cost reduction in 2024 (2023: EUR 95 million; 2022: EUR 103

million).The grants mainly relate to research and development activities and business development.

Audit and audit-related fees

The following table shows the fees attributable to the fiscal years 2022, 2023 and 2024 for services

rendered by the external auditors.

Philips Group

Audit and audit-related fees in millions of EUR


	2022			2023			2024
	EY NL¹	EY Network	Total	EY NL¹	EY Network	Total	EY NL¹	EY Network	Total
Audit fees	9.5	5.6	15.2	9.9	5.0	14.9	8.9	5.5	14.4
consolidated financial statements	9.5	3.1	12.6	9.9	2.6	12.5	8.9	3.0	11.9
statutory financial statements		2.5	2.5		2.5	2.5		2.5	2.5
Audit-related fees²	0.8	0.2	1.0	0.9	0.2	1.1	1.9	0.3	2.2
sustainability assurance	0.6		0.6	0.8		0.8	1.6		1.6
other	0.1	0.2	0.3	0.2	0.2	0.3	0.3	0.3	0.6
Tax fees
All other fees
Fees	10.3	5.8	16.2	10.8	5.2	16.1	10.8	5.7	16.6

1EY Accountants B.V.

2Also known as Assurance fees

Other business income (expenses)

Other business income (expenses) consists of the following:

Philips Group

Other business income (expenses) in millions of EUR


	2022	2023	2024
Result on disposal of businesses:
income	4	50	27
expenses	-	-	(14)
Result on disposal of fixed assets:
income	3	12	3
expenses	(1)	(1)	-
Result on other remaining businesses:
income	121	49	560
expenses	(109)	(643)	(1,005)
Other business income (expenses)	18	(533)	(429)
Total other business income	127	112	590
Total other business expenses	(109)	(645)	(1,019)

The result on disposal of businesses mainly relates to income (expense) in the respective periods for

divestments of non-strategic businesses. For more information refer to Acquisitions and

divestments.

The result on disposal of fixed assets mainly relates to the sale of real estate assets.

The result on other remaining businesses mainly relates to the revaluation of contingent

consideration and various legal matters. In 2024, Philips Respironics recorded a EUR 984 million

provision in connection with the settlement of the Respironics personal injury and the medical

monitoring claims in the US. Philips Respironics recorded insurance income of EUR 538 million in

connection with the agreement with insurers to partially reimburse the Respironics recall-related

product liability claims. For more information on contingent consideration, refer to Provisions.


	106


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

7Financial income and expenses

Accounting policies

Financial income and expenses are recognized on the accrual basis in the Consolidated statements

of income. Interest income and expense are measured using the effective interest method. Dividend

income is recognized in the consolidated statements of income on the date that the company’s

right to receive payment is established, which in the case of quoted securities is normally the ex-

dividend date.

Philips Group

Financial income and expenses in millions of EUR


	2022	2023	2024
Interest income	25	46	79
Interest income from loans and receivables	7	13	12
Interest income from cash and cash equivalents	18	33	67
Dividend income from financial assets	3	2	3
Net gains from disposal of financial assets	-	-	2
Net change in fair value of financial assets through profit or loss	9	-	-
Other financial income	20	15	21
Financial income	58	63	105
Interest expense	(235)	(277)	(288)
Interest expense on debt and borrowings	(200)	(229)	(231)
Finance charges under lease contract	(25)	(27)	(37)
Interest expense on pensions	(10)	(21)	(20)
Provision-related accretion expenses	(9)	(29)	(49)
Net foreign exchange gains (losses)	9	(23)	(7)
Net change in fair value of financial assets through profit or loss		(26)	(18)
Net change in fair value of derivatives		-	(5)
Other financial expenses	(24)	(21)	(20)
Financial expenses	(258)	(376)	(387)
Financial income and expenses, net	(200)	(314)	(282)

In 2024, financial income and expenses net decreased by EUR 32 million year-on-year, mainly due

to higher interest income on cash and cash equivalents and net foreign exchange losses in 2023 ,

partly offset by higher interest expenses and provision-related accretion costs. Net interest expense

in 2024 was EUR 22 million lower than in 2023 , mainly due to an increased cash position which

was invested in short-term interest-bearing assets, partly offset by higher interest expenses. Interest

expenses increased as a result of debt refinancing in 2024 and higher finance charges on lease

contracts.

In 2023 , financial income and expenses, net increased by EUR 114 million year-on-year, mainly due

to fair value losses and net foreign exchange losses in 2023 , compared with gains in 2022. The fair

value losses mainly relate to Power Purchase Agreements for renewable energy, limited-life funds

(mainly Gilde Healthcare) and other investments recognized at fair value through profit and loss.

Furthermore, provision-related accretion expenses and net interest expense were higher in 2023

compared with 2022. Net interest expense in 2023 was EUR 21 million higher than in 2022, mainly

due the issuance of new debt in 2022 and 2023 and the impact of increasing interest rates.

8Income taxes

Accounting policies

Income taxes comprise current, non-current and deferred tax. Income tax is recognized in the

Consolidated statements of income except to the extent that it relates to items recognized directly

within equity or in other comprehensive income. Current tax is the expected taxes payable on the

taxable income for the year, using tax rates enacted or substantively enacted at the reporting date,

and any adjustment to tax payable in respect of previous years.

In cases where it is concluded it is not probable that tax authorities will accept a tax treatment, the

effect of the uncertainty is reflected in the recognition and measurement of tax assets and liabilities

or, alternatively, a provision is made for the amount that is expected to be settled, where this can

be reasonably estimated. This assessment relies on estimates and assumptions and may involve a

series of judgments about future events. New information may become available that causes the

company to change its judgment regarding the adequacy of existing tax assets and liabilities. Such

changes to tax assets and liabilities will impact the income tax expense in the period during which

such a determination is made.

Deferred tax assets and liabilities are recognized, using the consolidated balance sheet method, for

the expected tax consequences of temporary differences between the carrying amounts of assets

and liabilities and the amounts used for taxation purposes. Deferred tax is not recognized for the

following temporary differences: (a) the initial recognition of goodwill; or (b) the initial recognition

of an asset or liability in a transaction which: (i) is not a business combination, (ii) at the time of

transaction, affects neither accounting profit nor taxable profit (tax loss), (iii) at the time of the

transaction, does not give rise to equal amounts of taxable and deductible differences; or (c)

differences relating to investments in subsidiaries, joint ventures and associates where the reversal

of the respective temporary difference can be controlled by the company and it is probable that it

will not reverse in the foreseeable future. Deferred taxes are measured at the tax rates that are

expected to be applied to temporary differences when they reverse, based on the laws that have


	107


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are

offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate

to income taxes levied by the same tax authority on the same taxable entity or on different taxable

entities, but the company intends to settle current tax liabilities and assets on a net basis or their

tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary

differences to the extent that it is probable that there will be future taxable profits against which

they can be utilized. The ultimate realization of deferred tax assets is dependent upon the

generation of future taxable income in the countries where the deferred tax assets originated and

during the periods when the deferred tax assets become deductible. Management considers the

scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning

strategies in making this assessment.

Deferred tax liabilities for withholding taxes are recognized for subsidiaries in situations where the

income is to be paid out as dividend in the foreseeable future and for undistributed earnings of

unconsolidated companies to the extent that these withholding taxes are not expected to be

refundable or deductible. Changes in tax rates and tax laws are reflected in the period when the

change was enacted or substantively enacted by the reporting date.

Any subsequent adjustment to a tax asset or liability that originated in discontinued operations and

for which no specific arrangements were made at the time of divestment, due to a change in the

tax base or its measurement, is allocated to discontinued operations (i.e., backwards tracing).

Examples are a tax rate change or change in retained assets or liabilities directly relating to the

discontinued operation. Any subsequent change to the recognition of deferred tax assets is

allocated to the component in which the taxable gain is or will be recognized. The above principles

are applied to the extent the ‘discontinued operations’ are sufficiently separable from continuing

operations.

Consistent with the IAS 12 amendment regarding Pillar Two taxation as issued by the IASB and

adopted by the EU, Philips does not recognize and disclose deferred taxes arising from tax laws that

implement Pillar Two model rules published by the Organization for Economic Co-operation and

Development.

Accounting estimates and judgments

Deferred tax recoverability

Deferred tax assets are recognized to the extent that it is probable that there will be future taxable

profits against which these can be utilized. Significant judgment is involved in determining whether

such profits are probable. Management determines this on the basis of expected taxable profits

arising from the reversal of recognized deferred tax liabilities, on appropriate tax planning

opportunities to support business goals and on the basis of forecasts.

Uncertain tax positions

Uncertain tax positions are recognized as liabilities if and to the extent it is probable that additional

tax will be due and the amount can be reliably measured. Significant judgment is involved in

determining these positions.

The income tax expense of continuing operations amounts to EUR 963 million ( 2023 : EUR 73

million tax benefit; 2022: EUR 113 million tax benefit).

The components of income before taxes and income tax expense are as follows:

Philips Group

Income tax expense in millions of EUR


	2022	2023	2024
Income before taxes	(1,731)	(526)	123
Investments in associates, net of income taxes	(2)	(98)	(124)
Income before taxes excluding Investment in associates	(1,729)	(429)	247

Current tax (expense) benefit	(97)	(201)	(140)
Deferred tax (expense) benefit	210	274	(823)
Income tax (expense) benefit of continuing operations	113	73	(963)

Income tax expense of continuing operations excludes the tax benefit of the discontinued

operations of EUR 143 million (2023 : EUR 9 million benefit; 2022: EUR 18 million benefit), mainly

related to the tax audit settlements of prior years.

The components of income tax expense of continuing operations are as follows:

Philips Group

Current income tax expense in millions of EUR


	2022	2023	2024
Current year tax (expense) benefit	(111)	(211)	(150)
Prior year tax (expense) benefit	14	10	9
Current tax (expense) benefit	(97)	(201)	(140)


	108


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Deferred income tax expense in millions of EUR


	2022	2023	2024
Recognition of previously unrecognized tax loss and credit carryforwards	2	72	5
Unrecognized tax loss and credit carryforwards	(13)	(41)	(351)
Changes to recognition of temporary differences	(4)	(112)	(602)
Prior year tax (expense) benefit	(1)	(2)	(13)
Tax rate changes	(18)	4	2
Origination and reversal of temporary differences, tax losses and tax credits	244	353	136
Deferred tax (expense) benefit	210	274	(823)

The increase in deferred tax expense in 2024 is mainly due to the de-recognition of deferred tax

assets in the US.

Philips’ operations are subject to income taxes in various foreign jurisdictions. The statutory income

tax rate varies per country, which results in a difference between the weighted average statutory

income tax rate and the Netherlands’ statutory income tax rate of 25.8% (2023: 25.8%; 2022:

25.8% ).

A reconciliation of the weighted average statutory income tax rate to the effective income tax rate

of continuing operations is as follows:

Philips Group

Effective income tax rate in %


	2022	2023	2024
Weighted average statutory income tax rate in %	23.6	22.0	26.6
Recognition of previously unrecognized tax loss and credit carryforwards	0.1	16.8	(1.9)
Unrecognized tax loss and credit carryforwards	(0.7)	(9.6)	141.8
Changes to recognition of temporary differences	(0.2)	(26.2)	243.6
Non-taxable income and tax incentives	5.8	22.8	(30.2)
Non-deductible expenses	(22.9)	(10.7)	10.0
Withholding and other taxes	(1.4)	(5.1)	16.0
Tax rate changes	(1.0)	0.9	(0.9)
Prior year tax	0.7	1.9	1.2
Tax expense (benefit) due to change in uncertain tax treatments	2.8	2.3	(20.4)
Others, net	(0.2)	1.9	3.1
Effective income tax rate	6.5	17.0	389.5

The effective income tax rate in 2024 is higher than the weighted average statutory income tax

rate, primarily due to the changes in the recognition of temporary differences and unrecognized tax

loss and credit carryforwards. This specifically relates to the de-recognition of deferred tax assets

associated with the Respironics litigation provision and carryforward losses along with temporary

differences in the United States (EUR 941 million). This increase is partly offset by the release of

uncertain tax positions and recurring tax incentives related to the innovation box regime in the

Netherlands, R&D investments and export activities.

Global minimum tax (Pillar Two)

In December 2021, the OECD released model rules to introduce a global minimum corporate

income tax rate of 15% applicable to multinational enterprise groups with global revenue over EUR

750 million (Pillar Two). The formal adoption of Council Directive (EU) 2022/2523 in December

2022 aims to achieve a coordinated implementation of Pillar Two in the EU Member States. The

Dutch Government adopted the Minimum Tax Rate Act 2024 (MTR Act), in December 2023 and

the Pillar Two legislation has been applicable in local law with effect from 2024 in the Netherlands,

the EU and multiple other countries around the world. Therefore, Pillar Two applies to Philips from

the financial year ending December 31, 2024, and onward. Under this legislation, Philips is

generally required to pay top-up taxes on profits if the related Pillar Two jurisdictional effective tax

rate is less than 15% .

The current tax expense related to Pillar Two is EUR 1 million, resulting in an increase of ETR by

0.4%. This amount has been accounted for within the income taxes of the reporting period.

With reference to the income taxes accounting policy, Philips does not recognize and disclose

deferred taxes arising from tax laws that implement Pillar Two model rules published by the

Organization for Economic Co-operation and Development.

Deferred tax assets and liabilities

Deferred tax assets are recognized for temporary differences, unused tax losses, and unused tax

credits to the extent that realization of the related tax benefits is probable. The ultimate realization

of deferred tax assets is dependent upon the generation of future taxable income in the countries

where the deferred tax assets originated and during the periods when the deferred tax assets

become deductible. Management considers the scheduled reversal of deferred tax liabilities,

projected future taxable income, and tax planning strategies in making this assessment.

Net deferred tax assets relating to the years 2024 and 2023, respectively, are presented in the

following tables.

The net deferred tax assets of EUR 1,835 million ( 2023: EUR 2,556 million) consist of deferred tax

assets of EUR 1,916 million ( 2023 : EUR 2,627 million) and deferred tax liabilities of EUR 81 million

(2023: EUR 71 million). Of the total deferred tax assets of EUR 1,916 million as of December 31,

2024 (2023: EUR 2,627 million), EUR 1,188 million (2023: EUR 1,676 million ) is recognized with

respect to entities in various countries where there have been tax losses in the current or preceding

period, primarily the US. Based on Philips' assessment of the recoverability of the recognized


	109


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

deferred tax assets, the net decrease mainly relates to de-recognition of deferred tax assets on

carryforward losses, intangible assets and other liabilities, which include provisions for Respironics

litigation in the US. The decrease mainly results from updates to the company's long term income

projections by jurisdiction, including the US.

Philips recognizes deferred tax assets only to the extent future tax profits are considered probable.

For the recoverability assessment, the income projections were determined using similar

methodology as used for goodwill impairment testing (for more information refer to note

Goodwill ). The company evaluated multiple risk-adjusted scenarios that support the assumption

that it is probable that the results of future operations will generate sufficient taxable income to

utilize the recognized tax losses as well the deductible temporary differences. The projections

include forward-looking assumptions whereby the most recent available information was used to

determine the expected period of recovery of the deferred tax assets. Relevant developments

potentially impacting the period and probability of recovery are monitored closely.

A change in enacted tax rates or a revision to risk-adjusted long term income projections by

jurisdiction could have an impact on the measurement of deferred tax assets.

As of December 31, 2024, the temporary differences associated with investments, including

potential income tax consequences on dividends, for which no deferred tax liabilities are

recognized, aggregate to EUR 340 million (2023: EUR 444 million).

Philips Group

Deferred tax assets and liabilities in millions of EUR


	Balance as of January 1, 2024	Recognized in income statement	Other¹	Balance as of December 31, 2024	Assets	Liabilities
Intangible assets	679	(333)	26	373	533	(160)
Property, plant and equipment	(88)	25	(1)	(64)	39	(103)
Inventories	360	(9)	13	364	369	(5)
Other assets	184	(25)	(9)	151	207	(56)
Pensions and other long- term employee benefits	193	(61)	20	152	179	(27)
Other liabilities	496	(198)	20	319	365	(47)
Deferred tax assets on tax loss carryforwards	730	(222)	33	541	541
Set-off deferred tax positions					(317)	317
Net deferred tax assets	2,556	(823)	102	1,835	1,916	(81)

1Other includes the movements of assets and liabilities recognized in equity and OCI, which includes foreign

currency translation differences, acquisitions and divestments.

Philips Group

Deferred tax assets and liabilities in millions of EUR


	Balance as of January 1, 2023	Recognized in income statement	Other¹	Balance as of December 31, 2023	Assets	Liabilities
Intangible assets	630	61	(12)	679	826	(147)
Property, plant and equipment	(2)	18	(103)	(88)	44	(132)
Inventories	464	(26)	(78)	360	363	(2)
Other assets	44	20	120	184	233	(48)
Pensions and other employee benefits	153	69	(29)	193	204	(11)
Other liabilities	483	(56)	69	496	521	(25)
Deferred tax assets on tax loss carryforwards	586	188	(44)	730	730
Set-off deferred tax positions					(294)	294
Net deferred tax assets	2,358	274	(77)	2,556	2,627	(71)

1Other includes the movements of assets and liabilities recognized in equity and OCI, which includes foreign

currency translation differences, acquisitions and divestments.

As of December 31, 2024, the amount of deductible temporary differences for which no deferred

tax asset has been recognized in the balance sheet was EUR 788 million (2023: EUR 125 million).

The company has available tax loss and credit carryforwards, which expire as follows:

Philips Group

Expiry years of net operating loss and credit carryforwards in millions of EUR


	Total balance as of December 31, 2023	Unrecognized balance as of December 31, 2023	Total balance as of December 31, 2024	Unrecognized balance as of December 31, 2024
Within 1 year	17	15	21	21
1 to 2 years	20	16	5	4
2 to 3 years	7	2	6	3
3 to 4 years	9	5	15	6
4 to 5 years	38	16	146	64
Later	808	81	807	771
Unlimited	2,997	1,231	3,342	1,695
Total	3,896	1,366	4,342	2,564

The increase in the unrecognized balance as of December 31, 2024 mainly relates to the US.


	110


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Tax risks

Philips is exposed to tax risks and uncertainty over tax treatments. For particular tax treatments that

are not expected to be accepted by tax authorities, Philips either recognizes a liability or reflects the

uncertainty in the recognition and measurement of its current and deferred tax assets and tax

attributes. For the measurement of the uncertainty, Philips uses the most likely amount or the

expected value of the tax treatment. The expected liabilities resulting from the uncertain tax

treatments are included in non-current tax liabilities (2024: EUR 116 million; 2023: EUR 390 million,

and this decrease mainly relates to releases and settlements arising out of the tax audit settlements

of prior years, in combination with higher tax losses or similar tax carryforwards that can be used if

uncertain tax treatments were settled for the presumed amount at balance sheet date). The

positions include, among others, the following:

Transfer pricing risks

Philips has issued transfer pricing directives, which are in accordance with international guidelines

such as those of the Organization of Economic Co-operation and Development. In order to reduce

the transfer pricing uncertainties, monitoring procedures are carried out by Group Tax to safeguard

the correct implementation of the transfer pricing directives. However, tax disputes can arise due to

inconsistent transfer pricing regimes and different views on 'at arm's length' pricing.

Tax risks on general and specific service agreements and licensing agreements

Due to the centralization of certain activities (such as research and development, IT and group

Functions), costs are also centralized. As a consequence, these costs and/or revenues must be

allocated to the beneficiaries, i.e., the various Philips entities. For that purpose, service contracts

such as intra-group service agreements and licensing agreements are signed with a large number of

group entities. Tax authorities review these intra-group service and licensing agreements, and may

reject the implemented intra-group charges. Furthermore, buy in/out situations in the case of

(de)mergers could affect the cost allocation resulting from the intra-group service agreements

between countries. The same applies to the specific service agreements.

Tax risks due to disentanglements and acquisitions

When a subsidiary of Philips is disentangled, or a new company is acquired, tax risks may arise.

Philips creates merger and acquisition (M&A) teams for these disentanglements or acquisitions. In

addition to representatives from the involved business, these teams consist of specialists from

various group Functions and are formed, among other things, to identify tax risks and to reduce

potential tax claims.

Tax risks due to permanent establishments

A permanent establishment may arise when a Philips entity has activities in another country; tax

claims could arise in both countries on the same income.


	111


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9Earnings per share

Accounting policies

The company presents basic and diluted earnings per share (EPS) data for its common shares. Basic

EPS is calculated by dividing the Net income (loss) attributable to shareholders by the weighted

average number of common shares outstanding (after deduction of treasury shares) during the

period. Diluted EPS is determined by adjusting the Net income (loss) attributable to shareholders

and the weighted average number of common shares outstanding (after deduction of treasury

shares) during the period, for the effects of all dilutive potential common shares, which comprise

performance shares, restricted shares and share options granted under share-based compensation

plans as well as forward contracts to repurchase shares.

Philips Group

Earnings per share in millions of EUR unless otherwise stated 1


	2022	2023	2024
Income from continuing operations	(1,618)	(454)	(840)
Income from continuing operations attributable to shareholders	(1,622)	(456)	(843)
Income from continuing operations attributable to non-controlling interests	3	2	3
Income from discontinued operations	13	(10)	142
Income from discontinued operations attributable to shareholders	13	(10)	142
Net income	(1,605)	(463)	(698)
Net income attributable to shareholders	(1,608)	(466)	(702)
Net income attributable to non-controlling interests	3	2	3

Weighted average number of common shares outstanding (after deduction of treasury shares) during the period	951,811,382	948,300,672	933,370,814
Plus incremental shares from assumed conversions of:
Share options	25,506		232,965
Performance shares	1,147,790	2,623,097	4,958,144
Restricted shares	1,986,538	2,574,738	3,898,844
Forward contracts to repurchase shares	17,611,920	15,511,844	1,835,048
Dilutive potential common shares²	20,771,753	20,709,680	10,925,002
Diluted weighted average number of shares outstanding (after deduction of treasury shares) during the period	951,811,382	948,300,672	933,370,814
Basic earnings per common share attributable to shareholders (in EUR)
Income from continuing operations	(1.70)	(0.48)	(0.90)
Income from discontinued operations	0.01	(0.01)	0.15
Net income	(1.69)	(0.49)	(0.75)
Diluted earnings per common share attributable to shareholders (in EUR)²
Income from continuing operations	(1.70)	(0.48)	(0.90)
Income from discontinued operations	0.01	(0.01)	0.15
Net income	(1.69)	(0.49)	(0.75)

Dividend distributed per common share in EUR	0.85	0.85	0.85

1 Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2023.

2The dilutive potential common shares are not taken into account in the periods for which there is a loss, as the effect would be antidilutive.


	112


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Per-share calculations adjusted for share dividend

On May 7, 2024, the General Meeting of Shareholders approved a dividend of EUR 0.85 per

common share, in shares only. The dividend was settled in May through the issuance of

30,860,582 new common shares. In accordance with IAS 33 Earnings Per Share, per share

calculations have been adjusted retrospectively for all periods presented to reflect the issuance of

shares for the share dividend with respect to 2023.

10Property, plant and equipment

Accounting policies

Owned assets

The cost of property, plant and equipment comprise all directly attributable costs (including the cost

of material and direct labor).

Depreciation is generally calculated using the straight-line method over the useful life of the asset.

Land and assets under construction are not depreciated. When assets under construction are ready

for their intended use, they are transferred to the relevant asset category and depreciation starts.

All other property, plant and equipment items are depreciated over their estimated useful lives to

their estimated residual values.

The estimated useful lives of property, plant and equipment are as follows:

Philips Group

Useful lives of property, plant and equipment



Buildings	from 5 to 50 years
Machinery and installations	from 3 to 20 years
Other equipment	from 1 to 10 years

Property, plant and equipment are reviewed for impairment whenever events or changes in

circumstances indicate that the book value of the assets concerned may not be recoverable. An

impairment loss is recognized for the amount by which the asset's book value exceeds their

recoverable amount. Impairments are reversed if and to the extent that the impairment no longer

exists. The recoverable amount is defined as the higher of the asset’s fair value less costs of disposal

and its value in use.

Gains and losses on the sale of property, plant and equipment are included in other business

income. Costs related to repair and maintenance activities are expensed in the period in which they

are incurred unless they extend the asset's original lifetime or capacity.

Right-of-use assets

The company leases various items of real estate, vehicles and other equipment. The company

determines whether an arrangement constitutes or contains a lease based on the substance of the

arrangement at the lease inception. The arrangement constitutes or contains a lease if fulfillment is

dependent on the use of a specific asset and the arrangement conveys a right to use the asset,

even if that asset is not explicitly specified in the arrangement.

Company as a lessee

The company recognizes right-of-use assets and lease liabilities for leases with a term of more than

12 months if the underlying asset is not of low value. Payments for short-term and low-value leases

are expensed over the lease term. Extension options are included in the lease term if their exercise

is reasonably certain. Right-of-use assets are measured at cost less accumulated depreciation and

impairment losses, adjusted for any remeasurements. Right-of-use assets are depreciated using the

straight-line method over the shorter of the lease term and the useful life of the underlying assets.

Company as a lessor

When the company acts as a lessor, it determines at lease inception whether a lease is a finance

lease or an operating lease. Leases in which the company does not transfer substantially all the risks

and rewards incidental to ownership of an asset are classified as operating leases. The company

recognizes lease payments received under operating leases as income on a straight-line basis over

the lease term in the Consolidated statement of income.

Accounting estimates and judgments

Impairment of owned and right-of-use assets

Judgments are required, not only to determine whether there is an indication that an asset may be

impaired, but also whether indications exist that impairment losses previously recognized may no

longer exist or may have decreased (impairment reversal). After indications of impairment have

been identified, estimates and assumptions are used in the determination of the recoverable

amount of a fixed asset. These involve estimates of expected future cash flows (based on future

growth rates and remaining useful life) and residual value assumptions, as well as discount rates to

calculate the present value of the future cash flows.

Owned assets

Estimates are required to determine the (remaining) useful lives of fixed assets. Useful lives are

determined based on an asset's age, the frequency of its use, repair and maintenance policy,

technology changes in production and expected restructuring. The company estimates the

expected residual value per asset item. The residual value is the higher of the asset's expected sales

price (based on recent market transactions of similar sold items) and its material scrap value.

Right-of-use assets

Judgment is required to determine the lease term. The assessment of whether the company is

reasonably certain to exercise extension options impacts the lease term, which could affect the

amount of lease liabilities and right-of-use assets recognized.


	113


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Property, plant and equipment are fixed assets that are owned or right-of-use assets under a lease

agreement. Owned and right-of-use assets are held for use in Philips' operating activities.

Philips Group

Property, plant and equipment in millions of EUR


	2023	2024
Owned assets	1,565	1,565
Right-of-use assets	919	886
Total	2,483	2,452

Philips Group

Property, plant and equipment in millions of EUR


	Owned assets					Right-of-use assets			Property, plant and equipment
	Land and buildings	Machinery and installations	Other equipment	Assets under construction	Total	Land and buildings	Other equipment	Total	Total
Balance as of January 1, 2024
Cost	1,114	1,731	1,404	274	4,521	1,425	216	1,641	6,162
Accumulated depreciation	(638)	(1,278)	(1,041)		(2,957)	(619)	(104)	(722)	(3,679)
Book value	476	453	363	274	1,565	806	113	919	2,483
Additions	2	134	76	236	448	101	87	189	637
Assets available for use	12	70	140	(248)	(26)	26	-	26	-
Depreciation	(49)	(191)	(166)		(406)	(146)	(56)	(202)	(608)
Impairments	(14)	(23)	(28)	-	(65)	(23)	-	(23)	(89)
Transfers to assets classified as held for sale	-	-	-
Reclassifications	7	(6)	8	(1)	8	(9)	(3)	(12)	(4)
Translation differences and other	20	2	9	10	41	(6)	(4)	(10)	31
Total change	(22)	(13)	38	(3)	1	(57)	24	(33)	(32)
Balance as of December 31, 2024
Cost	1,151	1,790	1,527	271	4,738	1,462	241	1,702	6,441
Accumulated depreciation	(697)	(1,350)	(1,126)		(3,173)	(712)	(104)	(816)	(3,989)
Book value	454	440	401	271	1,565	749	137	886	2,452


	114


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Property, plant and equipment in millions of EUR


	Owned assets					Right-of-use assets			Property, plant and equipment
	Land and buildings	Machinery and installations	Other equipment	Assets under construction	Total	Land and buildings	Other equipment	Total	Total
Balance as of January 1, 2023
Cost	1,135	1,779	1,454	309	4,676	1,365	206	1,571	6,247
Accumulated depreciation	(621)	(1,291)	(1,046)		(2,958)	(543)	(108)	(651)	(3,609)
Book value	514	488	408	309	1,718	822	98	919	2,638
Additions	1	115	77	239	433	175	62	236	669
Assets available for use	20	90	144	(262)	(8)	2	6	8	-
Depreciation	(56)	(196)	(167)		(420)	(150)	(51)	(201)	(621)
Impairments	(5)	(23)	(17)	-	(45)	(23)	-	(23)	(68)
Transfers to assets classified as held for sale	(1)	(1)	(45)		(46)	(2)		(2)	(48)
Reclassifications	15	2	(17)	(5)	(6)	-	4	4	(2)
Translation differences and other	(14)	(22)	(19)	(7)	(62)	(18)	(5)	(23)	(85)
Total change	(39)	(35)	(45)	(35)	(154)	(16)	15	(1)	(154)
Balance as of December 31, 2023
Cost	1,114	1,731	1,404	274	4,521	1,425	216	1,641	6,162
Accumulated depreciation	(638)	(1,278)	(1,041)		(2,957)	(619)	(104)	(722)	(3,679)
Book value	476	453	363	274	1,565	806	113	919	2,483

Leasing activities

The company leases various items of real estate, vehicles and other equipment where it acts as a

lessee. The company has multiple extension and termination options in a number of lease

contracts. These are used to maximize operational flexibility in terms of managing the assets used

in the company's operations. The options considered reasonably certain are part of lease liabilities.

The company has no commitments to any leases not yet commenced in 2024 ( 2023: EUR 128

million). The company's lease contracts do not contain financial covenants.

The company enters into sale-and-leaseback transactions primarily for its Sleep & Respiratory Care

Business. These transactions are accounted for at market value. The payments for these leases are

considered in determining lease liabilities. Principal repayments are part of cash flows used for

financing activities and interest payments are part of cash flows used for operating activities. The

cash inflows arising from the sales transactions are part of cash flows provided by financing

activities. Lease payments under sale-and-leaseback arrangements for 2024 were EUR 43 million

(2023 : EUR 55 million). The remaining minimum payment under sale-and-leaseback arrangements

included in lease obligations above are as follows:

Philips Group

Remaining minimum payments under sale-and-leaseback arrangements in millions of EUR


2025	29
2026	21
2027	14
2028	7
2029	1
Thereafter	-

Further lease disclosures as lessee can be found in Income from operations; Financial income and

expenses, Cash flow statement supplementary information and Debt. For disclosures for lease

receivables refer to Receivables .


	115


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

11Goodwill

Accounting policies

The measurement of goodwill at initial recognition is described in the Acquisitions and divestments

note. Goodwill is subsequently measured at cost less accumulated impairment losses.

Goodwill is not amortized but is instead tested for impairment annually in the fourth quarter, or

more frequently if indicators of potential impairment exist. Internal and external sources of

information are considered to assess if there are indicators that an asset or groups of cash-

generating units (CGUs) may be impaired. Goodwill is allocated to groups of CGUs and tested for

impairment at the Business level (one level below segment), which represents the lowest level at

which goodwill is monitored internally for management purposes. An impairment loss is recognized

in the Consolidated statements of income whenever and to the extent that the carrying amount of

a group of CGUs exceeds the recoverable amount for the group of CGUs, whichever is the greater,

its value in use or its fair value less cost of disposal. Value in use is measured as the present value of

future cash flows expected to be generated by the asset. Fair value less cost of disposal is measured

as the amount obtained from the sale of an asset in an arm’s length transaction, less costs of

disposal.

Accounting estimates and judgments

The cash flow projections used in the value in use calculations for goodwill impairment testing

contain various judgments and estimations as described in the ‘key assumptions’ section.

The changes in 2023 and 2024 were as follows:

Philips Group

Goodwill in millions of EUR


	2023	2024
Balance as of January 1
Cost	12,747	12,133
Impairments	(2,509)	(2,256)
Book value	10,238	9,876

Acquisitions¹	24
Impairments	(8)
Divestments and transfers to assets classified as held for sale²	(8)	(22)
Translation differences and other	(370)	528
Total change	(362)	507
Balance as of December 31
Cost	12,133	12,777
Impairments	(2,256)	(2,394)
Book value	9,876	10,383

1Refer to Acquisitions and divestments

2 Refer to Discontinued operations and assets classified as held for sale

In 2024, goodwill increased by EUR 507 million , primarily as a result of translation differences.

Goodwill impairment testing

During 2024 , there were no goodwill impairments recorded.

Goodwill allocated to the Businesses (groups of cash-generating units) as of December 31, 2024, is

presented in the following table:

Philips Group

Goodwill by business in millions of EUR


	2023	2024
Monitoring	3,964	4,194
Image-Guided Therapy	3,044	3,216
Precision Diagnosis	1,363	1,440
Sleep & Respiratory Care	687	694
Personal Health	483	509
Enterprise Informatics	336	331
Book value	9,876	10,383


	116


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The carrying amount of each group of CGUs is compared to the recoverable amount of the group

of CGUs. Unless otherwise noted, the recoverable amount for each group of CGUs is based on

value-in-use calculations. Cash flow projections were determined using Philips management's

internal forecasts that cover an initial forecast period from 2025 to 2027. Projections were

extrapolated using the growth rates disclosed in the following table for an extrapolation period of 4

years (2028-2031), after which a terminal value was calculated per 2032. For the terminal value

calculation, growth rates were capped at a historical long-term average growth rate. The company

uses scenarios in the business forecasting process and the most reasonable and supportable

assumptions that represent management’s best estimate are used as the basis for the value-in-use

calculations.

Key assumptions

Key assumptions used in the value-in-use calculations were compound sales growth rates, EBITA*

in the terminal value and the rates used for discounting the projected cash flows.

The compound sales growth rate is the annualized steady nominal growth rate over the forecast

period calculated with reference to the latest full year of actual sales as the base for the growth.

The compound sales growth rate used to calculate the terminal value is only applied to the first

year after the extrapolation period, after which no further growth is assumed for the terminal value

calculation.

The compound sales growth rates and EBITA* used to estimate cash flows are based on past

performance, external market growth assumptions and industry long-term growth averages.

EBITA* for each group of CGUs is expected to increase over the projection period as a result of

volume growth and cost efficiencies. By their nature, these assumptions involve risk and uncertainty

because they relate to future events and circumstances and there are many factors that could cause

actual results and developments to differ materially from the plans, goals and expectations set forth

in these assumptions.

The rates used for discounting the projected cash flows in goodwill impairment testing is based on

a weighted cost of capital (WACC), which in turn is based on business-specific inputs along with

other inputs as mentioned below. The WACC is based on post-tax cost of equity and cost of debt,

and is further calculated based on market data and inputs to accurately capture changes to the

time value of money, such as the risk-free interest rate, the beta factor and country risk premium.

In order to properly reflect the different risk-profiles of different businesses, a WACC is determined

for each business. As such, the beta factor is determined based on a selection of peer companies,

which can differ per business. Different businesses have different geographical footprints, resulting

in business-specific inputs for variables like country risk. Philips performs the value-in-use

calculations using post-tax cash flows and discount rate, the implicit pre-tax rate discount rate is

derived from an iterative calculation for disclosure purposes.

The values assigned to the key assumptions used for the value-in-use calculations were as follows:

Philips Group

Key assumptions 2024


	Compound sales growth rate
	Initial forecast period	Extrapolation period	Used to calculate terminal value	Pre-tax discount rates
Monitoring	5.3%	4.7%	2.5%	9.1%
Image-Guided Therapy	6.3%	5.0%	2.5%	9.7%
Precision Diagnosis	2.4%	3.6%	2.5%	9.9%
Sleep & Respiratory Care	10.1%	7.3%	2.5%	10.3%
Personal Health	5.1%	4.2%	2.5%	9.9%
Enterprise Informatics	4.4%	5.4%	2.5%	8.9%

The assumptions used for the 2023 value-in-use calculations for cash-generating units to which a

significant amount of goodwill was allocated were as follows:

Philips Group

Key assumptions 2023


	compound sales growth rate
	initial forecast period	extrapolation period	used to calculate terminal value	pre-tax discount rates
Monitoring	8.2%	5.5%	2.5%	9.5%
Image-Guided Therapy	7.9%	5.2%	2.5%	10.7%
Precision Diagnosis	3.8%	3.4%	2.5%	10.4%
Sleep & Respiratory Care	9.5%	9.3%	2.5%	10.8%
Personal Health	5.0%	4.6%	2.5%	10.3%
Enterprise Informatics	5.3%	5.8%	2.5%	9.0%

Sensitivity to changes in assumptions

The results of the annual impairment tests of the groups of CGUs indicate that a reasonably

possible change in key assumptions would not cause the value in use to fall to the level of the

carrying value.

*The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Information

by segment and main country


	117


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

12Intangible assets excluding goodwill

Accounting policies

Acquired finite-lived intangible assets are amortized using the straight-line method over their

estimated useful life. The useful lives are evaluated annually. Intangible assets are initially capitalized

at cost, with the exception of intangible assets acquired as part of a business combination, which

are capitalized at their acquisition date fair value.

The company expenses all research costs as incurred. Expenditure on development activities,

whereby research findings are applied to a plan or design for the production of new or substantially

improved products and processes, is capitalized as an intangible asset if the product or process is

technically and commercially feasible, the company has sufficient resources and the intention to

complete development and can measure the attributable expenditure reliably.

The capitalized development expenditure comprises of all directly attributable costs (including the

cost of materials and direct labor). Other development expenditures and expenditures on research

activities are recognized in the Consolidated statements of income. Capitalized development

expenditure is stated at cost less accumulated amortization and impairment losses. Amortization of

capitalized development expenditure is charged to the Consolidated statements of income on a

straight-line basis over the estimated useful lives of the intangible assets.

Philips Group

Expected useful lives of intangible assets excluding goodwill in years


Brand names	2-20
Customer relationships	2-25
Technology	3-20
Other	1-10
Software	1-10
Product development	3-10

The weighted average expected remaining life of brand names, customer relationships, technology

and other intangible assets is 8.5 years as of December 31, 2024 (2023: 9.3 years).

Impairment of intangible assets not yet ready for use

Intangible assets not yet ready for use are not amortized but are tested for impairment annually

and whenever impairment indicators require. In the case of intangible assets not yet ready for use,

either internal or external sources of information are considered to assess if there are indicators that

an asset or a CGU may be impaired.

Impairment of non-financial assets other than goodwill, intangible assets not yet ready

for use, inventories and deferred tax assets

Non-financial assets other than goodwill, intangible assets not yet ready for use, inventories and

deferred tax assets are reviewed for impairment whenever events or changes in circumstances

indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be

held and used is assessed by a comparison of the carrying amount of an asset with the greater of

its value in use and fair value less cost of disposal. Value in use is measured as the present value of

future cash flows expected to be generated by the asset. Fair value less cost of disposal is measured

as the amount obtained from a sale of an asset in an arm’s length transaction, less costs of

disposal. If the carrying amount of an asset is deemed not recoverable, an impairment charge is

recognized in the amount by which the carrying amount of the asset exceeds the recoverable

amount. The review for impairment is carried out at the level where cash flows occur that are

independent of other cash flows.

Impairment losses recognized in prior periods for intangible assets other than goodwill are assessed

at each reporting date for any indications that the loss has decreased or no longer exists. An

impairment loss is reversed if and to the extent that there has been a change in the estimates used

to determine the recoverable amount. The loss is reversed only to the extent that the asset’s

carrying amount does not exceed the carrying amount that would have been determined, net of

depreciation or amortization, if no impairment loss had been recognized. Reversals of impairment

are recognized in the Consolidated statements of income.

Accounting estimates and judgments

The cash flow projections used in the value in use calculations for intangible assets excluding

goodwill contain various judgments and estimations. For intangible assets excluding goodwill,

estimates are required to determine the (remaining) useful lives.


	118


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Intangible assets excluding goodwill in millions of EUR


	Brand names	Customer relationships	Technology	Product development	Product development in progress	Software	Other	Total
Balance as of January 1, 2024
Cost	629	2,593	2,908	2,432	635	929	139	10,265
Amortization / impairments	(511)	(1,718)	(1,895)	(2,096)	(91)	(662)	(101)	(7,075)
Book value	118	875	1,013	336	544	267	38	3,190

Additions		-	36	-	240	85	-	361
Assets available for use				266	(266)
Amortization	(19)	(92)	(138)	(162)		(95)	(1)	(506)
Impairments	(7)	-	(135)	(13)	(24)	(7)	(1)	(188)
Transfers to assets classified as held for sale		(11)					1	(10)
Translation differences and other	6	51	79	(9)	29	15	(37)	134
Total change	(20)	(52)	(158)	82	(21)	(3)	(38)	(208)

Balance as of December 31, 2024
Cost	671	2,722	2,900	2,659	624	984	-	10,559
Amortization / impairments	(573)	(1,899)	(2,044)	(2,241)	(101)	(719)	-	(7,578)
Book Value	98	823	855	418	523	265	-	2,982

Philips Group

Intangible assets excluding goodwill in millions of EUR


	Brand names	Customer relationships	Technology	Product development	Product development in progress	Software	Other	Total
Balance as of January 1, 2023
Cost	647	2,735	2,947	2,605	648	869	152	10,602
Amortization / impairments	(507)	(1,665)	(1,845)	(2,212)	(146)	(589)	(113)	(7,077)
Book value	140	1,070	1,102	393	502	280	39	3,526

Additions			33	-	214	70	-	317
Assets available for use				157	(157)		-	-
Acquisitions			40	-		-		40
Amortization	(20)	(137)	(131)	(169)		(97)	(1)	(556)
Impairments		-	-	(7)	(7)	(1)	-	(16)
Transfers to assets classified as held for sale	(1)	(20)			(8)	(2)		(32)
Translation differences and other	(1)	(37)	(30)	(38)	1	18	-	(87)
Total change	(22)	(195)	(89)	(57)	42	(13)	(1)	(335)

Balance as of December 31, 2023
Cost	629	2,593	2,908	2,432	635	929	139	10,265
Amortization / impairments	(511)	(1,718)	(1,895)	(2,096)	(91)	(662)	(101)	(7,075)
Book Value	118	875	1,013	336	544	267	38	3,190


	119


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips did not make any acquisitions in 2024 ( 2023: acquisitions involved EUR 40 million of

intangible assets). For more information, refer to Acquisitions and divestments.

Impairments in 2024 amounted to EUR 188 million (2023: EUR 16 million) and mainly relate to the

impairment of acquired intangible assets following the decision to discontinue certain products in

the Diagnosis & Treatment segment.

The company uses scenarios in the business forecasting process and the most reasonable and

supportable assumptions which represent management’s best estimate are used as the basis for

the value-in-use calculations.

The amortization and impairment of intangible assets is further specified in Income from

operations .

The most notable intangible assets as of December 31, 2024 relate to the BioTelemetry customer

relationships and technology with a carrying value of EUR 316 million and EUR 108 million and a

remaining amortization period of 12 years and 8 years, respectively, and Spectranetics customer

relationships and technology with a carrying value of EUR 256 million and EUR 164 million and a

remaining amortization period of 13 years and 8 years , respectively. The most notable intangible

assets as of December 31, 2023, relate to the BioTelemetry customer relationships and technology

with value of EUR 327 million and EUR 123 million and a remaining amortization period of 13 years

and 9 years, respectively, and Spectranetics customer relationships and technology with a carrying

value of EUR 261 million and EUR 175 million and a remaining amortization period of 14 years and

9 years, respectively.

13Other financial assets

Accounting policies

Classification and measurement of financial assets

The classification of financial assets at initial recognition depends on the financial asset’s

contractual cash flow characteristics and the company’s business model for managing them.

The company initially measures a financial asset at its fair value plus, in the case of a financial asset

not at fair value through profit or loss, transaction costs.

For the purposes of subsequent measurement, financial assets are classified into four categories:

• financial assets at amortized cost (debt instruments)

• financial assets at fair value through other comprehensive income (OCI) with recycling of

cumulative gains and losses (debt instruments)

• financial assets desi gnated at fair value through OCI with no recycling of cumulative gains and

losses upon derecognition (equity instruments)

• financial assets at fair value through profit or loss (debt instruments and equity instruments)

Impairment of financial assets

The company recognizes a loss allowance for expected credit losses for trade receivables, contract

assets, lease receivables, debt investments carried at amortized cost and fair value through other

comprehensive income (FVTOCI).

At each balance sheet date, the company assesses whether there is objective evidence that a

financial asset or a group of financial assets is impaired and recognizes a loss allowance for

expected credit losses for financial assets measured at either amortized costs or at fair value

through other comprehensive income. If, at the reporting date, the credit risk on a financial

instrument has not increased significantly since initial recognition, the company measures the loss

allowance for the financial instrument at an amount equal to 12 months of expected credit losses.

If, at the reporting date, the credit risk on a financial instrument has increased significantly since

initial recognition, the company measures the loss allowance for the financial instrument at an

amount equal to the lifetime-expected credit losses. For all trade receivables, contract assets and

lease receivables the company measures the loss allowance at an amount equal to lifetime-

expected credit losses.

Accounting estimates and judgments

The determination of fair value is subject to estimates for investments that are not publicly traded.

Refer to Fair value of financial assets and liabilities .

Financial assets classified at amortized cost and at fair value through OCI are subject to impairment

assessment. The calculation of expected credit losses requires the company to apply significant

judgment and make estimates and assumptions that involve significant uncertainty at the time they

are made. Changes to these estimates and assumptions can result in significant changes to the

timing and amount of expected credit losses to be recognized.

Other current financial assets

In 2024 , Other current financial assets decreased from EUR 3 million to EUR 2 million (2023 :

decreased from EUR 11 million to EUR 3 million).

Other non-current financial assets

The company’s investments in Other non-current financial assets mainly consist of investments in

common shares of companies in various industries and investments in limited life funds. The

changes during 2024 and 2023 were as follows:


	120


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Other non-current financial assets in millions of EUR


	Non-current financial assets at FVTP&L	Non-current financial assets at FVTOCI	Non-current financial assets at Amortized cost	Total
Balance as of January 1, 2024	284	258	77	619
Changes:
Acquisitions/additions	76	6	65	147
Sales/redemptions/reductions	(31)	(14)	(11)	(56)
Value adjustment through OCI		(23)		(23)
Value adjustment through P&L	(25)		1	(23)
Translation differences and other	8	12	(4)	16
Reclassification	(25)	4	(27)	(47)
Balance as of December 31, 2024	288	242	102	631

Philips Group

Other non-current financial assets in millions of EUR


	Non-current financial assets at FVTP&L	Non-current financial assets at FVTOCI	Non-current financial assets at Amortized cost	Total
Balance as of January 1, 2023	322	284	54	660
Changes:
Acquisitions/additions	71	14	20	105
Sales/redemptions/reductions	(33)	(14)	(11)	(58)
Value adjustment through OCI		(17)	-	(17)
Value adjustment through P&L	(39)	-	-	(39)
Translation differences and other	(29)	(14)	(1)	(44)
Reclassifications	(8)	5	15	12
Balance as of December 31, 2023	284	258	77	619

As of December 31, 2024, equity investments of EUR 222 million (2023 : EUR 231 million) are

accounted under the FVTOCI category based on the company's election at initial recognition mainly

because such investments are neither held for trading purposes nor primarily for their increase in

value and the elected presentation is considered to reflect the nature and purpose of the

investment.

14Other assets

Accounting policies

The company recognizes contract assets for revenue earned from installation services because the

receipt of consideration is conditional on successful completion of the installation. Upon

completion of the installation and acceptance by the customer, the amount recognized as contract

assets is reclassified to trade receivables.

Other assets are measured at amortized cost minus any impairment losses.

Other non-current assets

Other non-current assets as of December 31, 2024 , were EUR 118 million ( 2023 : EUR 93 million ),

mainly includes prepaid expenses.

Other current assets

Other current assets as of December 31, 2024, totaled EUR 586 million ( 2023 : EUR 500 million ),

primarily contract assets of EUR 349 million ( 2023 : EUR 297 million ) and prepaid expenses of EUR

238 million (2023: EUR 197 million) mainly related to Diagnosis & Treatment Businesses and

Connected Care Businesses.

15Inventories

Accounting policies

Inventories are stated at the lower of cost or net realizable value. The cost of inventories comprises

all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to

their present location and condition. The costs of conversion of inventories include direct labor and

fixed and variable production overheads, considering the stage of completion and the normal

capacity of production facilities. Costs of idle facility and abnormal waste are expensed. The cost of

inventories is determined using the first-in, first-out (FIFO) method. The write-down of inventories

to net realizable value is included in cost of sales.

Accounting estimates and judgments

Inventory is reduced for the estimated losses due to obsolescence. This reduction is determined for

groups of products based on sales in the recent past and/or expected future demand.


	121


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Inventories are summarized as follows:

Philips Group

Inventories in millions of EUR


	2023	2024
Raw materials and supplies	1,309	1,344
Work in process	552	414
Finished goods	1,629	1,439
Inventories	3,491	3,198

In 2024, overall global inventories have operationally decreased by EUR 293 million with the

increase in finished goods and decrease in other categories.

The write-down of inventories to net realizable value was EUR 230 million in 2024 and EUR 339

million in 2023.

16Receivables

Accounting policies

Receivables are initially measured at fair value and are subsequently measured at amortized cost if

held within a business model with the objective to collect the contractual cash flows or at fair value

through OCI if held within a business model with the objective of both holding to collect

contractual cash flows and selling. Receivables are measured less any impairment losses.

Receivables are derecognized when the company has transferred substantially all risks and rewards,

which includes transactions in which the company enters into factoring transactions, or if the

company does not retain control over the receivables.

Accounting estimates

Receivables are subject to impairment assessment, which involves estimating expected credit losses.

Refer to Other financial assets for accounting policies on impairment of financial assets.

Non-current receivables

Non-current receivables are associated mainly with customer financing in the Diagnosis &

Treatment Businesses amounting (net of allowance) to EUR 81 million (2023 : EUR 102 million) ,

i nsurance receivables in the US amounting to EUR 33 million (2023: EUR 33 million ) and income tax

receivables amounting to EUR 36 million ( 2023: EUR 8 million).

Philips has leasing activities where it acts as lessor. In such arrangements, Philips provides the

customer with a right to use of medical equipment in exchange for a series of payments. Residual

values of assets under lease form an insignificant part of the carrying amount of those assets.

Residual values are influenced by asset market prices and are therefore subject to management

estimation. Residual values are at least reassessed on an annual basis, or more often when

necessary. Reassessments are based on a combination of realization of assets sold, expert

knowledge and judgment of local markets. In order to reduce residual value risk exposures there

may be residual value guarantees or purchase options embedded in the customer contract. Credit

risk for lease receivables is reviewed regularly and mitigated, for example, by retaining a security

interest in the leased asset.

Current receivables

Current receivables of EUR 3,672 million ( 2023 : EUR 3,733 million ) as of December 31, 2024 ,

included trade accounts receivable (net of allowance) of EUR 3,513 million (2023: EUR 3,546

million ), accounts receivable other of EUR 134 million (2023 : EUR 170 million), and accounts

receivable from investments in associates of EUR 25 million ( 2023: EUR 18 million) .

The trade accounts receivable, net, per segment are as follows:

Philips Group

Trade accounts receivable, net in millions of EUR


	2023	2024
Diagnosis & Treatment	1,688	1,687
Connected Care	1,105	1,064
Personal Health	576	575
Other	177	187
Trade accounts receivable, net	3,546	3,513


	122


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The aging analysis of trade accounts receivable, net, representing current and overdue but not fully

impaired receivables, is as follows:

Philips Group

Aging analysis in millions of EUR


	2023	2024
Current	3,132	3,154
Overdue 1-30 days	117	141
Overdue 31-180 days	234	194
Overdue more than 180 days	63	24
Trade accounts receivable, net	3,546	3,513

The changes in the allowance for doubtful accounts receivable are as follows::

Philips Group

Allowance for accounts receivable in millions of EUR


	2023	2024
Balance as of January 1	226	216
Additions charged to expense	27	112
Deductions from allowance¹	(26)	(88)
Transfer to assets held for sale	(1)	-
Other movements	(10)	5
Balance as of December 31	216	245

1Write-offs for which an allowance was previously provided.

The allowance for doubtful accounts receivable has been primarily established for receivables that

are past due. Additions and deductions in the allowance include the impact of changes in estimates

for certain Connected Care receivables. The allowance presented also includes the allowance for

Non-current customer finance receivables of EUR 8 million ( 2023: EUR 8 million). Other movements

in the current period are mainly related to foreign currency valuations.

Included in the above balances as of December 31, 2024, are allowances for individually impaired

receivables of EUR 239 million (2023: EUR 210 million).

17Equity

Accounting policies

Common shares are classified as equity. Incremental costs directly attributable to the issuance of

shares are recognized as a deduction from equity. Where the company repurchases the company’s

equity share capital (treasury shares), the consideration paid, including any directly attributable

incremental transaction costs (net of income taxes), is deducted from shareholders’ equity until

such treasury shares are cancelled or reissued.

Where such treasury shares are subsequently reissued, any consideration received, net of any

directly attributable incremental transaction costs and the related income tax effects, is included in

shareholders’ equity.

Call options on own shares are treated as equity instruments.

Dividends are recognized as a liability in the period in which they are declared and approved by

shareholders. The income tax consequences of dividends are recognized when a liability to pay the

dividend is recognized.

Common shares

As of December 31, 2024 , authorized common shares consist of 2 billion shares ( December 31,

2023 : 2 billion ; December 31, 2022 : 2 billion ), and the issued and fully paid share capital consists

of 939,939,384 common shares, each share having a par value of EUR 0.20 ( December 31, 2023:

913,515,966 ; December 31, 2022: 889,315,082 ).

Preference shares

As a means to protect the company against (an attempt at) an unsolicited takeover or other

attempt to exert (de facto) control of the company, the ‘Stichting Preferente Aandelen Philips’ has

been granted the right to acquire preference shares in the company. As of December 31, 2024, no

such right has been exercised and no preference shares have been issued. Authorized preference

shares consist of 2 billion shares as of December 31, 2024 ( December 31, 2023 : 2 billion ;

December 31, 2022 : 2 billion ).

Options, restricted and performance shares

Under its share-based compensation plans, the company granted stock options on its common

shares and other conditional rights to receive common shares in the future such as restricted shares

and performance shares (refer to Share-based compensation).

Treasury shares

In connection with the company’s share repurchase programs, shares which have been

repurchased and are held in Treasury for the purpose of (i) delivery under share-based


	123


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

compensation plans upon exercise of options, or vesting of restricted or performance shares, and

(ii) capital reduction, are accounted for as a reduction of shareholders’ equity. Treasury shares are

recorded at cost, representing the market price on the acquisition date. When treasury shares are

delivered by the company under its share-based compensation plans, such shares are removed

from treasury shares on a first-in, first-out (FIFO) basis.

When treasury shares are delivered by the company upon exercise of options, the difference

between the cost and the cash received is recorded in retained earnings. When treasury shares are

delivered by the company upon vesting of restricted shares or performance shares (granted under

the company’s share-based compensation plans), the difference between the market price of the

shares and the cost is recorded in retained earnings, and the market price is recorded in capital in

excess of par value.

The following table shows the movements in the outstanding number of shares over the last three

years:

Philips Group

Outstanding number of shares


	2022	2023	2024
Balance as of January 1	870,182,445	881,480,527	906,403,156
Dividend distributed	14,174,568	39,334,938	30,860,582
Purchase of treasury shares	(5,080,693)	(15,964,445)	(13,718,391)
Delivery of treasury shares	2,204,207	1,552,136	1,463,727
Balance as of December 31	881,480,527	906,403,156	925,009,074

The following table reflects transactions that took place in relation to former and current share-

based compensation plans:

Philips Group

Transactions related to share-based compensation plans


	2022	2023	2024
Shares acquired	2,142,445	3,000,000	9,281,227
Average market price	EUR 31.76	EUR 41.59	EUR 21.88
Amount paid	EUR 68 million	EUR 125 million	EUR 203 million
Shares delivered	2,204,207	1,552,136	1,463,727
Average price (FIFO)	EUR 35.16	EUR 34.59	EUR 37.14
Cost of delivered shares	EUR 77 million	EUR 54 million	EUR 54 million
Total shares in treasury at year-end	5,664,946	7,112,810	14,930,310
Total cost	EUR 191 million	EUR 262 million	EUR 411 million

The following transactions took place for capital reduction purposes:

Philips Group

Transactions related to capital reduction


	2022	2023	2024
Shares acquired	2,938,248	12,964,445	4,437,164
Average market price	EUR 36.61	EUR 37.25	EUR 37.56
Amount paid	EUR 108 million	EUR 483 million	EUR 167 million
Cancellation of treasury shares (shares)	8,758,455	15,134,054	4,437,164
Cancellation of treasury shares (EUR)	EUR 299 million	EUR 566 million	EUR 167 million
Total shares in treasury at year-end	2,169,609
Total cost	EUR 83 million

Share purchase transactions related to employee option and share plans, as well as transactions

related to the reduction of share capital, involved a cash outflow of EUR 451 million in 2024. In

2024, we settled withholding tax liability for an amount of EUR 41 million relating to the dividend

distribution in 2023 (EUR 11 million) and in 2024 (EUR 29 million).

Share repurchase methods for share-based remuneration plans and capital reduction

purposes

Philips uses different methods to repurchase shares in its own capital: (i) share buyback repurchases

in the open market via an intermediary; (ii) repurchase of shares via forward contracts for future

delivery of shares; and (iii) the unwinding of call options on own shares. During 2024 , Philips used

methods (i) and (ii) to repurchase shares for share-based compensation plans and method (ii) to

repurchase shares for capital reduction purposes.

Forward contracts to repurchase shares and open market repurchases of shares

For share-based compensation plans

On August 05, 2024, Philips announced that it would repurchase shares for an amount of up to

EUR 125 million to cover certain of its obligations arising from its Long-Term Incentive plans. The

repurchases were executed through a combination of open market purchases by an intermediary

(in August 2024 acquiring 2.2 million shares which resulted in a EUR 60 million increase in retained

earnings against treasury shares) and one forward contract for an amount of EUR 65 million to

acquire 2.5 million shares with a settlement date in November 2026 and a weighted average

forward price of EUR 26.40.

On June 14, 2023 , Royal Philips announced that it will repurchase up to 7.1 million shares to cover

certain of its obligations arising from its Long-Term Incentive and employee stock purchases plans.

Under this program, Philips entered into one forward contract for an amount of EUR 138 million to

acquire 7.1 million shares with settlement dates varying between November 2024 and November

2025 and a weighted average forward price of EUR 19.43. As of December 31, 2024, a total of 3.1

million shares under this program were acquired (settled in the fourth quarter of 2024). This

resulted in a EUR 57 million increase in retained earnings against treasury shares.


	124


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

On June 13, 2022, Royal Philips announced that it will repurchase up to 3.2 million shares to cover

certain of its obligations arising from its Long-Term Incentive and employee stock purchases plans.

Under this program, Philips entered into one forward contract for an amount of EUR 63 million to

acquire 3.2 million shares with settlement dates in November 2024 and December 2024 and a

weighted average forward price of EUR 19.75. As of December 31, 2024, all shares under this

program were acquired (settled in the fourth quarter of 2024). This resulted in a EUR 63 million

increase in retained earnings against treasury shares.

On January 29, 2020, Philips announced that it will repurchase up to 6 million shares to cover

certain of its obligations arising from its Long-Term Incentive and employee stock purchase plans.

Under this program, Philips entered into three forward contracts to acquire in total 5 million for an

amount of EUR 174 million to acquire with settlement dates varying between October 2021 and

November 2022 and a weighted average forward price of EUR 34.85. On October 26, 2022, the

original settlement date of two tranches entered into under this program (in total 1.75 million

shares) has been extended from November 23, 2022 to November 2023, and November 2024,

respectively. As of December 31, 2024, a total of 5.0 million shares ( December 31, 2023: 4.3

million shares) under this program were acquired (settled in the fourth quarter of 2021 , 2022,

2023, and 2024). This resulted in a EUR 23 million (2023: EUR 35 million) increase in retained

earnings against treasury shares.

As of December 31, 2024, the remaining forward contracts to cover obligations under share-based

compensation plans related to 6.5 million shares (December 31, 2023: 11.1 million shares) and

amounted to EUR 142 million (December 31, 2023: EUR 224 million).

For capital reduction

On July 26, 2021, Philips announced a share buyback program for share cancellation purposes for

an amount of up to EUR 1.5 billion. Consequently, in the third quarter of 2021 Philips entered into

three forward contracts for an amount of EUR 731 million to acquire 20 million shares with

settlement dates in 2022, 2023 and 2024 and a weighted average forward price of EUR 37.36.

Philips executed the remainder of the program through open market purchases by an intermediary

in the fourth quarter of2021(acquiring 21 million shares) and January 2022 (acquiring 0.8 million

shares). This resulted in a EUR 781 million increase in retained earnings against treasury shares. As

of December 31, 2024, Philips completed the program announced in 2021 and as a result a total

of 19.6 million (December 31, 2023: 15.1 million ) shares were acquired (in the fourth quarter of

2022 , second, third and fourth quarters of 2023, and first and second quarters of 2024). This

resulted in a EUR 167 million increase in retained earnings against treasury shares (2023: EUR 483

million including dividend adjustment).

As of December 31, 2024, there were no remaining forward contracts entered into for capital

reduction purposes. As of December 31, 2023, the remaining forward contracts entered into for

capital reduction purposes related to 4.4 million shares and amounted to EUR 167 million.

Shares cancellation

In June 2024, Philips completed the cancellation of 4.4 million of its common shares (with a cost

price of EUR 167 million). The cancelled shares were acquired as part of Philips’ EUR 1.5 billion

share repurchase program announced on July 26, 2021.

Dividend distribution

2024

In May 2024, Philips distributed a dividend of EUR 0.85 per common share, representing a total

value of EUR 768 million (including costs). The dividend was distributed in the form of shares only,

resulting in the issuance of 30,860,582 new common shares. Per share calculations have been

adjusted retrospectively for all periods presented to reflect the issuance of shares for the share

dividend in respect of 2023. Further reference is made to Earnings per share.

A proposal will be submitted to the 2025 Annual General Meeting of Shareholders to pay a

dividend of EUR 0.85 per common share, in shares or cash at the option of the shareholder, against

retained earnings for 2024.

2023

In May 2023, Philips distributed a dividend of EUR 0.85 per common share, representing a total

value of EUR 749 million (including costs). The dividend was distributed in the form of shares only,

resulting in the issuance of 39,334,938 new common shares.

2022

In May 2022, Philips distributed a dividend of EUR 0.85 per common share, representing a total

value of EUR 741 million (including costs). Shareholders could elect for a cash dividend or a share

dividend. Approximately 45% of the shareholders elected for a share dividend, resulting in the

issuance of 14,174,568 new common shares. The settlement of the cash dividend involved an

amount of EUR 411 million (including costs).

Limitations in the distribution of shareholders’ equity

As of December 31, 2024, pursuant to Dutch law, certain limitations exist relating to the

distribution of shareholders’ equity of EUR 3,254 million. Such limitations relate to common shares

of EUR 188 million, as well as to legal reserves required by Dutch law included under retained

earnings of EUR 1,052 million and unrealized currency translation differences of EUR 2,014 million.

The unrealized gain related to cash flow hedges of EUR 1 million and unrealized loss related to fair

value through OCI financial assets of EUR 90 million qualify as revaluation reserves and reduce the

distributable amount due to the fact that these reserves are negative.

The legal reserves required by Dutch law of EUR 1,052 million included under retained earnings

relates to any legal or economic restrictions on the ability of affiliated companies to transfer funds

to the parent company in the form of dividends.

As of December 31, 2023, these limitations in distributable amounts were EUR 2,435 million and

related to common shares of EUR 183 million, as well as to legal reserves required by Dutch law

included under retained earnings of EUR 990 million and unrealized currency translation differences

of EUR 1,263 million. The unrealized losses related to fair value through OCI financial assets of EUR


	125


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

390 million and unrealized loss related to cash flow hedges of EUR 6 million qualify as a revaluation

reserve and reduce the distributable amount due to the fact that this reserve is negative.

Non-controlling interests

Non-controlling interests relate to minority stakes held by third parties in consolidated group

companies.

Capital management

Philips manages capital based upon the IFRS measures, net cash provided by operating activities

and net cash used for investing activities as well as the non-IFRS measure net debt. The definition

of this non-IFRS measure and a reconciliation to the IFRS measure is included below.

Net debt is defined as the sum of long and short-term debt minus cash and cash equivalents.

Group equity is defined as the sum of shareholders’ equity and non-controlling interests. This

measure is used by Philips Treasury management and investment analysts to evaluate financial

strength and funding requirements. The Philips net debt position is managed with the intention of

retaining the current strong investment grade credit rating. Furthermore, Philips’ dividend policy is

aimed at dividend stability and a pay-out ratio of 40% to 50% of Adjusted income from continuing

operations attributable to shareholders (reconciliation to the most directly comparable IFRS

measure, Net income, is provided at the end of this note).

Philips Group

Composition of net debt and group equity in millions of EUR unless otherwise stated


	2022	2023	2024
Long-term debt	7,270	7,035	7,113
Short-term debt	931	654	526
Total debt	8,201	7,689	7,639
Cash and cash equivalents	1,172	1,869	2,401
Net debt	7,028	5,820	5,238
Shareholders’ equity	13,249	12,028	12,006
Non-controlling interests	34	33	37
Group equity	13,283	12,061	12,043
Net debt : group equity ratio	35:65	33:67	30:70

Adjusted income from continuing operations attributable to shareholders is not a recognized

measure of financial performance under IFRS. The reconciliation of Adjusted income from

continuing operations attributable to shareholders to the most directly comparable IFRS measure,

Net income, is included in the following table.

Philips Group

Adjusted income from continuing operations attributable to shareholders1 in millions of EUR


	2022	2023	2024
Net income	(1,605)	(463)	(698)
Discontinued operations, net of income taxes	(13)	10	(142)
Income from continuing operations	(1,618)	(454)	(840)
Income from continuing operations attributable to non-controlling interests	(3)	(2)	(3)
Income from continuing operations attributable to shareholders¹	(1,622)	(456)	(843)
Adjustments for:
Amortization and impairment of acquired intangible assets	363	290	392
Impairment of goodwill	1,357	8	0
Restructuring costs and acquisition-related charges	202	381	326
Other items:	925	1,358	830
Respironics litigation provision		575	984
Respironics insurance income			(538)
Respironics consent decree charges	250	363	113
Respironics field-action running costs	210	224	133
Quality actions	59	175	123
R&D project impairments	134
Portfolio realignment charges	109
Impairment of assets in S&RC	39
Provision for public investigations tender irregularities	60
Provision for a legal matter		31
Investment re-measurement loss		23
Loss (gain) on divestment of business		(35)
Remaining items	63	2	16
Net finance income/expenses	(4)	18	23
Tax impact on adjusting items²	(376)	(450)	(370)
Tax effect of derecognition of US deferred tax asset			941
Adjusted Income from continuing operations attributable to shareholders 1	845	1,148	1,300

1Shareholders in this table refers to shareholders of Koninklijke Philips N.V.

2Includes deferred tax assets derecognized in the line below.


	126


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

18Debt

Accounting policies

Debt

Debt is initially measured at fair value net of directly attributable transaction costs. Subsequently,

debt is measured at amortized cost using the effective interest rate method. Amortized cost is

calculated by taking into account any discount or premium on acquisition and fees or costs that are

an integral part of the effective interest rate. Debt is derecognized when the obligation under the

liability is discharged, cancelled or has expired.

Lease liabilities

Lease liabilities are measured at the present value of the lease payments due over the lease term,

generally discounted using the incremental borrowing rate. Lease liabilities are subsequently

measured at amortized cost using the effective interest method. Lease liabilities are remeasured in

case of modifications or reassessments of the lease.

Philips has a USD 2.5 billion Commercial Paper Program and a EUR 1 billion committed standby

revolving credit facility that can be used for general group purposes. As of December 31, 2024 ,

Philips did not have any loans outstanding under either facility. These facilities do not have a

material adverse change clause, have no financial covenants and no credit-rating-related

acceleration possibilities.

Philips established a Euro Medium-Term Note (EMTN) program, a framework that facilitates the

issuance of notes for a total amount up to EUR 10 billion . In 2024, Philips issued EUR 700 million

fixed rate notes due 2032 under the EMTN program for general corporate purposes, including the

repayment of the 2025 EUR Bonds and other floating rate debt . As of December 31, 2024 , Philips

has EUR 3.7 billion (2023: EUR 3.3 billion) fixed rate notes outstanding under the EMTN program.

The provisions applicable to all USD-denominated corporate bonds issued by the company in March

2008 and March 2012 (due 2038 and 2042) contain a ‘Change of Control Triggering Event’. If the

company would experience such an event with respect to a series of corporate bonds the company

might be required to offer to purchase the bonds that are still outstanding at a purchase price

equal to 101% of their principal amount, plus accrued and unpaid interest, if any. Furthermore, the

conditions applicable to the EUR-denominated corporate bonds issued since 2018 contain a similar

provision (‘Change of Control Put Event’). Upon the occurrence of such an event, the company

might be required to redeem or purchase any of such bonds at their principal amount together

with interest accrued. Philips’ outstanding long-term debt does not contain financial covenants.

As of December 31, 2024, debt includes forward contracts of EUR 142 million (nominal value)

relating to the repurchase of shares to cover long-term incentive and employee stock purchase

plans, with maturity dates in the fourth quarter of 2025 (EUR 77 million ) and the fourth quarter of

2026 (EUR 65 million).

In 2023, Philips issued EUR 500 million of fixed rate notes under the company’s EMTN program

that mature in 2031 and used the proceeds for general corporate purposes, including the

repayment of EUR 500 million that was outstanding under the credit facility entered into in the

fourth quarter of 2022 . In 2023 , Philips entered into a total amount of EUR 138 million forward

contracts relating to the company’s long-term incentive plans. These forwards partly matured in the

fourth quarter of 2024 (EUR 61 million ) with the remainder maturing in 2025 (EUR 77 million ). In

addition, a total of EUR 125 million forward contracts relating to the Long-Term Incentive and

employee stock purchase plans and EUR 481 million of forwards related to the share buyback

program announced in 2021 matured throughout 2023.

Long-term debt

The following tables present information about the long-term debt outstanding, its maturity and

average interest rates in 2024 and 2023.

Philips Group

Long-term debt in millions of EUR unless otherwise stated


	2024
	Amount outstanding	Current portion	Non-current portion	Between 1 and 5 years	Amount due after 5 years	Average remaining term (in years)	Average rate of interest
USD bonds	1,408	131	1,276	122	1,154	12.3	6.3%
EUR bonds	4,917		4,917	2,639	2,278	4.7	2.3%
Forward contracts	148	82	66	66		1.3	1.2%
Lease liabilities	1,073	219	854	506	347	3.8	3.7%
Bank borrowings	1	1	1	1		1.5	1.0%
Other long-term debt	-	-	-	-	-	3.2	1.2%
Long-term debt	7,546	434	7,113	3,333	3,779	5.9	3.2%


	127


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Long-term debt in millions of EUR unless otherwise stated


	2023
	Amount outstanding	Current portion	Non-current portion	Between 1 and 5 years	Amount due after 5 years	Average remaining term (in years)	Average rate of interest
USD bonds	1,325		1,325	240	1,085	13.3	6.3%
EUR bonds	4,569		4,569	2,335	2,234	5.1	2.0%
Forward contracts	396	321	76	76		0.8	1.4%
Lease liabilities	1,074	211	864	505	358	3.9	3.1%
Bank borrowings	203	1	201	201		1.2	4.2%
Other long-term debt	-	-	-	-	-	7.4	1.2%
Long-term debt	7,568	532	7,035	3,357	3,678	6.0	2.9%

Bonds

The following table presents the amount outstanding and effective rate of bonds.

Philips Group

Unsecured Bonds in millions of EUR unless otherwise stated


	Effective rate	2023	2024
Unsecured EUR Bonds
Due 30/03/2025; 1 3/8%	1.509%	346
Due 22/05/2026; 1/2%	0.608%	750	750
Due 05/05/2027; 1 7/8%	2.049%	750	750
Due 02/05/2028; 1 3/8%	1.523%	500	500
Due 05/11/2029; 2 1/8%	2.441%	650	650
Due 30/03/2030; 2%	2.128%	500	500
Due 08/09/2031; 4 2/8%	4.33%	500	500
Due 31/05/2032; 3 3/4%	4.043%		700
Due 05/05/2033; 2 5/8%	2.71%	600	600
Unsecured USD Bonds
Due 15/05/2025; 7 3/4%	7.429%	49	52
Due 15/05/2025; 7 1/8%	6.794%	75	79
Due 01/06/2026; 7 1/5%	6.885%	114	121
Due 03/11/2038; 6 7/8%	7.21%	657	697
Due 15/03/2042; 5%	5.273%	452	480
Adjustments¹		(47)	(55)
Unsecured Bonds		5,894	6,324

1Adjustments related to both EUR and USD bonds and concern bond discounts, premium and

transaction costs.

Leases

The following table presents a reconciliation between the total of future minimum lease payments

and their present value.

Philips Group

Lease liabilities in millions of EUR


	2023			2024
	Future minimum lease payments	Interest	Present value of minimum lease payments	Future minimum lease payments	Interest	Present value of minimum lease payments
Less than one year	239	28	211	255	35	219
Between one and five years	572	67	505	592	85	506
More than five years	388	30	358	385	38	347
Lease liabilities	1,200	125	1,074	1,232	159	1,073

Short-term debt

Philips Group

Short-term debt in millions of EUR


	2023	2024
Short-term bank borrowings	122	92
Current portion of long-term debt	532	434
Short-term debt	654	526

During 2024, the weighted average interest rate on the bank borrowings was 9.3% (2023: 8.6%).

This increase was mainly driven by higher interest rate environments across various countries

globally.


	128


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

19Provisions

Accounting policies

A provision is a liability of uncertain timing or amount. Provisions are recognized if, as a result of a

past event, the company has a present legal or constructive obligation, it is probable that an

outflow of economic benefits will be required to settle the obligation and the amount can be

estimated reliably. Provisions are measured at the present value of the expenditures expected to be

required to settle the obligation using a pre-tax discount rate that reflects current market

assessments of the time value of money. The increase in the provision due to passage of time

(accretion) is recognized as interest expense.

Restructuring-related provisions

Provisions for severance and termination benefits are recognized for those costs only when the

company has a detailed formal plan for the restructuring and has raised a valid expectation with

those affected that it will carry out the restructuring by starting to implement that plan or

announcing its main features to those affected by it. Before a provision is established, the company

recognizes any impairment loss on the assets associated with the restructuring.

Accounting estimates and judgments

By their nature, the recognition of provisions requires estimates and assumptions regarding the

timing and the amount of outflow of resources. The main estimates include:

• Product warranty provisions – the provisions for assurance-type product warranty reflect the

estimated costs of replacement and free-of-charge services that will be incurred by the company

with respect to products sold and include costs to execute quality remediation and related field

actions (including the Respironics field action). These require management to make estimates

and assumptions about items such as quantities and the portion of products to be remediated

through replacement, repair or (partial) refund.

• Environmental provisions – provisions for environmental remediation can change significantly

due to the emergence of additional information regarding the extent or nature of the

contamination, the need to utilize alternative technologies, actions by regulatory authorities as

well as changes in judgments and discount rates. The impact of climate change is also

considered when assessing whether Philips has a present legal or constructive obligation,

particularly in relation to fines, penalties and commitments to reduce greenhouse gas emissions.

• Legal provisions – provisions for legal claims and investigations reflect the best estimate of the

outflow of resources, supported by internal and external legal counsel, when it is probable that

such outflow of resources will be required to settle an obligation.

• Contingent consideration provisions – the provision for contingent consideration reflects the

fair value of the expected payment to former shareholders of an acquired company for the

exchange of control if specified future events occur or conditions are met, such as the

achievement of certain regulatory milestones or the achievement of certain commercial

milestones. The provision for contingent consideration can change significantly due to changes

in the estimated achievement of milestones and changes in discount rates. Changes in fair value

of the contingent consideration liability are reflected in other business income (expenses).


	129


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Provisions in millions of EUR


	Post-employment benefits	Product warranty	Environmental	Restructuring- related	Legal	Contingent consideration	Other	Total
Current		624	22	102	477	57	181	1,463
Non-current	558	67	80	14	10	58	248	1,035
Balance as of December 31, 2023	558	692	102	116	487	115	429	2,498

Additions	81	439	9	131	1,015	5	185	1,865
Utilizations	(76)	(507)	(15)	(127)	(477)	(9)	(124)	(1,336)
Releases	(5)	(15)	-	(26)	(28)	(3)	(35)	(113)
Accretion			5		38	3	(1)	45
Changes in discount rate			(7)				-	(8)
Translation differences and other	2	(24)	4	(1)	44	3	(8)	21
Total change	3	(107)	(5)	(23)	592	(2)	16	474

Current		522	20	77	1,066	61	229	1,977
Non-current	560	63	76	16	13	52	216	996
Balance as of December 31, 2024	560	585	96	94	1,079	113	446	2,972

Philips Group

Provisions in millions of EUR


	Post-employment benefits	Product warranty	Environmental	Restructuring- related	Legal	Contingent consideration	Other	Total
Current		653	20	134	74	23	112	1,018
Non-current	546	80	83	6	14	89	279	1,097
Balance as of December 31, 2022	546	733	104	140	89	113	390	2,115

Additions	112	553	18	263	644	24	223	1,836
Utilizations	(91)	(553)	(14)	(219)	(235)	(20)	(134)	(1,266)
Releases	(10)	(20)	(2)	(67)	(10)	(7)	(45)	(159)
Accretion			5		23	1	(3)	25
Acquisitions						6		6
Changes in discount rate			(6)					(6)
Translation differences and other	-	(22)	(3)	(2)	(23)	(2)	(1)	(53)
Total change	12	(42)	(2)	(24)	399	2	39	383

Current		624	22	102	477	57	181	1,463
Non-current	558	67	80	14	10	58	248	1,035
Balance as of December 31, 2023	558	692	102	116	487	115	429	2,498


	130


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Post-employment benefits

For details of post-employment benefits refer to Post-employment benefits .

Product warranty provisions

Product warranty provisions include costs to execute quality remediation and related field actions,

as well as the field action provision in connection with the Philips Respironics voluntary recall

notification which is explained separately below. The company expects the provisions to be utilized

mainly within 2025.

Additions in 2024 include quality remediation and related field actions of EUR 137 million and EUR

139 million in the Diagnosis & Treatment and Connected Care segments, respectively, mainly for

the following matters:

Trilogy EVO and Trilogy EV300

In September 2024, Philips issued a field safety notice to customers of its Trilogy EVO and Trilogy

EV300 ventilators, regarding a potential contamination issue when the ventilator is used in

combination with in-line nebulizers. This notification was updated in November 2024 with

additional customer instructions. Philips is in the process of commencing the necessary remediation

actions.

Respironics field-action provision

On June 14, 2021, Philips subsidiary Philips Respironics initiated a voluntary recall notification in the

US and field safety notice outside the US for certain sleep and respiratory care products related to

the polyester-based polyurethane (PE-PUR) sound abatement foam in these devices. The

remediation is progressing globally. The total number of units expected to be remediated as of

December 31, 2024 is 5.1 million (2023: 5.6 million) devices globally. The decrease in units is

mainly due to current insights regarding the number of units that are not expected to be returned

to Philips or where key data collection efforts to perform remediation have been exhausted.

Philips has recognized a provision based on Philips’ best estimate of the costs to repair, replace or

refund devices, subject to the Respironics field action. The provision is related to the cost to repair,

replace or provide financial compensation for affected devices and includes, among others, the

costs for the remaining production, the cost of intensified communication with physicians and

patients, material costs, labor cost and logistics, as well as costs relating to financial compensation

provided to customers under the field action. The provision does not include any product liability

costs or other claims.

Philips Group

Respironics field-action provision in millions of EUR


	2023	2024
Balance as of January 1	390	334
Additions	240	30
Utilizations	(285)	(220)
Translation differences and other	(10)	(14)
Balance as of December 31	334	130

Utilizations for the year reflect the costs incurred in executing the remediation during the year.

The completion of the field action continues to be subject to uncertainty, which requires

management to make estimates and assumptions about items such as quantities and the portion to

be replaced, repaired and subject to financial compensation. An increase in the assumption for the

financial compensation portion by 10 percentage points could have the effect of increasing the

provision by an estimated EUR 18 million. Actual outcomes in future periods may differ from these

estimates and affect the company’s results of operations, financial position and cash flows.

Further to the above, field-action running remediation costs during the year of EUR 133 million

(2023: EUR 224 million, 2022: EUR 210 million ), such as testing, external advisory and regulatory

response and additional right-of-return and warranty provisions, have been incurred.

Philips and its affiliates are defendants in a number of consumer class action lawsuits from users of

the affected devices and a number of individual personal injury and other compensation claims. For

legal matters including claims refer to the legal provisions section of this note as well as

Contingencies.

Environmental provisions

The environmental provisions include accrued costs recorded with respect to environmental

remediation in various countries. In the US, subsidiaries of the company have been named as

potentially responsible parties in state and federal proceedings for the clean-up of certain sites.

The additions and the releases of the provisions originate from additional insights in relation to

factors like the estimated cost of remediation, changes in regulatory requirements and efficiencies

in completion of various site work phases.

Approximately EUR 65 million of the long-term provision is expected to be utilized after one to five

years, with the remainder after five years. For more details on the environmental remediation refer

to Contingencies.


	131


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Restructuring-related provisions

Philips Group

Restructuring-related provisions in millions of EUR


	December 31, 2023	December 31, 2024
Diagnosis & Treatment	36	34
Connected Care	18	19
Personal Health	7	15
Other	56	26
Philips Group	116	94

In 2024, the most significant restructuring projects impacted segments Other and Connected Care

and mainly took place in the US and the Netherlands. The restructuring comprised mainly product

portfolio rationalization and the reorganization of global support functions. The company expects

the provisions to be utilized mainly within the next year.

In 2024, Philips continued general productivity actions aimed at simplifying the organization as part

of its multi-year plan designed to create value with sustainable impact. This included the further

reduction of 2,000 roles, thereby completing the planned reduction of 10,000 roles globally across

the organization by 2025 ahead of schedule. Severance and termination-related costs of EUR 140

million were recorded in 2023.

Legal provisions

The company and certain of its group companies and former group companies are involved as a

party in legal proceedings, including regulatory and other governmental proceedings.

Additions mainly relate to the legal provision in connection with the settlement of Respironics

personal injury and medical monitoring claims in the US of EUR 982 million (discounted). Under the

settlement Philips Respironics has agreed to pay a total of USD 1.1 billion. Most of the related

payments are expected in 2025. In the first half of 2024 Philips Respironics recorded insurance

income of EUR 538 million in connection with the agreement with insurers to partially reimburse

the Respironics recall related product liability claims. This amount was paid in full to the company in

2024.

Utilizations of EUR 477 million mainly relate to the economic loss class action settlement in the US

that was paid in 2024.

For details of other legal matters, including regulatory and other governmental proceedings, refer

to Contingencies .

The company expects the provisions to be utilized mainly within the next three years.

Contingent consideration provisions

There is no material movement in 2024 and approximately EUR 21 million of the long-term

provision is expected to be utilized within the next three years, with the remainder after four years.

Other provisions

The main elements of other provisions are:

Philips Group

Other provisions in millions of EUR unless otherwise stated


	2023	2024
Other long-term employee benefits	77	80
Self-insurance	63	60
Non-income taxes / social security	51	48
Rights of return	39	44
Decommissioning costs	34	37
Onerous contracts	76	66
Remaining	89	111
Balance as of December 31	429	446

Onerous contracts reflect non-cancellable commitments on supplies for which no future demand or

alternative usage has been identified.

Remaining provisions relate to a variety of positions, for example provision for disability of

employees and provision for royalty obligations.

Releases in 2023 and 2024 are due to the reassessment of the positions in other provisions

throughout the year.

The company expects the other provisions to be utilized mainly within the next five years.

20Post-employment benefits

Accounting policies

Defined contribution plans

A defined contribution plan is a post-employment benefit plan for which the company pays fixed

contributions into a separate entity and will have no legal or constructive obligation to pay further

amounts. Obligations for contributions to defined contribution pension plans are recognized as an

employee benefit expense in the Consolidated statements of income in the periods during which

services are rendered by employees.


	132


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Defined benefit plans

A defined benefit plan is a post-employment benefit plan that is not a defined contribution plan.

Defined benefit plans define an amount of pension benefit that an employee will receive after

retirement. That pension benefit typically depends on several factors such as years of service, age

and salary.

The net pension asset or liability recognized in the Consolidated balance sheets in respect of

defined benefit plans is the fair value of plan assets less the present value of the projected defined

benefit obligation at the balance sheet date. The defined benefit obligation is calculated annually

by qualified actuaries using the projected unit credit method. Recognized assets are limited to the

present value of any reductions in future contributions or any future refunds. The net pension

liability is presented as a long-term provision; no distinction is made for the short-term portion.

For the company’s major plans, a full discount rate curve of high-quality corporate bonds is used to

determine the defined benefit obligation, where available. The curves are based on the Mercer

Yield Curve methodology, which uses data of corporate bonds rated AA or equivalent. For the

other plans the Mercer Yield Curve/Mercer Methodology has also been used taking into account

the cash flows as much as possible in case there is a deep market in corporate bonds. For plans in

countries without a deep corporate bond market, the discount rate is based on government bonds

and the plan’s maturity.

Pension costs with respect to defined benefit plans primarily represent the increase of the actuarial

present value of the obligation for post-employment benefits based on employee service during the

year and the interest on the net recognized asset or liability with respect to employee service in

previous years.

Remeasurements of the net defined benefit asset or liability comprise actuarial gains and losses, the

return on plan assets (excluding interest) and the effect of the asset ceiling (excluding interest). The

company recognizes all remeasurements in Other comprehensive income.

Past service costs arising from the introduction of a change to the benefit payable under a plan or a

significant reduction of the number of employees covered by a plan (curtailment) are recognized in

full in the Consolidated statements of income.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed

as the related service is provided. The company recognizes a liability and an expense for bonuses

and incentives based on a formula that takes into consideration the profit attributable to the

company’s shareholders after certain adjustments.

The company’s net obligation with respect to other long-term employee benefits is the amount of

future benefit that employees have earned in return for their service in the current and prior

periods, such as jubilee entitlements. That benefit is discounted to determine its present value.

Remeasurements are recognized in the Consolidated statements of income in the period in which

they arise.

Further information on other long-term employee benefits can be found in Provisions in the Other

provisions section.

Accounting estimates and judgments

To make the actuarial calculations for the valuation of defined benefit obligations, assumptions are

needed for interest rates, healthcare cost increases, future pension increases, life expectancy and

employee turnover rates. The actuarial calculations are made by external actuaries based on inputs

from observable market data, such as corporate bond returns and yield curves to determine the

discount rates to apply, mortality tables to determine life expectancy and inflation rates to

determine future salary and pension growth assumptions.

Employee post-employment benefit plans have been established in many countries in accordance

with the legal requirements, customs and the local practice in the countries involved. The larger

part of post-employment benefits are company pension plans, of which some are funded and some

are unfunded. All funded post-employment benefit plans are considered to be related parties.

Most employees who take part in a company pension plan are covered by defined contribution

(DC) pension plans. The main DC plans are in the Netherlands and the US. The company also

sponsors a number of defined benefit (DB) pension plans. The benefits provided by these plans are

based on employees’ years of service and compensation levels.

The company also sponsors a limited number of DB retiree medical plans. The benefits provided by

these plans typically cover a part of the healthcare costs after retirement. None of these plans are

individually significant to the company and are therefore not further separately disclosed.

The larger funded DB and DC plans are governed by independent Trustees who have a legal

obligation to protect the interests of all plan members and operate under the local regulatory

framework.

The DB plans in Germany and the US make up most of the defined benefit obligation (DBO) and

the net position. The company also has DB plans in the rest of the world; however these are

individually not significant to the company and do not have a significantly different risk profile that

would warrant separate disclosure.

The adjacent table provides a breakdown of the present value of the funded and unfunded DBO,

the fair value of plan assets and the net position in Germany, the US and in other countries. The

table also provides the value of reimbursement rights.


	133


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Post-employment benefits in millions of EUR


	Germany		United States		Other countries		Total
	2023	2024	2023	2024	2023	2024	2023	2024
Present value of funded DBO	(511)	(531)	(404)	(416)	(182)	(205)	(1,097)	(1,152)
Present value of unfunded DBO	(253)	(242)	(118)	(131)	(137)	(134)	(508)	(507)
Total present value of DBO	(764)	(773)	(522)	(547)	(319)	(339)	(1,605)	(1,659)
Fair value of plan assets	481	496	442	465	166	189	1,089	1,150
Asset ceiling						(1)		(1)
Net position	(283)	(277)	(80)	(82)	(153)	(151)	(516)	(510)

Value of reimbursement rights					8	7	8	7

The classification of the net position is as follows: :

Philips Group

Classification net position in millions of EUR


	Germany		United States		Other countries		Total
	2023	2024	2023	2024	2023	2024	2023	2024
Total asset for plans in a surplus	-	-	39	49	2	1	41	50
Total liability for plans in a deficit	(283)	(277)	(118)	(131)	(156)	(152)	(558)	(560)
Net position	(283)	(277)	(80)	(82)	(153)	(151)	(516)	(510)

Germany

The company has several DB plans in Germany, some of which are unfunded. The plan assets of

the funded DB plans in Germany are held in a legally separate pension trust.

Due to the relatively high level of social security in Germany, the company’s pension plans mainly

provide benefits for the higher earners. The plans are open for future pension accrual. Indexation is

mandatory due to legal requirements. Some of the German plans have a DC design, but are

accounted for as DB plans due to a legal minimum return requirement.

Company pension commitments in Germany are largely protected against employer bankruptcy via

the “Pensions-Sicherungs-Verein” which charges a fee to all German companies providing pension

promises.

Philips is one of the sponsors of Philips Pensionskasse VVaG in Germany, which is a multi-employer

plan. The plan is classified and accounted for as a DC plan.

United States

The US DB pension plans are closed plans without future pension accrual. For the funding of any

deficit in the US plan the Group adheres to the minimum funding requirements of the US Pension

Protection Act.

The assets of the US funded pension plans are in Trusts governed by fiduciaries. The non-qualified

pension plans that cover accrual above the maximum salary of the funded qualified plan are

unfunded.

The company’s qualified pension commitments in the US are covered via the Pension Benefit

Guaranty Corporation, which charges a fee to US companies providing DB pension plans. The fee is

also dependent on the amount of unfunded vested liabilities.

Philips has announced to plan participants the intent to fully terminate the US qualified defined

benefit pension plans in 2025. The announcements made did not impact the accounting for these

plans during 2024 and the anticipated settlement, if and when completed, is not expected to have

a material impact to the company’s results or cash flows in 2025.

Risks related to DB plans

DB plans expose the company to various demographic and economic risks such as longevity risk,

investment risks, currency and interest rate risk and in some cases inflation risk. The latter plays a

role in the assumed wage increase but more importantly in some countries where indexation of

pensions is mandatory.

The company has an active de-risking strategy in which it constantly looks for opportunities to

reduce the risks associated with its DB plans. Liability-driven investment strategies, lump sum cash-

out options, buy-ins, buy-outs and a change to DC are examples of the strategy.

Investment policy in the largest pension plans

Plan assets are managed in legally separate pension trusts, primarily overseen by independent

trustees, who bear full responsibility for and have complete discretion over the investment strategy

for these plan assets. The plan assets of the Philips pension plans are invested in well-diversified

portfolios. For most plans, the interest rate sensitivity of the fixed income portfolio is closely aligned

with that of the plan’s pension liabilities. Contributions from the sponsoring company are primarily

directed toward increasing the fixed income allocation. Additionally, in most investment strategies,

any structural improvement in the plan's funded ratio over time is used to further reduce the

interest rate mismatch between the plan assets and the pension liabilities.


	134


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Summary of pre-tax costs for post-employment benefits and reconciliations

The adjacent table contains the total of current and past service costs, administration costs and

settlement results as included in Income from operations and the interest cost as included in

Financial expenses.

Philips Group

Pre-tax costs for post-employment benefits in millions of EUR


	2022	2023	2024
Defined benefit plans	50	47	43
- included in income from operations	39	25	23
- included in financial expense	10	21	20
- included in Discontinued operations		-	-
Defined contribution plans	400	376	365
- included in income from operations	400	376	365
- included in Discontinued operations		-	-
Post-employment benefits costs	449	423	408

Summary of the reconciliations for the DBO and plan assets

The adjacent tables contain the reconciliations for the DBO and plan assets.

Philips Group

Defined benefit obligations in millions of EUR


	2023	2024
Balance as of January 1	1,621	1,605
Service cost	32	29
Interest cost	71	65
Employee contributions	3	4
Actuarial (gains) / losses
- demographic assumptions		-
- financial assumptions	48	20
- experience adjustment	2	9
(Negative) past service cost	(9)	(7)
Settlements	2	1
Benefits paid from plan	(104)	(63)
Benefits paid directly by employer	(39)	(36)
Translation differences and other	(22)	32
Balance as of December 31	1,605	1,659

Philips Group

Plan assets in millions of EUR


	2023	2024
Balance as of January 1	1,122	1,089
Interest income on plan assets	49	45
Admin expenses paid	(1)	(1)
Return on plan assets excluding interest income	23	13
Employee contributions	3	4
Employer contributions	14	30
Settlements		-
Benefits paid from plan	(104)	(63)
Translation differences and other	(17)	33
Balance as of December 31	1,089	1,150

The past service costs in 2024 mainly relate to the retiree medical plans in Brazil and the pension

plan in Switzerland. The past service costs in 2023 mainly relate to the retiree medical plans in

Brazil.

Plan assets allocation

The asset allocation in the company’s DB plans as of December 31, 2024, was as follows:

Philips Group

Plan assets allocation in millions of EUR


	2023	2024
Assets quoted in active markets
- Debt securities	513	460
- Equity securities		12
- Other1	182	431

Assets not quoted in active markets
- Debt securities		-
- Equity securities	31	-
- Other¹	363	247
Total assets	1,089	1,150

1Other assets are primarily composed of cash and cash equivalents, real estate, investment funds, and assets

managed by insurance companies.

The plan assets in 2024 contain 22% (2023: 36%) unquoted plan assets. Plan assets in 2024 do

not include property occupied by or financial instruments issued by the company.


	135


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Assumptions

The mortality tables used for the company’s largest DB plans are:

Germany: Heubeck-Richttafeln 2018 Generational, assuming 93% of mortality rates for male

retirees between ages 60 and 85. US: PRI-2012 Generational with MP2021 improvement scale +

white collar adjustment.

The weighted averages of the assumptions used to calculate the DBO were as follows:

Philips Group

Assumptions used for defined benefit obligations in %

as of December 31,


	Germany		United States		Other countries		Total
	2023	2024	2023	2024	2023	2024	2023	2024
Discount rate	3.7%	3.3%	5.0%	5.1%	4.9%	4.2%	4.3%	4.0%
Inflation rate	2.0%	2.0%	2.3%	2.3%	2.5%	2.2%	2.2%	2.1%
Salary increase	2.8%	2.8%	0.0%	0.0%	4.3%	4.4%	3.0%	3.1%

Sensitivity analysis

The following table illustrates the approximate impact on the DBO from movements in key

assumptions. The DBO was recalculated using a change in the assumptions of 1% which overall is

considered a reasonably possible change. The impact on the DBO because of changes in discount

rate is normally accompanied by offsetting movements in plan assets, especially when using

matching strategies.

The average duration in years of the DBO of the DB plans is 10 (Germany: 11, US: 8, and other

countries: 10) as of December 31, 2024 (2023: 10).

Philips Group

Sensitivity of key assumptions in millions of EUR


	2023	2024
Increase
Discount rate (1% movement)	(123)	(123)
Pension increase (1% movement)	60	60
Salary increase (1% movement)	12	14
Longevity¹	32	34
Decrease
Discount rate (1% movement)	147	150
Pension increase (1% movement)	(52)	(52)
Salary increase (1% movement)	(11)	(12)
Longevity¹	(22)	(24)

1The mortality table (i.e. longevity) also impacts the DBO. The above sensitivity table illustrates the impact on

the DBO of a further 10% decrease / increase in the assumed rates of mortality for the company’s major

plans. A 10% decrease / increase in assumed mortality rates equals a change of life expectancy by 0.5 - 1

year.

Cash flows and costs in 2025

Cash outflows in relation to post-employment benefits are estimated to amount to EUR 421 million

in 2025, consisting of:

• EUR 24 million employer contributions to DB plans (Germany: EUR 11 million, US: EUR 0 million ,

other countries: EUR 13 million);

• EUR 45 million cash outflows in relation to DB plans (Germany: EUR 21 million, US: EUR 10

million, Other Countries: EUR 14 million); and

• EUR 352 million employer contributions to DC plans (Netherlands: EUR 142 million, US: EUR 144

million, Other Countries: EUR 66 million).

The service and administration cost for 2025 is expected to amount to EUR 33 million for DB plans.

The net interest cost for 2025 for the DB plans is expected to amount to EUR 18 million. The cost

for DC pension plans in 2025 is equal to the expected DC cash flow.

21Accrued liabilities

Accounting policies

Accrued liabilities are initially measured at fair value and subsequently at amortized cost and are

derecognized when the obligation under the liability is discharged, cancelled or has expired.

Accrued liabilities are summarized as follows:

Philips Group

Accrued liabilities in millions of EUR


	2023	2024
Personnel-related costs:
- Salaries and wages	791	601
- Accrued holiday entitlements	96	95
- Other personnel-related costs	93	101
Fixed-asset-related costs:
- Gas, water, electricity, rent and other	43	41
Communication and IT costs	61	55
Distribution costs	99	95
Sales-related costs:
- Commission payable	12	16
- Advertising and marketing-related costs	133	120
- Other sales-related costs	20	15
Material-related costs	138	124
Interest-related accruals	76	83
Other accrued liabilities	324	283
Accrued liabilities	1,887	1,630


	136


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

22Other liabilities

Accounting policies

Other liabilities are initially measured at fair value and subsequently at amortized cost and are

derecognized when the obligation under the liability is discharged, cancelled or has expired.

The company recognizes contract liabilities if a payment is received or a payment is due (whichever

is earlier) from a customer before the company transfers the related goods or services. Contract

liabilities are recognized as revenue when the company performs under the contract (i.e., transfers

control of the related goods or services to the customer).

Other non-current liabilities

Non-current liabilities were EUR 45 million as of December 31, 2024 ( December 31, 2023 : EUR 54

million ).

Non-current liabilities are associated mainly with indemnification and non-current accruals.

Other current liabilities

Other current liabilities are summarized as follows:

Philips Group

Other current liabilities in millions of EUR


	2023	2024
Accrued customer rebates	186	169
Other taxes including social security premiums	129	115
Other liabilities	98	70
Other current liabilities	414	354

Contract liabilities

Non-current contract liabilities were EUR 431 million as of December 31, 2024 ( December 31,

2023: EUR 469 million ) and current contract liabilities were EUR 1,699 million as of December 31,

2024 ( December 31, 2023 : EUR 1,809 million).

The current contract liabilities decreased by EUR 109 million , which is mainly driven by an decrease

in deferred balances for customer service contracts.

The current contract liabilities as of December 31, 2023, resulted in revenue recognized of EUR

1,809 million in 2024.

23Cash flow statement supplementary information

Accounting policies

Cash and cash equivalents

Cash and cash equivalents include all cash balances, certain money market funds and short-term

highly liquid investments with an original maturity of three months or less that are readily

convertible into known amounts of cash. Bank overdrafts are included in borrowings in current

liabilities.

Cash flow statements

The cash flow statement is prepared using the indirect method. Cash flows related to interest and

tax are included in operating activities. Assets and liabilities acquired as part of a business

combination are included in investing activities (net of cash acquired). Dividends paid to

shareholders are included in financing activities. Dividends received are included in operating

activities.

Cash flows arising from transactions in a foreign currency are translated into the company’s

functional currency using the exchange rate at the date of the cash flow. Cash flows from

derivative instruments that are accounted for as cash flow hedges are classified in the same

category as the cash flows from the hedged items. Cash flows from other derivative instruments

are classified as investing cash flows.

Income taxes

Income taxes in 2023 include EUR 2 million of interest related to uncertain tax positions.

Cash paid for leases

In 2024, gross lease payments of EUR 252 million ( 2023 : EUR 271 million ; 2022: EUR 316 million )

included interest of EUR 37 million (2023: EUR 27 million ; 2022 : EUR 25 million).

Net cash used for derivatives and current financial assets

In 2024 , a total of EUR 38 million cash was received with respect to foreign exchange derivative

contracts related to activities for liquidity management and with respect to the purchase and

proceeds from current financial assets (2023 : EUR 46 million outflow; 2022 : EUR 72 million

outflow)

Purchase and proceeds from non-current financial assets

In 2024 , the net cash outflow is EUR 66 million. In 2023, the net cash outflow is EUR 44 million . In

2022, the net cash outflow is EUR 38 million.


	137


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Reconciliation of liabilities arising from financing activities

Certain items in the statements of cash flows do not correspond to the differences between the

balance sheet amounts for the respective items, principally because of the effects of translation

differences and consolidation changes.

Philips Group

Reconciliation of liabilities arising from financing activities in millions of EUR


	Balance as of December 31, 2023	Cash flow	Currency effects and consolidation changes	Other¹	Balance as of December 31, 2024
Long term debt²	7,567	(53)	107	(74)	7,546
EUR bonds	4,569	340		8	4,917
USD bonds	1,325		83		1,408
Leases	1,074	(192)	24	167	1,073
Forward contracts³	396			(248)	148
Bank borrowings	203	(201)		(1)	1
Other long-term debt
Short term debt²	122	(30)	1		92
Short-term bank borrowings	122	(31)	1		92
Other short-term loans	-	1			1
Equity	(656)	(413)		516	(554)
Dividend payable		(3)		3	-
Forward contracts³	(394)			251	(143)
Treasury shares⁴	(262)	(410)		262	(411)
Total		(496)

1 Besides non-cash, other includes interest paid on leases, which is part of cash flows from operating

activities

2 In this table, current portion of long-term debt is included in long-term debt (and excluded from short-term

debt).

3 The forward contracts are related to the share buyback program and LTI plans

4 Cash flow in 2024 includes withholding tax for share buyback amounting to EUR 41 million.

Philips Group

Reconciliation of liabilities arising from financing activities in millions of EUR


	Balance as of December 31, 2022	Cash flow	Currency effects and consolidation changes	Other¹	Balance as of December 31, 2023
Long term debt²	8,111	(210)	(96)	(238)	7,567
EUR bonds	4,061	497		11	4,569
USD bonds	1,378		(53)		1,325
Leases	1,082	(200)	(42)	235	1,074
Forward contracts³	858			(462)	396
Bank borrowings	705	(502)			203
Other long-term debt	28	(5)	(1)	(22)
Short term debt²	89	29	3		122
Short-term bank borrowings	89	46	(14)		122
Other short-term loans		(17)	17		-
Equity	(1,133)	(666)		1,143	(656)
Dividend payable		(4)		4
Forward contracts³	(858)			465	(394)
Treasury shares	(275)	(662)		675	(262)
Total		(848)

1 Besides non-cash, other includes interest paid on finance leases, which is part of cash flows from operating

activities

2 In this table, current portion of long-term debt is included in long-term debt (and excluded from short-term

debt).

3 The forward contracts are related to the share buyback program and LTI plans

4 Cash flow in 2023 includes withholding tax for share buyback amounting to EUR 55 million .

24Contingencies

Accounting policies

Contingent liabilities

A contingent liability is a liability of uncertain timing and amount. Contingencies are not recognized

in the balance sheet because they are dependent on the occurrence or non-occurrence of one or

more uncertain future events not wholly within the control of the company or because the risk of

loss is estimated to be possible but not probable or because the amount cannot be measured

reliably. Pursuant to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, certain

information is not disclosed for legal proceedings for which the company concludes that disclosure

can be expected to seriously prejudice the outcome of the matter.

Contingent assets

Contingent assets are disclosed if the inflow of economic benefits is probable, but not virtually

certain. If the inflow of economic benefits becomes virtually certain, the asset would no longer be

contingent and its recognition appropriate.


	138


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Financial guarantees

Philips’ policy is to provide guarantees and other letters of support only in writing. Philips does not

stand by other forms of support. The company recognizes a liability at the fair value of the

obligation at the inception of a financial guarantee contract. The guarantee is subsequently

measured at the higher of the best estimate of the obligation or the amount initially recognized

less, when appropriate, cumulative amortization.

Accounting estimates and judgments

Significant judgment is required to determine the likelihood of a potential outflow of resources. In

addition, judgment is involved in determining whether the amount of an obligation can be

measured with sufficient reliability. Contingencies involve inherent uncertainties including, but not

limited to, court rulings, negotiations between affected parties, governmental actions, tax and

environmental remediation. Contingent assets require management to apply judgment, especially

to estimate the likelihood of the inflow of economic benefits and timing of recognition.

Guarantees

The total fair value of guarantees recognized on the balance sheet amounts to EUR nil million for

both 2024 and 2023 . Remaining off-balance-sheet business related guarantees on behalf of third

parties and associates as of December 31, 2024, amounted to EUR 343 million (December 31,

2023 : EUR 2 million ). These mainly include bank guarantees secured for insurance companies to

cover product liability-related cash flows related to the Respironics recall.

Environmental remediation

The company and its subsidiaries are subject to environmental laws and regulations. Under these

laws, the company and/or its subsidiaries may be required to remediate the effects of certain

manufacturing activities on the environment.

Legal proceedings

The company and certain of its group companies and former group companies are involved as a

party in legal proceedings, regulatory and other governmental proceedings, including discussions

on potential remedial actions, relating to such matters as competition issues, commercial

transactions, product liability, participations, and environmental pollution.

While it is not feasible to predict or determine the outcome of all pending or threatened legal

proceedings, regulatory and governmental proceedings, the company is of the opinion that the

cases described below may have, or have had in the recent past, a significant impact on the

company’s consolidated financial position, results of operations and cash flows.

Public investigations

In February 2023, the company received a statement of objections from the French Competition

Authority (FCA) initiating a formal investigation to verify whether the company and certain other

manufacturers of small domestic appliances breached antitrust rules in France in the period

2009-2014 through the alleged exchange of commercially sensitive information. The FCA issued its

decision in December 2024, in which it closed the case by concluding that the company did not

violate antitrust rules in France.

Respironics recall

On June 14, 2021, Philips subsidiary Philips RS North America LLC (Philips Respironics) issued a

voluntary recall notification in the United States and field safety notice outside the United States for

specific Philips Respironics CPAP, Bi-Level PAP, and mechanical ventilator devices (the “Recalled

Devices”).

Consent Decree

On August 26, 2021, the US Food and Drug Administration (FDA) commenced an inspection of the

Philips Respironics manufacturing facility in Murrysville, Pennsylvania, and provided Philips

Respironics with its preliminary inspectional observations on November 9, 2021. In the first half of

2024, Philips Respironics reached an agreement with the US Department of Justice (DoJ), acting on

behalf of the FDA, regarding the terms of a consent decree to resolve the identified issues in

relation to the inspection. The consent decree was entered by the court in April 2024.

DOJ investigation; state Attorneys General investigation

Philips Respironics and certain of Philips' subsidiaries in the US continue to cooperate with a

criminal and civil investigation triggered by a subpoena received from the DOJ in 2022 to provide

information related to events leading to the Respironics recall. In addition, the same entities are

cooperating with an investigation initiated in 2024 by certain US state Attorneys General into trade

practices related to the products subject of the Respironics recall. While the outflow of economic

resources in connection with these investigations is assessed as probable, given the current stage of

the investigations, the company is not able to reliably estimate the financial impact.

Product liability claims

Following the voluntary recall notification, a number of civil complaints have been filed in several

jurisdictions against Philips Respironics and certain of its affiliates (including the company) generally

alleging economic loss, personal injury and/or the potential for personal injury allegedly caused by

the recalled devices.

In the US, consumer and commercial class action lawsuits have been filed alleging economic loss

and medical monitoring claims. Individual personal injury lawsuits have also been filed. On October

8, 2021, a Multi-District Litigation (MDL) in the US District Court for the Western District of

Pennsylvania was formed, and most of these class action and personal injury lawsuits have been

consolidated in the MDL for pre-trial proceedings.

On September 7, 2023, Philips Respironics reached agreement on a class action settlement in

relation to the economic loss class action complaint, for which the company recorded a EUR 575

million provision in the first quarter of 2023. Under the agreement, which became final in May

2024, the Philips defendants agreed to provide predefined cash awards to all eligible participants in

the US depending on the type of device, extended warranties on all remediated devices provided as

part of Respironics’ recall program, and an additional cash award if they return the recalled device


	139


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

to Philips Respironics. The settlement also provides for compensation for individuals who acquired

replacement devices in the market after the recall and prior to the announcement of the

settlement. The settlement also provides for compensation to private insurers and other third-party

payers. The claims period concluded on August 9, 2024, and since then, the Claims Administrator

has been processing claims, calculating relevant payment amounts, and making payments to

eligible class members.

On May 9, 2024, Philips Respironics reached agreement on a class action settlement in relation to

the medical monitoring class action complaint. Under the agreement, which became final in

January 2025, the Philips defendants agreed to pay USD 25 million into a Qualified Settlement

Fund for the benefit of eligible class members. The USD 25 million amount is a fixed cap on the

amount of the settlement and will be used to fund, among other things, research related to the

advancement of public knowledge regarding the detection, diagnosis, and treatment of those

injuries alleged to have been caused by use of the recalled devices.

Also on May 9, 2024, Philips Respironics reached agreement on a private settlement in relation to

US personal injury claims. Under the agreement, the Philips defendants have agreed (subject to a

termination right) to pay USD 1.075 billion to consist of USD 25 million in notice and administrative

costs and USD 1.050 billion into a Personal Injury Settlement Fund. The settlement is an opt-in

agreement, by which eligible claimants would release all of their personal injury claims in exchange

for participation in the Personal Injury Settlement Fund. To participate in the settlement, an eligible

claimant must have experienced a qualifying injury. The Philips parties had the right to terminate

the settlement if less than 95% of eligible claimants would register for the settlement by the

registration deadline on January 31, 2025. As at the registration deadline registrations exceeded

95%, the settlement has now become final with payment expected in the first half of 2025. For

any individuals who declined to participate in, or are ineligible for, the settlement, and who wish to

litigate their personal injury claims, they will need to identify themselves after the registration

deadline and then comply with court orders imposing certain discovery obligations on them,

including with respect to early disclosure of their evidence on causation.

Philips Respironics and certain of its affiliates (including the company) continue to be defendants in

consumer class action lawsuits in Australia, Canada and Israel and collective or group actions in

Chile, France, Germany, Italy and the Netherlands alleging economic loss and/or personal injury.

While the company believes it is probable that ongoing lawsuits will in the aggregate lead to an

outflow of economic resources for Philips Respironics or other Philips entities, given the significant

uncertainty regarding the nature of the relevant events and potential obligations, the company is

not currently able to reliably estimate the amount of the obligation associated with these various

lawsuits. The final outcome of the lawsuits and the remaining cost to resolve them cannot currently

be determined due to a number of variables, including the early stages of some of these

proceedings and uncertainty regarding the number of remaining claimants, their allegations, and

their alleged injuries. The courts have not yet been asked to decide the question of whether any of

the claimed injuries could have been caused by use of the recalled devices.

In 2024, the company and its insurance carriers reached an agreement on the basis of which the

insurance carriers agreed to contribute EUR 540 million to cover product liability-related cash flows

related to the Respironics recall. This amount was paid in full to the company in 2024.

Securities claims

On August 16, 2021, a securities class action complaint was filed against the company, its former

CEO and its former CFO in the US District Court for the Eastern District of New York alleging

violations of the Securities Exchange Act of 1934 causing damage to investors. On September 23,

2024, following amendments to the complaint, the court issued a decision dismissing all claims

against the company’s former CFO and the former head of Philips Respironics but denying in part

the motion to dismiss with respect to the company and its former CEO. The Court narrowed the

class period and dismissed all claims based on statements made before 2018. The Court also

dismissed all claims relating to certain categories of alleged misstatements. On October 28, 2024,

the company and its former CEO moved for reconsideration of that portion of the decision denying

their motion, and that motion was pending as of December 31, 2024.

In the Netherlands, six different parties (including European Investors – VEB and Deminor Litigation

Funding) representing both retail and institutional investors have approached the company, holding

the company and its directors liable for alleged misstatements and failures to make timely

disclosures in relation to the Respironics recall. As of December 31, 2024, one party has filed a civil

complaint with the Amsterdam District Court.

It is the company’s assessment that it is possible but not probable that these cases could lead to a

certain outflow of economic resources. The company is not able to reliably estimate the financial

impact, if any. An adverse outcome of these cases could have a material impact on the company’s

consolidated financial position, results of operations and cash flows.

SEC investigation

Following earlier requests for information from the US Securities and Exchange Commission (SEC),

in March 2024, the company received a subpoena from the SEC relating to the Respironics Recall

and compliance with relevant securities laws. The investigation is not an indication that the SEC or

its staff have determined that any violations of law have occurred. The company is fully cooperating

with the investigation.It is the company's assessment that it is possible but not probable that this

investigation could lead to certain outflow of resources. The company is not able to reliably

estimate the financial impact, if any.

Other claims

On October 12, 2021, SoClean, a company offering ozone-based cleaning products for sleep

devices, filed a lawsuit in the US against the company and certain of its affiliates alleging that the

defendants’ statements about the potential adverse effect ozone cleaning may have on the recalled

devices has significantly damaged its business. Philips believes that the claim is without merit and

will vigorously defend itself. In November 2023, the court ruled on one of the motions to dismiss

filed by defendants and partially dismissed some of SoClean’s claims. On January 4, 2024, Philips

and its affiliates filed their answer and counterclaims against SoClean and one of its affiliates. In


	140


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

October 2024, the court partially dismissed some of the counterclaims. Philips and its affiliates are

also pursuing claims against SoClean and one of its affiliates for contribution for personal injury

settlement costs and/or personal injury liability incurred by the company or its affiliates. SoClean

and its affiliate have sought to dismiss those claims, but the court has not yet reached a decision.

In addition, some of Philips Respironics’ business partners, such as distributors and durable medical

equipment providers, have filed or threatened to file claims alleging economic losses suffered as a

consequence of the voluntary recall. Philips Respironics is engaging with certain of its business

partners on the level of compensation they allege to be entitled to under Philips Respironics’

replacement program of the recalled devices. As of December 31, 2024, most of these claims have

been resolved.

It is the company’s assessment that it is possible but not probable that these cases could lead to a

certain outflow of economic resources. The company is not able to reliably estimate the financial

impact, if any. In the event of an adverse outcome, these matters could have a material impact on

the company’s consolidated financial position, results of operations and cash flows.

To date, other than for the economic loss, medical monitoring and personal injury settlements

discussed above, no provisions have been recorded for the litigation and investigations in the US

and Canada associated with the Respironics field action.

Other

In the second half of 2023, Electro Medical Systems S.A., a manufacturer of, among others,

medical devices for dental prophylaxis, filed a lawsuit against the company alleging that the

company materially breached its duties under a cooperation agreement entered into between the

parties in 2016, claiming damages in excess of EUR 300 million, alleging loss of profit and lost

increase in brand value. Philips disagrees with the allegations and has submitted its statement of

defense in June 2024. The first Court hearing is expected to take place in the first half of 2025.

Miscellaneous

For details on other contractual obligations, please refer to liquidity risk in Details of treasury and

other financial risks.

25Related-party transactions

In the normal course of business, Philips purchases and sells goods and services from/to various

related parties in which Philips typically holds between 20% and 50% equity interest and has

significant influence. These transactions are generally conducted with terms comparable to

transactions with third parties.

Philips Group

Related-party transactions in millions of EUR


	2022	2023	2024
Sales of goods and services	111	106	89
Purchases of goods and services	46	42	50
Receivables from related parties	55	18	25
Payables to related parties	2	2	2

The above table includes sales transactions between Philips and PMC of EUR 88 million in 2024

(2023: EUR 87 million; 2022 : EUR 101 million), under which PMC has leased the equipment to the

ultimate customer. In addition, as part of its S&RC operations in the US, Philips Medical Capital LLC

funded durable medical equipment (DMEs) providers, through loans and leases. PMC-funded

transactions these DMEs entered into with Philips amount to EUR 75 million in 2024 ( 2023 : EUR

117 million ; 2022: EUR 117 million). The associated costs of these funding transactions are borne

by the ultimate customer and settled directly with Philips Medical Capital LLC. Philips Medical

Capital LLC, a Pennsylvania limited liability company, is owned 60% by De Lage Landen Financial

Services, Inc. (DLL) and 40% by Philips Electronics North America Corporation (Philips).

On August 14, 2023, it was announced that Exor N.V. acquired a 15% minority stake in Philips

shares and entered into a relationship agreement with the company. Pursuant to the relationship

agreement with the company, Exor N.V. proposed one member to the Supervisory Board, who was

confirmed at the 2024 Annual General Meeting of Shareholders on May 7, 2024. From this date,

Exor is considered a related party for reporting purposes. For remuneration details of Benoît

Ribadeau-Dumas as the Exor nominee see Information on remuneration. Exor has agreed to

maintain its shareholding of at least 15% up to 20% for three years from August 13, 2023. Philips

did not have other reportable transactions with Exor during the period ended December 31, 2024.

In light of the composition of the Executive Committee, the company considers the members of the

Executive Committee and the Supervisory Board to be the key management personnel as defined in

IAS 24 Related Party Disclosures.

For remuneration details of the Executive Committee, the Board of Management and the

Supervisory Board see Information on remuneration.

For Post-employment benefit plans see Post-employment benefits.


	141


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

26Share-based compensation

Accounting policies

Philips share-based compensation is an equity-settled plan made of restricted and performance

shares. The restricted shares are subject to a three -year service condition and the performance

shares include both market and non-market-based performance conditions, in addition to a three -

year service condition. These shares are awarded to the Executive Committee and senior

management.

The grant date fair value of market-based performance shares is determined through a Monte

Carlo valuation model. The grant date fair value of non-market-based performance shares and

restricted shares is determined as the share price at the grant date as participants receive notional

dividends throughout the vesting period. The costs of share-based compensation plans are revised

for expected performance (non-market-based performance shares) and forfeiture and are spread

evenly over the service period.

Share-based compensation is recognized over the service period as personnel expense in the

consolidated statement of income, with a corresponding increase to equity.

Accounting estimates and judgments

The use of a valuation model to determine market-based performance share fair value requires

estimates for the expected volatility of the Philips share price and correlation among input variables.

At each reporting date, Philips calculates the expected realization of the non-market-based

performance targets and revises the expected share-based compensation expense. The cumulative

effect is recorded in the consolidated statement of income with a corresponding adjustment in equity.

No expense is recognized for awards that do not ultimately vest because non-market performance

and/or service conditions have not been met.

The purpose of the share-based compensation plans is to align the interests of management with

those of shareholders by providing incentives to improve the company’s performance on a long-

term basis, thereby increasing shareholder value.

The company has the following plans:

• performance shares: rights to receive common shares in the future based on performance and

service conditions

• restricted shares: rights to receive common shares in the future based on a service condition

• options on its common shares

Since 2013 the Board of Management and other members of the Executive Committee are only

granted performance shares*. Performance shares as well as restricted shares can be granted to

executives, certain selected employees and new employees. Prior to 2013, options were also

granted.

Under the terms of employee stock purchase plans established by the company in various countries,

employees are eligible to purchase a limited number of Philips shares at discounted prices through

payroll withholdings.

Share-based compensation costs were EUR 104 million (2023 : EUR 97 million; 2022: EUR 104

million ). This includes the employee stock purchase plan of EUR 8 million , which is not a share-

based compensation that affects equity. In the Consolidated statements of changes in equity EUR

96 million is recognized in 2024 and represents the costs of the share-based compensation plans.

The amount recognized as an expense is adjusted for forfeitures. USD-denominated performance

shares, restricted shares and options are granted to employees in the US only.

Performance shares

The performance is measured over a three -year performance period. The performance shares have

three performance conditions: relative Total Shareholders’ Return (TSR) compared to a peer group

of 20 companies including Philips (20 companies including Philips (2023: 20 companies; 2022: 20

companies, 2021 : 20companies); adjusted Earnings Per Share growth** (EPS); and a sustainability

criterion. The criterion is based on three Sustainable Development Goals (SDG) as defined by the

United Nations that are included in Philips’ strategy on sustainability (refer to Environment, Social

and Governance). The performance conditions are weighted as follows: TSR 50%, EPS 40% and

SDG 10% (applicable for 2021, 2022 and 2023 plans). As of 2024 the performance conditions are

weighted as follows: TSR 40%, EPS 40% and SDG 20%.

The performance shares vest three years after the grant date. The number of performance shares

that will vest is dependent on achieving the performance conditions provided that the grantee is

still employed with the company.

The amount recognized as an expense is adjusted for actual performance of adjusted EPS growth**

and the actual realization of the SDGs, since these are non-market performance conditions. It is not

adjusted for non-vesting or extra vesting of performance shares due to a relative TSR performance

that differs from the performance anticipated at the grant date, since this is a market-based

performance condition.

The fair value of the performance shares is measured based on Monte Carlo simulation, which

takes into account dividend payments between the grant date and the vesting date by including

reinvested dividends as well as the market conditions expected to impact relative Total

Shareholders’ Return performance in relation to selected peers. The following weighted-average

assumptions were used for the 2024 grants:

• risk-free rate: 2.72%

• expected share price volatility: 39%


	142


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The assumptions were used for these calculations only and do not necessarily represent an

indication of management’s expectation of future developments for other purposes. The company

has based its volatility assumptions on historical experience measured over a 10-year period.

A summary of the status of the company’s performance share plans as of December 31, 2024, and

changes during the year are presented in the following table:

Philips Group

Performance shares


	2023		2024
	Shares	Weighted average grant- date fair value	Shares	Weighted average grant- date fair value
EUR-denominated
Outstanding as of January 1	4,385,837	33.13	5,392,035	27.22
Granted	2,299,280	23.65	2,265,462	28.94
Notional dividends¹	240,977	27.15	218,782	24.35
Vested/Issued	(154,987)	44.08	(169,524)	50.30
Forfeited	(489,295)	27.05	(451,052)	25.07
Adjusted quantity²	(889,777)	44.27	(788,865)	50.65
Outstanding as of December 31	5,392,035	27.22	6,466,838	24.41

USD-denominated
Outstanding as of January 1	2,749,983	36.66	3,261,048	29.73
Granted	1,667,812	25.96	1,733,891	31.07
Notional dividends¹	152,750	29.78	142,892	26.85
Vested/Issued	(121,760)	48.33	(80,151)	61.37
Forfeited	(596,846)	28.95	(489,195)	28.35
Adjusted quantity²	(590,890)	48.28	(377,857)	61.37
Outstanding as of December 31	3,261,048	29.73	4,190,628	26.89

1Dividend declared in 2024 on outstanding shares.

2Adjusted quantity includes the adjustments made to Performance shares outstanding due to updates on

the actual TSR, EPS, and SDG.

As of December 31, 2024 , a total of EUR 128 million of unrecognized compensation costs relate to

non-vested performance shares (as of December 31, 2023 EUR 102 million; as of December 31,

2022 EUR 103 million). These costs are expected to be recognized over a weighted-average period

of 2.0 years.

Restricted shares

The fair value of restricted shares is equal to the share price at grant date. The company issues

restricted shares that, in general, have a three-year cliff-vesting period provided that the grantee is

still employed with the company.

A summary of the status of the company’s restricted shares as of December 31, 2024, and changes

during the year are presented in the following table:

Philips Group

Restricted shares


	2023		2024
	Shares	Weighted average grant- date fair value	Shares	Weighted average grant- date fair value
EUR-denominated
Outstanding as of January 1	2,321,250	30.73	2,995,252	23.39
Granted	1,471,975	16.35	1,367,380	22.64
Notional dividends¹	135,791	27.98	52,481	22.57
Vested/Issued	(595,796)	35.07	(627,855)	35.10
Forfeited	(337,968)	24.46	(263,352)	21.06
Outstanding as of December 31	2,995,252	23.39	3,523,906	21.17

USD-denominated
Outstanding as of January 1	2,345,263	33.87	2,654,193	26.04
Granted	1,284,761	17.72	1,460,620	24.59
Notional dividends¹	126,498	31.12	48,774	24.33
Vested/Issued	(679,430)	37.83	(582,404)	40.51
Forfeited	(422,899)	26.79	(253,953)	23.43
Outstanding as of December 31	2,654,193	26.04	3,327,230	23.04

1Dividend declared in 2024 on outstanding shares.

As of December 31, 2024, a total of EUR 73 million of unrecognized compensation costs relate to

non-vested restricted shares (as of December 31, 2023 EUR 63 million; as of December 31, 2022

EUR 72 million). These costs are expected to be recognized over a weighted-average period of 1.9

years.

Option plans

Retention option plan

In April 2023, the company granted non-recurring retention options that expire after 10 years.

These options vest after two years, provided that the grantee is still employed with the company.


	143


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The fair value of the options under this plan is measured based on Black-Scholes-Merton option

pricing model. The expected life of the options is calculated as the average between vesting period

(two years) and the total contractual life (10 years).

The following tables summarize information about the company’s options as of December 31,

2024, and changes during the year:

Philips Group

Options on EUR-denominated listed share


	Options	Weighted average exercise price
Outstanding as of January 1, 2024	3,660,000	22.16
Exercised	(3,793)	22.16
Forfeited	(259,668)	22.16
Outstanding as of December 31, 2024	3,396,539	22.16

The total intrinsic value of EUR-denominated options exercised during 2024 was EUR 15,475. Cash

received during 2024 from exercises under the company’s options plans amounted to EUR 84,053.

As of December 31, 2024, there were 39,983 options exercisable with a weighted average

remaining contractual term of 0.4 years and total intrinsic value of EUR 89,562.

The weighted average remaining contractual term for options outstanding as of December 31,

2024, was 8.1 years.

Philips Group

Options on USD-denominated listed share


	Options	Weighted average exercise price
Outstanding as of January 1, 2024	1,929,000	24.42
Forfeited	(291,236)	24.42
Outstanding as of December 31, 2024	1,637,764	24.42

There were no exercisable USD-denominated options as of December 31, 2024. The weighted

average remaining contractual term for options outstanding as of December 31, 2024, was 8.0

years.

As of December 31, 2024, a total of EUR 2 million of unrecognized compensation costs relate to

outstanding options. These costs are expected to be recognized over a weighted-average period of

0.3 years.

Philips Group

Outstanding options in millions of EUR unless otherwise stated


	Number of options	Intrinsic value	Weighted average remaining contractual term in years
EUR-denominated
20-25	3,396,539	8	8.1
Outstanding options	3,396,539	8	8.1

USD-denominated
20-25	1,637,764	1	8.0
Outstanding options	1,637,764	1	8.0

*Executive Committee members can receive restricted share rights as a sign-on LTI awards upon hiring.

**The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Equity.

27Information on remuneration

Remuneration of the Executive Committee

In 2024 , the total remuneration costs relating to the Executive Committee (consisting of 15

members throughout the year, including the members of the Board of Management) amounted to

EUR 32.0 million ( 2023 : EUR 32.8 million ; 2022 : EUR 25.6 million ) and consisted of the elements in

the following table.

Philips Group

Remuneration costs of the Executive Committee1 in EUR


	2022	2023	2024
Base salary/Base compensation	9,528,279	8,729,458	9,362,765
Annual incentive²	208,370	11,405,130	5,292,388
Performance shares³	11,242,581	7,272,815	12,673,614
Stock options		13,358	90,503
Restricted share rights³	1,191,529	1,907,511	999,374
Pension allowances⁴	1,949,204	1,346,937	1,197,695
Pension scheme costs	288,179	260,554	269,092
Other compensation⁵	1,216,163	1,900,224	2,136,668
Total	25,624,305	32,835,987	32,022,099

1The Executive Committee consisted of 13 members as per December 31, 2024 (2023 : 13 members; 2022:

13 members)

2The annual incentives are related to the performance in the year reported which are paid out in the

subsequent year.

3Costs of performance shares and restricted share rights are based on accounting standards (IFRS) and do

not reflect the value of performance shares at the vesting/release date

4Pension allowances are gross taxable allowances paid to the Executive Committee members in the

Netherlands. These allowances are part of the pension arrangement

5The stated amounts mainly concern (share of) allowances to members of the Executive Committee that can

be considered as remuneration. In a situation where such a share of an allowance can be considered as

(indirect) remuneration (for example, private use of the company car), then the share is both valued and

accounted for here. The method employed by the fiscal authorities is the starting point for the value stated


	144


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Remuneration of the Board of Management

In 2024, the total remuneration costs relating to the members of the Board of Management amounted to EUR 10.3 million (2023: EUR 9.9 million; 2022: EUR 8.5 million). See the following table.

Philips Group

Remuneration costs of individual members of the Board of Management in EUR


	Base compensation/ salary	Annual incentive¹	Performance shares²	Restricted share rights²	Pension allowances	Pension scheme costs	Other compensation³	Total costs
2024
R. Jakobs	1,237,500	927,750	1,692,087		274,925	32,218	83,870	4,248,350
C. Hanneman⁴	175,545	98,372	104,606		35,247	7,775	23,089	444,633
A. Bhattacharya	622,500	351,934	1,424,219		129,788	25,478	963,596	3,517,514
M.J. van Ginneken	652,500	422,374	740,101		128,675	32,218	74,227	2,050,095
	2,688,045	1,800,429	3,961,013		568,635	97,689	1,144,781	10,260,593
2023
R. Jakobs	1,200,000	2,004,480	968,922		267,798	31,891	109,256	4,582,347
A. Bhattacharya	810,000	1,075,939	793,429		197,133	31,891	94,516	3,002,907
M.J. van Ginneken	630,000	846,922	614,840		125,298	31,891	53,446	2,302,397
	2,640,000	3,927,341	2,377,191		590,228	95,673	257,218	9,887,650

2022
R. Jakobs⁵	256,438		112,737		57,973	6,012	11,507	444,667
F.A. van Houten⁵	1,041,849	208,370	2,930,068		444,051	22,121	42,533	4,688,992
A. Bhattacharya	806,250		763,140		237,250	28,133	61,308	1,896,081
M.J. van Ginneken	626,250		585,490		141,622	28,133	35,343	1,416,837
	2,730,788	208,370	4,391,434		880,896	84,398	150,691	8,446,577

1The annual incentives are related to the performance in the year reported which are paid out in the subsequent year.

2Costs of performance shares and restricted share rights are based on accounting standards (IFRS) and do

not reflect the value of performance shares at the vesting/release date

3The stated amounts mainly concern (share of) allowances to members of the Board of Management that

can be considered as remuneration. In a situation where such a share of an allowance can be considered as

(indirect) remuneration (for example, private use of the company car), then the share is both valued and

accounted for here. The method employed by the fiscal authorities is the starting point for the value stated.

4As per October 1, 2024, Charlotte Hanneman was appointed as CFO of the company. This table includes

actual costs incurred as of this date and until the end of the year.

5As per October 15, 2022, Roy Jakobs was appointed as CEO of the company. The table includes actual

costs incurred in respect of the remuneration received by Mr Van Houten and Mr Jakobs, respectively, as

CEO.

The accumulated annual pension entitlements and the pension costs of individual members of the

Board of Management are as follows:


	145


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Accumulated annual pension entitlements and pension-related costs in EUR unless otherwise stated


	Age as of December 31, 2024	Accumulated annual pension as of December 31, 2024	Total pension related costs
R. Jakobs	50	60,886	307,143
C. Hanneman	46	1,298	100,072
M.J. van Ginneken	51	58,167	160,894
Pension costs			568,109

When pension rights are granted to members of the Board of Management, necessary payments (if

insured) and all necessary provisions are made in accordance with the applicable accounting

principles. In 2024, no (additional) pension benefits were granted to former members of the Board

of Management.

Remuneration of the Supervisory Board

The remuneration of the members of the Supervisory Board amounted to EUR 1.7 million (2023:

EUR 1.5 million; 2022: EUR 1.5 million). Former members received no remuneration.

The members of the Supervisory Board do not receive any share-based remuneration. Therefore, as

of December 31, 2024, the members of the Supervisory Board held no stock options, performance

shares or restricted shares.

The individual members of the Supervisory Board received, by virtue of the positions they held, the

following remuneration:

Philips Group

Remuneration of the Supervisory Board in EUR


	Membership	Committees	Other compensation¹	Total
2024
F. Sijbesma	166,500	37,500	28,945	232,945
P.A.M. Stoffels	123,500	37,500	13,269	174,269
S.K. Chua	107,500	19,250	26,107	152,857
M.E. Doherty	107,500	29,000	20,289	156,789
A.M. Harrison	107,500	15,000	7,769	130,269
P. Löscher	107,500	34,250	18,769	160,519
I. Nooyi	107,500	15,000	20,154	142,654
S. Poonen	107,500	16,771	19,267	143,538
D.E.I. Pyott	107,500	28,750	18,769	155,019
B. Ribadeau-Dumas	70,390	9,822	17,986	98,198
H. Verhagen	107,500	26,229	16,267	149,996
	1,220,390	269,072	207,592	1,697,054
2023
F. Sijbesma	155,000	35,000	16,345	206,345
P.A.M. Stoffels	115,000	35,000	22,269	172,269
S.K. Chua	100,000	18,000	22,269	140,269
M.E. Doherty	100,000	27,000	27,269	154,269
A.M. Harrison	100,000	14,000	19,769	133,769
P. Löscher	100,000	32,000	17,269	149,269
I. Nooyi	100,000	14,000	17,269	131,269
S. Poonen	100,000	18,000	19,769	137,769
D.E.I. Pyott	100,000	35,000	19,769	154,769
H. Verhagen	100,000	14,000	7,269	121,269
	1,070,000	242,000	189,266	1,501,266
2022
F. Sijbesma	155,000	35,000	16,345	206,345
P.A.M. Stoffels	115,000	35,000	27,269	177,269
S.K. Chua	100,000	18,000	22,269	140,269
N. Dhawan	35,616	6,411	5,808	47,836
M.E. Doherty	100,000	27,000	24,769	151,769
A.M. Harrison	100,000	14,000	12,269	126,269
P. Löscher	100,000	32,000	24,769	156,769
I. Nooyi	100,000	14,000	17,269	131,269
S. Poonen	100,000	18,000	17,269	135,269
D.E.I. Pyott	100,000	35,000	17,269	152,269
H. Verhagen	100,000	14,000	7,269	121,269
	1,105,616	248,411	192,574	1,546,602

1The amounts mentioned under other compensation relate to the fee for intercontinental travel, inter-

European travel, the Philips product arrangement and the annual fixed net expense allowance.


	146


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Supervisory Board members’ and Board of Management members’ interests in Philips

Members of the Supervisory Board and of the Board of Management are prohibited from writing

call and put options or similar derivatives of Philips securities.

Philips Group

Shares held by Board members1 2 in number of shares


	December 31, 2023	December 31, 2024
R. Jakobs	126,809	134,298
M.J. van Ginneken	129,447	137,753
P. Stoffels	17,759	18,366
S. Poonen	3,133	3,240
I. Nooyi	3,238	3,348
D. Pyott	19,848	20,526
S.K. Chua	2,089	2,160
F. Sijbesma	25,000	25,854
M. Harrison	1,567	1,620
P. Löscher	21,658	22,398

1Reference date for board membership is December 31, 2024

2The total shares held by the members of the Board of Management is less than 1% of the company's

issued share capital.

28Fair value of financial assets and liabilities

Accounting policies

Fair value hierarchy

For financial reporting purposes, financial instruments are categorized into Level 1, 2 or 3, based on

the degree to which the inputs to the fair value measurements are observable and the significance

of the inputs to the fair value measurement in its entirety, which are as follows:

• Level 1 – inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets

that the company can access at the measurement date.

• Level 2 – all significant inputs (other than quoted prices included within Level 1) are observable

for the asset or liability, either directly (as prices) or indirectly (derived from prices).

• Level 3 – one or more of the significant inputs are not based on observable market data, such as

third-party pricing information without adjustments, for the asset or liability.

Transfers between levels of the fair value hierarchy are recognized at the end of the reporting

period during which the change has occurred.

Offsetting and master netting agreements

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when,

and only when, the company currently has a legally enforceable right to set-off the amounts and

the group intends either to settle them on a net basis or to realize the asset and settle the liability

simultaneously.

Accounting estimates and judgments

Determining the fair value of financial instruments requires the use of estimates according to the

method applied for each type of financial asset of liability. The estimated fair value of financial

instruments has been determined by the company using available market information and

appropriate valuation methods. The estimates presented are not necessarily indicative of the

amounts that will ultimately be realized by the company upon maturity or disposal. The use of

different market assumptions and/or estimation methods may have a material effect on the

estimated fair value amounts.

Specific valuation techniques used to value financial instruments include:

Level 1

Instruments included in level 1 are composed primarily of listed equity investments classified as

financial assets carried at fair value through profit or loss or carried at fair value through other

comprehensive income (OCI). The fair value of financial instruments traded in active markets is

based on quoted market prices at the balance sheet date. A market is regarded as active if quoted

prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing

service, or regulatory agency, and those prices represent actual and regularly occurring market

transactions on an arm’s length basis.

Level 2

The fair value of financial instruments that are not traded in an active market (for example, over-

the-counter derivatives or convertible bond instruments) is determined by using valuation

techniques. These valuation techniques maximize the use of observable market data where it is

available and rely as little as possible on entity-specific estimates. If all significant inputs required to

fair value an instrument are based on observable market data, the instrument is included in level 2.

The fair value of derivatives is calculated as the present value of the estimated future cash flows

based on observable interest yield curves, basis spread and foreign exchange rates. The valuation of

convertible bond instruments uses observable market quoted data for the options and present

value calculations using observable yield curves for the fair value of the bonds.

The fair value of debt is estimated on the basis of the quoted market prices for certain issuances, or

on the basis of discounted cash flow analysis using market rates plus Philips’ spread for the

particular tenors of the borrowing arrangement. Accrued interest is not included within the

carrying amount or estimated fair value of debt.


	147


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Level 3

If one or more of the significant inputs are not based on observable market data, such as third-

party pricing information without adjustments, the instrument is included in level 3.

The fair value of contingent consideration is dependent on the terms of the respective acquisition

agreement that may require Philips to pay additional consideration to former shareholders if

specified future events occur or conditions are met, such as the achievement of certain regulatory

milestones or the achievement of certain commercial milestones. The fair value of the contingent

consideration provision is generally determined using a probability-weighted and a risk-adjusted

approach to estimate the achievement of future regulatory and commercial milestones,

respectively. The discount rates used in the risk adjusted approach reflect the inherent risk related

to achieving the commercial milestones. Both regulatory and commercial milestones are discounted

for the time value of money at risk-free rates. The fair value measurement is based on

management’s estimates and assumptions and hence classified as Level 3 in the fair value

hierarchy.

The following tables show the carrying amounts and fair values of financial assets and financial

liabilities, including their levels in the fair value hierarchy. Fair value information for financial assets

and financial liabilities not carried at fair value is not included if the carrying amount is a reasonable

approximation of fair value.


	148


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Fair value of financial assets and liabilities in millions of EUR


	2023		2024
	Carrying amount	Estimated fair value¹	Carrying amount	Estimated fair value¹	Level 1	Level 2	Level 3
December 31
Financial assets
Carried at fair value:
Debt instruments	226	226	231	231			231
Equity instruments	2	2	3	3			2
Other financial assets	56	56	54	54		53	-
Financial assets carried at FVTP&L	284	284	288	288		53	234
Debt instruments	27	27	21	21		20
Equity instruments	231	231	222	222	4		218
Current financial assets	3	3	2	2			2
Receivables - current	32	32
Receivables - non-current
Financial assets carried at FVTOCI	293	293	244	244	4	20	220
Derivative financial instruments	48	48	77	77		72	6
Financial assets carried at fair value	624	624	609	609	4	146	460

Carried at (amortized) cost:
Cash and cash equivalents	1,869		2,401
Loans and receivables:
Current loans receivables	-		-
Other non-current loans and receivables	77		102
Receivables - current	3,701		3,672
Receivables - non-current	193		208
Financial assets carried at (amortized) cost	5,840		6,382
Total financial assets	6,465		6,992

Financial liabilities
Carried at fair value:
Contingent consideration	(115)	(115)	(113)	(113)			(113)
Financial liabilities carried at FVTP&L	(115)	(115)	(113)	(113)			(113)
Derivative financial instruments	(43)	(43)	(63)	(63)		(63)
Financial liabilities carried at fair value	(158)	(158)	(176)	(176)		(63)	(113)

Carried at (amortized) cost:
Accounts payable	(1,917)		(1,830)
Interest accrual	(76)		(83)
Debt (Corporate bonds and leases)	(6,969)	(6,798)	(7,397)	(7,363)	(6,290)	(1,073)
Debt (excluding corporate bonds and leases)	(721)		(241)
Financial liabilities carried at (amortized) cost	(9,682)		(9,551)
Total financial liabilities	(9,840)		(9,728)

1For Cash and cash equivalents, Loans and receivables, Accounts payable, interest accrual and Debt (excluding corporate bonds and leases), the carrying amounts approximate fair value because of the nature of these instruments

(including maturity and interest conditions) and therefore fair value information is not included in the table above.


	149


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The following table shows the reconciliation from the beginning balance to the end balance for

Level 3 fair value measurements.

Philips Group

Reconciliation of Level 3 fair value measurements in millions of EUR


	2023		2024
	Financial assets	Financial liabilities	Financial assets	Financial liabilities
Balance as of January 1	549	113	503	115
Acquisitions		6
Purchase	85		86
Sales	(56)		(48)
Utilizations		(20)		(9)
Recognized in profit and loss:
other business income		16		2
financial income and expenses¹	(43)	1	(23)	3
Recognized in other comprehensive income²	(40)	(2)	(8)	3
Receivables held to collect and sell	6		(32)
Reclassification		1	(18)	-
Balance as of December 31	503	115	460	113

1Refer to Financial income and expenses for details.

2Includes translation differences

Offsetting and master netting agreements

Transactions in derivatives are subject to master netting and set-off agreements. In the case of

certain termination events, under the terms of the master agreement, Philips can terminate the

outstanding transactions and aggregate their positive and negative values to arrive at a single net

termination sum (or close-out amount). This contractual right is subject to the following:

• The right may be limited by local law if the counterparty is subject to bankruptcy proceedings.

• The right applies on a bilateral basis.

Philips Group

Financial assets subject to offsetting, enforceable master netting arrangements or similar agreements

in millions of EUR


	2023	2024
Derivatives
Gross amounts of recognized financial assets	48	72
Gross amounts of recognized financial liabilities offset in the balance sheet
Net amounts of financial assets presented in the balance sheet	48	72

Related amounts not offset in the balance sheet
Financial instruments	(34)	(45)
Net amount	13	27

Philips Group

Financial liabilities subject to offsetting, enforceable master netting arrangements or similar

agreements in millions of EUR


	2023	2024
Derivatives
Gross amounts of recognized financial liabilities	(43)	(63)
Gross amounts of recognized financial assets offset in the balance sheet
Net amounts of financial liabilities presented in the balance sheet	(43)	(63)

Related amounts not offset in the balance sheet
Financial instruments	34	45
Net amount	(9)	(18)


	150


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

29Details of treasury and other financial risks

Accounting policies

Derivative financial instruments, including hedge accounting

The company uses derivative financial instruments principally to manage its foreign currency risks

and, to a more limited extent, interest rate and commodity price risks. All derivative financial

instruments are accounted for at the trade date and classified as current or non-current assets or

liabilities based on the maturity date or the early termination date. The company measures all

derivative financial instruments at fair value that is derived from the market prices of the

instruments, calculated on the basis of the present value of the estimated future cash flows based

on observable interest yield curves, basis spread, credit spreads and foreign exchange rates, or

derived from option pricing models, as appropriate. Gains or losses arising from changes in fair

value of derivatives are recognized in the Consolidated statements of income, except for derivatives

that are highly effective and qualify for cash flow or net investment hedge accounting.

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies

as a cash flow hedge are recorded in other comprehensive income (OCI) until the Consolidated

statements of income are affected by the variability in cash flows of the designated hedged item.

To the extent that the hedge is ineffective, changes in the fair value are recognized in the

Consolidated statements of income

Changes in the fair value of foreign exchange forward contracts attributable to forward points and

changes in the time value of the option contracts are deferred in the cash flow hedges reserve

within equity. The deferred amounts are recognized in the Consolidated statements of income

against the related hedged transaction when it occurs.

The company formally assesses, both at the hedge’s inception and on an ongoing basis, whether

the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair

values or cash flows of hedged items. When it is established that a derivative is not highly effective

as a hedge or that it has ceased to be a highly effective hedge, the company discontinues hedge

accounting prospectively. When hedge accounting is discontinued because a forecasted transaction

is expected not to occur, the company continues to carry the derivative on the Consolidated

balance sheets at its fair value, and gains and losses that were accumulated in OCI are recognized

immediately in the same line item as they relate to in the Consolidated statements of income.

Foreign currency differences arising upon retranslation of financial instruments designated as a

hedge of a net investment in a foreign operation are recognized directly in the currency translation

differences reserve through OCI, to the extent that the hedge is effective. To the extent that the

hedge is ineffective, such differences are recognized in the Consolidated statements of income.

Accounting estimates and judgments

Financial assets are subject to impairment assessment, which involves estimating expected credit

losses. Refer to Other financial assets for accounting policies on impairment of financial assets.

Philips is exposed to several types of financial risks which are further analyzed below. Philips does

not purchase or hold derivative financial instruments for speculative purposes. Information

regarding financial instruments is included in Fair value of financial assets and liabilities.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with

financial liabilities.

Liquidity risk for the group is monitored through the Treasury liquidity committee, which tracks the

development of the actual cash flow position for the group and uses input from a number of

sources in order to forecast the overall liquidity position on both short and longer term basis. Philips

invests surplus cash in short-term deposits with appropriate maturities and money market funds to

ensure sufficient liquidity is available to meet liabilities when due and in money market funds.

The rating of the company’s debt by major rating agencies may improve or deteriorate. As a result,

Philips’ future borrowing capacity may be influenced and its financing costs may fluctuate. Philips

has various sources to mitigate the liquidity risk for the group. As of December 31, 2024 Philips had

EUR 2,401 million in cash and cash equivalents ( 2023 : EUR 1,869 million ), which includes short-

term deposits of EUR 1,946 million ( 2023 : EUR 1,399 million). Cash and cash equivalents include all

cash balances, money market funds and short-term highly liquid investments with an original

maturity of three months or less that are readily convertible into known amounts of cash. Philips

pools cash from subsidiaries to the extent legally and economically feasible; cash not pooled

remains available for the company’s operational or investment needs.

Philips faces cross-border foreign exchange controls and/or other legal restrictions in a few

countries that could limit its ability to make these balances available on short notice for general use

by the group.

Philips has a USD 2.5 billion Commercial Paper Program and a EUR 1 billion committed standby

revolving credit facility that can be used for general group purposes. As of December 31, 2024 ,

Philips did not have any loans outstanding under either facility. These facilities do not have a

material adverse change clause, have no financial covenants and have no credit-rating-related

acceleration possibilities.

Philips established a Euro Medium-Term Note (EMTN) program, a framework that facilitates the

issuance of notes for a total amount up to EUR 10 billion. In 2024, Philips issued EUR 700 million

fixed rate notes due 2032 under the EMTN program for general corporate purposes, including the

repayment of the 2025 EUR Bonds and floating rate debt. As of December 31, 2024, Philips has


	151


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

EUR 3.7 billion (2023: EUR 3.3 billion) fixed rates notes outstanding under the EMTN program. For

a description of Philips’ credit facilities, refer to Debt.

In addition to cash and cash equivalents, as of December 31, 2024, Philips also held EUR 4 million

(2023: EUR 14 million ) of listed (level 1) equity investments at fair value (classified as other non-

current financial assets).

The following table presents a summary of the Group’s fixed contractual cash obligations and

commitments as of December 31, 2024. These amounts are an estimate of future payments which

could change as a result of various factors such as a change in interest rates, foreign exchange, and

contractual provisions, as well as changes in business strategy and needs. Therefore, the actual

payments made in future periods may vary from those presented in the following table:

Philips Group

Contractual cash obligations1 2 in millions of EUR


		Payments due by period
	Total	Less than 1 year	1-3 years	3-5 years	After 5 years
Long-term debt	7,168		2,006	1,338	3,824
Short-term debt	525	525
Interest on debt	1,792	197	368	325	902
Derivative liabilities	72	64	8
Purchase obligations³	1,161	300	307	210	344
Trade and other payables	1,830	1,830
Contractual cash obligations	12,548	2,916	2,689	1,873	5,070

1Amounts in this table are undiscounted

2This table excludes post-employment benefit plan contribution commitments and income tax liabilities in

respect of tax risks because it is not possible to make a reasonably reliable estimate of the actual period of

cash settlement.

3Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding

for the Group. They specify all significant terms, including fixed or minimum quantities to be purchased,

fixed, minimum or variable price provisions and the approximate timing of the transaction. They do not

include open purchase orders or other commitments which do not specify all significant terms.

Philips has contracts with investment funds where it committed itself to make, under certain

conditions, capital contributions to these funds of an aggregated remaining amount of EUR 130

million (2023: EUR 153 million). As of December 31, 2024, capital contributions already made to

these investment funds are recorded as non-current financial assets.

Philips offers voluntary supply chain finance programs for certain US Dollar, Euro and Swedish

Krona third parties which provide participating suppliers the opportunity to factor their trade

receivables at the sole discretion of both the suppliers and the third parties. Philips continues to

recognize these liabilities as trade payables and settles them accordingly on the invoice maturity

date based on the terms and conditions of those arrangements. As of December 31, 2024,

approximately EUR 97 million (2023: EUR 114 million ) of the Philips account payable were

transferred under these arrangements.

Philips Group

Carrying amount of financial liabilities1 in millions of EUR


	2024
Presented in accounts payables:	97
- of which suppliers have received payment from finance provider	85

Philips Group

Range of payment due dates


	2024
Liabilities that are part of the arrangements	30 -135 days
Comparable trade payables that are not part of the arrangements	0 -135 days

1 There were no material business combinations or foreign exchange differences during the year.

With respect to the Respironics field action, please refer to Contingencies. The management

continues to monitor the risks associated with such potential claims and its impact on liquidity

position, if any.

Currency risk

Currency risk is the risk that reported financial performance or the fair value or future cash flows of

a financial instrument will fluctuate because of changes in foreign exchange rates. Philips operates

in many countries and currencies and therefore currency fluctuations may impact Philips’ financial

results. Philips is exposed to currency risk in the following areas:

• transaction exposures, related to anticipated sales and purchases and on-balance-sheet

receivables/payables resulting from such transactions

• translation exposure of foreign-currency intercompany and external debt and deposits

• translation exposure of net income in foreign entities

• translation exposure of foreign-currency-denominated equity invested in consolidated

companies

• translation exposure to equity interests in non-functional-currency investments in associates and

other non-current financial assets

It is Philips’ policy to reduce the potential year-on-year volatility caused by foreign-currency

movements on its net earnings by hedging the anticipated net exposure of foreign currencies

resulting from foreign-currency sales and purchases. In general, net anticipated exposures for the

Group are hedged during a period of 15 months in layers of 20% up to a maximum hedge of

80%. Philips’ policy requires significant committed foreign currency exposures to be fully hedged,

generally using forwards. However, not every foreign currency can or shall be hedged as there may

be regulatory barriers or prohibitive hedging cost preventing Philips from effectively and/or

efficiently hedging its currency exposures. As a result, hedging activities cannot and will not

eliminate all currency risks for anticipated and committed transaction exposures.


	152


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The following table outlines the estimated nominal value in millions of EUR for committed and

anticipated transaction exposure and related hedges for Philips’ most significant currency exposures

consolidated as of December 31, 2024:

Philips Group

Estimated transaction exposure and related hedges in millions of EUR


	Sales/Receivables		Purchases/Payable
	Exposure	Hedges	Exposure	Hedges
Balance as of December 31, 2024
Exposure currency
USD	2,071	(1,669)	(1,163)	1,049
JPY	527	(300)	(7)	7
GBP	259	(161)	(15)	14
CNY	442	(312)	(209)	209
PLN	95	(62)	(1)	1
CAD	236	(134)
AUD	177	(104)
CHF	144	(85)
KRW	126	(83)
ILS	12	(8)	(204)	121
EUR	160	(158)	(121)	121
Others	169	(113)	(23)	23
Total 2024	4,420	(3,188)	(1,743)	1,543
Total 2023	4,287	(3,185)	(1,346)	1,173

Philips uses foreign exchange spot and forward contracts, as well as zero cost collars in hedging the

exposure. The derivatives related to transactions are, for hedge accounting purposes, split into

hedges of on-balance-sheet accounts receivable/payable and forecasted sales and purchases.

Changes in the value of on-balance-sheet foreign-currency accounts receivable/payable, as well as

the changes in the fair value of the hedges related to these exposures, are reported in the income

statement under costs of sales. Hedges related to forecasted transactions, where hedge accounting

is applied, are accounted for as cash flow hedges. The results from such hedges are deferred in

other comprehensive income within equity to the extent that the hedge is effective. As of

December 31, 2024, a gain of EUR 1 million was deferred in equity as a result of these hedges

(2023: EUR 6 million gain). The result deferred in equity will be released to earnings mostly during

2025 at the time when the related hedged transactions affect the income statement. During 2024,

nil (2023 nil) was recorded in the consolidated statement of income as a result of ineffectiveness on

certain anticipated cash flow hedges. Ineffectiveness arises when anticipated exposures are no

longer expected to be highly probable. During 2024, a gain of EUR 29 million (2023 EUR 19 million

gain) included in the cash flow hedges reserve in equity pertaining to changes in fair value of

foreign exchange forward and option contracts was released to income statement.

The total net fair value of hedges related to transaction exposure as of December 31, 2024, was an

unrealized loss of EUR 2 million. The estimated impact of a 10% increase of value of the EUR is

estimated to be EUR 122 million. The following table contains an overview of the instantaneous

10% increase in the value of EUR against major currencies.

Philips Group

Estimated impact of 10% increase of value of the EUR on the fair value of hedges in millions of EUR


	2023	2024
USD	64	63
JPY	15	13
GBP	16	13
CHF	5	7
PLN	1	1
RUB	-	1

The EUR 122 million increase includes a gain of EUR 34 million that would impact the income

statement, which would largely offset the opposite revaluation effect on the underlying accounts

receivable and payable, and the remaining gain of EUR 88 million would be recognized in equity to

the extent that the cash flow hedges were effective.

Foreign exchange exposure also arises as a result of inter-company loans and deposits. Where the

company enters into such arrangements, the financing is generally provided in the functional

currency of the subsidiary entity. The currency of the company’s external funding and liquid assets

is matched with the required financing of subsidiaries, either directly through external foreign

currency loans and deposits, or synthetically by using foreign exchange derivatives, including cross

currency interest rate swaps and foreign exchange forward contracts. In certain cases where group

companies may also have external foreign currency debt or liquid assets, these exposures are also

hedged through the use of foreign exchange derivatives. Changes in the fair value of hedges

related to this exposure are recognized within financial income and expenses in the statements of

income. When such loans would be considered part of the net investment in the subsidiary, net

investment hedging would be applied.

Translation exposure of foreign-currency equity invested in consolidated entities is generally not

hedged. If a hedge is entered into, it is accounted for as a net investment hedge. Net current-

period change, before tax, of the currency translation reserve of positive EUR 768 million mainly

relates to the development of the USD versus the EUR. As of December 31, 2024, a weakening of

USD by 10% versus the EUR would result in a decrease in the currency translation reserve in equity

of approximately EUR 1,275 million, while a strengthening of USD by 10% versus the EUR would

result in an increase in the currency translation reserve in equity of approximately EUR 1,558

million. Refer to the country risk paragraph for countries with significant foreign currency

denominated equity invested.


	153


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

As of December 31, 2024, external bond funding for a nominal value of USD 1,466 million (liability

at book value: EUR 1,408 million) was designated as a net investment hedge of financing

investments in foreign operations for an equal amount. During 2024, no ineffectiveness was

recognized in the income statement on net investment hedges arising from counterparty and own

credit risk.

As of December 31, 2024, an instantaneous 10% increase in the value of the EUR against all

currencies would lead to an decrease of EUR 106 million in the value of the derivatives, including a

EUR 50 million decrease related to the USD.

As of December 31, 2023, external bond funding for a nominal value of USD 1,474 million (liability

at book value: EUR 1,325 million) were designated as a net investment hedge of financing

investments in foreign operations for an equal amount. During 2023 a total loss of EUR 2 million

was recognized in the income statement as ineffectiveness on net investment hedges, arising from

counterparty and own credit risk.

As of December 31, 2023, an instantaneous 10% increase in the value of the EUR against all

currencies would lead to an decrease of EUR 52 million in the value of the derivatives, including a

EUR 11 million increase related to the USD.

Generally Philips does not hedge the foreign exchange exposure arising from equity interests in

non-functional-currency investments in associates and other non-current financial assets.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in market interest rates. As of December 31, 2024, Philips had

outstanding debt of EUR 7,639 million (2023: EUR 7,689 million), which constitutes an inherent

interest rate risk with potential negative impact on financial results. As of December 31, 2024,

Philips held EUR 2,401 million in cash and cash equivalents (2023: EUR 1,869 million), and had total

long-term debt of EUR 7,113 million (2023: EUR 7,035 million) and total short-term debt of EUR

526 million (2023: EUR 654 million). As of December 31, 2024, Philips had a ratio of fixed-rate

long-term debt to total outstanding debt of approximately 93% compared to 89% one year

earlier. Philips debt has a long maturity profile with an average tenor of long-term debt of 5.9 years

with maturities up to 2042.

The following table provides the impact of a 1% increase/decrease of interest rates on the fair

value of the debt and the annualized net interest expenses.

Philips Group

Interest rate sensitivity in millions of EUR


	2023	2024
Impact 1% interest rate increase on fair value of fixed-rate long-term debt¹ ²	(283)	(304)
Impact 1% interest rate decrease on fair value of fixed-rate long-term debt¹ ²	284	304
Impact 1% interest rate increase on annualized net interest expense³	15	23

1The sensitivity analysis conducted shows that if long-term interest rates were to increase/decrease

instantaneously by 1% from their level of December 31, 2024, with all other variables (including foreign

exchange rates) held constant.

2Fixed-rate long-term debt is excluding forward contracts.

3The impact is based on the outstanding net floating-rate position as of December 31, 2024.

Equity price risk

Equity price risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in equity prices.

Philips is a shareholder in some publicly listed companies and as a result is exposed to potential

financial loss through movements in their share prices. The aggregate equity price exposure in such

financial assets amounted to approximately EUR 4 million as of December 31, 2024 (2023: EUR 14

million). Philips does not hold derivatives in the above-mentioned listed companies. Philips also has

shareholdings in several privately-owned companies amounting to EUR 220 million, mainly

consisting of minority stakes in companies in various industries. As a result, Philips is exposed to

potential value adjustments.

Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will

fluctuate because of changes in commodity prices.

Philips is a purchaser of certain base metals, precious metals and energy. Philips may hedge certain

commodity price risks using derivative instruments to minimize significant, unanticipated earnings

fluctuations caused by commodity price volatility. As of December 31, 2024 Philips had financial

commodity derivatives outstanding to the value of EUR 6 million (2023: nil).

Credit risk

Credit risk represents the loss that would be recognized at the reporting date, if counterparties

failed completely to perform their payment obligations as contracted. Credit risk is present within

Philips trade receivables and contract assets. To have better insights into the credit exposures,

Philips performs ongoing evaluations of the financial and non-financial condition of its customers

and adjusts credit limits when appropriate. In instances where the creditworthiness of a customer is

determined not to be sufficient to grant the credit limit required, there are a number of mitigation

tools that can be utilized to close the gap, including reducing payment terms, cash on delivery, pre-

payments and pledges on assets.

Philips invests available cash and cash equivalents with various financial institutions and is exposed

to credit risk with these counterparties. Philips is also exposed to credit risks in the event of non-


	154


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

performance by financial institutions with respect to financial derivative instruments. Philips actively

manages concentration risk and on a daily basis measures the potential loss under certain stress

scenarios, should a financial institution default. These worst-case scenario losses are monitored and

limited by the company.

The company does not enter into any financial derivative instruments to protect against default by

financial institutions. However, where possible the company requires all financial institutions with

which it deals in derivative transactions to complete legally enforceable netting agreements under

an International Swap Dealers Association master agreement or otherwise prior to trading, and

whenever possible, to have a strong credit rating. Philips also regularly monitors the development

of the credit risk of its financial counterparties. Wherever possible, cash is invested and financial

transactions are concluded with financial institutions with strong credit ratings or with governments

or government-backed institutions.

The following table shows the number of financial institutions with credit rating A- and above with

which Philips has cash at hand and short-term deposits above EUR 10 million as of December 31,

2024.

Philips Group

Credit risk with number of counterparties for deposits above EUR 10 million


	10-100 million	100-500 million	500 million and above
AAA rated bank counterparties		2
AA- rated bank counterparties	1
A+ rated bank counterparties	1	4
A rated bank counterparties	2	2
A- rated bank counterparties	2	2
Total	6	10

For an overview of the overall maximum credit exposure related to debt instruments, derivatives

and loans and receivables, refer to Fair value of financial assets and liabilities.

Country risk

Country risk is the risk that political, legal, or economic developments in a single country could

adversely impact performance. The country risk per country is defined as the sum of the equity of

all subsidiaries and associated companies in country cross-border transactions, such as

intercompany loans, accounts receivable from third parties and intercompany accounts receivable.

The country risk is monitored on a regular basis.

As of December 31, 2024, the company had country risk exposure of EUR 13.6 billion in the United

States, EUR 2.3 billion in the Netherlands, EUR 872 million in China (including Hong Kong). Other

countries higher than EUR 500 million are United Kingdom EUR 787 million, Japan EUR 635 million

and Germany EUR 625 million. Other countries with significant exposure are: Israel EUR 301

million, Singapore EUR 221 million, and India EUR 226 million. The degree of risk of a country is

taken into account when new investments are considered. The company does not, however, use

financial derivative instruments to hedge country risk.

The impact of hyperinflation is also routinely assessed and was not material for the periods

presented.

Other insurable risks

Philips is insured for a broad range of losses by global insurance policies in the areas of property

damage/business interruption, general and product liability, transport, directors’ and officers’

liability, employment practice liability, crime and cybersecurity. The counterparty risk related to the

insurance companies participating in the above-mentioned global insurance policies is actively

managed. As a rule, Philips only selects insurance companies with a financial strength of at least A-.

Throughout the year the counterparty risk is monitored on a regular basis.

To lower exposures and to avoid potential losses, Philips has a global Risk Engineering program in

place. The main focus of this program is on property damage and business interruption risks

including company interdependencies. Regular on-site assessments take place at Philips locations

and business-critical suppliers by risk engineers of the insurer in order to provide an accurate

assessment of the potential loss and its impact. The results of these assessments are shared across

the company’s stakeholders. On-site assessments are carried out against the predefined Risk

Engineering standards, which are agreed between Philips and the insurers. Recommendations are

made in a Risk Improvement report and are monitored centrally. This is the basis for decision-

making by the local management of the business as to which recommendations will be

implemented.

For all policies, deductibles are in place, which vary from EUR 0 million to EUR 10 million per

occurrence, and this variance is designed to differentiate between the existing risk categories within

Philips. Above a first layer of working deductibles, Philips operates its own re-insurance captive,

which during 2024 retained EUR 25 million per claim and EUR 50 million in the annual aggregate

for general, product, professional liability, and marine cargo claims and EUR 15 million aggregate

for cyber.

New contracts were signed effective December 31, 2024, for the coming year, whereby the re-

insurance captive retention remained the same.

30Subsequent events

On January 28, 2025, Philips announced that it has signed an agreement to sell its Emergency Care

Business Unit, which is part of the Connected Care segment, to Bridgefield Capital. The transaction

is subject to the satisfaction of certain closing conditions and receipt of regulatory approval, and is

expected to be completed in the second half of 2025.


	155


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

7Company financial statements


7.1Statements of income	156
7.2Balance sheets before appropriation of results	157
7.3Statements of changes in equity	158
7.4Notes to the Company financial statements	159

Amounts may not add up due to rounding.1


	156


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

7.1Statements of income

Koninklijke Philips N.V.

Statements of income in millions of EUR 1

for the year ended December 31,


		2023	2024
Sales	B	432	465
Cost of sales		(19)	(10)
Gross margin		413	455
Selling expenses		(11)	(19)
General and administrative expenses		(25)	(41)
Other business income	C	116	92
Income from operations	D	493	488
Financial income	E	166	207
Financial expenses	E	(368)	(419)
Results relating to investments in associates	I	(87)	(32)
Income before taxes		203	243
Income tax (expense) benefit	F	(66)	52
Income after tax		137	295
Net income from group companies		(603)	(997)
Net income		(466)	(702)

Amounts may not add up due to rounding. 2


	157


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

7.2Balance sheets before appropriation of results

Koninklijke Philips N.V.

Balance sheets in millions of EUR 2

as of December 31,


		2023	2024
Non-current assets
Property, plant and equipment		1	1
Intangible assets	H	101	120
Financial fixed assets	I	20,759	21,628
Non-current receivables		25	33
Deferred tax assets		502	454
Other non-current financial assets	J	213	173
Other non-current assets		14	23
Total non-current assets		21,615	22,431

Current assets
Current financial assets	J	3	2
Receivables	K	2,239	1,579
Cash and cash equivalents	L	1,605	2,173
Total current assets		3,847	3,754
Total assets		25,462	26,185


		2023	2024
Shareholders’ equity	M
Common shares		183	188
Capital in excess of par value		5,827	6,654
Revaluation reserves		(384)	(89)
Other legal reserves		2,252	3,066
Other reserves		4,615	2,888
Net income		(466)	(702)
Total shareholders’ equity		12,028	12,006

Non-current liabilities
Long-term debt	N	6,170	6,259
Long-term provisions		7
Deferred tax liabilities		13	15
Non-current tax liabilities		243	19
Other non-current liabilities		70	62
Total non-current liabilities		6,504	6,354

Current liabilities
Short-term debt	N	6,738	7,561
Other current liabilities	O	191	264
Total current liabilities		6,929	7,825
Total liabilities and shareholders’ equity		25,462	26,185


	158


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

7.3Statements of changes in equity

Koninklijke Philips N.V.

Statements of changes in equity in millions of EUR

for the year ended December 31,


	Common shares	Capital in excess of par value	Fair value through OCI	Cash flow hedges	Currency translation differences	Affiliated companies	Retained earnings	Treasury shares	Net income	Shareholders ’ equity
			Revaluation reserves		Other legal reserves		Other reserves
Balance as of December 31, 2022	178	5,025	(376)	(2)	1,866	1,010	7,431	(275)	(1,608)	13,249
Appropriation of prior year result							(1,608)		1,608
Net income									(466)	(466)
Net current period change			(20)	29	(578)	(20)	(6)			(595)
Income tax on net current period change			3	(2)	-		3			5
Reclassification into income				(19)	(26)					(45)
Dividend distributed	8	741					(816)			(68)
Transfer of result on disposal of equity investments at FVTOCI to retained earnings			4				(4)			-
Purchase of treasury shares							-			-
Re-issuance of treasury shares		(29)					(24)	54		-
Forward contracts							465	(608)		(143)
Share call options							-			-
Cancellation of treasury shares	(3)						(563)	566
Share-based compensation plans		88								88
Income tax on share-based compensation plans		2								2
Balance as of December 31, 2023	183	5,827	(390)	6	1,263	990	4,878	(262)	(466)	12,028
Appropriation of prior year result							(466)		466
Net income									(702)	(702)
Net current period change			(21)	21	766	62	(80)			749
Income tax on net current period change			9	3	(8)		12			17
Reclassification into income				(29)	(7)					(36)
Dividend distributed	6	762					(799)			(31)
Transfer of result on disposal of equity investments at FVTOCI to retained earnings			311		-		(313)			(2)
Purchase of treasury shares							-	(60)		(60)
Re-issuance of treasury shares		(36)					(18)	54		-
Forward contracts							251	(310)		(59)
Cancellation of treasury shares	(1)						(166)	167
Share-based compensation plans		96								96
Income tax on share-based compensation plans		5								5
Balance as of December 31, 2024	188	6,654	(90)	1	2,014	1,052	3,299	(411)	(702)	12,006

Amounts may not add up due to rounding.


	159


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

7.4Notes to the Company financial statements

A General information to the Company financial statements

Accounting policies applied

The financial statements including the notes thereon have been prepared in accordance with Part 9

of Book 2 of the Dutch Civil Code. In accordance with Section 2:362 (8) of the Dutch Civil Code,

the recognition and measurement principles applied in these company financial statements are the

same as those applied in the consolidated financial statements (refer to General information to the

Consolidated financial statements and the accounting policies relating to specific financial

statement items included in the respective notes to the consolidated financial statements).

Presentation of Company financial statements

The structure of the Company balance sheets and Company statements of income are aligned as

much as possible with the Consolidated statements in order to achieve optimal transparency

between the Group financial statements and the Company financial statements.

The Company balance sheet is presented prior to the appropriation of results.

B Sales

Sales relate to external sales and mainly comprise of license income from intellectual property rights

owned by the company.

C Other business income (expense)

Koninklijke Philips N.V.

Other Business Income in millions of EUR


	2023	2024
Other business income (expense) from sold and deconsolidated businesses	4	6
Other	112	86
Other business income	116	92

Other business income (expense) includes the results from various sold and deconsolidated

businesses.

The line Other mainly includes income and expense from transactions with group companies

regarding overhead services and from brand license agreements.

D Sales and costs by nature

Koninklijke Philips N.V.

Sales and costs by nature in millions of EUR


	2023	2024
Sales	432	465
Costs of materials used	(3)	13
Employee benefit expenses	(15)	(30)
Depreciation and amortization	(10)	(14)
Advertising and promotion	(3)	(3)
Other operational costs	(25)	(34)
Other business income	116	92
Income from operations	493	488

The line Costs of materials used includes foreign exchange results.

For more information about Other business income, refer to Other business income (expense) and

Discontinued operations and assets classified as held for sale.

For a summary of the audit fees related to the Philips Group, refer to the Group financial

statements which is deemed incorporated and repeated herein by reference.

E Financial income and expense

Financial income mainly relates to intercompany financing transactions of EUR 33 million ( 2023:

EUR 32 million) and interest income from third parties of EUR 57 million ( 2023: EUR 26 million).

Interest income from third parties increased mainly due to increase in free cash available.

Financial expense mainly relates to interest paid on external debt of EUR 217 million (2023: EUR

207 million) and interest expense from intercompany financing transactions of EUR 58 million

(2023: EUR 13 million). Increase in interest expense from intercompany financing transactions

mainly comes from an increase in interest expense on in-house bank balance, due to capital

injections made to group companies.


	160


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

F Income taxes

Koninklijke Philips N.V. is the lead legal entity of the fiscal unity that exists for Dutch corporate

income tax purposes and reports the income tax expense and deferred tax assets and liabilities of

the fiscal unity. The components of income before taxes and income tax expense are as follows:

Koninklijke Philips N.V.

Income tax expense in millions of EUR


			2024
Income before taxes			243
Investments in associates, net of income taxes			(32)
Income before taxes excluding Investment in associates			276

Current tax (expense) benefit			96
Deferred tax (expense) benefit			(44)
Income tax (expense) benefit			52
Discontinued operations tax benefit excluded			(140)
Income tax (expense) benefit of continuing operations			(89)

Discontinued operations is a tax benefit relating to tax audit settlements of prior years.

The effective tax rate in 2024 is higher than the Dutch statutory tax rate of 25.8% mainly due to

non-deductible expenses and the increase in Others which mainly represents the effect of the

inclusion of income of other legal entities that are part of the fiscal unity contributing to the fiscal

unity income tax expense, partly offset by recurring tax incentives.

Koninklijke Philips N.V.

Effective income tax rate in %


	2024
Weighted average statutory income tax rate	25.8
Unrecognized tax loss and credit carryforwards	—
Changes to recognition of temporary differences	—
Non-taxable income and tax incentives	(16.6)
Non-deductible expenses	8.8
Withholding and other taxes	(1.4)
Tax rate changes	—
Prior year tax	5.1
Tax expenses (benefit) due to other tax liabilities	(6.6)
Others, net	16.9
Effective income tax rate	32.0

As of December 31, 2024, tax credit carry forwards for which no deferred tax assets have been

recognized in the balance sheet amount to nil (2023 : nil).

Consistent with the IAS 12 amendment regarding Pillar Two taxation as issued by the IASB and

adopted by the EU, Philips does not recognize and disclose deferred taxes arising from tax laws that

implement Pillar Two model rules published by the Organisation for Economic Co-operation and

Development. The estimated current tax expense related to Pillar Two is EUR 1 million, resulting in

an increase of ETR by 0.4% in the company financial statements. This amount has been accounted

for within the income taxes of the reporting period. Refer to section Global minimum tax (Pillar

Two) in Income taxes.

G Employees

The number of persons having a contract with the company as of December 31, 2024 was 8

(2023: 9):

• 3 of them had a services contract;

• 5 of them had a contract of employment.

They were all posted in the Netherlands.

For the remuneration of past and present members of both the Board of Management and the

Supervisory Board, refer to Information on remuneration, which is deemed incorporated and

repeated herein by reference.

H Intangible assets

Intangible assets include mainly licenses and patents. The changes during 2024 were as follows;

Koninklijke Philips N.V.

Intangible assets in millions of EUR


	2024
Balance as of January 1
Cost	239
Amortization / impairments	(138)
Book value	101

Additions	33
Disposal	-
Amortization	(13)
Impairment	(1)
Total change	19

Balance as of December 31
Cost	268
Amortization / impairments	(148)
Book Value	120


	161


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

I Financial fixed assets

Accounting policies

Investments in group companies and associates are measured on the basis of the equity method.

Loans provided to group companies are stated at amortized cost, less impairment. The company

makes use of the option to eliminate intercompany expected credit losses against the book value of

loans and receivables to group companies, instead of elimination against the investments in group

companies.

The changes during 2024 were as follows:

Koninklijke Philips N.V.

Financial fixed assets in millions of EUR


	Investments in group companies	Investments in associates	Loans to group companies	Total
Balance as of January 1, 2024	19,945	133	681	20,759
Changes:
Reclassifications		8		8
Acquisitions/additions	1,522	2	9	1,533
Sales/redemptions	(39)	(11)	(122)	(172)
Net income from group companies and associates	(997)	(25)		(1,022)
Dividends received	(353)			(353)
Translation differences	843	2	(6)	839
Impairment		(10)		(10)
Other	46			46
Balance as of December 31, 2024	20,967	99	562	21,628

Investments in group companies

Investment in group companies increased by EUR 1,022 million. The increase is driven by the capital

injection of EUR 1.4 billion into a US group company. The capital injection took place to settle

intercompany debt and in connection with the Respironics claim. The transaction was cash neutral

at a consolidated group level. For further information regarding the Respironics claim, refer to

Provisions. The increase is offset by negative result from group companies and dividends paid by

group companies to Koninklijke Philips N.V.

No acquisitions were made in 2024. Divestments were not material from the point of view of the

company financial statements. For further information about acquisitions and divestments, refer to

Acquisitions and divestments.

Investments in associates

Investments in associates represent minority investments in various companies with significant

influence.

In 2024 the company recorded its share in negative results of associates of EUR 25 million and

impairment of EUR 10 million. The EUR 8 million in Reclassifications mainly concerns the conversion

of convertible notes. For more information on conversions, refer to Other financial assets.

For further information about associates, refer to Interests in entities.

Loans to group companies

The decrease in loans by EUR 119 million in 2024 is mainly due to the repayment of loans granted

to group companies.

List of investments in group companies

A list of investments in group companies, prepared in accordance with the relevant legal

requirements (Dutch Civil Code, Book 2, Sections 379 and 414), is deposited at the Chamber of

Commerce in Eindhoven, the Netherlands.

J Other financial assets

Other current financial assets

Other current financial assets of EUR 2 million as of December 31, 2024 ( 2023 : EUR 3 million) is

related to earn-out arising from equity investment.

Other non-current financial assets

The changes during 2024 were as follows:

Koninklijke Philips N.V.

Other non-current financial assets in millions of EUR


	Non-current financial assets at FVTP&L	Non-current financial assets at FVTOCI	Non-current financial assets at Amortized cost	Total
Balance as of January 1, 2024	138	68	7	213
Changes:
Acquisitions/additions	32	5	1	37
Sales/redemptions/reductions	(47)	(4)	-	(52)
Value adjustments through OCI		3		3
Value adjustments through P&L	(20)		-	(20)
Translation differences and other	2	2	-	4
Reclassifications	(14)			(14)
Balance as of December 31, 2024	90	74	8	173


	162


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The company's investments in Other non-current financial assets mainly consist of investments in

common shares of companies in various industries and investments in limited life funds.

Acquisitions/additions of EUR 32 million mainly relate to capital calls for certain limited life funds

and bridge financing of equity investment mainly in the form of convertible notes. Sales/

redemptions/reductions of EUR 47 million mainly pertain to the transfer of limited life funds to

other Philips entities. The transaction was neutral at the group level. Reclassifications mainly relates

to equity financing events that resulted in the conversion of notes into equity. For further

information on conversion to equity, refer to Investments in associates.

KReceivables

Koninklijke Philips N.V.

Receivables in millions of EUR


	2023	2024
Trade accounts receivable	107	102
Receivables from group companies	1,916	1,293
Advances and prepaid expenses	60	73
Derivative instruments - assets	68	105
Other receivables	88	6
Receivables	2,239	1,579

Receivable from group companies mainly relate to in-house bank contracts. The position decreased

mainly due to the conversion of loans in the US to equity. For further details, refer to note Debt

and Financial fixed assets.

For further details on derivative instruments, refer to note Fair value of financial assets and liabilities

and Details of treasury and other financial risks.

LCash and cash equivalents

Cash and cash equivalents are all freely available. For further details on Cash and cash equivalents,

refer to note Fair value of financial assets and liabilities and Details of treasury and other financial

risks.

M Shareholders’ equity

Accounting policies

The revaluation reserves and other legal reserves are recognized based on the Dutch Civil Code.

For details, please refer to Group financial statements note Equity .

Revaluation and Other Legal Reserves

As of December 31, 2024, revaluation reserves relate to unrealized loss on financial assets fair value

through OCI of EUR 90 million (2023 : EUR 390 million unrealized losses) and unrealized currency

translation gain of EUR 2,014 million (2023: EUR 1,263 million unrealized gain). Legal reserves

relate to ‘affiliated companies’ of EUR 1,052 million (2023: EUR 990 million) and unrealized gain on

cash flow hedges of EUR 1 million (2023: EUR 6 million unrealized gain).

The item ‘affiliated companies’ relates to the ‘wettelijke reserve deelnemingen’, which is required

by Dutch law. This reserve relates to any legal or economic restrictions on the ability of affiliated

companies to transfer funds to the parent company in the form of dividends.


	163


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

N Debt

Long-term debt

The following tables present information about the long-term debt outstanding, its maturity and

average interest rates in 2024 and 2023 .

Koninklijke Philips N.V.

Long-term debt in millions of EUR


	USD bonds	EUR bonds	Loans from group companies	Forward contracts	Bank borrowings	Total debt
Balance as of January 1, 2024	1,325	4,569	609	396	200	7,100
New financing		686	1,247	65		1,997
Repayment		(346)	(1,417)	(319)	(200)	(2,282)
Exchange differences	82		14			96
Other changes in value		7		6		13
Balance as of December 31, 2024	1,408	4,917	453	148		6,924

Koninklijke Philips N.V.

Long-term debt in millions of EUR, unless otherwise stated


	2024
	Amount outstanding	Current portion	Non-current portion	Between 1 and 5 years	Amount due after 5 years	Average remaining term (in years)	Average rate of interest
USD bonds	1,408	131	1,276	122	1,154	12.3	6.3%
EUR bonds	4,917		4,917	2,639	2,278	4.7	2.3%
Loans from group companies	453	453				0.9	3.1%
Forward contracts	148	82	66	66		1.3	1.2%
Long-term debt	6,924	666	6,259	2,827	3,432

Koninklijke Philips N.V.

Long-term debt in millions of EUR, unless otherwise stated


	2023
	Amount outstanding	Current portion	Non-current portion	Between 1 and 5 years	Amount due after 5 years	Average remaining term (in years)	Average rate of interest
USD bonds	1,325		1,325	240	1,085	13.3	6.3%
EUR bonds	4,569		4,569	2,335	2,234	5.1	2.0%
Loans from group companies	609	609				0.9	3.1%
Forward contracts	396	321	76	76		0.8	1.4%
Bank borrowings	200		200	200		1.2	4.2%
Long-term debt	7,100	930	6,170	2,851	3,319

New external financing in long-term debt mainly relates to the issuance of nominal EUR 700 million

bond due in 2032 under the EMTN program, partially offset by the redemption of EUR 346 million

EUR bonds due in 2025. Other external payments relate to a loan repayment of EUR 200 million

and the settlement of forward contracts with a nominal value of EUR 313 million. The remaining

balance of forward contracts relates to the long-term incentive and employee stock purchase plans.


	164


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Short-term debt

The following table presents information about the short-term debt outstanding in 2024 and 2023.

Koninklijke Philips N.V.

Short-term debt in millions of EUR


	2023	2024
Short-term bank borrowings
Current portion of external long-term debt	321	213
Current portion of intercompany loans	609	453
Other debt to group companies	5,808	6,895
Short-term debt	6,738	7,561

Short-term debt mainly relates to the other debt to group companies of EUR 6,895 million which

represents in-house bank contracts driven by investments and operational cash needs in

subsidiaries. The increase in debt is mainly related to the conversion of loans into equity in the US.

For further details on debt and treasury risk, refer to Debt and Details of treasury and other

financial risks.

OOther current liabilities

Koninklijke Philips N.V.

Other current liabilities in millions of EUR


	2023	2024
Accrued expenses	102	107
Derivative instruments - liabilities	72	98
Other short-term liabilities	18	59
Other current liabilities	191	264

For further details on derivative instruments, refer to note Fair value of financial assets and liabilities

and Details of treasury and other financial risks.

PCommitments and contingencies

The company has contracts with investment funds where it committed itself to make, under certain

conditions, capital contributions to their funds up to an aggregated remaining amount of EUR 76

million (2023: EUR 122 million). As of December 31, 2024, capital contributions already made to

these investment funds are recorded as Other non-current financial assets.

General guarantees as referred to in Section 403, Book 2, of the Dutch Civil Code, have been given

by the company on behalf of several group companies in the Netherlands. The liabilities of these

companies to third parties and investments in associates totaled EUR 1,107 million as of

December 31, 2024 (2023: EUR 1,304 million). Guarantees totaling EUR 328 million (2023: EUR

369 million) have also been given on behalf of other group companies. Bank guarantees totaling

EUR 339 million (2023: nil) have been secured for insurance companies to cover product liability

related cash flows related to the Respironics recall.

The company is the head of a fiscal unity that contains the most significant Dutch wholly-owned

group companies. The company is therefore jointly and severally liable for the tax liabilities of the

tax entity as a whole.

For additional information, refer to Contingencies.

QSubsequent events

For more information refer to Group financial statements Subsequent events.


	165


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

8Sustainability statement

This chapter comprising our sustainability statement and the information incorporated by reference as presented in ESRS cross-reference table. The Notes refer to the location in the sustainability statement where

the disclosures are presented.

Notes to the sustainability statement


	166


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

8.1Tracking our 2025 ESG program

In the table below, we provide a condensed overview of our metrics and targets linked to our ESG commitments, with reference to the topical ESRS. These topics are discussed in greater detail in the corresponding

notes to the sustainability statement, where we also provide further context to the metrics and targets that we use.

We track the effectiveness of our policies and actions through quarterly performance reviews with our Businesses, Functions and Regions. For more information refer to ESG governance.

In 2024, we did not change targets nor corresponding metrics for entity-specific metrics. Our metrics are aligned, where necessary, to the relevant ESRS definitions. If any underlying measurement methodology has

been changed or updated, this is addressed in the relevant note.


Legend	Value chain	p¢q	Upstream	p¢q	Own operations	p¢q	Downstream			2025 target achieved


Note/ Section	Material topics	Commitment	KPI	Value chain	Unit	2020 Baseline	2023	2024	2025 target*
	Environmental	We act responsibly towards our planet in line with UN SDGs 12 and 13.
Section 4.1.2 I XIII	Climate change (ESRS E1)	We will maintain carbon neutrality and use 75% renewable energy in our operations by 2025. We have set ambitious targets to reduce CO₂ emissions in our entire value chain in line with a 1.5 °C global warming scenario (based on Science Based Targets).	Net operational carbon footprint	p¢q	kilotonnes CO 2 - e	0	0	0	0
			Renewable energy in our operations	p¢q	% of energy from renewable sources	72%	77%	80%	75%
			Scope 1 & 2 emissions	p¢q	kilotonnes CO 2 - e	35	22	20	34
			Scope 3 emissions	p¢q	kilotonnes CO 2 - e	7,360	4,973	4,378	4,269 (2030 target)
			% of suppliers committed to Science Based Targets	p¢q	%	N/A	46%	48%	50%
I II	Energy efficiency (ESRS E1)	We will design all new product introductions in line with our EcoDesign requirements by 2025, with ‘EcoHeroes’ accounting for 25% of hardware revenues.	EcoDesigned NPIs	p¢q	%	N/A	N/A	100%	100%
II	Circular Economy (ESRS E5)	We will generate 25% of our revenue from products, services and solutions contributing to circularity, and offer responsible take-back on all professional medical equipment by 2025.	EcoHero revenues	p¢q	% hardware revenues	N/A	15.9%	21.9%	25%
			Circular revenues	p¢q	% total revenues	14.6%	20.0%	24.4%	25%
			Closing the Loop	p¢q	Systems or pieces of equipment	Achieved for large medical equipment	11,500	more than 8,600	Extend to small medical equipment
II	Waste management (ESRS E5)	We will embed circular practices at our sites and put zero waste to landfill by 2025.	Circular Materials Management	p¢q	%	90%	91%	94%	95%
II	Waste management (ESRS E5)		Zero waste to landfill as a percentage of total regular waste	p¢q	%	2.6%	0.0%	0.0%	less than 0.5%


	167


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Note/ Section	Material topics	Commitment	KPI	Value chain	Unit	2020 Baseline	2023	2024	2025 target*
	Social	Our purpose is to improve people’s health and well-being through meaningful innovation, in line with UN SDG 3. We act responsibly towards society and partner with our stakeholders.
V VII XII	Fair & Inclusive workplace (ESRS S1)	We aim to be the best place to work for our employees, providing opportunities for learning and development, promoting an inclusive workplace, and assuring a safe and healthy work environment. We pay at least a living wage and aim for employee engagement above the high-performance norm.	Women in leadership positions	p¢q	% of senior management positions	27%	31%	33%	35%
V VII XII	Fair & Inclusive workplace (ESRS S1)		Employee Engagement Index	p¢q	%	79%	73%	78%	N/A
VIII XII	Employee rights (ESRS S1)		We pay at least a living wage	p¢q	%	100%	100%	100%	100%
XI XII	Employee well-being, Health & Safety (ESRS S1)		Total Recordable Case (TRC) rate	p¢q	Total recordable cases per 100 FTE	0.24	0.24	0.21	N/A
IV X XII	Talent & development (ESRS S1)		Training hours per employee	p¢q	Hours	N/A	43	47.5	N/A
XI XIII Section 4.2.3 XIV	Human Rights (ESRS S1 and S2)		Human Rights impact assessments at our at-risk sites	p¢q	%	60%	100%	100%	100%
XIII	Responsible & resilient supply chains (ESRS S2)	We work with our suppliers to reduce the environmental footprint of our supply chain in line with a 1.5 °C global warming scenario (based on Science Based Targets).	% of suppliers committed to Science Based Targets	p¢q	%	N/A	46%	48%	50%
XIII	Responsible & resilient supply chains (ESRS S2)	Through our supplier development program we will improve the lives of 1 million workers in our supply chain by 2025.	Lives improved in the supply chain	p¢q	Number of lives	302,000	723,000	936,000	1 million
XVI	Access to (quality & affordable) care (ESRS S4)	We aim to improve the health and well-being of 2 billion people per year by 2025, including 300 million people in underserved communities.	Lives improved in medically underserved communities	p¢q	Number of lives	127 million	221 million	242 million	300 million
XVI	Access to (quality & affordable) care (ESRS S4)	It is our strategy to lead with innovative solutions to deliver real change – helping our customers achieve better health outcomes, a better experience for patients and staff, and lower cost of care, as well as helping people take better care of their health.	Lives improved	p¢q	Number of lives	1.53 billion	1.88 billion	1.96 billion	2 billion
VII Section 4.2.3	Product responsibility & safety (ESRS S4)	Enabling the delivery of patient-centric, safe, and high-quality care – the essence of patient safety and quality – is foundational to Philips’ purpose to improve the health and well-being of people through meaningful innovation.	Total training hours in Quality Management Learning (QML)	p¢q	Hours		2.33 million	2.44 million	N/A


	168


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Note/ Section	Material topics	Commitment	KPI	Value chain	Unit	2020 Baseline	2023	2024	2025 target*
	Governance (ESRS G1)	We aim to deliver superior long-term value for our customers and shareholders, and we live up to the highest standards of ethics and governance in our culture and practices.
XIX Section 4.3.4	Business ethics & general business principles (ESRS G1)	Our General Business Principles set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and serve as a reference for the business conduct we expect from all our business partners.		p¢q					N/A
Section 4.3.7	Governance (ESRS G1)	Our management structure and governance combines responsible leadership and independent supervision.		p¢q					N/A
Section 4.3.8	Public affairs (ESRS G1)	We are transparent about our plans, activities, results and contributions to society (e.g., tax reporting, and engaging with shareholders, customers, business partners, governments and regulators through a variety of platforms).		p¢q					N/A
Section 4.3.5	Big data, Al & cybersecurity								N/A
Section 4.3.4	Competition & market access								N/A
II XIV	Sustainable value creation	We engage with our stakeholders and other companies to drive sustainability efforts addressing the United Nations Sustainable Development Goals.	Lives improved	p¢q	Number of lives	1.53 billion	1.88 billion	1.96 billion	2 billion
II XIV	Sustainable value creation		Lives improved in medically underserved communities	p¢q	Number of lives	127 million	221 million	242 million	300 million
II XIV	Innovation & research		Green/EcoDesigned Innovation		EUR	255 million	142 million	263 million	N/A
Section 4.3.7 Section 4.3.8	Geopolitical events		Tax transparency		EUR				N/A

* N/A - Philips currently has not set measurable, quantitative targets related to these material impacts, risks, or opportunities. Philips nevertheless tracks the effectiveness of our policies and actions related to these material impacts, risks,

opportunities through having qualitative ESG commitment and/or quantitative metrics in place. Philips continues to monitor these commitments and metrics via Philips’ ESG governance structure and processes.


	169


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

8.2General basis for preparation

Basis for preparation

Although the European Corporate Sustainability Reporting Directive (CSRD) has not been

transposed and implemented in Dutch law on the date of this Annual Report, Royal Philips has

prepared the accompanying sustainability statement in accordance with the European Sustainability

Reporting Standards (ESRS) as adopted by the European Commission. The sustainability statement

also meets the specifications adopted pursuant to Article 8(4) of the Taxonomy Regulation

(Regulation (EU) 2020/852 of the European Parliament and of the Council).

The sustainability statement consists of chapter 8 Sustainability statement and the information

incorporated by reference as presented in ESRS cross-reference table.

Consolidation

The sustainability statement has been prepared on a consolidated basis, with the same scope of

consolidation as applied in our group financial statements, which is based on the financial control

approach. Therefore it includes ESG information of Royal Philips and its subsidiaries. The

sustainability statement also includes value chain information relating to Philips' direct and indirect

business relationships (downstream and upstream) through which the company has impact and

where identified risks and opportunities are potentially material. Where applicable, this is disclosed

in the relevant section of the material topic. The selected consolidated financial information in the

sustainability statement has been derived from the group financial statements, which are prepare d

in accordance with IFRS. Based on stakeholder engagement and impact assessments of our value

chain, we have identified the material topics, determined their relative impact in the value chain

(downstream, our own operations, upstream) and reported for each topic on the relevant parts of

the value chain. More details are provided in the relevant sections in the sustainability statement.

Philips has not used the option to omit a specific piece of information corresponding to intellectual

property, know-how or the results of innovation. Philips also did not use the exemption from

disclosure of subsidiaries provided for in articles 19a (3) and 29a (3) of Directive 2013/34/EU.

Disclosures in relation to specific circumstances

Time horizons

Short-, medium-, and long-term time horizons are defined in ESRS 1, meaning one year or less, one

to five years, and over five years, respectively. Philips used different time horizons for its Climate

Resilience Assessment. Please refer to Climate change for more details.

Value Chain estimation

Where applicable, we include information from our upstream and/or downstream data as part of

our metrics. We use primary data from our suppliers when available. When value chain information

cannot be measured directly and can only be estimated, measurement uncertainty may exist.

Sources of estimation and outcome uncertainty

We used expert opinions, estimates and proxies for some parts of the metrics calculations and

some data points, which are disclosed in the relevant methodology sections. When metrics are

subject to a high level of measurement uncertainty, the source is disclosed, including the estimates,

assumptions and judgments applied. We regularly reassess our use of these expert opinions,

estimates and proxies based on, for example, the availability of new data, experience, new

standards and methodologies, and the availability and quality of value chain information. There is

therefore an inherent uncertainty in our calculations, for example, lives improved, Environmental

Profit & Loss statement, and Scope 3 carbon emissions calculations. In these cases the figures

reported are Philips’ best estimate. As our insight increases, or higher-quality sources become

available, we may enhance the methodology in the future.

Changes in preparation or presentation of sustainability information

In the current year, Philips has changed the preparation of the sustainability statement to be in

accordance with ESRS. The sustainability information that was included in our Annual Report 2023

was prepared by Philips using the GRI Sustainability Reporting Standards supplemented by Philips’

own criteria. Comparative figures in this year’s sustainability statement have the same definitions

and scopes which were applied in the prior year, unless stated otherwise. In case of material

changes in the preparation and presentation of individual metrics and disclosures, we disclose the

nature of these changes, the new information provided, including the difference between the

previously reported metric and the revised metric and revised comparative figures (if possible).

When it is not possible to report revised comparative information, this will be disclosed.

Subsequent events

On January 28, 2025, Philips announced that it has signed an agreement to sell its Emergency Care

business unit to Bridgefield Capital, which is part of the Connected Care segment. The transaction

is subject to the satisfaction of certain closing conditions and receipt of regulatory approval, and is

expected to be completed in the second half of 2025. Sustainability information related to

Emergency Care business unit is included in the sustainability statement 2024 and after completion

of the transaction this information will be excluded from our future sustainability reporting.

Reporting errors in prior periods

Adjustments of our sustainability statement may or may not follow an adjustment or restatement

of our Group financial statements (if any), and will be based on our judgment as to whether we

should restate information, considering materiality. We clearly disclose where we have restated any

information, including the nature of the correction.

Philips did not identify material misstatements related to sustainability information in prior reporting

periods.


	170


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Incorporation by reference

Philips applied the option to incorporate content in this sustainability statement by reference, as

defined in ESRS 1. By doing so, we aim to enhance the readability of the sustainability statement

and provide the relevant context.

We included links to external websites for information purpose only; these links are not

incorporated by reference into the sustainability statement as information addressing the relevant

ESRS disclosure requirements are presented in the sustainability statement itself.

8.2.1Tracking trends

We follow external trends and upcoming legislation to determine the issues most relevant for our

company and where we can make a positive contribution to society at large. In addition to our own

research and stakeholder engagement, we make use of a variety of sources, including the United

Nations Environmental Programme (UNEP), World Bank, World Economic Forum (WEF),

International Financial Reporting Standards (IFRS) and ISSB, EFRAG, World Health Organization, the

World Business Council for Sustainable Development (WBCSD), and various rating agencies and

analyst reports. Our work also involves tracking topics of concern to governments, non-

governmental organizations (NGOs), regulatory bodies, academia, and following the resulting

media coverage.

8.2.2ESG governance, strategy and policies

ESG is embedded in our core business processes, such as innovation (EcoDesign), sourcing (Supplier

Sustainability Program), manufacturing (Sustainable Operations), logistics (Green Logistics), and in

programs such as our Circular Economy program.

Statement on due diligence

Philips incorporates due diligence in various parts of its operating model. An overview of the core

elements of due diligence is given in the next table :

Philips Group

Steps of the due diligence process


Core elements of due diligence	References in sustainability statement *
Embedding due diligence in governance, strategy and business model	ESRS 2 GOV-2: Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies
	ESRS 2 GOV-3: Integration of sustainability-related performance in incentive schemes
	ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model
Engaging with affected stakeholders in all key steps of due diligence	ESRS 2 GOV-2: Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies
	ESRS 2 SBM-2: Interests and views of stakeholders
	ESRS 2 IRO-1:Description of the processes to identify and assess material impacts, risks and opportunities
	ESRS 2 MDR-P: Policies adopted to manage material sustainability matters
	Topical ESRS: reflecting the different stages and purposes of stakeholder engagement throughout the due diligence process.
Identifying and assessing adverse impacts	ESRS 2 IRO-1 (including Application Requirements related to specific sustainability matters in the relevant ESRS)
Identifying and assessing adverse impacts	ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model
Taking actions to address those adverse impacts	ESRS 2 MDR-A: Actions and resources in relation to material sustainability matters
Taking actions to address those adverse impacts	Topical ESRS: reflecting the range of actions, including transition plans, through which impacts are addressed
Tracking the effectiveness of these efforts and communicating	ESRS 2 MDR-M: Metrics in relation to material sustainability matters
	ESRS 2 MDR-T: Tracking effectiveness of policies and actions through targets
	Topical ESRS: regarding metrics and targets

*Please refer to the the ESRS cross-reference table for the paragraphs in the sustainability statement

Strategy

Strategy, business model, and value chain

At Philips, ESG has been embedded in the strategy for over 15 years, and is driven by five-year

programs. As a health technology company, Philips is committed to driving progressive value

creation through a strategy of focused growth, scalable patient- and people-centric innovation, and

focus on reliable execution supported by our culture of impact with care. We have a portfolio of

patient- and people-centric innovations in hardware, software, AI and services, supporting care in

the hospital and in the home. We serve our key customers including healthcare providers, patients,

and people who use our products. Our integrated supply chain is tailored to customer needs, which

encompasses supplier selection and management through procurement, manufacturing across all

the industrial sites, logistics and warehousing operations, and customer installation, as well as

demand/supply orchestration.


	171


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

We gather stakeholder inputs as described in Double Materiality Assessment and Working with

stakeholders and advocacy. We summarized the current and future expected benefits for our

stakeholders in the Impacts, Risks and Opportunities table. For headcount of employees by

geographical areas, refer to Employees headcount by contract type and region.

Interests and view of stakeholders

Philips actively engages with stakeholders and this engagement is closely aligned with the

company’s purpose to improve people’s health and well-being through meaningful innovation.

More information on this process can be found in Working with stakeholders and advocacy.

Material impacts, risks, and opportunities and their interaction with strategy and business

model

Philips conducted a Double Materiality Assessment (DMA) in 2024 to identify material topics, the

related impacts risks and opportunities, and the subsequent reporting scope. Details can be found

in Double Materiality Assessment and Material topics and our focus.

Policies

Policies adopted to manage material sustainability matters

Philips policies relating to the material topics identified through the DMA process can be found in

the Policy Overview. More details on these policies can be found in the topical sections in the

sustainability statement.

To read the policies in full, please refer to ESG downloads. To read the General Business Principles

in full, please refer to General Business Principles. To read the SpeakUp Policy in full please refer to

Philips SpeakUp Policy.

The policies and the General Business Principles are made available via the Philips website to all

potentially affected stakeholders, and to stakeholders who need help to implement them. The

scope of the policies includes activities of Philips, including all of its Businesses, Regions, and

Functions. Key stakeholders, such as employees, customers and NGOs, are engaged to understand

their interests. These interests are fully considered and their inputs inform Philips policies both in

their objectives and their governance. For more information on how Philips engages with

stakeholders, please refer to Working with stakeholders and advocacy.

Actions

Actions and resources in relation to material sustainability matters

Actions and resources relating to the material topics can be found in the topical sections in the

sustainability statement.

8.2.3External assurance

EY Accountants B.V. (EY) has issued an assurance report on the information included in our

sustainability statement. Refer to Independent auditor’s assurance report on the ESG information

and the EU Taxonomy information . Also refer to ESRS cross-reference table where we specify level

of assurance provided by EY. All datapoints in the ESRS cross-reference table are subject to limited

assurance. In addition, the sustainability information on which EY provided reasonable assurance in

prior year has been included in the FY2024 reasonable assurance scope. In 2023, the sustainability

information was prepared by Philips using the GRI Sustainability Reporting Standards supplemented

by Philips' own criteria. Comparative figures of the prior year have the same definitions and scopes,

which are applied in the current year unless otherwise stated.

Where the measurement of a metric has been validated by an external organization other than EY,

this is clearly indicated in the relevant section.

8.3Double Materiality Assessment

We have conducted a Double Materiality Assessment (DMA) to determine the scope of

sustainability reporting requirements applicable to us, pursuant to the EU Corporate Sustainability

Reporting Directive (CSRD) and the related European Sustainability Reporting Standards (ESRS). This

is the third DMA we conducted. We have built years of experience conducting impact materiality

assessments in line with the GRI requirements and consider it a multi-stakeholder process. Please

refer to Working with stakeholders and advocacy.

The DMA addresses both financial materiality (the impact of society on Philips) as well as impact

materiality (the impact of Philips on society). We believe that the ESG topics we identified, have the

greatest impact on our business and the greatest level of concern to stakeholders along our value

chain, for instance patient safety and quality.

Taking our 2023 DMA as a starting point, we used an evidence-based approach to this year’s DMA,

DMA requirements under the CSRD, and now includes data from our supply chain partners and industry

peers, as well as customers. We included, for example, data from 21 key suppliers, 37 customers of our

Businesses, 32 peer companies and 72 countries. The application allows automated sifting and analysis

of millions of data points from publicly available sources, including corporate reports, mandatory

regulations and voluntary initiatives, as well as news. Combining all input, we first created a long list of

sustainability topics based on the outcome of this assessment and analyzed the number of occurrences

in the AI tool. We narrowed down this list based on workshops with internal subject matter experts.

From the original list, 32 of the most relevant topics were retained for the short-list of sustainability

topics and mapped against the company’s value chain. These topics were clustered to avoid overlaps. As

part of the process, we defined and assessed Impacts, Risks and Opportunities (IROs, as referred to by

the ESRS) with respect to the identified topics connected to our strategy and business model. Subject

matter experts assessed the materiality of negative impacts based on scale, scope and any irremediable

character. The materiality of positive impacts was assessed based on scale and scope. As such, positive

and negative impacts have been assessed, where most impacts were also assessed to be ‘actual’ rather

than ‘potential’. Materiality thresholds used in the DMA have primarily a qualitative nature and are

quantitative where possible. For risks and opportunities, we assessed the dependencies on natural,

human and social resources. The materiality of risks and opportunities is assessed based on a

combination of the likelihood of occurrence and the potential magnitude of the financial effects.

Subsequently, we created a validation survey, which was sent to more than 300 internal and external

stakeholders. We received 117 responses from a representative stakeholder group.


	172


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

We calibrated the financial and impact materiality of the 20 topics (clustered from 32 topics) with the CSRD Steering Committee, a team of internal experts from Enterprise Risk Management, Group Control,

Internal Audit, Legal, Insurance and Risk Management, People Function, and Sustainability and aligned them with our Enterprise Risk Management assessment.


	173


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Results

As a result of the DMA, three topical standards, water, pollution, and biodiversity, were deemed

not material for our strategy and business model, which is also supported by the outcome of our

EP&L, the Climate Resilience report, and the TNFD report. The latter includes the process of how

Philips assessed IROs, specifically related to pollution, water, and biodiversity for own sites and

business activities. Next, three sub-topics from ESRS S1 were assessed to be not material to Philips:

child labor, forced labor and adequate housing. Philips did not explicitly consult with affected

communities as we deemed our current stakeholder consultation process to be sufficient.

The results were calibrated and approved by our Board of Management and the other Executive

Committee members, followed by the Supervisory Board.

During the calibration sessions, the financial materiality of most of the Environmental topics

increased compared with the initial assessment. On the Social topics, the financial impact of Human

rights increased the most, followed by Fair & inclusive workplace. Product responsibility & safety,

Geopolitical events, Big data, AI and cybersecurity, and Business ethics & general business principles

were assessed to have the highest financial materiality, similar to 2023.

Overall, the impact materiality of the resulting topics did not change significantly compared to the

2023 DMA.

Philips has not identified any actual material risks and opportunities meaning that the risks and

opportunities identified as an outcome of Philips' DMA process do not have any current financial

effects on Philips' financial position, cash flows, and carrying value of assets and liabilities reported

in the financial statements within the next annual reporting period.

The material topics are monitored regularly. The 2024 DMA also serves as input for the

development of our 2030 ESG program. Assessing these material topics enables us to prioritize and

address these in our policies, programs, targets and actions, and address the material impacts, risks,

and opportunities with full consideration of the interests of the key stakeholders, such as end-users.

Material topics

For 2024, Philips reports on topical standards ESRS E1 (climate change), E5 (resource use and the

circular economy), S1 (own workforce), S2 (workers in the value chain), S4 (consumer and end-

users), and G1 (business conduct). Philips also reports on a number of company-specific topics,

such as product responsibility, product safety, big data, AI and cybersecurity. The accompanying

table provides an overview of the material topics, policies, and metrics, along with the applicability

in our value chain.


	174


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Legend

Time horizon

òòò

Short-term

òòò

Medium-term

òòò

Long-term

Value chain

p¢q

Upstream

p¢q

Own operations

p¢q

Downstream


Environmental	Impacts, Risks and Opportunities	Description	Time horizon	Policies	Actions	Metrics	Value chain	2025 Target
								KPI	Unit	2025 target
Climate change (ESRS E1)	Material negative impact, material risk	As a healthcare company, Philips has a negative impact on the environment due to GHG emissions as a result of Philips' own operations and value chain activities.	òòò	Environmental Policy	Section 4.1.2 Note I Note XIII	E1-5 – Energy consumption and mix E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions E1-8 – Internal carbon pricing Entity specific : Operational Carbon Footprint	p¢q	Net operational carbon footprint	kilotonnes CO 2 - e	0
								Renewable energy in our operations	% of energy from renewable sources	75%
								Scope 1 & 2 emissions	kilotonnes CO 2 - e	34
		Philips is exposed to certain physical risks (including acute and chronic risks) and certain transitional risks which can lead to disruptions in Philips' operations, supply chain, and increased costs.	òòò					Scope 3 emissions	kilotonnes CO 2 - e	4,269 (2030 target)
								% of suppliers committed to Science Based Targets	%	50%
Energy efficiency (ESRS E1)	Material risk, material opportunity	Risk of losing Philips' competitive position if Philips does not develop energy-efficient equipment.	òòò	Environmental Policy	Note I Note II	E1-5 – Energy consumption and mix Entity specific: EcoDesigned new product introductions (NPIs) Green Innovation	p¢q	EcoDesigned NPIs	%	100%
		Risk of reputation loss if Philips fails to deliver on external (e.g., SBTi) commitments and fails to increase the share of renewables on site.	òòò
		Philips has a potential opportunity to further improve its reputation which may lead to increased sales if Philips continues to develop energy-efficient equipment through its' EcoDesign program and bring them to market.	òòò


	175


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Environmental	Impacts, Risks and Opportunities	Description	Time horizon	Policies	Actions	Metrics	Value chain	2025 Target
								KPI	Unit	2025 target
Circular Economy (ESRS E5)	Material negative impact, material risk, material opportunity	Philips has a negative impact on the environment due to resource extraction to manufacture Philips' products that can further contribute to resource scarcity.	òòò	Environmental Policy	Note II	E5-4 – Resource inflows E5-5 – Resource outflows Entity specific: Environmental Profit & Loss Circular Revenues EcoHero Revenue EcoDesigned NPIs Closing the Loop	p¢q	EcoHero revenues	% hardware revenues	25%
		Risk of resource scarcity and risk of competing for sustainable materials can result in lack of resiliency in Philips' supply chain and increased costs of operation.	òòò
		Risk of failing to meet customers' changing demands from customers (buying more environmentally friendly) can result in declining sales. Philips could face challenges in incorporating EcoDesign criteria from new or upcoming legislation into its products and services.	òòò					Circular revenues	% total revenues	25%
		Opportunity to further embed circular economy practices across Philips' value chain, which can further grow Philips' business and reputation.	òòò					Closing the Loop	Systems or pieces of equipment	Extend to small medical equipment
Waste management (ESRS E5)	Material negative impact	Philips has a negative impact on the environment as a result of Philips putting a significant amount (and weight) of electronics products to the market, which is also one of the world's fastest growing waste streams.	òòò	Environmental Policy	Note II	E5-5 – Resource outflows Entity specific: Circular Revenues Circular Material Management Waste to Landfill Closing the Loop	p¢q	Circular Materials Management	%	95%
		Philips has a negative impact on the environment as a result of Philips generating waste in own operations and value chain because of Philips' manufacturing activities.	òòò					Zero waste to landfill as a percentage of total regular waste	%	less than 0.5%


	176


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Social	Impacts, Risks or Opportunities	Description	Time horizon	Policies	Actions	Metrics	Value Chain	2025 target
								KPI	Unit	2025 target
Fair & Inclusive workplace (ESRS S1)	Material positive impact, material opportunity	Philips makes a positive impact on employees by promoting an inclusive workplace, where all employees and other workers feel valued and respected.	òòò	General Business Principles, Diversity & Inclusion Policy, Fair Employment Policy	Note V Note VII Note XII	S1-6 – Characteristics of the undertaking’s employees S1-7 – Characteristics of non- employee workers in the undertaking’s own workforce S1-9 – Diversity metrics S1-12– Persons with disabilities S1-16 – Compensation metrics (pay gap and total compensation) Entity specific: Women in leadership positions Employee Engagement Index	p¢q	Women in leadership positions	% of senior management positions	35%
		Philips has an opportunity to support and strengthen employee belonging and employment engagement by providing a fair, safe and respectful treatment for all employees in employment practices, compensation and an inspiring place to work and grow.	òòò					Employee Engagement Index	%	N/A
Employee rights (ESRS S1)	Material positive impact, material risk	Philips has positive impacts on employees by respecting employee rights, providing at least a living wage to all employees, providing fair employment, providing fair and equal opportunities for development, and respecting employees' right to organize and collective bargaining.	òòò	General Business Principles, SpeakUp Policy, Fair Employment Policy, Human Rights Policy	Note VIII Note XII	S1-8 – Collective bargaining coverage and social dialogue S1-10 – Adequate wages S1-11 – Social protection Entity specific: Philips pays its employees at least a living wage	p¢q	We pay at least a living wage	%	100%
		Risk of fines, legal liabilities, and reputational damage for Philips due to Philips not adequately addressing employee rights in their operations.	òòò
Employee well- being, Health & Safety (ESRS S1)	Material positive impact, material negative impact, material risk	Philips has a positive impact on employees' well-being as a result of providing a healthy work-life balance.	òòò	Diversity & Inclusion Policy, Occupational Health & Safety Policy, Mental Health Champion program	Note XI Note XII	S1-14 – Health and safety metrics S1-15 – Work-life balance metrics	p¢q	Total Recordable Case (TRC) rate	Total recordable cases per 100 FTE	N/A
		Negative impact on Philips' employees due to work- related incidents and illnesses.	òòò
		Health & Safety: Risk of fines, legal liabilities, increased absenteeism due to work-related incidents and illnesses in Philips' own operations.	òòò
Talent & development (ESRS S1)	Material positive impact, material opportunity	Philips has positive impacts on employees by providing opportunities to develop their skills and to realize their full potential through on-the job training, learning from others (such as through coaching and mentoring) and virtual and classroom courses.	òòò	Fair Employment Policy	Note IV Note X Note XII	S1-13 – Training and skills development metrics	p¢q	Training hours per employee	Hours	N/A
		Philips has an opportunity to further strengthen relationships with employees and increase company performance through employees' continuous learning and growth.	òòò


	177


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Social	Impacts, Risks or Opportunities	Description	Time horizon	Policies	Actions	Metrics	Value Chain	2025 target
								KPI	Unit	2025 target
Human Rights (ESRS S1 and S2)	Material negative impact (operations and supply chain), material risk (supply chain)	Potential impact of discrimination, including harassment on Philips’ workforce and workers in Philips' supply chain through the failure to ensure a safe and respectful workplace and/or ineffective grievance mechanisms.	òòò	Human Rights Policy	Note XI Note XIII Section 4.2.3 Note XIV	S1-17 – Incidents, complaints and severe human rights impacts S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions Entity specific: Human rights impact assessments at our at-risk sites Suppliers participating in Supplier Development program	p¢q	Human Rights impact assessments at our at-risk sites	%	100%
		Potential negative impact of illegal or unethical labor practices on own workforce and workers in Philips' supply chain.	òòò
		Risk of fines, legal proceedings, and reputational damage due to incidents of human rights violations, including existing and emerging regulatory requirements.	òòò
Responsible & resilient supply chains (ESRS S2 and G1)	Material positive impact, material risk	Philips brings positive impacts to workers in the value chain by engaging suppliers in sustainability initiatives through its supplier sustainability program.	òòò	General Business Principles Human Rights Policy	Note XIII	S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions G1-2 – Management of relationships with suppliers Entity specific: Human rights impact assessments, Suppliers participating in Supplier Development program	p¢q	% of suppliers committed to Science Based Targets	%	50%
		Risk of loss in revenue and risk of reputational damage for Philips due to not having a resilient supply chain as a result of poor working conditions and unequal treatment of workers in the value chain by Philips' suppliers.	òòò					Lives improved in the supply chain	Number of lives	1 million


	178


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Social	Impacts, Risks or Opportunities	Description	Time horizon	Policies	Actions	Metrics	Value Chain	2025 target
								KPI	Unit	2025 target
Access to (quality & affordable) care (ESRS S4)	Material positive impact, material opportunity	Philips makes a positive impact on consumers, customers and their patients by improving people's health and well-being by bringing access to quality and affordable care.	òòò	General Business Principles, Stakeholder Engagement Policy	Note XVI	S4-4 – Taking action on material impacts on consumers and end-users, and approaches to managing material risks and pursuing material opportunities related to consumers and end- users, and effectiveness of those actions Entity specific: Lives improved Lives improved in underserved health communities	p¢q	Lives improved	Number of lives	2 billion
		Philips has an opportunity to further its' partnerships with healthcare customers to increase productivity and deliver better care for more people, additionally to further empower more people to take care of their health and well-being through Philips' personal health propositions.	òòò					Lives improved in medically underserved communities	Number of lives	300 million
Product responsibility & safety (ESRS S4)	Material negative impact, material risk	Philips can have negative impacts on its consumers, its customers and their patients because of the safety and quality compliance of Philips' products and services.	òòò	General Business Principles, SpeakUp Policy, Quality and Safety Standards	Note XVII Section 4.2.3	S4-4 – Taking action on material impacts on consumers and end-users, and approaches to managing material risks and pursuing material opportunities related to consumers and end- users, and effectiveness of those actions Entity specific: Quality Management Learning (QML)	p¢q	Total training hours in Quality Managemen t Learning (QML)	Hours	N/A
		Risk of substantial fines, reputational damages or legal costs due to defects of Philips' products.	òòò


	179


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Governance	Impacts, risks or opportunities	Description	Time horizon	Policies	Actions	Metrics	Value Chain	2025 target
								KPI	Unit	2025 target
Business ethics & General Business Principles (ESRS G1)	Material positive impact, material risk	Philips makes a positive impact on people and society by operating in a responsible and ethical manner, contributing to long-term value creation for all stakeholders.	òòò	General Business Principles, SpeakUp Policy	Note XIX Section 4.3.4	G1-1– Corporate culture and Business conduct policies G1-3 – Prevention and detection of corruption and bribery G1-4 – Confirmed incidents of corruption or bribery G1-6 – Payment practices	p¢q			N/A
		Risk of non-compliance with business conduct rules and regulations due to unethical behaviors, including corruption and bribery.	òòò
Governance (ESRS G1)	Material risk, material opportunity	Risk of not effectively simplifying the organization and ways of working, including (but limited to) changes in governance, processes, and IT landscape and architecture.	òòò	General Business Principles	Section 4.3.7	Entity specific: Tax transparency	p¢q			N/A
		Philips has an opportunity to grow its business by creating a simplified, more agile operating model to improve the execution of Philips' strategy.	òòò
Public affairs (ESRS G1)	Material positive impact, material risk	Philips has positive impacts on internal and external stakeholders by actively engaging in public affairs; making advocacy efforts to foster an open, meaningful, effective, and informed dialogue regarding Philips' activities; and meeting internal and external stakeholders’ needs, concerns and expectations.	òòò	Stakeholder Engagement Policy	Section 4.3.8	G1-5 – Political influence and lobbying activities	p¢q			N/A
		Philips may be unable to meet internal or external aims or expectations with respect to ESG-related matters	òòò
Big data, AI & Cybersecurity	Potential negative impact, material risk, opportunity	Philips can have negative impacts on employees, customers, and consumers if Philips fails to meet cybersecurity standards.	òòò	General Business Principles, Internal cybersecurity policies	Section 4.3.5	S1-17 – Incidents, complaints and severe human rights impacts	p¢q			N/A
		Risk of business operations disruptions, customer dissatisfaction, reputation loss, and legal liabilities and fines, if Philips fails to meet cybersecurity standards.	òòò
		Philips has an opportunity to further integrate AI, and incorporate AI and capabilities in its products and services, which can result in improving customer experiences and driving efficiencies, which in turn grows Philips' business.	òòò
Competition & market access	Material positive impact, material risk	Philips can have a positive impact on society by complying with global regulations and standards and advocate fair competition.	òòò	General Business Principles, SpeakUp Policy	Section 4.3.4	S1-17 – Incidents, complaints and severe human rights impacts	p¢q			N/A
		Risk of substantial fines, reputational damage or legal costs due to competition and market access issues.	òòò


	180


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Governance	Impacts, risks or opportunities	Description	Time horizon	Policies	Actions	Metrics	Value Chain	2025 target
								KPI	Unit	2025 target
Sustainable value creation	Material positive impact, material opportunity	Philips has positive impacts on people and society by delivering sustainable value to its customers and consumers.	òòò	General Business Principles, Environmental Policy	Note II Note XIV	Entity specific: Lives improved Lives improved in medically underserved communities	p¢q	Lives improved	Number of lives	2 billion
		Philips has an opportunity to create sustainable value by developing sustainable products and solutions.	òòò					Lives improved in medically underserved communities	Number of lives	300 million
Innovation & research	Material positive impact, material opportunity	Philips can have a positive impact on society by developing sustainable products and solutions.	òòò	Environmental Policy	Note II Note XIV	Entity specific: Green/EcoDesigned innovation	p¢q	Green/ EcoDesigned Innovation	EUR	N/A
		Opportunity to gain sustainable competitive advantage and create value with sustainable impact by delivering scalable, people-centric, and patient-centric innovations.	òòò
Geopolitical events	Material risk	Risk of adversely impacted business and operations due to unfavorable macro-economic conditions and geopolitical instability in global and individual markets as result of changes in politics as well as monetary, trade and tax policies in the US, the EU and China.	òòò	Stakeholder Engagement Policy	Section 4.3.7 Section 4.3.8	Entity specific: Tax transparency	p¢q	Tax transparency	EUR	N/A

The scope of below policies applies to Philips Group including all of its Businesses, Regions, and Functions. In general, as stated in the ESG Governance section in Chapter 4, the Board of Management defines

Philips’ ESG strategy, commitments, programs, action plans and policies, oversees major transactions, monitors progress on ESG priorities (including the implementation of due diligence), and takes corrective action

where needed.

Philips Group

Policy Overview


Policy	Key content	Third party standards	Reference to relevant section	Availability of the policy
Environmental Policy	To optimize Philips' environmental strategy and performance to support the transition towards a low-carbon, nature positive and circular economy through Philips' key environmental programs including Climate Action and Circular Economy addressing the below key aspects of the program: • reduce full value chain emissions and building Philips' adaptive capacity • implement energy efficiency measures, phasing out fossil fuels, procuring renewable electricity • maximize value with minimal consumption of virgin and non-renewable materials guided by Philips' circularity principles 'use less, use longer, and use again' through application of EcoDesign and Circular principle in the design of software and hardware as well as in manufacturing, end-use management, and shift towards cloud	UN SDG TCFD	8.4 Environmental information	Philips Key ESG downloads
General Business Principles	To establish Philips' standard for integrity, guiding ethical behavior, transparency, and accountability.	N/A	4.3.4 General Business Principles (GBP) 8.6 Governance information	Philips website
General Business Principles	To set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and serve as a reference for the business conduct we expect from all our business partners.	N/A		Philips website


	181


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Diversity & Inclusion Policy	To have a diverse workforce and an inclusive work environment, and to be an equal-opportunity employer, ensuring that all hiring, promotions, and pay decisions are based solely on merit, qualifications and performance.	N/A	8.5 Social information	Philips Key ESG downloads
Diversity & Inclusion Policy	Commitment to not discriminate on the basis of race, color, ethnicity, age, gender, gender identify or expression, sexual orientation or identity, marital status, language, background, religion, health status, pregnancy, political or other opinions, disability, national or social origin/birth or any other status in our recruitment, hiring, training, promotion, compensation, or employment practices.	N/A	8.5 Social information	Philips Key ESG downloads
Fair Employment Policy	Details the ethical and social principles that govern the company's relationship with its employees and other workers world wide.	International Bill of Human Rights International Labour Organization (ILO)	8.5 Social information	Philips Key ESG downloads
	Promotes transparency, accountability, and a positive work environment and is aimed at creating a fair and equal work space.
	Create an environment of inclusion and belonging where all employees and other workers are treated fairly, free from discrimination, harassment, and other prohibited behaviors.
	Provide all employees with fair and equal development opportunities.
Speak Up Policy	To ensure the highest standards of business conduct by sustaining a culture in which all employees show ethical conduct, and where doing things ethically is recognized and valued.	N/A	8.5 Social information 8.6 Governance information	Philips website
Speak Up Policy	To establish a process of reporting a concern and explanation of process of subsequent investigation in situations which people do not uphold the standards of business conduct, leading to potential violations of the GBP.	N/A	8.5 Social information 8.6 Governance information	Philips website
Human Rights Policy	Commitment to identify, prevent, and mitigate adverse human rights impacts. Philips' commitment to human rights, including labor rights of workers, extends to other parts of our value chain, affecting our business partners, suppliers, and customers.	International Bill of Human Rights International Labour Organization (ILO)	8.5.2 Workers in the value chain	Philips Key ESG downloads
		Declaration on Fundamental Principles and Rights at Work
	Philips conducts human rights due diligence by identifying, prioritizing, and addressing impact areas and aims to periodically review and strengthen our due diligence approach in alignment with our own learnings and industry best practices.	United Nations Guiding Principles on Business and Human Rights (UNGP)
		Organization for Economic Co-operation and Development (OECD)
Occupational Health & Safety Policy	Commitment to prevent injuries, illnesses and incidents by providing a health and safe working environment to every employee, contractor and visitor through proactive risk management focused on: • hazard control and elimination • consultation and engagement of employees • fostering a culture of health and well-being • ensuring regulatory compliance and continual improvement through OHS performance management	ISO standard	8.5 Social information	Philips Key ESG downloads
Mental Health Champion Program	To promote and support well-being and mental wellness. Providing the right foundations for the Mental Health Champions will help create a more engaged, happy and high performing culture at Philips.	N/A	Note V Diversity, Inclusion and Well- Being	Philips intranet
Quality and Safety Standard	Expresses our overall intention and direction with respect to quality. It states our objectives for, and commitment to, quality.	N/A	4.3.3 Patient safety, quality and regulatory	Philips intranet
Stakeholder Engagement Policy	To pursue and foster an open, meaningful, effective, and informed dialogue regarding our activities and our internal and external stakeholders' needs, concerns and expectations.	1.1.5 of the Dutch Corporate Governance Code	4.3.8 Working with stakeholders and advocacy 8.3 Double Materiality Assessment	Philips website
Internal Cybersecurity Policies	Philips’ products and services need appropriate security features and controls to ensure our customers and Philips can comply with applicable legislation, recommended security best practices and internal policies.	N/A	4.3.5 Cybersecurity	Philips intranet


	182


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

In addition to the DMA process where we specifically consult affected stakeholders regarding inputs to the materiality assessment, Philips also engage our key stakeholders throughout the year which help us deliver

on one of our key ESG commitments: to be transparent about our plans, activities, targets, results and contributions to society, and to engage with shareholders, customers, business partners, employees,

academics, governments and regulators through a variety of platforms.

Philips Group

Stakeholder engagement overview (non-exhaustive)


	Stakeholders	Processes	Results
Employees	• European Works Council • Local works councils • Individual employees	Regular meetings across all levels (such as individual discussions, group sessions, and town hall meetings), quarterly Employee Survey, employee development process, quarterly update webinars. For more information, refer to Social. Regular mail updates, team meetings, webinars	Engaged and informed employees, action plans, policies and policy updates, offering attractive employment and career paths, fostering skill development,talent and experience
Customers	• Hospitals • Retailers • Consumers	Regular engagements dialogue and guidance, joint (research) projects, business development, Lean value chain projects, strategic partnerships, consumer panels, Net promoter scores, Philips Customer Experience Centers, Philips customer care centers, training centers, social media	New technologies and processes, frustration-free packaging solutions, green consumer propositions, life cycle analysis of products, EU Product Environmental Footprint pilots
Suppliers	• Chinese suppliers in the Supplier Development program • Randstad, Lenovo	Supplier development activities (including topical training sessions), supplier forums, supplier website, participation in industry working groups such as COCIR and RBA. For more information, refer to Supplier sustainability & Workers in the value chain	Supplier improvement projects, supplier commitments to Science Based Targets to reduce CO 2 -e emissions, joint projects, informed selection of suppliers
Governments, municipalities, etc.	• European Commission • US government • Chinese government	Regular (topical) meetings and engagements, research projects, policy and legislative developments, business development, multi-stakeholder projects	Feedback on proposed legislation, investment plans, transition plans to a circular and low-carbon society, aligning business model and strategy to mitigate risk, ensuring regulatory compliance
NGOs	• UNICEF, International Red Cross • Friends of the Earth, Greenpeace	Topical meetings, multi-stakeholder projects, joint (research) projects, innovation challenges, renewables projects, social investment program and Philips Foundation	Projects to increase access to care in underserved communities, action plans, policies, site-specific initiatives
Investors	• Mainstream investors • ESG investors • Investor platforms	Webinars, roadshows, capital markets day, investor relations and sustainability accounts	Green and Sustainability Innovation Bonds, visits to Philips Customer Experience Centers, enhanced transparency
Communities	• Local communities • Underserved and disadvantaged communities	Active engagement, supporting initiatives, building relationships, addressing questions and concerns, engaging with independent foundations, increased direct- to-consumer relationships	Volunteering, internships, STEM (Science, Technology, Engineering, Mathematics) initiatives, social value creation, building trust, community benefits


	183


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

8.4Environmental information

Note I Climate change

Climate change has been a material topic for Philips for many years, and the Double Materiality

Assessment (DMA) performed in 2024 re-confirmed this. It has also been a part of senior

management remuneration as further explained in Remuneration report 2024. Building on our

success in achieving carbon neutrality in 2020, this chapter details how Philips aligns its climate

actions with the Science Based Targets initiative (SBTi) and European Sustainability Reporting

Standards (ESRS). We will set out Philips’ policy, targets and metrics, material climate-related risks

and opportunities as well as actions and resources allocated to the transition.

Please note that Philips is not excluded from any EU Paris-aligned Benchmarks as we do not meet

any of the exclusion criteria stated in Article 12.1 (d) to (g) of Commission Delegated Regulation

(EU) 2020/1818.

Policies, metrics and targets

In this section, Philips’ Environmental policy, Science Based Targets and climate action scope will be

further explored. For a more detailed overview of this please refer to the Climate Resilience report .

Philips’ Policy and targets related to climate change mitigation and adaptation

Our Climate Action targets are in line with our Environmental Policy, aiming to reduce our full value

chain emissions and building Philips’ adaptive capacity. These targets therefore also help to address

the impacts, risks and opportunities related to climate change.

Philips set its first science-based emission reduction targets back in 2017 for its Scope 1 & 2

(market-based) emissions, officially approved by the Science Based Targets initiative (SBTi). In 2022,

Philips has stepped-up and introduced new Science Based Targets, covering Scope 1, 2 and 3

emissions (approximately 96% of our value chain emissions). We are therefore committed to

collaborating with suppliers and customers to amplify our impact and reduce our footprint across

the value chain.

Our Scope 3 target includes the following Greenhouse Gas Protocol categories:

• Category 1: Purchased goods and services

• Category 4: Upstream transportation and distribution

• Category 6: Business travel

• Category 4: Downstream transportation and distribution

• Category 11: Use of sold products

All other Scope 3 emission categories are excluded from our inventory after a thorough assessment

of their relevance and materiality in line with the GHG Protocol and CDP reporting requirements.

Capital goods (Category 2), fuel- and energy-related activities (Category 3), waste generated in

operations (Category 5), employee commuting (Category 7), and end-of-life treatment of sold

products (Category 12) are all considered immaterial due to size. Additionally, upstream/

downstream leased assets (Category 8 and 13), processing of sold products (Category 10),

franchises (Category 14), and investments (Category 15) are not applicable to Philips'. This

approach is consistent with the best practice of focusing on material categories that have the most

impact on emissions reductions and ensures the accuracy and credibility of the disclosed inventory.

For all of our SBTi-approved and 1.5 °C-aligned targets, baselines and performance, please refer to

the following table. These targets follow the cross-sector guidance of the SBTi and take into

consideration future developments such as changes in sales volumes, shifts in customer preferences

and demand, regulatory factors, and advancements in technology.

Please note that we have also committed to Net Zero via SBTi and are in the process of formalizing

this target, including the target year.

Philips Group

Science Based Targets reduction % compared to baseline


		Scope coverage	2025	2030	2040
Absolute Contraction Approach (ACA) emission reduction targets	Scope 1 & 2 (Baseline 2015)	100%	-75%		-90%
	Scope 3 (Baseline 2020)	95%		-42%

In accordance with the SBTi guidance, our site specific direct (Scope 1) and indirect (Scope 2)

emissions fall under the same target. During our baseline year, our Scope 1 and 2 emissions were

divided as follows: 26% Scope 1 emissions and 74% Scope 2 (market-based) emissions. In 2024,

89% of our target consisted of Scope 1 emissions and 11% consisted of Scope 2 (market-based)

emissions. We have therefore decarbonized our Scope 2 emissions at a faster rate compared with

Scope 1.

All our consolidated subsidiaries contribute to our Science Based Targets at Group level listed

above. We do not have material subsidiaries that are not fully consolidated and that would

therefore require separate targets.

In establishing our Greenhouse Gas (GHG) emissions baseline, the selection of the base year was

guided by several considerations. More precisely, it was driven by historical data availability, the

stability of operations during that period, and the desire to capture a representative snapshot of

our emissions profile. In particular, we considered factors such as significant changes in business

operations, facility expansions, or the implementation of emission reduction initiatives.


	184


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Despite the unprecedented challenges brought about by the COVID-19 pandemic, the baseline

year 2020 for Scope 3 stands out as a significant year for Philips, marked by a level of relative

stability in both customer base and emissions profile. In contrast, the year 2015 was selected as the

baseline for Scope 1 and 2 emissions because it was the earliest feasible date for measurement and

target-setting in alignment with the Paris Agreement. Should enhancements in data quality or

methodological changes lead to an emission deviation exceeding 5% compared with our current

baseline emissions, we intend to restate the baseline in accordance with the Science Based Targets

initiative.

Actions associated with climate change

In this section Philips’ 2024 performance will be further described. This includes an analysis of our

energy performance, gross Scope 1, 2 and 3 emissions, investments linked to carbon credits and

internal carbon pricing mechanisms. This section will therefore provide further clarification on our

2024 performance.

Philips’ energy consumption and mix

In 2024 our total energy demand has slightly increased by 2% compared to 2023. This was

primarily due to an increased consumption of electricity and purchased heating, cooling and steam

which can be linked to employees going to the office more frequently. Most notably the amount of

self generated non-fuel renewable energy has increased by 45% compared to 2023 highlighting

our commitment to expand the share of on site renewables.

As such we are making good progress in transitioning to renewable energy, increasing the share to

80% in 2024. We have therefore achieved our 2025 ambition of sourcing 75% of our energy from

renewable sources. This is largely driven by multiple Power Purchase Agreements (PPAs) securing

the supply of renewable electricity. Prior to 2023, these included the Los Mirasoles wind farm in the

US and the Krammer and Bouwdokken wind farms in the Dutch province of Zeeland. To further

secure the long-term delivery and quality of renewable electricity for all our operations in Europe,

we increased our portfolio in 2023 and 2024 with a wind farm in Mutkalampi, Finland and a solar

farm in Pontinia, Italy. In December 2023, we also closed our first direct renewable energy deal in

China followed by a second one in December of 2024. For all remaining electricity demand, we

acquire unbundled Energy Attribute Certificates (EACs). Details regarding the attributes per country

are available through RE100.

EACs play a pivotal role in achieving our renewable energy target, aligning with the

recommendations of RE100. These instruments serve as strategic tools in our commitment to

sustainability and environmental responsibility. By investing in renewable energy projects through

the purchase of EACs, we not only contribute to the growth of the clean energy sector, but also

directly limit our carbon footprint associated with electricity consumption. For more information on

our renewable energy strategy please refer to the renewable energy methodology.

Philips Group

Energy consumption in megawatt hours (MWh) unless otherwise stated


	2020	2021	2022	2023	2024
Fuel consumed from coal and coal products
Fuel consumed from crude oil and petroleum products	7,400	4,300	5,000	5,120	4,773
Fuel consumed from natural gas	126,400	116,300	97,700	84,853	78,702
Fuel consumed from other non-renewable sources					445
Consumption from nuclear products
Consumption of purchased electricity, heat, steam, and cooling from non-renewable sources	12,600	14,400	11,900	11,682	11,025
Total non-renewable energy consumption	146,400	135,000	114,600	101,656	94,945

Fuel consumption from renewable sources (including biomass, biogas, non-fossil fuel waste, etc.)
In-contract renewable electricity	63,100	56,700	39,600	34,416	26,457
Power Purchase Agreement (PPA)	186,200	168,700	187,400	198,454	204,204
Consumption of purchased electricity, heat, steam, and cooling from renewable sources	130,000	161,300	152,300	119,778	134,251
Total consumption of self-generated non-fuel renewable energy	2,100	2,400	2,700	3,272	4,730
Total renewable energy consumption	381,400	389,100	382,000	355,921	369,642

Share of non-renewable energy consumption (%)	28%	26%	23%	22%	20%
Share of renewable energy consumption (%)	72%	74%	77%	78%	80%
Share of renewable electricity consumption (%)	100%	100%	100%	100%	100%

Total energy consumption	527,800	524,100	496,600	457,576	464,587
Total Sales in millions of EUR¹				EUR 18,169	EUR 18,021
Total energy efficiency in MWh/million EUR sales				25.18	25.78

Energy consumption from high climate impact sectors³					464,587
Total Sales in million of EUR from high climate impact sectors²					EUR 16,848
Energy intensity from high climate impact sectors in MWh/million EUR sales³					27.58

1Total sales can be found in 6.1 Consolidated statements of income

2In accordance with the ESRS we have only accounted for revenue from manufacturing associated with

NACE code C26.6 (excluding revenue and energy consumed from our Enterprise Informatics business/sites

which is linked to NACE J62.01)

3Calculation as follows: Energy consumption total x Share of high climate impact sector sales. Share of high

climate impact sector sales is calculated as: (Total Sales - EI business sales) / Total Sales


	185


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Our total energy efficiency slightly declined by 2%, from 25.18 MWh/million EUR sales in 2023 to

25.78 MWh/million EUR sales in 2024. As noted, this is primarily due to increase office attendance.

No capital expenditures have been made related to coal, oil or gas-related economic activities.

There have also not been any site-related investments in 2024 with significant locked-in GHG

emissions that might impede our renewable energy and/or emission-related targets. On the

contrary, by signing new long-term Power Purchase Agreements, we have been able to secure the

delivery of renewable energy for the future.

Philips’ gross Scope 1, 2, 3 and Total GHG emissions

We report on our full value chain emissions covering approximately 96% of our Scope 1, 2 and 3

emissions. Compared to 2023 we have not made any changes to this reporting scope ensuring

comparability. The main adjustment compared with the previous year has been the splitting of

upstream transportation and distribution from downstream transportation and distribution. This is

further explained in Scope 3, Category 4 & 9 - Transportation and Distribution.

Overall, we are well underway to achieving our Science Based Targets. We have reduced our Scope

1 and 2 emissions by 85% meaning that for the achievement of our long-term 2040 target we will

only have to reduce our emissions by 7 kilotonnes CO2-e. Additionally, we have reduced our Scope

3 emissions by 12% meaning that in the remaining 6 years we will only have to reduce emissions

by 110 kilotonnes CO2-e. This excludes the use of any carbon credits (e.g., removal or reduction

projects).

Philips Group

Carbon footprint by Scope and category in tonnes CO2-equivalent1


	Retrospective			Milestones and target years²
	Base year	2023	2024	2025	2030	2040
Scope 1 GHG emissions (Baseline 2015)				Scope 1&2 GHG emissions
Gross Scope 1 GHG emissions	34,896	19,856	17,783	33,543		13,417
% Scope 1 emissions covered by ETS²		3%	2%
Scope 2 GHG emissions (Baseline 2015)
Gross Location-based emissions	198,820	145,908	157,610
Gross Market-based emissions	99,275	2,137	2,179
Significant Scope 3 emissions (Baseline 2020)³				Scope 3 GHG emissions
Category 1- Purchased goods and services	1,715,819	1,511,035	1396,321		4,268,906
Category 4 - Upstream transportation & distribution	271,071	209,605	228,409
Category 6 - Business travel	70,158	90,776	115,534
Category 9 - Downstream transportation & distribution	143,613	95,481	109,568
Category 11 - Use of sold products	5,159,574	3,066,284	2,528,611
Total GHG emissions
Total GHG emissions (Location- based)		5,138,945	4,553,836
Total GHG emissions (Market- based)		4,995,174	4,398,405
Total GHG emissions including biofuels (Market-based)⁴		4,994,496	4,398,405

Total Sales in millions of EUR⁵		18,169	18,021

GHG intensity
GHG intensity (Location-based approach) (kgCO₂-e/EUR)		0.28	0.25
GHG intensity (Market-based approach) (kgCO₂-e/EUR)		0.27	0.24

1 The emissions cover all activities over which Philips has operational control. This is done in respect of ESRS 1

- DR 62 and 67

2 For each of these trading schemes only emissions from CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3 are

regulated. Please also note that none of our operational activities fall under the EU ETS

3 We do not currently use any biomass in our upstream and downstream value chain

4 Philips does not consume any biofuels in its direct, upstream and downstream operations that would

contribute to biogenic emissions

5 Total sales can be found in 6.1 Consolidated statements of income


	186


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Scope 1 and 2 greenhouse gas emissions

At our sites, we reduced our Scope 1 (direct) CO2-e emissions by 10% and increased our Scope 2

(market-based approach) CO2-e emissions by 1% compared to 2023. Scope 1 emissions include the

emissions from direct fuel consumption and refrigerant use, while Scope 2 (market-based)

emissions cover non-renewable electricity and purchased (city/district) heating, cooling, and steam.

In line with our environmental policy, we are actively implementing energy efficiency measures,

phasing out fossil fuels, and procuring renewable electricity to meet our Science Based Targets for

Scope 1 and 2 (market-based) emissions in line with limiting global warming to 1.5 degrees Celsius.

This commitment is further underscored by our pursuit of ISO 50001 certification for our

manufacturing sites, enabling a systematic approach to continuous energy management

improvements. For more information on our energy performance please refer to Philips’ energy

consumption and mix.

Although we have already achieved our 2025 SBTi targets, we are committed to accelerating our

Scope 1 and 2 decarbonization efforts by reducing overall energy consumption and sourcing

alternative renewable energy solutions. This ensures we remain on track to meet our long-term

2040 Science Based Target.

As part of our reporting obligations, we are also committed to disclosing emissions per greenhouse

gas type, where available. We do this for our Scope 1 and 2 (market-based) emissions as these are

under our direct operational control. Knowing which greenhouse gases contribute the most to our

footprint allows us to scrutinize the underlying processes and if needed take corrective actions.

In accordance with international reporting requirements, emissions from each of the gases are

weighted by their Global Warming Potential (GWP), so that total Greenhouse Gas emissions can be

reported on a consistent basis. For an overview of the respective GWPs per fuel please refer to

Philips’ Emission calculation methodologies.

Philips Group

Greenhouse Gas emissions per gas type in tonnes CO2-equivalent


		2023	2024
Scope 1	Carbon dioxide (CO₂)	18,267	16,971
	Methane (CH₄)	25	25
	Nitrous oxide (N₂0)	13	10
	Hydrofluorocarbons (HFC)	1,297	550
	Perfluorinated carbons (PFC)	0	0
	Chlorofluorocarbons (CFC)	5	4
	Hydrochlorofluorocarbons (HCFC)	249	223
Scope 2 (Market based)	Carbon dioxide (CO₂)	2,118	2,160
	Methane (CH₄)	12	12
	Nitrous oxide (N₂0)	7	7
Total amount of emissions		21,993	19,962

Scope 3, Category 1 - Purchased Goods and Services

Our emissions from purchased goods and services were 1,396 kilotonnes CO2 -e in 2024. This is a

reduction of 19% compared to the 2020 baseline and a 8% reduction compared to 2023. The

main reason for this reduction is the reduced sales volume of Philips in 2024 vs 2023 and the shift

in our product portfolio reducing the per unit purchased goods emissions.

To further reduce these emissions towards our 2030 SBTi target and Net Zero commitment, we are

driving action through our Circular Economy and EcoDesign programs, applying the principles ’use

less, use longer and use again’. For more information on our actions associated with the Circular

Economy program please refer to Resource use and circular economy. For more information on

how we are planning to decarbonize our purchased goods and service emissions in the future

please refer to Philips’ transition plan.

We also announced at COP26 our plan to step up our acclaimed Supplier Sustainability program

with the goal of having at least 50% of our suppliers (based on spend) committing to Science

Based Targets for CO2-e emissions reduction by 2025. This will help amplify our impact reducing

emissions across the supply chain. For more information please refer to Supplier sustainability &

Workers in the value chain.

Scope 3, Category 4 & 9 - Transportation and Distribution

In 2024, we split our upstream transportation and distribution emissions from our downstream

transportation and distribution. This adds a level of granularity to our report that we were not able

to provide in previous years. To ensure comparability across the years we have decided to use the

same proportionate split between upstream and downstream for all historic years up to our

baseline year 2020. This change has therefore not impacted our total value chain emissions but

merely added more granularity.

Overall, we recorded an increase of 11% in our emissions from our Transportation and Distribution

compared to 2023. The reason for this increase is primarily driven by the updated BEIS emission

factors that have increased by 20% compared to our 2023 emission factors (for long haul flights).

This is a variable that we are not able to influence and therefore out of our control. Looking at the

variables we are able to influence, we have successfully reduced our total number of air freight

shipments by 2% which has mitigated the increase in emission factors.

This reduction in air freight shipments can be associated with several business specific projects.

These among others include the Magnet by Ocean project, where we shifted several up- and

downstream lanes from air freight to ocean freight, and the shipment consolidation project, where

we group multiple shipments in one to reduce the total number of shipments. It is also important

to note that Philips was the first healthcare company to sign the coZEV ambition statement for

Sustainable Maritime Freight Shipping. This will support our efforts in accelerating maritime

decarbonization.


	187


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Logistic Freight emissions per mode of transportation in tonnes CO2-equivalent


	2020	2021	2022	2023	2024
Air freight	261,504	252,104	213,562	168,153	210,633
Road freight	64,124	54,897	27,276	26,393	22,183
Sea freight	42,913	38,997	22,150	23,552	18,774
Parcel freight	46,090	70,963	63,811	86,988	86,387
Philips Group	414,631	416,961	326,798	305,086	337,977

Scope 3, Category 6 - Business Travel

Our business travel emissions increased by 27% compared to 2023. This is mainly due to the

restructuring at Philips that required increased travel to allow for an optimal transition. The post-

pandemic increase in travel was also driven by a need to align with customers which further

contributed to the increased emissions. Moving forward, we continue to electrify our lease fleet

and promote online collaboration, as well as increase our efforts to move travelers to rail transport

for shorter distances. With tightened travel budgets in 2025, we aim to curb the growth of travel

emissions.

Philips Group

Business travel emissions per mode of transportation in tonnes CO2-equivalent


	2020	2021	2022	2023	2024
Air travel	21,433	21,051	30,231	42,130	60,453
Lease cars	46,503	48,370	52,838	45,249	52,365
Rental cars	2,223	2,723	3,330	3,397	2,716
Philips Group	70,158	72,144	86,399	90,776	115,534

Scope 3, Category 11 - Use of sold products

In 2024, our emissions related to the use of sold products were 2,529 kilotonnes CO2-e, a

reduction of 51% compared to our baseline in 2020 and an 18% reduction compared to 2023.

The reduction in use-phase emissions can mainly be explained through reduced sales volume of

energy-intensive products, and changes in the sales mix towards more energy efficient products.

To reduce the impact of our sold products we are implementing energy efficiency measures for our

existing and future installed base. This is closely tied to our EcoDesign commitment of having all

new product introductions EcoDesigned by 2025. This is further explored under EcoDesign.

We are also involved in novel partnerships with our customers to ensure reduced energy

consumption and increased renewable energy usage of our devices. For more information on our

partnerships please refer to Advocacy activities and expenses.

Philips’ GHG removals and GHG mitigation projects financed through carbon credits

Although reduction is key to achieving carbon neutrality, unavoidable carbon emissions require

compensation. This is achieved by the cancellation of acquired carbon credits. In 2024, we offset a

total of 474 kilotonnes CO2-e, equivalent to the annual uptake of approximately 14.2 million

medium-sized oak trees. To plant all these trees an area of 512 million m2 would be required,

equivalent to 9 times the area of Manhattan. This covers our operational carbon footprint, which

includes all CO2-e emissions from our sites, business travel, and transportation and distribution. We

thereby address climate change outside our own value chain and contribute to the reduction of

global CO2-e emissions that we cannot eliminate along our own value chain. These activities

complement our existing climate strategy and are excluded from our Science Based Targets for

emission reductions. Thus, ensuring that these investments do not impede the achievement of our

carbon reduction targets.

Philips not only offsets its operational carbon footprint by funding impactful social and

environmental projects but is also proactively exploring innovative approaches to directly reduce

carbon emissions in its value chain, particularly for unavoidable transport-related emissions.

Although we did not use any biofuels in 2024, we do believe this is a potential lever that can help

us reduce our carbon footprint in the future. For future reference we only accept biofuels from

wastes, residues and by-products as feedstocks with preference for REDII Annex IX feedstocks for

advanced biofuels. This strategic move not only resulted in a modest reduction of emissions, but

also aligns with our commitment to nature-based solutions.

Philips Group

Carbon credits cancelled outside Philips own value chain1 in tonnes CO2-equivalent


	2023	2024
Total credits cancelled	417,900	474,000
Share from removal projects (%)²	2%	2%
Share from reduction projects (%)	98%	98%

Gold Standard GS (%)	17%	3%
Verra VCS (%)	83%	97%

Share from projects within the EU (%)	-	-
Share of carbon credits that qualify as corresponding adjustments (%)	-	-

1All credits are from project outside our own value chain thereby avoiding the risk of double counting

2All our removal projects are from biogenic sinks. We are currently not exploring technological sinks

Carbon credits planned to be cancelled in the future is 420-450 kilotonnes CO2-e in 2025. This

future cancellation is a high-level estimate and is subject to change depending on our operational

carbon footprint in 2025.


	188


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

We finance projects in emerging regions that have a strong link with UN Sustainable Development

Goals 3 and 12. To ensure these offsets meet our high-quality standard of additionality,

permanence and avoidance of double counting, Philips only procures carbon credits from carbon

standards that are endorsed by ICROA, such as VCS Standard and Gold Standard. Each program is

also verified by an independent third party. We ensure, through our providers, that the quality

criteria of additionality, permanence and avoidance of double counting are met. In addition, Philips

has conducted site visits to some of the projects in our portfolio. None of our credits as of now are

subject to corresponding adjustment under Article 6 of the Paris Agreement. Philips will follow the

developments of Article 6 closely to understand if, and when, any of the projects might become

subject to corresponding adjustments. Please note that all removal credits are associated with

biogenic sinks and linked to activities outside Philips value chain.

All our carbon offsets drive social, economic and environmental progress in emerging markets. In

2024 we did not retire any carbon credits from removal projects. Our projects include:

Restoring ecosystems and empowering communities through tree planting

In Kenya, subsistence farmers are supported to plant and maintain trees on their land through the

International Small Group and Tree Planting Program (TIST). This carbon removal project enhances

biodiversity, improves soil fertility, and strengthens community resilience, providing co-benefits

beyond carbon sequestration. Farmers retain ownership of the trees and their products, receiving

training and a share of carbon revenues. As an Afforestation, Reforestation, and Revegetation

(ARR) initiative, it is a nature-based solution contributing to the protection of a biogenic sink. To

ensure quality, all offsets are verified under the VCS standard with the CCB label.

Providing access to safe drinking water while reducing wood consumption

This carbon-emission reduction project is expected to provide millions of liters of safe drinking

water in Uganda and reduce the mortality risk from water-borne diseases. Additionally, less wood

will be required for boiling water, leading to less indoor air pollution and slowing down the

deforestation rate. As such, this contributes to the protection of a biogenic sink. To ensure quality,

all offsets are verified under the Gold Standard.

Protecting forests through sustainable production

Deforestation is expected to be reduced through promotion of sustainable businesses to protect

the forest. Unsustainable harvest of fuelwood is reduced, thereby contributing to the protection of

a biogenic sink. The forest supports the supply of water to other parts of Ethiopia and neighboring

countries. It is also the habitat of diverse and, in some cases, rare species. To ensure quality, all

offsets are verified under the VCS standard.

Increasing employment through provision of sustainable energy

In India, the energy supply gap is reduced by providing access to clean energy and related

employment through wind generation. This is therefore considered a technological solution that

also enables an improvement in livelihoods. To ensure quality, all offsets are verified under the VCS

standard.

Improving respiratory health and reducing deforestation through provision of clean

cookstoves

By supporting a range of cookstove technologies across Ghana and Kenya, the projects improve

respiratory health, reduce fuel costs and reduce deforestation. As such, this project contributes to

the protection of a biogenic sink. This also gives people more time for paid work, thus improving

prospects. To ensure quality, all offsets are verified under the Gold Standard.

Philips’ internal carbon pricing

At Philips, we apply an internal carbon shadow discount price for our IT, Real Estate, Businesses and

R&D investments. If an investment may support our climate targets by reducing CO2-e emissions,

the relevant Function and/or Business is encouraged to apply EUR 150 discount per saved tonne

CO2-e. This enables all Functions and Businesses to incorporate climate impacts in their business

case development. Furthermore, by using a discount we proactively incentivize the pursuit of

sustainable projects, rather than imposing penalties on unsustainable investments. The scope spans

all Philips operations and includes Scope 1 and 2 emissions, as well as all the material Scope 3

categories. There are no geographic or business-specific boundaries. This therefore covers 100% of

our Scope 1 & 2 targets and approximately 95% of our gross Scope 3 emissions (96% of overall

emissions).

The price of EUR 150 per metric ton CO2-e is derived from the internationally recognized ReCiPe

methodology, in combination with the environmental pricing provided by CE Delft. The price is also

validated by an external body other than our assurance provider, namely KPMG and set in

alignment with our EP&L statement. The key assumption is that the price of carbon will increase in

the future. Therefore, to ensure price stability over the coming years, an uplift was applied to the

price of carbon, identified by CE Delft.

Please note that the internal carbon pricing is not considered in the financial statements as the

assumptions in the financial statements are based on (external) market assumptions.

Philips Group

Carbon pricing in tonnes CO2-equivalent unless otherwise stated


Type of carbon price	Volume at stake (tCO₂-e)	Price applied (EUR/tCO₂-e)	Perimeter description
Shadow discount price (CapEx, R&D, etc.)	4,398,405	150	All Philips employees are encouraged to leverage the internal carbon price of EUR 150 to include environmental factors in the decision making process

Impact, risk and opportunity management

The analysis of climate change related impacts, risks and opportunities is contingent on a multitude

of assumptions that are based on desk research, internal and external experts, trend analysis and

other resources. Conclusions are therefore merely indicative, and quantifications should be

considered estimates with considerable levels of uncertainty. For a full overview of our assumptions


	189


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

please refer to the Climate Resilience report 2024 that can be found via our ESG download page.

Most importantly our definitions for the short-, medium-, and long-term diverge from our central

definition prescribed by the ESRS. This was done in consultation with other departments, to ensure

perpetual business continuity and acknowledge the fact that climate related risks and opportunities

generally materialize beyond a 5-year time horizon. It also accounts for the time horizons linked to

our commitments.

Philips Group

Impact risk and opportunity management time horizons


Time Horizons
	Short term	Medium term	Long term
Duration	1 < x < 2 years	5 < x < 10 years	10 < x < 25 years
Target year	2025	2030	2050*

* 2100-time horizon for sea level rise due to limited data availability (physical risk exposure) and 2040 for site

related emissions (transition pathway)

Philips transition plan for climate change mitigation

Together with our customers and suppliers, we aim to reduce our collective carbon footprint and

build a more sustainable and resilient healthcare industry, in line with a 1.5 degrees scenario (as

validated by SBTi). This aligns and is embedded in our business strategy as well as financial

planning. To achieve this, we focus on the following core objectives, prioritized by their potential

impact. Further details on underlying assumptions are available in our Climate Resilience report,

which has been approved by our administrative, management and supervisory bodies.

Designing energy-efficient products and collaborating with our customers to reduce

emissions during the use-phase

Since most of our climate impact occurs downstream during the use-phase of our products, we are

dedicated to designing energy-efficient solutions and supporting the transition to renewable energy

sources.

All new product introductions adhere to our EcoDesign requirements, where energy efficiency is a

key focus. This approach allows us to engineer a product portfolio optimized for energy

consumption during use, which not only reduces our environmental footprint but also helps our

customers lower their operational costs.

Moreover, the adoption of renewable energy by our customers, also supports our use phase

decarbonization by eliminating CO2-e emissions during the energy generation. We therefore

actively support and encourage our customers in their transition to renewables (see Champalimaud

case). Our key assumption is that electrical grids will decarbonize in line with the International

Energy Agency’s (IEA) Stated Policy Scenario (SPS) or Announced Pledge Scenario (APS).

Based on preliminary estimates, we expect to reduce our use phase (GHGP category 11) carbon

footprint as follows:


Philips Group Expected use-phase emission reduction in kilotonnes CO 2-equivalent unless otherwise stated
	Current	Medium-term	Long-term
(Expected) emissions level	2,529	2,797 – 2,330	1,590 – 98
Reduction compared to 2020 baseline	2,631	2,363 – 2,829	3,570 – 5,062
Percentage Reduction compared to 2020 baseline	51%	46% - 55%	69% - 98%

Minimizing our purchased goods emissions by adopting circular economy practices and

transitioning to sustainable alternatives

From a climate perspective, applying circular business models has the potential for significant

emission reductions. By retaining materials’ value, we reduce the need for virgin resources and the

energy required to produce them, resulting in lower emissions. This approach is led by our Circular

Economy team through the principles of ‘use less, use longer, and use again’, which also includes

our ambition of ‘closing the loop’.

Circular design is one of the key focal areas of EcoDesign, which includes for example design for

low weight, which reduces the need for material extraction and thereby contributes to emission

reductions. It also includes designing with sustainable materials (recycled, biobased, etc.), which

often require less energy to process, cutting down greenhouse gases in the sourcing and

manufacturing phase. For our Personal Health segment, for example, this includes replacing virgin

plastic packaging with paper-based alternatives or increasing the recycled content of the materials

we use.

Next, we focus on increasing circular practices at our sites and responsible waste management

according to the waste hierarchy. As such we actively monitor the waste management of our

industrial sites with the aim of retaining the value of materials. This is further explained in

Sustainable Operations.

Lastly, we initiated the process to focus on responsibly reusing products and parts at the end of

their use. Among other things, this includes refurbishment, and responsible takeback. By

recirculating products, parts and materials, we increase the market for used products and ensure

materials are longer in use. Altogether we believe that by applying our circularity principles, we will

be able to reduce our purchased goods emissions (GHGP category 1) by:


Philips Group Expected purchased goods emission reduction in kilotonnes CO 2-equivalent unless otherwise stated
	Current	Medium-term	Long-term
(Expected) emissions level	904	1,023 – 872	812 – 148
Reduction compared to 2020 baseline	275	156 – 307	367 – 1,031
Percentage Reduction compared to 2020 baseline	23%	13% - 26%	31% - 87%


	190


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Climate mitigation across the value chain


	Scope 3 Purchased goods and services	Scope 3 Transportation and distribution	Scope 1 & 2 Sites	Scope 3 Business travel	Scope 3 Use of sold products
Strategy	• Design products for low weight and sustainable materials • Collaborate with our suppliers to amplify our impact • Promote material reuse	• Optimize route planning and inventory management • Transition to low carbon modes of transportation and fuel	• Improve our sites’ energy efficiency • Transition to renewable energy	• Promote video conferences and low carbon travel • Electrify our lease fleet	• Design products for energy efficiency • Support our customers in expanding the share of renewables

Topic owner	Supplier Sustainability, EcoDesign, Circular Economy	Supplier Sustainability, Procurement	Real Estate, Procurement	Finance, Procurement	EcoDesign, Markets, Circular Economy


	191


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Collaborating with our suppliers to reduce emissions in our supply chain

There is a pressing need for industry and business to manage and reduce CO2-e emissions across

the entire value chain – including at supplier level. To this end, we have invited many of our largest

suppliers to report their climate performance and strategy as part of the Carbon Disclosure Project

(CDP) Supply Chain program. Additionally, we engage with these suppliers to reduce their

emissions as part of our Supplier Sustainability program. By engaging with suppliers, encouraging

them to set Science Based targets and supporting their decarbonization efforts we believe we will

be able to amplify our impact. We acknowledge our dependency on suppliers’ decarbonization in

achieving our climate ambitions and will continue our focus on driving impact throughout the value

chain. To that end, we expect that by further engaging with our suppliers through our Supplier

Sustainability program we are able to reduce our purchased services emissions as follows (GHGP

category 1):


Philips Group Expected purchased services emission reduction in kilotonnes CO 2-equivalent unless otherwise stated
	Current	Medium-term	Long-term
(Expected) emissions level	492	442 – 388	334 – 308
Reduction compared to 2020 baseline	44	95 – 149	203 – 229
Percentage Reduction compared to 2020 baseline	8%	18% - 28%	38% - 43%

Reducing emissions from logistics by optimizing our planning horizon

We are committed to minimizing the CO2-e impact of our logistics operations by working closely

with our logistics partners and transportation providers. To this end, we have initiated

collaborations with our key logistics suppliers to transition to low-emission vehicle fleets, increase

fuel efficiency, and optimize route planning. We actively engage with all partners (both internal and

external) through our Sustainable Logistics program, which aims to identify further opportunities

for emission reductions, including alternative fuel options and innovative, lower-emission transport

modes. Key decarbonization levers are correspondingly: reducing the need for shipments, shifting

air to ocean, reducing shipment chargeable weight in line with our EcoDesign strategy and

transitioning to alternative fuels (e.g. electric or biofuel). To that end we expect to reduce our

logistic emissions (GHGP categories 4 and 9) as follows:


Philips Group Expected upstream and downstream logistics emissions reduction in kilotonnes CO2-equivalent unless otherwise stated
	Current	Medium-term	Long-term
(Expected) emissions level	338	275 – 200	239 – 67
Reduction compared to 2020 baseline	77	140 – 215	176 – 348
Percentage Reduction compared to 2020 baseline	18%	34% - 52%	42% - 84%

Transitioning to lower carbon-emitting energy at our sites

By continuing to phase-out fossil fuels at our sites and increase our global renewable energy share,

we will be able to achieve our long-term emission targets (GHGP Scope 1 and 2). The main lever to

transition to lower carbon-emitting energy at our sites is by reducing our natural gas consumption.

We are aiming to significantly reduce our natural gas consumption by for example moving towards

geothermal and renewable district heating and cooling solutions as well as exploring the option of

switching towards biofuels. As such we expect to decarbonize our sites as follows:


Philips Group Expected Scope 1 and 2 emission reduction in kilotonnes CO2-equivalent unless otherwise stated
	Current	Medium-term	Long-term
(Expected) emissions level	20	19 – 13	13 – 1
Reduction compared to 2020 baseline	124	116 – 121	121 – 134
Percentage Reduction compared to 2020 baseline	84%	86% - 90%	90% - 99%

Philips Group

Climate Transition plan

2024

Emission reductions are linked to performance bonuses through for example the Long-term

Incentive (LTI) program. As mentioned previously we have also included carbon pricing as standard

measure in our corporate saving and investment tooling highlighting our climate change

governance and embeddedness.

Material physical and transition risks and potential climate-related opportunities

Philips recognizes the importance of identifying, assessing and mitigating climate-related risks to

ensure business continuity and resilience. We publish the annual Climate Resilience report (formerly

TCFD report) to provide the information needed by investors, lenders, insurance underwriters and


	192


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

other stakeholders to appropriately assess and price climate-related risks and opportunities. Please

see the visual below for an indication of Philips’ climate-related risks and opportunities.

Philips Group

Climate risks and opportunities

2024

For the physical risk (including both climate and nature related risks) assessment, a range of Philips

sites are evaluated over short-, medium-, and long-term and the expected impact on them due to

acute and chronic physical risks. This is done using a high global warming scenario with expected

average temperature increase of above 4 degrees Celsius (RCP8.5 – SSP5). Transition risks on the

other hand are globally assessed across the short-, medium-, and long-term, encompassing both

upstream and downstream activities and their potential impact. This done using a low global

warming scenario in line with the Paris ambition of keeping global warming below 1.5 degrees

Celsius (RCP1.9 – SSP1, IEA APS, IEA SPS).

The assessment of each risk is conducted by a multi-disciplinary team, consisting of members of

Philips Group Sustainability, Business Continuity Management, Real Estate, Enterprise Risk

Management, Insurance & Risk Management, Innovation & Strategy, Health and Safety and Group

control. By embedding this risk assessment in existing processes and frameworks we have ensured

alignment with the company’s strategy and financial plans.

All Climate-related risks are a result of the DMA and maintained as part of the common risk view

and considered in the Philips Enterprise Risk Management (ERM) framework. As such Philips

Executive Committee identifies, oversees, and manages the climate-related risks Philips faces in

executing its strategy and its objectives. A Risk Management Support Team together with Philips

Group Sustainability, consisting of several functional experts covering the various categories of

enterprise risks, supports the Executive Committee through regular analysis of the climate-related

risk- and opportunity profiles. Where needed assets and business activities at risk are addressed

through climate mitigation or adaptation actions.

To evaluate enterprise-wide risks (including climate risks), these are cascaded to the relevant target

of evaluation, which are then expected to identify Philips risk exposure utilizing the Risk Assessment

Number (RAN). This standardized metric, spanning from 1 to 125, allows all relevant stakeholders

to uniformly compare diverse risks, irrespective of their varying risk drivers. The RAN is defined

through three distinct variables. Namely, the likelihood of the risk materializing, the impact of the

risk considering no control measures and lastly the control effectiveness of existing controls. Each

of these variables are rated on a Likert scale from 1 to 5 by relevant subject matter experts.

Physical Risk Assessment

We assess physical risks through objective definition, risk exposure identification, vulnerability

calculation, and impact analysis. The result of the risk assessment will constitute the basis for

Philips’ adaptation actions. For more information on the underlying process and tooling used please

refer to the Climate Resilience report that is available via the ESG download page. This risk

assessment is limited to 24 of our sites that are considered critical for our business continuity.

Critical suppliers have also been screened as part of the hot spot analysis but not yet integrated in

our risk process. The following risks are assessed: drought, heat stress, wildfire, precipitation, river

flood, tropical cyclones, cold stress, sea level rise and chronic risks.

To evaluate Philips’ exposure to physical climate risks a two-step approach was employed. First, a

hotspot analysis was conducted using the NATHAN tool to identify the expected future likelihood

of risks becoming material. This initial analysis was enriched through site specific insights gathered

through a workshop for relevant risks per site. This workshop engaged experts from Business

Continuity Management, Plant Management, and Environmental and Financial Management for

each in-scope site. These experts collaborated to assess the potential impact and the effectiveness

of existing controls under a hypothetical worst-case scenario.

This comprehensive assessment enabled us to quantitatively assess each site’s exposure to climate

related perils. The resulting risk scores were aggregated at the company level.


	193


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

From an acute perspective results show that three sites require particular attention, namely Best,

Reedsville and Pune. The site of Best (Netherlands, NUTS code: NL414) and Reedsville (US) face

high-level risks across all time scales, primarily due to cold stress. According to NATHAN analysis,

this risk is expected to decrease significantly in the future. The site of Pune (India) is projected to

face high-level physical risks in the medium and long-term. Its exposure to precipitation and heat

stress is expected to increase, alongside the consistently high risk of fire weather across all time

scales. Additionally, sites in Alajuela (Costa Rica), Haifa (Israel), and Colorado Springs (US) are

assessed to have medium-level risks in the foreseeable future predominately driven by heat stress

and drought.

From a chronic perspective results indicate that none of our sites are expected to be exposed to sea

level rise and exposure to chronic shifts (e.g. change average temperatures) is also very limited. It is

however important to note that there are a few sites in direct proximity to high-risk areas for sea

level rise. This includes the Drachten site (Netherlands), Hamburg site (Germany), and Batam site

(Indonesia).

Philips has implemented robust control measures across our sites to address identified climate risks.

Our risk analysis demonstrates comprehensive preparedness: among the 12 risks categorized as

very high likelihood, all are controlled by measures with medium or higher effectiveness, with 83%

controlled by high or very high effective measures. Similarly, for the 29 risks identified with high

likelihood, 86% are managed through control measures of high or very high effectiveness. This

data validates the strength and thoroughness of our risk adaptation strategy, confirming our

operational resilience in the face of climate challenges.

Transition Risk & Opportunity Assessment

To ensure a smooth and gradual transition it is important for us to anticipate potential transition

events and their impact on Philips’ operations. Conducting a transition risk/opportunity assessment

therefore helps us navigate the rapidly evolving global market and regulatory landscape marked by

sustainability imperatives. It also enables us to identify opportunities that we should capitalize on.

Overall, through a stringent transition risk and opportunity assessment we are able to ensure the

company stays compliant with upcoming regulations, adapts its business strategies, invest in

sustainable technologies, minimize financial disruptions and proactively attract eco-conscious

customers and investors. For more information on the methodology and results of the risk

assessment please refer to the Climate Resilience report 2024. Please note that calculation

methodologies, critical assumptions and scope of assessment are specific to each transition and

explored below underneath each header.

Upstream transition events

It is expected that the prices for Greenhouse Gas (GHG) emissions will rise in the future to

incentivize the adoption of low-carbon technologies. This can be driven by mechanisms such as the

Emission Trading Schemes (ETS) or carbon taxation. While we endorse this general policy direction,

it comes with associated risks. From an upstream perspective, we expect that impacted suppliers

will pass on the cost of carbon using the rates as defined by CE Delft (2021) per sector. The general

assumption is that depending on the homogeneity of the product and elasticity of demand, some

sectors are more inclined to pass on the cost of carbon downstream to their value chain partners

(e.g. Philips).

Most notably the EU-ETS is a cap-and-trade system that covers roughly 40% of all EU wide

emissions. Sectors in scope are among others steel, iron, aluminum, paper and cardboard and

glass. With the introduction of the Carbon Border Adjustment Mechanism (CBAM) legislation in

2026, the scope of the EU ETS will expand to also include importers that currently reside outside

the EU.

For a preliminary estimation we have the below key assumptions: 

• We can decarbonize our Scope 3 GHG emissions from purchased goods and service in line with

Philips’ transition plan.

• Maximum carbon prices in accordance with the SSP1-1.9 scenario as derived by IIASA.

• Only purchased goods and service-related emissions are of interest.

For the short- and medium-term it was assumed that only high emitting industries, in alignment

with the EU-ETS, will be directly impacted by carbon pricing (steel, iron, aluminum, glass, etc.).

Carbon prices were therefore only applied to chemicals, glass, a subset of metals, and paper and

cardboard. For the long-term it was then assumed that all materials regardless of their type will be

impacted by carbon pricing.

As response, we actively monitor the life cycle emissions of our purchased goods and steer our

businesses towards sustainable product development through our EcoDesign and Circular Economy

program. For more information, please refer to Resource use and circular economy.

Operations transition events

As Philips we have set a stringent long-term emission reduction target of reducing our Scope 1 and

2 emissions by 90% until 2040 compared to the 2015 baseline. From a transition perspective we

are therefore interested in identifying potential stranded assets, which are concretely planned sites,

across the medium- and long-term with significant locked-in GHG emissions.

Based on our internal investigations that included members from our integrated supply chain, Real

estate and Group Sustainability, we have concluded that there are no expected stranded assets and

no assets exposed to transition risks. This is based on the fact that in 2024 we have already reduced

our Scope 1 and 2 emissions by 85% compared to 2015 meaning a target achievement rate of

95%. We are therefore well on track to achieving our long-term reduction targets. To manage our

remaining energy and GHG intensive sites we monitor the emissions of our high impact sites

monthly and together with Real estate are investigating novel ways to eliminate the usage of fossil

fuels on site. All high impact sites are therefore under control and addressed by climate mitigation

plans. From 2025 onwards a new KPI will also be introduced targeted at the CO2-e footprint of our

sites.


	194


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Please note that no carbon pricing scheme associated with our Scope 1 and 2 emissions (ETS,

carbon tax, etc.) has a current material impact on our financial statements.

Downstream transition events

Under the given low global warming scenario, it is assumed that there is strong socio-economic

drive to shift towards a low-carbon economy. With more than 60% of our full value chain

emissions residing downstream during the use phase of our products this is our main exposure. This

could include energy efficiency policies, market forces demanding energy efficiency improvements

and consumer preferences that drive technological advancements. The rapid change could lead to

a situation where Philips’ current technological capabilities lag behind those of our competitors and

where the locked-in GHG emissions of our products inhibit our Scope 3 target achievement. For a

more detailed overview of this risk please refer to our Climate Resilience report that is available via

our ESG download page.

To manage this risk, we continue our focus on energy efficiency, with Energy as one of four key

focal areas of our EcoDesign program. All new product introductions are expected to optimize their

energy efficiency. For more information on how EcoDesign can help our target achievement

besides the transition towards renewable energy please refer to Philips transition plan for climate

change mitigation. For a quantitative assessment of our locked-in GHG emissions associated with

our products please refer to Climate change and more specifically our emission associated with

purchased goods and use of sold products.

Resources allocated to climate change

To strengthen our climate resilience from both adaptation and mitigation perspective and meet

external commitments (e.g. Science Based Targets) we have allocated resources to reducing our

environmental impact and preparing for potential acute and chronic climate related risks.

Past and current resources

Philips has allocated resources to enhance environmental resilience, including proceeds from the

Green and Sustainability Innovation Bonds issued under Philips’ Green and Sustainability Innovation

Bond Framework (April 24, 2019). These funds have been invested in Green and Sustainability

Eligible Projects aligned with the objectives of:

• Reducing value chain emissions (climate mitigation)

• Building adaptive capacity (climate adaptation)

All bonds issued under the Framework follow the International Capital Market Association (ICMA)

Green Bond Principles 2018, Social Bond Principles 2018 and the ICMA Sustainability Bond

Guidelines 2018, to ensure that the selected and disclosed projects meet widely recognized criteria.

For more information, visit https://www.philips.com/a-w/about/investor-relations/debt.html.

We have other expenditures allocated to our environmental objectives. For climate mitigation and

adaptation, a subset of the expenditures for the EU Taxonomy reporting are relevant. This is

equivalent to approximately EUR 3 million (0.3%) of our EU Taxonomy aligned CapEx related to our

actions to improve energy efficiency, phase out fossil fuels and build adaptive capacity on site.

Refer to our EU Taxonomy disclosures for more. We have also invested EUR 263 million in Green

Innovation in 2024 to support our efforts in reducing our biggest emissions contributors which are

purchased goods and use of sold products. In total, our aforementioned expenditures cover these

key actions related to our decarbonization levers:

• Designing energy-efficient products and collaborating with our customers to reduce emissions

during the use-phase

• Minimizing our purchased goods emissions by adopting circular economy practices and

transitioning to sustainable alternatives

• Collaborating with our suppliers to reduce emissions in our supply chain

• Reducing emissions from logistics by optimizing our planning horizon

• Transitioning to lower carbon-emitting energy at our sites

Future resources

To ensure we meet our future climate targets and continue to build our adaptive capacity, it is

important that future resources are allocated to our target achievement, such as:

• Investments in renewable energy and energy efficiency

• Development of EcoDesigned new product introductions and partnerships

• Infrastructure resilience, flood defense improvements, and climate-resilient, nature-based

solutions

The final financial planning including future financial resources related to our transition plan is in

progress.

Philips’ Emission calculation methodologies:

Philips reports in line with the Greenhouse Gas Protocol (GHGP). The GHGP distinguishes three

Scopes, as described below. The GHGP requires businesses to report on the first two Scopes to

comply with the GHGP reporting standards. As per the updated GHGP Scope 2 reporting guidance,

from 2015 onward our Scope 2 emissions reporting includes both the market-based method and

the location-based method. The market-based method of reporting will serve as our reference for

calculating our total carbon footprint. As part of our carbon footprint, Philips also reports on five

Scope 3 categories. These are indirect emissions that reside either upstream or downstream and are

included in our approved Science Based Target of 42% reduction by 2030.

Scope 1 greenhouse gas emissions

These are direct emissions caused by company owned and -controlled entities. For example, the

burning of fossil fuels and the use of refrigerants or chemicals on-site generates Scope 1-related

CO2-e (carbon dioxide equivalent) emissions. Sites report their consumption of refrigerants, and

anthropogenic or biogenic-based fuels via our internal sustainability reporting system. Consumption

per resource is then aggregated across all sites and multiplied by resource-specific emission factors.

This approach is being used for all industrial sites and 80% of our non-industrial sites’ floor area.

For all other sites, consumption is extrapolated. For Scope 1 emissions we use two sets of emission

factors. For fossil fuels and natural gases, we use the UK Department for Business, Energy &

Industrial Strategy (BEIS) database (v1.1 2023 – Global Warming Potentials (GWP) 5th


	195


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Intergovernmental Panel on Climate Change (IPCC) Assessment Report (AR)). For all other relevant

Scope 1 refrigerants, we use the IPCC database (Either AR6, v1.2 or v1.5, or AR5, v1.2).

Scope 2 greenhouse gas emissions

These are indirect emissions caused by the purchase of electricity, heating, steam, and cooling.

These emissions are not generated on our sites but are still directly impacted by our consumption

level and contractual agreements. We can therefore reduce these emissions by reducing

consumption or by ensuring purchased energy comes from low-emission sources. We report on

both market-based and location-based emissions. For the market-based approach, we first subtract

the amount of renewable energy acquired or self-generated in a specific region from the actual

amount of electricity consumed. All renewable electricity claimed by Philips is sourced from the

same energy market where the electricity-consuming operations are located, and is tracked and

redeemed, retired, or cancelled solely on behalf of Philips. To ensure ‘additionality’, all certificates

were generated in 2024 – or maximum six months prior – in the market of consumption and are

retired on behalf of Philips. The remainder can then be considered grey electricity, meaning a non-

renewable source. We then multiply this by a residual mix emission factor. For more information on

our renewable energy methodology please refer to the ESG download page. For the location-based

approach, we examine energy purchases and disregard any renewable energy certificates acquired.

This amount is then multiplied by grid-average emission factors. The grid emission factors used for

the market-based approach are dependent on the location. For sites in the US, we apply the eGrid-

specific Residual Mix emission factor (Green-e 2023 v1.1 (2021 Data)), and for sites in Europe we

use the AIB European Residual Mixes (2022 v1.1). For all other countries, we apply the IEA emission

factors because residual mix emission factors are non-existent for these regions (2023 v1.1 - GWP

AR4, or 2022 v1.1 – GWP AR4). For the location-based approach we use eGrid and IEA grid

average emission factors (Both v1.1 – GWP AR4). For all other energy purchases we use the

emission factors from Bets (v1.1 2023 – GWP AR5).

Scope 3, category 1 – Purchased goods and services

This includes any emissions generated by the consumption of raw materials, components,

packaging, and services that are acquired to create and distribute Philips products. This is partially

done in alignment with the Philips EP&L statement and only includes production-related goods

(e.g., components and parts) and all services that fall under the GHG Protocol described category.

Goods-related emissions are calculated using an average data method and services using a spend-

based method. Components and material specific emission factors are determined using EcoInvent

(v3.9.1 – GWP AR6). These factors are regularly updated and consider the sourcing as well as raw

material processing. The impact of purchased services is in contrast based on an input-output

model. To derive emissions the Exiobase database (v3.8.2 – GWP AR5 and AR6) is leveraged, which

factors in all activities connected to the corresponding service.

Scope 3, category 4 – Upstream transportation and distribution

This includes all emissions generated by transporting components, products, or raw materials from

one location to another via a mode owned by a third party. This includes both upstream and

mainstream (shipment between Philips facilities) related shipments and can include transport via air,

road, or sea. Rail transport is rarely used by Philips and therefore has a negligible influence on total

emissions. For air freight, road freight or less than a container load ocean freight, the emission

factors from BEIS are leveraged (v1.1 2023 - GWP AR5). For full container load transports the

emission factors from Clean Cargo are used (version 2022 – GWP AR6).

Scope 3, category 6 – Business travel

This covers any mode of transportation that is used by employees for business purposes and

operated by a third party, excluding commuting. To calculate business travel emissions, we

distinguish air travel and automobile travel. For automobile travel, we include leased vehicles and

rented vehicles. All other modes of transportation are not considered due to their minimal usage

for business purposes and negligible total impact (e.g., trains in the Netherlands run on renewable

electricity). The emissions factors from BEIS (v1.1 2023 – GWP AR5) are leveraged as these are

updated annually.

Scope 3, category 9 – Downstream transportation and distribution

This includes all emissions generated by transporting finished goods from a Philips facility or third-

party warehouse to a customer via a mode owned by a third party. Please note that we are not

always able to clearly distinguish shipments paid by Philips or by our customers, thereby slightly

deviating from the GHGP. This can include transport via air, road, or sea. Rail transport is rarely

used by Philips and therefore has a negligible influence on total emissions. For air freight, road

freight or less than a container load ocean freight the emission factors from BEIS are leveraged

(v1.1 2023 - GWP AR5). For full container load transports the emission factors from Clean Cargo

are used (version 2022 – GWP AR6).

Scope 3, category 11 – Use of sold products

To calculate the emissions generated during the use phase of our products we are interested in

three key variables: the lifetime energy per device, number of products sold per country and

country specific emission factors. It should be noted that the energy consumption during the full

lifetime of the products sold is included in the emission calculation of the year of sale. To calculate

emissions, the country grid average emission factors from EcoInvent (v3.9.1 – GWP AR6) are used.

Only the direct energy need during use is accounted for (e.g., electricity to power our products).

For more information on our emission and renewable energy calculation methodologies please

refer to the ESG download page. This also includes a detailed analysis of the proportion of

emissions calculated using primary data from our suppliers.


	196


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Note II Resource use and circular economy

For Philips, resource use and circular economy has, similar to climate change, been a material topic

for many years, reconfirmed also by the DMA conducted in 2024. Our first circularity targets were

established in the 1990s when we set recycling targets for our manufacturing sites. Since then, we

have continued with waste related targets that build on established measurements in line with

global waste standards. Recognizing that circularity goes beyond waste, already in 2016, we

committed to deliver 15% circular revenues by 2020, building on experiences from the significant

progress through our Green Revenue commitment. This was followed by another commitment in

2018 at Davos to ‘close the loop’ of our large medical equipment, recognizing the need to also

take responsible care of them at their end-of-use.

This chapter details Philips’ policies, targets, metrics, impacts, risks, opportunities as well as actions

and resources allocated to the transition towards sustainable resource use and a circular economy.

Policies, metrics and targets

Philips’ policy and 2025 circularity targets

Our circularity targets are in line with our Environmental Policy, aiming to maximize value with

minimal consumption of virgin and non-renewable materials. Philips looks at circularity in its

broadest sense, meaning that we do not only address the type and weight of the materials we use,

but also, for example, dematerialization (e.g. through digitalization), efficiency (e.g., improving

utilization), optimizing products-in-use (e.g. upgrades) and take-back of our products at end-of-

use. The accompanying table shows how our 2025 circularity targets relate to increasing the

circularity of our resource inflows and outflows while reducing waste. These targets also help to

address the impacts, risks and opportunities related to resource use.

Philips Group

Philips 2025 targets linked to circularity of resource inflows and outflows


KPIs	Increase circular design	Increase circular material use rate	Minimize primary raw materials	Increase sustainable sourcing of renewable materials	Ensure waste management
Circular revenues
EcoDesigned NPIs
EcoHero revenues
Close the loop on medical equipment
Zero waste to landfill
Circular materials management

Philips tracks progress on its 2025 targets as included in the next table, which also describes key

actions to further deliver on these metrics. The progress toward accomplishing these targets is

internally monitored on at least a quarterly basis, with quarterly progress externally reported for a

selection of these via the Philips results hub.

Philips Group

Progress towards Philips' 2025 circularity targets


Metrics	Unit	2020 Baseline	2022 Results	2023 Results	2024 Results	2025 Targets	Key actions to deliver on 2025 targets linked to strategic circularity areas
Resource inflows & outflows
Circular revenues	% total revenu es	14.6%	18.1%	20.0%	24.4%	25.0%	Grow sales from products, services and solutions that use less virgin materials, optimize product lifetime, and recirculate materials. This relates to the strategic areas of circular design, delivery and financing models, services in use- phase and end-of-use management.
EcoDesigned NPIs	%	N/A	N/A	N/A	100%	100%	Increase EcoDesigned hardware, including circular design of hardware. This relates to the strategic area of circular design.
EcoHero revenues	% hardwa re revenu es	N/A	N/A	15.9%	21.9%	25.0%	Grow sales from EcoHero products that are EcoDesigned and significantly outperform in at least one of the focal areas of EcoDesign. One of the outperformance criteria is related to the strategic area of circular design.
Close the loop on medical equipment	System s or pieces of equipm ent	Achieved for large medical equipment				Extend to small medical equipm ent	Adopt policy to responsibly take- back all professional medical equipment sold directly to customers as part of a trade-in offer or as a service at customer request. This relates to the strategic area of circular end-of-use management.
Resource outflows (waste)
Zero waste to landfill	%	2.6%	0.0%	0.0%	0.0%	less than 0.5	Minimize waste to landfill, as part of the strategic area of circular manufacturing and supply
Circular materials management	%	90%	91%	91%	94%	95%	Increase the recirculation of discarded material through prevention, reuse and recycling as part of the strategic area of circular manufacturing and supply


	197


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

We use circular revenues as an overarching target metric that collates practices at Philips related to

products, services and solutions that contribute to circularity across all our businesses. It measures

the revenue contributions across four of our five strategic circularity areas – Circular design of

software and hardware, Circular delivery & finance models, Circular service in-use phase and

Circular end-of-use management. Circular revenues addresses circular design, circular material use

rate, primary material consumption, renewable resources, plus all layers of the waste hierarchy –

from prevention to recycling.

Our EcoDesigned NPIs fulfill circular design requirements on, for example, low weight design and

sustainable materials that can reduce primary material consumption and increase use of sustainably

sourced renewable materials. Requirements to design for disassembly and recycling also support

recirculation that improves the circular material use rate. A subset of the EcoHero revenues are

related to sales of products that outperform on circular design. These support the increase of

circular design, circular material use rate and also minimizing primary raw materials. Hence, this

subset of EcoHero revenues is also included in the circular revenues metric. See EcoDesign.

For the strategic area circular manufacturing and supply we have separate targets on Zero waste to

landfill and Circular materials management that address waste management at our sites including

prevention, reuse and recycling. This can, for example, support the provision of secondary

materials. See Sustainable Operations.

Our target for Close the Loop on medical equipment extends waste management to our customers

and beyond our sites, supporting also an increase in circular material use rate and reduction of

primary materials. By the end of 2020, Philips ‘closed the loop’ on its large medical equipment by

structurally embedding a responsible take-back policy into its customer trade-in offers. This means

that for all large equipment that a customer is willing to trade-in at end of use, Philips will, where

feasible, take it back for refurbishment and/or parts recovery, or locally recycle it in a certified way

to avoid equipment from ending up in landfill. This includes MR, IGT, CT, US and DXR systems.

Following our policy implementation for our large medical equipment, Philips is continuing to

extend its ’closing the loop’ program to small medical equipment by adapting this policy to fit with

the different value drivers, distribution channels and modalities of small equipment. This includes

patient monitors, ECGs, and image guided therapy consoles. By 2025, we aim to have a policy in

place to responsibly take-back all professional medical equipment sold directly to customers as part

of a trade-in offer or as a service at customer request. This excludes consumables, accessories and

non-Philips equipment.

Philips’ material flows

In addition to tracking progress towards our 2025 circularity ambitions, we are also measuring the

impact of these on Philips’ material flows. In 2024, Philips put a total weight of 60 kilotonnes of

products & parts, 34 kilotonnes of packaging on the market, 20 kilotonnes of waste and less than

0.07 kilotonnes of chemicals via emissions. As such, the total weight of 114 kilotonnes is used as

the reference value for all ‘%’ related reporting on material weight.

The main materials that Philips used in 2024 for its products, parts and packaging include plastics

(29%), metals (18%), cardboard (13%), and paper (7%). A more granular view on the material

inflow content (such as whether it’s reused or renewable) and material outflow potential (its ability

to re-enter the technical and biological loops of a circular economy) are depicted in the below

table.

Philips Group

Philips material flows


	2024
Total weight of products, parts and materials, waste and VOC emissions	114 kilotonnes
Material inflow content
Recycled content	22 kilotonnes / 19%
Renewable content	30 kilotonnes / 26%
Reused content (excl. recycled content)	2.6 kilotonnes / 2%
Critical raw materials	7.7 kilotonnes / 6.8%
Strategic raw materials	7.6 kilotonnes / 6.7%
Material outflow potential
Recyclable content	87 kilotonnes / 76%
Technical materials	75 kilotonnes / 66%
Technical recyclable materials	57 kilotonnes / 50%
Technical non-recyclable materials	15 kilotonnes / 13%
Biological materials	29 kilotonnes / 26%

Packaging is a key contributor to both recycled (10%) and renewable content (21%) in 2024.

Additionally, 1% of Philips material flow was from sustainably sourced renewable materials with a

certification from, e.g., FSC or ISCC. The numbers are currently low and we are working to improve

the reporting process.

We continue our efforts to advance our transparency on use of both Critical and Strategic Raw

Materials as defined by the European Commission. Our current data shows that most of the critical

raw materials (such as aluminum and helium) are also considered strategic.

In 2024, the theoretical recyclability of products and packaging was 77% and 97% respectively.

While looking at the recyclable content is important, it is also critical to look at the recyclability at a

product level. Product design can negatively impact a product’s recyclability, making it harder to

recover value from them at the end of their useful lives. To improve product level recyclability of

our professional and consumer portfolio, we have developed and started to deploy a recyclability

tool that uses product-specific data on the materials and the types of connections used to

determine the recyclability rate.

Approximately 91% of our total weight is classified either as a technical or biological material. The

remaining 9% (3 kilotonnes) includes materials not reported via the EP&L as well as the out of


	198


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

scope materials within the EP&L. While biological materials like paper are suitable for biological

loops, these are also materials that can be recycled and have a high rate of recyclable content. That

is why the recyclable content is higher for our biological materials (100%) compared to our

technical materials (50%). For our biological and renewable materials, it is important to note that in

line with the 1st priority of the cascading principle, these materials are used in our products and

packaging and not for energy purposes. Similar to our renewable materials, 1% of Philips material

flow was from sustainably sourced biological materials. The results are similar because most

renewable materials are also considered biological.

Diagnosis & Treatment and Connected Care contributed with 2.5 kilotonnes of reused materials.

This includes our Circular Edition refurbished medical equipment and recirculated parts. Personal

Health contributed with 0.01 kilotonnes from refurbished products.

Actions

Philips circular revenues, which is our overarching circularity metric, increased with 4% compared

to 2023. The step-up is mainly driven by contributions from circular design, mostly from low-weight

design and use of sustainable materials. Revenues associated with circular services in use-phase

dropped, mainly related to reclassifying products within ‘circular service in use-phase’ to other

circular revenue categories. This is also one of the main reasons why circular revenues from circular

delivery and financing models increased compared to 2023.

Philips Group

Philips Circular revenues as % of total Philips revenues

More detailed actions to deliver on our 2025 circularity commitments are described in subsequent

sections.

Circular design of software and hardware

Our EcoDesign program is a key driver for our Circular Economy program. One of the focal areas of

EcoDesign is circularity, which encompasses, for example, the application of recycled and bio-based

materials and designing for low weight, durability, disassembly, and recycling. A subset of

EcoDesigned products, those which specifically outperform on the focal area of circular design, will

therefore also be counted as contributing to circular revenues target metric. These include, for

example, products that meet defined thresholds on reduced weight compared to competitor

products or their predecessors.

Durability is a product’s ability to remain functional and relevant when used as intended and can be

expressed through different ways such as reliability and lifetime. At this moment, Philips cannot

report on the durability of its product groups compared to industry average, as there are no

publicly available industry averages for our product groups. We however continue our efforts to

optimize lifetime either through circular design requirements (by outperforming on our EcoDesign

requirements for ‘design for durability & reliability’ vs predecessor) or for which lifetime extensions

and refurbishment can be offered.

Most of our medical equipment portfolio is serviceable, including service instructions for

professional maintenance, and spare parts and support availability over the product lifetime.

Consumer products are being redesigned as required to meet all relevant new standards and

regulations including Right to Repair regulations and the EU Battery Directive, if applicable and

required. Philips strives to improve professional and consumer repairability of its products, and our

design process includes tools to assess repairability.

Circular manufacturing and supply

In line with our ambition for fully circular operations, Philips applies Lean methodologies to improve

processes and continuously reduce the environmental footprint across our sites. Circular materials

management is our leading KPI and is not expressed in circular revenues. We retain as much as

possible material value of our waste stream through waste management and increasing circular

practices at our sites. Waste related to biological materials is taken care of according to the

cascading principle, which is similar to the waste hierarchy for which we apply with regards to

waste from technical materials. We team up with our supply chain partners to find circular

solutions for discarded materials, for example in the ’waste to value’ initiative. For inbound supplier

packaging, we aim to replace single-use packaging with more sustainable solutions like reusable

boxes to contribute to our packaging waste ambitions from recycling to re-use and reduce. For

example, at the Philips Personal Health Industrial Site in Zhuhai 0.8 kilotonnes of plastic waste and

0.4 kilotonnes of cardboard waste were prevented by implementing reusable plastic trays to

replace cardboard box partitions and implementing circular systems in which boxes are

continuously sent back to the suppliers for them to use again for the supply of future shipments.

Through initiatives like this in 2024, a total of 4.8 kilotonnes of waste were prevented or reused,

thereby averting end of life emissions of 3.0 kilotonnes of CO2-e (assuming incineration as end-of-

life treatment). For more information, please refer to Sustainable Operations.


	199


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Circular delivery and financing models

Circular delivery and financing models enable ecosystem partners, including customers and

suppliers, to work closely together on products that incentivize material efficiency across the

company’s value chain. This includes leasing, rentals, and service-based models such as Enterprise

Monitoring as a Service (EMaaS) and mobile cardiac telemetry monitoring. By subscribing to EMaaS,

customers gain access to critical patient monitoring capabilities and managed services. This can

help advance staff’s capabilities and analyze performance across care settings to help improve

workflows. A collaborative Life Cycle Assessment (LCA) conducted with Jackson Health System in

Miami-Dade County, Florida also showed Philips patient monitors can help reduce carbon emissions

by 685.1 tonnes of CO2-e or 47% compared to previous systems. Through digitalizing

documentation flow and telemetry monitoring, the customer was able to eliminate the need for an

estimated 6.5 million sheets of paper and 420,000 disposable AA batteries, which can allow the

health system to save $1.2 million over a 10-year device lifetime. For our consumer products, we

offer, for example, rental programs for Lumea IPL and the Avent breastpump. When the rental

period is over, we take the product back and wherever possible, refurbish it so it can be used by

another consumer. Circular delivery and financing models also include digital solutions that drive

dematerialization, helping to further reduce resource use. Our businesses develop and operate

cloud-based informatics solutions for customers, which use less resources compared to running

these solutions on IT hardware on premises. For instance, Philips is further advancing our digital

pathology solutions with AWS. Digitalizing pathology also reduces the need to process and store

glass slides while improving workflow efficiency.

Circular service in use-phase

During the use-phase of our products, we help our customers to optimize the use of our products

to maximize their value. For example in 2024, we upgraded almost 3000 medical systems around

the globe combined for HPM, MR, CT, Image Guided Therapy and Ultrasound. For example, our

MR SmartPath portfolio helps customers to re-use their existing magnets and convert these to the

next-generation MR. Our software upgrades like SmartSpeed increases imaging speed by up to a

factor of 3* while reducing power consumption on average by 32% per patient scan** while still

using the same equipment.

*Compared to Philips SENSE imaging.

**Applicable to BlueSeal SE. Philips SmartSpeed power consumption versus Philips SENSE based scanning.

Based on COCIR and in-house simulated environment. Results can vary based on site conditions.

Circular end-of-use management

Keeping materials in circulation is a vital element of the circular economy. Philips strives to

recirculate products and parts that come back to our operations.

Medical equipment

Operationalizing our ’closing the loop’ commitment has reduced our environmental footprint by

enabling us to reclaim more and triage for re-use at highest value. In 2024, as part of ‘Closing the

Loop’ Philips:

• Reclaimed more than 8,600 systems or pieces of equipment, driven largely by the take-back

program for patient monitors (more than 5,800 patient monitors). This is lower than 2023 where

we reclaimed 11,500 systems or pieces of equipment. This drop is mainly attributed to less

Philips systems and equipment made, influenced also by market conditions.

• Managed our active refurbished systems (Circular Edition) installed base of over 10,000 systems.

• Locally recycled 0.3 kilotonnes of medical systems and equipment through our certified global

recycling network. This is a decrease compared to 2023 where 0.5 kilotonnes was locally

recycled. The results are however not comparable to 2023 due to an improvement in the

reporting methodology.

We have more than 30 years of experience providing hospitals with refurbished systems. Our

refurbished portfolios (Circular Edition), offer refurbished imaging systems that are ‘as good as

new’ across MR, CT, Ultrasound and Image Guided Therapy Systems, with the same high-quality

standards, warranty and service performance levels as you expect from new Philips systems. Our

Circular Edition refurbishment factories are compliant with ISO standard 13485 and ISO 14001. In

2024, Philips re-used on average 84% of material weight from returned MR, CT, US and IGT

systems during refurbishment, thereby reducing the need for additional materials. The reuse of

materials also drives carbon emission savings. For example, the carbon footprint of a refurbished

Azurion 7 C20 system is 28% lower compared to a new one, saving 26 tonnes CO2-e emissions,

thanks to reusing more than 2,457 kg (80%) of the material weight. This translates to 60% less

Scope 3 emissions for a hospital versus a new system. When shifting to renewable electricity during

use, the carbon footprint saving goes up to 55%***. In addition, Philips has also recirculated more

than 100,000 parts for use again with customers. This includes repaired and recovered parts from

the take-back of medical equipment and parts, including also All Parts Medical.

***Comparison of a new Azurion 7 C20 and a refurbished Azurion 7 C20. Based on Life Cycle Assessment

(LCA) in line with ISO14040/44 and using ReCiPe2016, EcoInvent3.9.1 database including global average

energy mix, COCIR standard for energy consumption, and the average reused weight percentage during

refurbishment in Best in 2023. Results will vary based on amount, system type and age of returned systems

as well as the country due to, amongst other things, source of energy and logistics. Supply chain emissions

refer to all life cycle stages, excluding use-phase and end of life. For a healthcare customer this is equivalent

to Scope 3 emissions - for more information, refer to the Greenhouse Gas Protocol.

Consumer products

In 2024, we offered refurbished products in 16 countries that also come with a warranty. Our

refurbished products include Lumea IPL, shavers, hair care products and baby monitors. This year,

we also started to offer refurbished toothbrushes.

While we proactively engage with our Business-to-Business customers, including retailers, to

responsibly take care of products at end-of-use, products are also disposed via local take back

systems. These are discarded by consumers at the end of their useful life, and they are eventually

processed by national collection and recycling schemes. Europe has advanced schemes, and in

accordance with the recycling rates published for packaging and the EU Waste Electrical and

Electronic Equipment (WEEE) regulations, we estimate that approximately 9 kilotonnes of products

(in WEEE category 5) and packaging from our Personal Health business units were recycled in the

EU in 2024. This is a decrease compared to the previous year (11.8 kilotonnes), mainly attributable

to a shift in methodology for packaging, and lower packaging volumes put to market. The weight

of recycled consumer products & packaging is estimated by multiplying the weight of products and


	200


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

packaging put to market (stemming from the Philips Environmental Profit and Loss Account – EP&L)

with the EU WEEE recycling rates. For products, we use a 3-year average weight put to market, and

for packaging we use the weight put to market in the reporting year only. This is a slight change

from last year, where we used a 3-year average for both. The change in methodology for

packaging is because we assume that packaging is disposed of in the year of purchase. Due to this

change, this year’s figure is not comparable to last year.

Impact, risk and opportunity management

In this section, Philips’ nature risk assessment approach (including risks related to resource use and

circular economy), and the results of this assessment, will be explained.

Philips nature risk assessment approach

Philips recognizes the importance of identifying, assessing and mitigating nature-related risks to

ensure business continuity and resilience. The Task Force on Nature-related Financial Disclosures

(TNFD) report provides information needed by investors, lenders, insurance underwriters, and other

stakeholders to appropriately assess nature-related risks and opportunities, including those related

to ESRS E5.

To identify and evaluate our impacts and dependencies (actual and potential) and assess related

risks and opportunities related to resource use and circular economy, we applied the Locate,

Evaluate, Assess, and Prepare (LEAP) approach, in line with the recommended approach of TNFD.

This approach constitutes four stages: Locate (Philips’ interface with nature), Evaluate (Philips’

dependencies and impacts on nature), Assess (Philips’ nature-related risks and opportunities) and

Prepare (to respond to and report on material nature-related issues). This is also aligned with the

recommended disclosures for Task Force on Nature-related Financial Disclosures (TNFD).

As part of the Locate stage, we determined the scope of our risk and opportunities assessment

includes Philips’ businesses, regions, and functions focusing on Philips’ 23 manufacturing sites. To

apply the LEAP approach, Philips used multiple available tools such as an external risk insurance tool

(Munich Re), the Ecosystem Intelligence tool (Ecometrix), and the Philips EP&L. Local teams at our

manufacturing sites were involved in the impact assessment to identify high priority nature-related

risks and opportunities. As part of the improvement opportunities in developing the LEAP

approach, we aim to expand the consultations with local affected stakeholders in the coming years.

Philips nature risk assessment results

In the Evaluate stage, the dependencies analysis results showed dependencies on the ecosystem

services like resource extraction. While resource extraction occurs outside the scope of our

manufacturing sites, we further assessed its dependencies and impacts on material flows based on

2023 EP&L data. See Philips material flows for more information. The highest dependencies

identified are: Paper & Cardboard (29%), Plastics (29%) and Metals (21%). In terms of materials

type, the highest impacts are caused by metals (including processing) (37%), PCBs (33%), and

electronics components (10%). Overall, the majority of the material impacts are found in the

upstream value chain.

As part of the Assess stage, we applied the same time horizons in the climate-related risk

assessments. These timeframes are agreed in the Kunming-Montreal Global Biodiversity Framework

(GBF) for ‘halting and reversing nature loss’ and ‘living in harmony with nature’. See Philips

transition plan for climate change mitigation. The main physical and transitional risks include:

Physical

Philips only uses limited amounts of water, but four manufacturing sites are located in water-

stressed regions. Continued and/or expansion of business operations could place additional stress

on scarcer water supply.

Transitional

A high priority risk identified is the volatility of costs of materials due to change in global

abundance of resources: Our analysis suggests that the highest risk stems from rising costs from

material scarcity due to various geopolitical drivers as well as developments in the non-renewables

market in the upstream value chain.

Secondly, Philips could face challenges in incorporating EcoDesign criteria from new or upcoming

legislation into its products and services.

The Prepare phase establishes metrics and targets related to nature-related dependencies and

impacts. These have been set as part of our ESG 2025 commitments. For targets linked to

circularity of resource inflows, outflows and waste management, see Philips’ policy and 2025

circularity targets.

Allocated Resources to Resource use and circular economy

To support the transition towards a circular economy and ensure we meet our external circularity

commitments, we have allocated resources.

Past and current resources

Part of Philips resources is from the proceeds of the Green and Sustainability Innovation Bonds that

were issued under Philips’ Green and Sustainability Innovation Bond Framework dated April 24,

2019. Refer to Climate change for more information. In addition to the proceeds, we also have

other expenditures allocated to our environmental objectives. For circular economy, a subset of the

expenditures for the EU Taxonomy reporting are relevant. This is equivalent to approximately EUR

83 million (13%) of our CapEx related to our actions to grow circular revenue sales from 'Circular

delivery and financing models' and 'Circular end-of-use management'. The former amounts to EUR

72 million from 'CE4.1 Provision of IT/OT data driven solutions' and 'CE5.5. Product-as-a-service

and other circular use- and result oriented services'. Their expenditures relate mainly to property,

plant, equipment and Right-of-Use assets (75%) followed by intangible assets (25%). The

expenditures of ‘Circular end-of-use management’ amounts to EUR 11 million from 'CE5.1 Repair,

refurbishment and remanufacturing' and 'CE5.2 Sales of spare parts'. Their expenditures only relate

to property, plant, equipment and Right-of-Use assets. Approximately EUR 361 million (19%) of

our OpEx expenditures relate primarily to our actions to grow circular revenue sales from 'Circular

delivery and financing models'. This amounts to EUR 357 million from 'CE4.1 Provision of IT/OT


	201


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

data driven solutions' and 'CE5.5. Product-as-a-service and other circular use- and result oriented

services'. Their expenditures relate primarily to research and development (62%) and the remainder

to property, plant and equipment related costs including short term leases (38%). Refer to EU

Taxonomy disclosures. We have also invested EUR 263 million in Green Innovation in 2024 to

support our efforts on circularity such as increasing circular design and shifting to cloud.

Future resources

The final financial planning including future financial resources related to our transition plan is in

progress.

EcoDesign

EcoDesigned New Product Introduction (NPI) and Green Innovation

A target metric for the EcoDesign program is EcoDesigned NPIs, measuring new product

introduction that are designed to meet the criteria for EcoDesigned Product that must comply with

all applicable legal requirements, Philips policies, and all stated EcoDesigned Product requirements

in our four focal areas: Energy, Substances, Circularity and Packaging.

For Energy, we, for example, set requirements to deliver low energy consumption during use and

standby. For Packaging, we design for minimal weight and volume and maximized recyclability

while also using sustainably sourced and recycled materials. Our Circularity requirements include

designing with minimal materials, using sustainable materials and optimizing design for e.g.

disassembly. For Substances, we work to phase-out hazardous substances and ensure full

compliance with the Philips Regulated Substances List (RSL).

Our Green Innovation – the Research & Development spend related to the development of

EcoDesigned Innovation and Circular Innovation. EcoDesigned Innovations include innovation

projects that are designed to contribute to our EcoDesign requirements while Circular innovations

relate to innovation projects that primarily aim to contribute to circular revenues.

Philips Group

Green Innovation per segment in millions of EUR

Diagnosis & Treatment

Philips develops innovative solutions that support precision diagnosis and effective, minimally

invasive interventions and therapy, while respecting the limits of natural resources. Investments in

Green Innovation in 2024 amounted to EUR 109 million compared to EUR 78 million in 2023.

Energy efficiency is a key area of focus, especially for our large imaging systems such as MRI.

Through circular design (both part of our Circular Economy Program and our EcoDesign program),

Philips also pays particular attention to enabling reduction in use of virgin materials, for example,

through designing for low weight and enabling the upgrading and re-use of our products. This

helps to further increase the value created and decrease the environmental impact Philips can

deliver during product use, but also from returned systems as part of our closing the loop

commitment on medical equipment.

Connected Care

Philips’ connected health solutions integrate, collect, combine, and deliver quality data for

actionable insights to help improve access to quality care, while respecting the limits of natural

resources. Green Innovation investments in 2024 amounted to EUR 94 million, a significant step up

compared to 29 million in 2023, mainly driven by investments in new product introductions. For

the hardware designs, we are focusing on our focal areas, especially reducing energy and phasing

out hazardous material.


	202


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Personal Health

Green Innovation investments in 2024 amounted to EUR 60 million, compared to 33 million in

2023. Personal Health continued its work on improving the energy efficiency of its products, and

the voluntary phase-out of polyvinyl chloride (PVC), brominated flame retardants (BFR), Bisphenol A

(BPA) and phthalates from, among others, food contact and childcare products. New hairdryers

have been launched that are more energy-efficient, with an average efficiency improvement of

more than 15% compared to the 2020 baseline. Personal Health also continues to increase

circularity by, for example, using sustainable materials in products and packaging. As part of our

Personal Health Packaging Program, we have launched additional paper-based packaging solutions

for e.g. OneBlade, Baby Monitors and electrical power toothbrushes as part of our transition and

phase out of single use plastic from our consumer packaging.

Other

The segment Other invested EUR 0 million in Green Innovation in 2024, compared to 2 million in

2023. As part of the new operating model, most investments shifted toward the business

segments.

EcoHero Revenues and Green Revenues

Another target metric under the EcoDesign Program is EcoHero revenues, which are generated

from products that meet all EcoDesign requirements applicable to new product introductions and

outperform in at least one of the focal areas of EcoDesign (Energy, Packaging, Substances and

Circularity) either compared to their predecessor or relevant benchmarks, or meeting a set

threshold, supported by a sustainability claim. Green Revenues is an additional metric on revenues

generated by EcoDesigned products, refurbished products, rentals, leases, as-a-service, upgrades

and green services.

Philips Group

Green Revenues per segment in millions of EUR unless otherwise stated

Diagnosis & Treatment

EcoHero revenues from Diagnosis & Treatment were 32.9% in 2024. A notable EcoHero launch in

2024 is Radiography 7000M from DXR. Compared to its predecessor (MobileDiagnost wDR),

energy consumption is 51% lower. Additional improvements are 22% lower system weight and

13% less packaging weight. Other EcoHeroes include the CT Incisive platform with reduced

weight, Ultrasound Epiq and Affiniti with reduced energy compared to their predecessors and the

MR 1.5T systems with low helium usage. On average, 1.5T ZBO magnets lose about 1200 liters of

liquid helium over 10 year lifetime globally, compared with 0 liters for BlueSeal magnets*. With

1,500 units installed globally, MRI scanners equipped with Philips’ BlueSeal magnet technology

have already saved more than 2.75 million liters of helium, since 2018. This year Philips also

announced the new BlueSeal XE and SE. Its main environmental benefit compared to predecessor

models Ambition X and S, is the standard feature PowerSave+ which ensures additional energy

savings by switching automatically to stand-by mode within 30 minutes of idle time. This reduces

power consumption by up to 45% and saves up to 40MWh in energy per year **. With EUR 7.3

billion, Green Revenues amounted to 83% of total sales.

*Based on typical performance of 1.5T ZBO magnets (Ingenia systems) in the Philips installed base.

**Philips stand-by versus ready-to-scan mode. Results can vary based on site conditions


	203


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Connected Care

Connected Care’s EcoHero revenues were 5.6% in 2024. Examples of an EcoHero include patient

monitors MX750 and MX850. In comparison to it's predecessor (MX800) the MX850 and the

MX750 have a significant better energy efficiency. For the MX850 the energy consumption is

reduced by 20%, for the MX750 around 30%. With EUR 3.0 billion, Green Revenues amounted to

59% of total. An example is the Philips EcoDesigned PageWriter TC35 cardiograph, with reduced

power in on-mode compared to its predecessors TC 20 and TC 30.

Personal Health

EcoHero revenues from Personal Health were 17.1% in 2024. One example of an EcoHero for

Personal Health is the Oral Healthcare Brush Head with biobased content. In our Mother and Child

Care portfolio, Philips launched a new baby monitor with 50% mechanically recycled ABS material

in the housing, coming in a paper based packaging. With EUR 3.3 billion, Green Revenues were

equivalent to 96% of total sales, demonstrating the maturity of the Personal Health business in

EcoDesign.

Waste

In 2024, our manufacturing sites generated 20 kilotonnes of waste, an increase of 4% compared

to 2023, mainly driven by the increased amount of reused materials reported from our two sites in

the US. The reused materials represent 13% of the total waste in 2024 compared to the 9% in

2023. In the Personal Health segment the waste increased significantly, by 19% due to increased

operational waste of the reused materials. Diagnosis & Treatment waste in 2024 was comparable

to 2023. Connected Care decreased waste by 31% due to decrease in operational waste at Sleep

& Respiratory Care Sites.

Philips Group

Total waste in tonnes


	2020	2021	2022	2023	2024
Diagnosis & Treatment	19,703	9,974	10,694	9,422	9,424
Connected Care	3,475	2,753	2,899	2,276	1,580
Personal Health	7,929	9,477	9,209	7,677	9,153
Philips Group	31,107	22,204	22,802	19,375	20,157

Until 2020, total waste consisted of waste that is delivered for landfill, incineration, waste to energy

or recycling. We extended the scope with materials sent for re-use and other recovery as of 2021.

Total waste does not include waste prevented.

Materials delivered for re-use, other recovery or recycling via an external contractor amounted to

18,485 tonnes, which equals 92% of the total waste. Non-recycled waste, classified as materials

delivered to incineration and landfill amounted to 1,672 tonnes, which equals 8% of the total

waste of which 67% comprised non-hazardous waste and 33% hazardous waste.

The total amount of non-recycled waste (subtracting recycled waste from total waste) is 4,211

tonnes, which equals 21% of the total waste of which 2,528 tonnes are prepared for reuse.

We recorded 2,314 tonnes of waste prevented in our own activities in 2024, compared to 1,531

tonnes in 2023. Philips did not produce any radioactive waste in 2024.

Philips Group

Total waste by destination in tonnes


	Total waste generated	Hazardous waste	Non-hazardous waste
Preparation for reuse	2,528	1	2,527
Recycling	15,946	1,551	14,395
Other recovery	11	-	11
Waste diverted from disposal by recovery operation	18,485	1,552	16,933
Incineration (with energy recovery)	1,109	178	931
Incineration (without energy recovery)	365	358	7
Landfill	198 ¹	11	187
Waste directed to disposal by disposal operation	1,672	547	1,125
Total waste generated	20,157	2,099	18,058

11.1 tonnes out of 198 tonnes of waste sent to landfill, excluding one-time-only waste and waste delivered

to landfill due to regulatory requirements

The total waste destinations are fully categorized above. There is no waste generated that is

destined for other disposal methods. Our sites addressed both the Circular Materials Management

percentage as well as waste sent to landfill, as part of our ESG commitments; refer to Definitions

and abbreviations for the definition of Circular Materials Management.

The Circular Materials Management percentage has replaced the recycling percentage in 2021. In

2024, 94% was achieved compared to 91% in 2023, the change was mainly driven by improving

operational waste management for instance through reuse of materials and through establishing

new partnerships for previously non-recycled materials.

Our Zero Waste to Landfill KPI excludes one-time-only waste and waste delivered to landfill due to

regulatory requirements. According to this definition, in 2024 our manufacturing sites reported 1.1

tonnes of waste sent to landfill, a significant decrease compared to 2.7 tonnes in 2023. All our 23

industrial sites achieved Zero Waste to Landfill status in 2024.


	204


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Total waste by composition in tonnes


	Waste generated	Waste diverted from disposal	Waste directed to disposal
Metal waste	4,296	4,238	58
Wood waste	4,237	4,227	10
Paper/cardboard waste	3,092	3,087	5
Plastic waste	2,669	2,568	101
Chemical waste	2,112	1,571	541
Municipal (mixed) waste	2,054	1,162	892
Electrical and electronic waste	535	526	9
Other	1,162	1,106	56

For all waste types and waste destinations, preparation for proper treatment takes place. This

preparation is case specific; in some cases it includes separation, inspection and cleaning.

The measurement of all the metrics included above for waste were validated by the assurance

provider and no further external bodies.

Philips methodologies for 2025 circularity targets:

Circular revenues: Propositions that qualify for circular revenues must comply with the

requirements for at least one of the circular revenue categories. These include, among others,

products with low weight or containing a minimum threshold of recycled or bio-based plastics, as-

a-service models, software running on cloud, telehealth, upgrades, lifetime extensions, and

refurbished equipment. Each contribution is underpinned and connected to sales via Philips

management accounting data or via inputs linked to other IT systems. Circular revenues is a

financial based metric, providing us with an integral overall view of how we progress and is

primarily a steering metric that helps us to move the organization in one overarching direction. It

should be seen as one of the multiple metrics needed to drive a business to circularity and to report

on its impact. Circular revenues do as such not measure the environmental impact – however, we

do measure its scientific impact on our material flow metrics. For more information, please refer to

our joint publication with KPMG: ‘Driving circularity in a multinational - Lessons from Philips’.

Circular Materials Management: Circular Materials Management is a KPI for promoting an

increase in the proportion of waste treated using waste management hierarchy levels that are

circular: prevention, re-use, and recycling. Circular Materials Management % is the proportion of

materials managed circularly in comparison to the total used materials baseline. The total used

materials baseline is the total of both circular and linear waste, excluding linear disposal of waste

that is required by law. Circular Materials Management includes recycling, re-use, prevention and

other recovery (e.g. repurposing). It excludes all linear disposal, which is classified as waste to

energy, incineration and landfill. Philips estimates waste prevented by calculating the reduction in

waste generation resulting from in its own activities, based on the Circular Materials Management

method.

Close the Loop on medical equipment: While our target is to adopt a policy to responsibly take-

back all professional medical equipment, we monitor the impact of our Close the Loop on medical

equipment by measuring the amount of reclaimed Philips equipment. This refers to the number of

systems or pieces of equipment that is returned to us for refurbishment, parts recovery or local

recycling. As part of the reporting process, we use the technical expertise of Philips experts.

EcoDesign NPI: The EcoDesign adherence of new product introductions is measured at two

milestones during the product development process. The measurement includes the parts subject

to design change for all hardware products where Philips is the design owner and that results in a

full product or system, following the Philips PDLM (Product Development, Launch and

Maintenance) process. This excludes for example software, consumables and minor part

modifications. Acquisitions and ventures are included once the integration of the EcoDesign

process has been completed. The evaluation is performed by internal EcoDesign experts, based on

pre-defined criteria that are captured in the Philips EcoDesign requirements standard.

EcoHero Revenues: The EcoHero adherence is underpinned similar to EcoDesign new product

introductions and connected to sales limited to hardware, measured via Philips management

accounting data. They are expressed as a percentage of all revenues related to hardware. A product

or solution that has been determined to contribute to EcoHero or Green Revenues will continue to

do so until it is decommissioned.

Green Revenues: Revenues reported as ‘Green’ are a combination of revenues related to products

that were evaluated to meet the EcoDesign criteria at time of introduction and revenues generated

by green services, upgrades and refurbished products. Green revenues are measured via Philips

management.

Green Innovation: Green/EcoDesigned Innovation is measured by the financial spend related to

R&D projects that directly contribute to the intended development and maintenance of

EcoDesigned or Circular products, technologies or services. The evaluation is performed by internal

EcoDesign experts, based on pre-defined criteria that are captured in the Philips standard on Green

Innovation.

Zero Waste to Landfill: A site is classified as ’zero waste to landfill’ if less than or equal to 0.5%

of the total regular waste reported by the site is sent directly to landfill via an external contractor.

This excludes one-time waste and waste that is landfilled due to a regulatory requirement.

Philips material flow methodology:

For our materials flows, we measure the following attributes: recycled, renewable, biological,

technical, recyclable, critical raw materials and strategic raw materials. These are mainly measured

via our EP&L, which is one of our main data sources capturing the Bill of Materials (BOM) of

reference products and packaging as well as waste data. The packaging BOM for Personal Health

businesses (with the exception of certain Mother and Child Care products) is determined via the

WEEE packaging data and assumes an average weight per material. The methodology to use

different sources is the best estimate by Philips and we allow a 5% deviation in weight. The waste


	205


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

and VOC emissions data comes from an environmental reporting tool and a sub-set of these are

also integrated into our EP&L. We also report on reused content from recirculated parts and

refurbished (healthcare and consumer) products. For parts, we use inputs from other IT systems. For

the reporting on reused content, the re-used weights from our refurbished equipment are

calculated based on a 1-year average re-use % per equipment multiplied by its original weight. For

X-ray tubes, only the re-used material weight is considered. For the re-used and refurbished

products from Personal Health, as well as reused spare parts for our medical equipment, we have

assumed that all product and part weight have been re-used. For shavers, however, we assume the

shaver head is always replaced. Since there are different reporting methodologies for reused vs

recycled content, there is no double-counting between these metrics. For our biofuel reporting, we

have assumed this is equivalent to wood, which is mainly used in our packaging. We have used the

technical expertise of Philips experts for our material flow reporting with recycled content and

critical & strategic raw materials as exception.

For more information on our calculation methodologies please refer to the ESG download page.

Philips Circular end-of-use management methodology:

Locally recycled medical systems and equipment: To report on the recycling of our medical

systems and equipment as part of ‘Closing the loop’, we use primary data from our certified

recycling network from which documentation is received on the total material weight. This is then

multiplied by the product-level recyclability for total recycled weight. The latter is an improvement

in the methodology compared to previous year.

Philips Environmental Profit & Loss account and Material Flow reporting methodology:

The Philips Environmental Profit & Loss (EP&L) account measures our environmental impact on

society at large. The EP&L account is based on Life Cycle Analysis methodology in which the

environmental impacts are expressed in monetary terms using specific conversion factors. The

outcomes help us to assess the highest impact areas, but we do not have targets for the EP&L. Our

material flow captures the weight-based flow of materials from our products, parts, and packaging

and sites waste, including Volatile Organic Compound (VOC) emissions, across its lifecycle with

Philips. From our material flow, we derive the total weight of materials put to market in the

reporting year.

For more information on our calculation methodologies please refer to the ESG download page.

Note III Other environmental information

Sustainable Operations

Our Sustainable Operations program relates to improving the environmental performance of our

manufacturing facilities and focus on most of the contributors to climate change, circular economy

and biodiversity & ecosystem services, addressing also for example water, recycling of waste and

chemical substances. Of the topics described below, water and pollution are not material topics as

per the 2024 DMA.

Philips Group

Sustainable Sites


	baseline year 2020	Actual 2024	target 2025
Total CO₂ from manufacturing¹	0 kilotonnes	0 kilotonnes	0 kilotonnes
Water withdrawal²	753,508 m³	672,608 m³	5% reduction
Zero waste to landfill	2.6%	-	less than 0.5%
Circular Materials Management	90%	94%	95%
Hazardous substances emissions	2,465 kilos	1,216 kilos	25% reduction
VOC emissions	79 tonnes	69 tonnes	10% reduction

1Net carbon footprint, includes offsets

2Baseline 2019

Water

Total water withdrawal in 2024 was 672,608 m3, a 5% decrease compared with 2023 and a 11%

reduction compared with 2019 (pre-COVID level). Diagnosis & Treatment, which consumes 49% of

Philips’ total water usage, recorded a 3% increase, mainly caused by increased manufacturing

activities at a site in Costa Rica. Personal Health recorded a 12% decrease, as a result of process

improvements at our sites in the Netherlands and Indonesia. Connected Care showed a decrease of

11%, due to improvement actions at our sites in Germany and the United States. The data was

restated for the reporting years 2019-2023 due to an updated groundwater withdrawal

methodology in 2024. This caused a significant increase at one Personal Health site.

Annually, we undertake thorough assessments of both our operational sites and strategic suppliers

to address potential water-related risks. Even though not considered as material in our DMA, we

recognize the importance of responsible water management. We utilize publicly accessible tools

such as the Aqueduct Water Risk Atlas by WRI and WWF Water Risk Filter to define and respond to

these risks. This comprehensive process evaluates the vulnerability of our sites to various risks

including water stress.

While Philips is not a water-intensive organization, this practice ensures the uninterrupted

continuity of our operations and the provision of high-quality Water, Sanitation and Hygiene

(WASH) services at all our sites. Among our facilities, six locations have been identified as exposed

to substantive financial and strategic risks related to water. Three sites in China and Indonesia are


	206


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

highly vulnerable to coastal flooding and one sites in India is vulnerable to heavy precipitation.

Furthermore, six sites are in regions with extremely high water stress and three sites in regions with

high water stress in the US, India, China, Israel, Germany, and the Netherlands.

We are proud to have again received an ’A’ score for disclosure transparency on water security in

the CDP Europe 2024, demonstrating our ongoing commitment to water risk management and

sustainability practices.

Philips Group

Water withdrawal in thousands of m3


	2020	2021	2022	2023	2024
Diagnosis & Treatment	286	337	310	324	333
Connected Care	116	119	111	99	88
Personal Health	259	282	302	286	252
Philips Group	661	738	723	709	673

In 2024, 93% of water was purchased and 7% was extracted from groundwater wells.

Hazardous substances emissions

Compared to heavy industry, our sites have relatively few chemical emissions and we have

voluntary targets to reduce them. However, most of our manufacturing operations have processes

that result in some emissions to air and water. Therefore, we carefully monitor all emissions and are

working to limit hazardous chemical and VOC emissions. Many of these decisions happen at the

product and process design stage.

Philips Group

Hazardous substances emissions in kilograms


	2020	2021	2022	2023	2024
Diagnosis & Treatment	92	181	175	158	162
Connected Care	20	1,239	863	781	708
Personal Health	455	1,242	510	362	345
Philips Group	567	2,662	1,548	1,300	1,216

At Philips, we want to track the impact of chemical substances on a life-cycle basis and, based on a

risk-level classification and precautionary principle, to ensure implementation in an active and

practical way. The Classified Substances List (CSL) has been set up to manage, restrict, control and/

or monitor chemical substances according to regulation requirements and/or known risks. In our

CSL, we label substances with known harmful effects on health and the environment as 'Risk Level

II'. This classification requires action to minimize exposure and emissions. For our chemical

reduction program ending in 2020, we used the 2015 CSL. In 2021, we began a new 5-year

program with an updated CSL that includes many more chemicals. As a result, the 2021 figures are

significantly higher than those in 2020 due to global protocol advancements. In 2024, we

continued our efforts to adopt safer chemicals, reducing exposure to carcinogenic, mutagenic, and

reprotoxic hazards at our industrial sites. The hazardous substances emissions amounted to 1,216

kg in 2024, which is a 6% reduction compared to the 1,300 kg in 2023. In the Diagnosis &

Treatment segment the emissions increased by 3% due to the repair activities in US sites. The

emissions in the Connected Care segment amounted 708 kg, which is a 9% reduction compared

to the prior year caused by replacing harmful chemicals and lower production volumes. In the

Personal Health segment the hazardous substances emissions were 345 kg in 2024, 5% reduction

compared to 2023.

VOC emissions

Philips Group

VOC emissions in tonnes


	2020	2021	2022	2023	2024
Diagnosis & Treatment	44	42	38	34	38
Connected Care	3	3	2	2	2
Personal Health	32	33	37	38	29
Philips Group	79	78	77	74	69

Volatile Organic Compounds (VOC) can easily become airborne, leading to health issues. Through

photochemical reactions with carbon monoxide and nitrogen oxides (NOx), VOCs form ground-

level ozone. This ozone is capable of traveling long distances, impacting remote areas and

ecosystems.

To address this, Philips is implementing low-VOC processes and alternatives, alongside enhanced

collection and treatment methods, to achieve emission reductions. The Personal Health site in

Indonesia has installed an efficient VOC treatment facility, successfully reducing annual emissions

by over 7 tonnes in 2024. This reduction was achieved through a well-designed system for

collecting and treating emissions from the painting processes. Additionally, low-VOC cleaning

materials have been sourced, tested, and implemented across other sites, following strict internal

validation.

VOC emissions decreased by 7% in 2024, to 69 tonnes compared to 74 tonnes in 2023. The

Personal Health businesses, which represent 39% of total VOC emissions, decreased by 24% due

to effective control of waste air treatment improvement in Asia sites. VOC emissions in the

Connected Care businesses remains at the same low level. VOC emissions at the Diagnosis &

Treatment business units (representing 51% of total VOC emissions) increased by 12%, mainly

driven by the cleaning activities for hygiene purposes in our site in Costa Rica.

ISO 14001 certification

The Philips manufacturing sites are certified individually by external certification bodies. In 2024,

100% of reporting manufacturing sites were certified. Plymouth site achieve the certificate in 2024.

Smaller sites are required to maintain environmental management systems while external

certification is not mandatory.


	207


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

ISO 14001 certifications as a % of all reporting organizations


	2020	2021	2022	2023	2024
Philips Group	81%	92%	96%	96%	100%

Environmental incidents

In 2024, one environmental incident was reported by at a Diagnosis & Treatment site were a

sinkhole that was previously remediated has re-opened. This incident was followed by

investigations and remedial actions.

No environmental incidents nor non-compliances were reported at Connected Care sites.

In Personal Health, two sites reported two environmental incidents. One incident was due to a

wastewater leakage in the past year, where immediate actions were taken. There was no

groundwater pollution, although minor contamination was detected on the upper soil. The

remediation was closed in 2024. The other incident was due to fires near to one of our factories.

Considerable amounts of water were consumed, addressing both air and water concerns in the

affected area.

To find out about our sustainability results at global and regional and market level, go to the Philips

results hub.

Philips Group


Market	Manufacturing sites	Total recordable case rate¹	Energy (GWh)	Waste (Tonnes)	CMM (%)	Water (m³)	Hazardous substances (kg)	VOC (kg)
Asia-Pacific	1	0.04	53,696	3,194	98%	96,553	39	20,160
Belgium, the Netherlands, Luxembourg	2	0.20	81,226	5,987	91%	57,045	206	11,026
Central Eastern Europe	0	0.00
Germany, Austria, Switzerland	3	0.49	43,260	2,468	94%	79,909	3	3,827
France	0	0.21
Greater China	5	0.14	42,303	2,348	97%	151,157	811	4,205
Iberia	0	0.50
Italy, Israel, Greece	1	0.40	8,905	386	80%	9,273	0	174
Indian Subcontinent	1	0.05	6,676	187	100%	17,531	8	88
Japan	0	0.24
Latin America	2	0.13	20,673	1,005	93%	81,689	1	20,252
Middle East, Türkiye, Africa	0	0.00
Nordics	0	1.38
North America	8	0.36	74,576	4,582	93%	179,451	148	9,418
Russia, Central Asia	0	0.26
UK & Ireland	0	0.00

1Includes manufacturing and non-manufacturing sites


	208


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips’ Environmental data for operations methodology:

All environmental data from manufacturing operations, except process chemicals, are reported on a

monthly basis in our sustainability reporting and validation tool, according to company guidelines

that include definitions, procedures and calculation methods. Process chemicals are reported on a

half-yearly basis.

These environmental data from manufacturing are tracked and reported to measure progress

against our Sustainable Operations targets.

Data on emissions of substances are based on measurements and estimates at manufacturing site

level. The basis of preparation is data submitted by our environmental coordinators at our

manufacturing sites, which is validated and consolidated by Group Sustainability.

Reporting on ISO 14001 certification is based on manufacturing units reporting in the sustainability

reporting system.

EU Taxonomy disclosures

The aim of the European Taxonomy Regulation (EU 2020/852), including the delegated acts

adopted thereunder, is to provide companies, investors and policymakers with appropriate criteria

for determining which economic activities can be considered environmentally sustainable, and it

requires companies to report on how and to what extent their activities are associated with such

‘taxonomy-eligible activities’. The Taxonomy Regulation is relatively new and still under

development (e.g. changes to the first Delegated Act, changes in presentation format), leaving still

significant uncertainties around its phased implementation.

The Taxonomy Regulation provides certain conditions for taxonomy alignment. Among others, the

relevant activity must substantially contribute to one or more of the following six environmental

objectives (while not significantly harming any of the others):

• Climate change mitigation

• Climate change adaptation

• The sustainable use and protection of water and marine resources

• The transition to a circular economy

• Pollution prevention and control

• The protection and restoration of biodiversity and ecosystems

The delegated acts adopted under the Taxonomy Regulation provide technical screening criteria

which must also be met to constitute taxonomy alignment. In 2023, the second Delegated Act was

published concerning activities significantly contributing to environmental objectives 3-6 above.

The taxonomy framework provisions effective on the date of this Annual Report require Philips to

disclose the proportion of its taxonomy-eligible and taxonomy-aligned activities (described in any

delegated act adopted to date) and non-eligible and non-aligned economic activities in its total turnover,

capital and operational expenditure, as well as certain qualitative information for environmental

objectives 1-6. We used the Regulation (EU) 2020/852 as supplemented with Commission Delegated

Regulation (EU) 2021/2139, Commission Delegated Regulation (EU) 2021/2178, Commission Delegated

Regulation (EU) 2022/1214, Commission Delegated Regulation (EU) 2023/2485 and Commission

Delegated Regulation (EU) 2023/2486 to identify activities that are eligible.

Consequently, 99.5% of Philips’ revenues were eligible under these delegated acts during 2024. All

remaining revenues were non-eligible (0.5%). We assessed the substantial contribution criteria and the

do no significant harm criteria related to our revenue related eligible economic activities. None of our

revenues were aligned, mainly due to the substantial contribution criteria and the strict criteria in Annex

C. Although we received waivers for using specific substances (as there currently are no alternatives for

these substances) we are not aligned with Appendix C. We used delegated act (EU) 2021/2178,

2023/2485 and 2023/2486 for the definition and calculation of the taxonomy-eligible and taxonomy-

alignment percentages. Revenue is calculated based on ’Sales’ as per Consolidated statements of

income.

Reportable taxonomy-eligible capital expenditures in 2024 amounted to EUR 688.56 million, or 69.0%

of total capital expenditure (non-eligible capital expenditures 31.0%). Some other (enabling) Philips

activities are included in the delegated act (EU) 2021/2139 and are eligible for capital expenditures for

the objective of climate change mitigation and climate change adaptation to be reported over 2024. We

therefore assessed our capital expenditure, and identified relevant activities mainly related to our real

estate portfolio. For these activities, capital expenditures are determined based on the 2024 additions to

property, plant and equipment, intangible assets, and additions to right-of-use assets, excluding any re-

assessments (refer to Property, plant and equipment and Intangible assets excluding goodwill).

Reportable taxonomy-aligned capital expenditures in 2024 amounted to EUR 3 million, or 0.3% of total

capital expenditure (non-aligned capital expenditures 99.7%), and mainly related to energy efficiency

improvement measures in our buildings (installation, maintenance, and repair of energy efficiency

equipment), such as energy-efficient heating, ventilation, and air conditioning (HVAC) in various

locations around the world. Next, we invested in onsite renewable electricity generation (installation,

maintenance and repair of renewable energy technologies) by installing PV (solar) panels.

We assessed compliance with the criteria set out in Article 3 of Regulation (EU) 2020/852 and the

associated technical screening criteria on a project basis.

Similar to capital expenditures, we screened (EU) 2021/2139 for relevant operational expenditure

activities. Total operational expenditures are determined based on the 2024 non-capitalized costs that

relate to research and development, building renovation, short-term lease, maintenance and repair, and

any other direct expenditures relating to day-to-day servicing of property, plant and equipment.

Reportable taxonomy-eligible operational expenditures in 2024 amounted to EUR 1,918 million, or

85.7% of total operational expenditures expenditure (non-eligible operational expenditures 14.3%), In

2024, we did not record reportable taxonomy-aligned operational expenditures (0%), as for example,

the sourcing of renewable energy is not included in the Taxonomy. Non-aligned operational

expenditures were 100%.


	209


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Nuclear and fossil gas related activities


Row	Nuclear energy related activities
1.	The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle.	NO
2.	The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies.	NO
3.	The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades.	NO
	Fossil gas related activities
4.	The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels.	NO
5.	The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels.	NO
6.	The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels.	NO


	210


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Proportion of turnover from products or services associated with Taxonomy-aligned economic activities – 2024

in millions of EUR unless otherwise stated

Financial year

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

Economic Activities (1)

Code (a)

(2)

Turnover (3)

Proportion

Turnover,

2024 (4)

Climate

Change

Mitigation

(5)

Climate

Change

Adaptation

(6)

Water

(7)

Pollution

(8)

Circular

Economy

(9)

Biodiversity

(10)

Climate

Change

Mitigation

(11)

Climate

Change

Adaptation

(12)

Water

(13)

Pollution

(14)

Circular

Economy

(15)

Biodiversity

(16)

Minimum

Safeguards

(17)

Proportion

Taxonomy

aligned

(A.1.) or

eligible

(A.2.)

turnover,

2023 (18)

Category

enabling

activity

(19)

Category

transitional

activity (20)

EUR

Y; N; N/

EL (b) (c)

Y; N; N/

EL (b) (c)

Y; N;

N/EL

(b) (c)

Y; N;

N/EL

(b) (c)

Y; N; N/

EL (b)

(c)

Y; N; N/

EL (b) (c)

Y/N

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Turnover of environmentally sustainable

activities (Taxonomy-aligned) (A.1)

Of which Enabling

Of which Transitional

A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (g)

EL; N/EL

(f)

EL; N/EL

(f)

EL; N/

EL (f)

EL; N/

EL (f)

EL; N/EL

(f)

EL; N/EL

(f)

Manufacture of electrical and

electronic equipment

CE1.2

13,164.19

73.1%

N/EL

73.6%

Provision of IT/OT data-driven

solutions

CE4.1

1,080.78

6.0%

N/EL

5.1%

Repair, refurbishment and

remanufacturing

CE5.1

26.80

0.1%

N/EL

0.2%

Sale of spare parts

CE5.2

77.65

0.4%

N/EL

0.2%

Product-as-a-service and other

circular use- and result-oriented

service models

CE5.5

3,588.66

19.9%

N/EL

19.6%

Turnover of Taxonomy-eligible but

not environmentally sustainable

activities (not Taxonomy-aligned

activities) (A.2)

17,938.09

99.5%

98.7%

A. Turnover of Taxonomy eligible

activities (A.1+A.2)

17,938.09

99.5%

98.7%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

Turnover of Taxonomy-non-eligible

activities

83.00

0.5%

1.3%

Total

18,021.09

100%


	211


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities – 2024

in millions of EUR unless otherwise stated

Financial year

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

Economic Activities (1)

Code (a)

(2)

CapEx (3)

Proportion

of CapEx,

2024 (4)

Climate

Change

Mitigation

(5)

Climate

Change

Adaptation

(6)

Water

(7)

Pollution

(8)

Circular

Economy

(9)

Biodiversity

(10)

Climate

Change

Mitigation

(11)

Climate

Change

Adaptation

(12)

Water

(13)

Pollution

(14)

Circular

Economy

(15)

Biodiversity

(16)

Minimum

Safeguards

(17)

Proportion

Taxonomy

aligned

(A.1.) or

eligible

(A.2.)

CapEx,

2023 (18)

Category

enabling

activity

(19)

Category

transitional

activity (20)

EUR

Y; N; N/

EL (b) (c)

Y; N; N/

EL (b) (c)

Y; N;

N/EL

(b) (c)

Y; N;

N/EL

(b) (c)

Y; N; N/

EL (b)

(c)

Y; N; N/

EL (b) (c)

Y/N

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation using solar

photovoltaic technology

CCM4.

CCA4.

0.35

N/EL

Installation and operation of electric

heat pumps

CCM4.

16/

CCA4.

0.01

N/EL

Renovation of existing buildings

CCM7.

CCA7.

CE3.2

0.03

N/EL

Installation, maintenance and repair

of energy efficient equipment

CCM7.

CCA7.

2.17

0.3%

N/EL

0.4%

Installation, maintenance and repair

of charging stations for electric

vehicles

CCM7.

CCA7.

0.19

0.0%

N/EL

Installation, maintenance and repair

of instruments and devices for

measuring, regulation and

controlling energy performance of

buildings

CCM7.

CCA7.

0.02

N/EL

Acquisition and ownership of

buildings

CCM7.

CCA7.

N/EL

CapEx of environmentally sustainable

activities (Taxonomy-aligned) (A.1)

2.77

0.3%

0.4%

Of which Enabling

2.74

0.3%

0.4%

Of which Transitional

0.03


	212


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Financial year

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

Economic Activities (1)

Code (a)

(2)

CapEx (3)

Proportion

of CapEx,

2024 (4)

Climate

Change

Mitigation

(5)

Climate

Change

Adaptation

(6)

Water

(7)

Pollution

(8)

Circular

Economy

(9)

Biodiversity

(10)

Climate

Change

Mitigation

(11)

Climate

Change

Adaptation

(12)

Water

(13)

Pollution

(14)

Circular

Economy

(15)

Biodiversity

(16)

Minimum

Safeguards

(17)

Proportion

Taxonomy

aligned

(A.1.) or

eligible

(A.2.)

CapEx,

2023 (18)

Category

enabling

activity

(19)

Category

transitional

activity (20)

A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (g)

EL; N/EL

(f)

EL; N/EL

(f)

EL; N/

EL (f)

EL; N/

EL (f)

EL; N/EL

(f)

EL; N/EL

(f)

Electricity generation using solar

photovoltaic technology

CCM4.

CCA4.

N/EL

Installation and operation of electric

heat pumps

CCM4.

16/

CCA4.

N/EL

Renovation of existing buildings

CCM7.

CCA7.

CE3.2

23.12

2.3%

N/EL

3.1%

Installation, maintenance and repair

of energy efficient equipment

CCM7.

CCA7.

0.03

N/EL

0.4%

Installation, maintenance and repair

of charging stations for electric

vehicles

CCM7.

CCA7.

N/EL

Installation, maintenance and repair

of instruments and devices for

measuring, regulation and

controlling energy performance of

buildings

CCM7.

CCA7.

N/EL

Acquisition and ownership of

buildings

CCM7.

CCA7.

23.29

2.3%

N/EL

Manufacture of electrical and

electronic equipment

CE1.2

556.60

55.8%

N/EL

53.5%

Provision of IT/OT data-driven

solutions

CE4.1

51.49

5.2%

N/EL

4.3%

Repair, refurbishment and

remanufacturing

CE5.1

10.42

1.0%

N/EL

0.9%

Sale of spare parts

CE5.2

0.26

N/EL


	213


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Financial year	Year			Substantial Contribution Criteria						DNSH criteria (’Does Not Significantly Harm’)(h)
Economic Activities (1)	Code (a) (2)	CapEx (3)	Proportion of CapEx, 2024 (4)	Climate Change Mitigation (5)	Climate Change Adaptation (6)	Water (7)	Pollution (8)	Circular Economy (9)	Biodiversity (10)	Climate Change Mitigation (11)	Climate Change Adaptation (12)	Water (13)	Pollution (14)	Circular Economy (15)	Biodiversity (16)	Minimum Safeguards (17)	Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2023 (18)	Category enabling activity (19)	Category transitional activity (20)
Product-as-a-service and other circular use- and result-oriented service models	CE5.5	20.58	2.1%	N/EL	N/EL	N/EL	N/EL	EL	N/EL								2.0%
CapEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)		685.79	68.7%	4.6%	4.6%	0%	0%	64.1%	0%								64.2%
A. CapEx of Taxonomy eligible activities (A.1+A.2)		688.56	69.0%	4.9%	4.6%	0%	0%	64.1%	0%								64.6%
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
CapEx of Taxonomy-non-eligible activities		308.96	31.0%														35.4%
Total		997.52	100%														100%


	214


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities – 2024

in millions of EUR unless otherwise stated

Financial year

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

Economic Activities (1)

Code (a)

(2)

OpEx (3)

Proportion

of OpEx,

2024 (4)

Climate

Change

Mitigation

(5)

Climate

Change

Adaptation

(6)

Water

(7)

Pollution

(8)

Circular

Econom

y (9)

Biodiversity

(10)

Climate

Change

Mitigation

(11)

Climate

Change

Adaptation

(12)

Water

(13)

Pollution

(14)

Circular

Economy

(15)

Biodiversity

(16)

Minimum

Safeguards

(17)

Proportion

Taxonomy

aligned

(A.1.) or

eligible

(A.2.) OpEx,

2023 (18)

Category

enabling

activity

(19)

Category

transitional

activity (20)

EUR

Y; N; N/

EL (b) (c)

Y; N; N/

EL (b) (c)

Y; N;

N/EL

(b) (c)

Y; N;

N/EL

(b) (c)

Y; N;

N/EL

(b) (c)

Y; N; N/

EL (b) (c)

Y/N

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

OpEx of environmentally sustainable activities

(Taxonomy-aligned) (A.1)

Of which Enabling

Of which Transitional

A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (g)

EL; N/EL

(f)

EL; N/EL

(f)

EL; N/

EL (f)

EL; N/

EL (f)

EL; N/

EL (f)

EL; N/EL

(f)

Manufacture of electrical and

electronic equipment

CE1.2

1,556.73

69.5%

N/EL

67.9%

Provision of IT/OT data-driven

solutions

CE4.1

256.96

11.5%

N/EL

12.5%

Repair, refurbishment and

remanufacturing

CE5.1

0.0

N/EL

Sale of spare parts

CE5.2

4.73

0.2%

N/EL

Product-as-a-service and other

circular use- and result-oriented

service models

CE5.5

99.73

4.5%

N/EL

4.4%

OpEx of Taxonomy-eligible but not

environmentally sustainable activities

(not Taxonomy-aligned activities)

(A.2)

1,918.15

85.7%

85.7

84.8%

A. OpEx of Taxonomy eligible

activities (A.1+A.2)

1,918.15

85.7%

85.7

84.8%

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

OpEx of Taxonomy-non-eligible

activities

320.54

14.3%

15.2%

Total

2,238.69

100%


	215


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

8.5Social information

This section provides additional information on (some of) the Social performance parameters

reported in Social .

The Lives Improved model helps us to track our performance on a country-by-country basis in line

with UN Sustainable Development Goal 3, allowing us to shape strategies to ensure healthy lives

and promote well-being for all at all.

Management of key material people topics (Impacts, Risks and Opportunities)

We depend on our people to deliver on our business strategy and our commitments to our

customers, patients and consumers and therefore place a lot of importance on managing the risks

and opportunities that pertain to our own workforce.

We identify key impacts, risks, and opportunities around social topics, which inform our Business

and People strategy through the DMA process, tracking our performance in key material topics, as

well as through our engagement with our people. In 2024, we identified (potential) negative

impacts related to Health & Safety and Human Rights. For programs which Philips developed to

prevent and mitigate material negative impacts please refer to the polices and programs described

in this section. Philips did not identify any incidents of child labor and forced labor. The attraction

and retention of talented employees is critical to Philips’ success, and the loss of employees with

specialized skills could result in business interruptions. Philips continuously assesses capability gaps

for its key positions and has initiatives in place to close any employee capability gaps. For further

information, please refer to Double Materiality Assessment .

Policies, metrics and targets

Our commitments to our people are observed in accordance with our General Business Principles,

Speak Up, Human Rights, Health & Safety, Fair Employment and Diversity & Inclusion policies

(available on our ESG website (link) as well as on our intranet for employees). Our policies apply to

workers employed by Philips (through a permanent or temporary contract, employed ‘at will’, or

through an employment scheme/WGP) and to ‘other workers’ (which includes contingent workers

(hired via an agency), interns, as well as contractors and their respective employees).

The Philips Fair Employment Policy details the ethical and social principles that govern the

company’s relationship with its employees and other workers worldwide. The policy promotes

transparency, accountability, and a positive work environment and is aimed at creating a fair and

equal workplace. In accordance with conventions of the International Labor Organization (ILO), we

are committed to be free from forced, bonded and child labor, which extends to human trafficking

in line with our Human Rights commitments. The policy helps create an environment of inclusion

and belonging, where all employees and other workers are treated fairly, free from discrimination,

harassment, and other prohibited behaviors. In accordance with the Fair Employment policy, we

provide all employees with fair and equal development opportunities. It is further supported by the

Philips Diversity & Inclusion Policy which is aimed to act on our commitment to an inclusive

workplace for our employees and other workers that reflects the diversity of our community. We

do not discriminate on the basis of race, color, ethnicity, age, gender, gender identity or expression,

sexual orientation or identity, marital status, language, background, religion, health status,

pregnancy, political or other opinions, disability, national or social origin/birth or any other status in

our recruitment, hiring, training, promotion, compensation or employment practices.

The key Social topics in relation to our own workforce are addressed at a global level in line with

our global policies, and managed locally in line with local regulations and labor law practices. As

such, we uphold employee rights and health & safety ensuring compliance with local legislation in

countries where we employ workers. We foster a fair & inclusive workplace as well as employee

well-being through targeted actions discussed in Diversity, Inclusion and Well-Being, subject to local

rules and regulations as they may vary from time to time and between different geographies.

Moreover, we provide all employees with at least a Living Wage (Living Wage and Adequate

Wage), and monitor the gender pay gap (Equal opportunities and equal pay). With regards to

talent & development, all employees are provided with fair and equal opportunities to develop their

skills, and to realize their full potential through on-the-job training, learning from others (such as

through coaching and mentoring) and virtual and classroom courses. More information on our

approach to building a Workforce of the Future including both Early Career talent and Leaders

along the employee journey from talent attraction and onboarding through career development

and learning hours can be found in Workforce of the future. Furthermore, local programs such as

WGP in the Netherlands (see Building employability), Employee volunteering and refugee hiring (see

Workforce of the future) are examples of how we drive social inclusion & engagement.

As part of the ESG Commitments, Philips set targets around improving people’s lives, paying all

employees at least a living wage, and gender diversity in senior management. These targets reflect

aspirational goals that apply globally, but may be impacted by conflicting local laws or regulations.

The process to set these targets included:

• Reviewing Philips existing targets and performance. All stakeholders are able to acquire insight

into Philips targets and the tracking of Philips performance against these via the Philips results

hub.

• Engaging with stakeholders who have insights into Philips such as customers (representatives of

consumers and end-users) and reviewing their inputs to give consideration to their interests. For

further information on how stakeholders are engaged, please refer to Working with

stakeholders and advocacy.

• Reviewing local rules and regulations, international standards and frameworks such as the World

Economic Forum International Business Council Common Metrics and Global Reporting

Initiative. Then mapping these against Philips Environmental, Social, and Governance dimensions

and ambitions.

• Reviewing and where needed further developing methodologies for potential targets.

The Philips Executive Committee decides on targets.

For an overview of the metrics and targets please refer to our commitments table.


	216


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The below tables shows an overview of the key social topics linked to relevant Policies and key

performance indicators (KPIs) with references to respective sections of the annual report. Our

metrics are monitored on a year-on-year basis. Additionally, targets have been summarized

including performance and external references. Targets, performance is also summarized.

Philips Group

Key data


Target name	Monitoring	Performance	References
Living wage	Annual	All employees are paid a living wage in line with standard. See Note VIII and XII	International Labor Organization (ILO)
Employee engagement	H1, H2	See Note VI	Fortune 500 Benchmark
Women in senior management positions	Quarterly	See Note V	Internal

8.5.1Own workforce

In this section we describe the relevant topics for our own workforce in line with our people

strategy, with a focus on actions and results. Relevant methodologies and assumptions have been

included.

Note IV Workforce of the future

As reflected in our ESG commitments, we aim to be the best place to work for our employees,

providing opportunities for learning and development, promoting an inclusive workplace, and

assuring a safe and healthy work environment. Our commitments to our people are observed in

accordance with our General Business Principles, Speak Up, Human Rights, Occupational Health &

Safety, Fair Employment, and Diversity & Inclusion policies.

We continued our Total Workforce Strategy, which considers all sources of skills, capabilities,

locations and changes in the labor market in order to deliver the Workforce of the Future. Globally,

we work with different worker types: employees and contingent workers, as well external services.

In 2024, we further focused on the implementation of our external workforce strategy. In addition,

we have been looking at how we are attracting contingent workforce talent. Direct sourcing has

been expanded to 26% in the Netherlands and to 40% in the US, and has been rolled out to India

(11%). To strengthen the way we directly source contingent workforce talent, our own Philips

employer value proposition is utilized for the different functions to attract these contingent

workers.

Total Workforce Strategy

We use our Right Shoring & Sourcing methodology to implement the Total Workforce Strategy.

This methodology steers improvements in workforce composition towards the ‘right

shore’ (onshore, nearshore and offshore) and the ‘right source’ (employees, contingent workers

and external services). The program delivered EUR 7 million in savings in 2024.

To develop the workforce that can deliver our strategy we have a Strategic Priorities recruitment

team who focus on the R&D, Patient Safety & Quality, Clinical and Informatics roles critical to our

success. Together, in 2024, they delivered 1,555 roles. In all of our external recruitment we secured

38% candidates with Medical Technology expertise.

Talent attraction

In 2024, we continued to recruit the talent we need to deliver our strategy, filling 11,391 positions

across the organization, of which 30% were internal hires. For external recruitment our strategic

hiring channels of Direct Sourcing (headhunting) and Referrals delivered 33% of our new joiners to

Philips.

Through collaboration with the Tent Partnership for Refugees, we continue to offer opportunities

to refugees across our operations. In 2024, we hired 120 refugees across the globe including the

first hires in the US, and we kicked off this refugee program roll-out in Mexico. We have been

continuing Tent’s Mentorship Program for Hispanic Refugees in the US and the Refugee Women in

the US and EMEA.

2024 saw a further strengthening of our strategic Employer Branding efforts, alongside an

expanded approach to Talent Marketing that now holistically addresses talent engagement.

Externally, we advanced our talent attraction strategy through targeted media campaigns focused

on critical talent segments and strategic capabilities such as Tech, Sales & Commercial, and Quality

& Regulatory professionals. These efforts resulted in a 62% increase in unique visitors to our

Careers website per job posting, and a 43% boost in applications per job requisition compared to

2023.

Our ongoing employer branding content program continued across multiple channels, reinforcing

our position as a purpose-driven health technology company dedicated to patient safety, quality,

and sustainability. This helped us solidify our reputation as an equal-opportunity employer of

choice. Notably, our marketing metrics showed double-digit growth in interest and favorability

toward our employer brand compared to the previous year.

On LinkedIn, our key media channel, by leveraging personal stories and emotionally resonant video

content, we established a distinctive, people-centric positioning that vividly showcases our culture

of impact with care for people, patients, and the planet.

In recognition of our efforts, we were honored at the 2024 Employer Brand Management Awards

for best aligning our Employer Value Proposition with our corporate brand values.


	217


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Early Career Talent

Our Philips-wide Graduate Development Program (GDP) focuses on growing our people and

increased from 40 participants in 2021 to 91 in 2024. The GDP lasts two years, and includes two

job rotations, as well as offering the graduates a comprehensive learning and development track,

and access to career centers to help guide future steps.

Philips also gave meaningful work experience to 2,111 interns, offering 330 of them permanent

employment after their internship.

Onboarding

At Philips, we welcome thousands of new employees every year. We understand the significance of

ensuring that our colleagues feel a profound sense of belonging and clarity about their roles right

from the start. To achieve this, we have crafted designed a digitally enhanced onboarding

approach, tailored for both new hires and internal movers.

Our people leaders and their teams play an important role in the onboarding experience. Our new

employees consistently highlight this as the most valuable aspect of their onboarding journey. To

bolster this approach, we offer support to our people leaders through comprehensive capability-

building programs and toolkits. We firmly believe that onboarding is not just a process, but a key

leadership accountability.

In 2024, we kept reinforcing our mandatory quality and clinical education that every new hire

receives, underscoring our unwavering commitment to patient safety and quality. Of those who

joined Philips in 2024, 90% reported a positive onboarding experience, and 95% felt genuinely

welcome here.

Our onboarding practices reflect our dedication to nurturing a dynamic and inclusive workplace,

enabling our new team members to thrive in their roles.

Career development

We see our talent as our most differentiating enterprise asset. We intend to enable everyone to

thrive at Philips, and we recognize that it is important to invest in strategic capabilities, and for both

leaders and employees to share accountability for career development. We expect our leaders to

scout for talent, develop people and upgrade capabilities, so that we can continue to build a

diverse, future-oriented workforce where inclusion is key, and transparent, ongoing feedback

enables all our people to grow.

We support our people in navigating their own career and stimulate our managers to have

meaningful career dialogues with their people. We have embedded this systematically in our People

function processes and initiatives to reinforce this across the spectrum of employee life cycle,

providing cohesive and in-time support as needed. Below are some highlights:

• Providing employees as well as people leaders with playbooks, toolkits and development

resources to help accelerate their careers and develop in their current or aspiring roles.

• Embedding continuous feedback through regular check-ins and feedback tools so employees are

more aware of areas they are doing well in and areas they need to develop in. Both employees

and people leaders are provided with continuous training on providing and receiving feedback.

• Deploying an AI-based digital talent marketplace within Philips, giving employees the

opportunity to build their skills in new areas outside of their core jobs.

• Providing Development Centers to identify talent and options to develop using mentoring,

coaching, and just-in-time support using both internally and externally.

• Supporting onboarding for new employees as well as onboarding for key segments such as

people leaders and executives to help them integrate faster.

• Providing access to technology-enabled self-paced learning and best-in-class learning content by

enabling online platforms such as LinkedIn Learning as well as supporting external education

and certifications.

• Enabling skill building for our People leaders on key skills such as coaching and continuous

feedback to ensure that the People leaders are equipped to support their team members.

• In order to build leadership accountability, in 2024 our people leaders had a specific goal on

people development, clearly defining the expectation to develop their teams and show them

career opportunities at Philips by nominating them to succession plans.

Our People Performance Management focuses on both ‘what’ we achieve (goals and key areas of

responsibilities) and ‘how’ we achieve these goals. This more balanced view of performance drives

holistic conversations between employees and managers throughout the year, with regular check-

ins for feedback and development built in along the way. In 2024, 86% of our employees were

involved in regular performance and career development reviews. We see a difference in the

percentage of men and women involved in the PPM process due to a higher number of women in

the role of production line workers. These roles are excluded from the online PPM process due to

the nature of the role and contractual agreements. Performance assessment typically happens

through locally established KPIs.

Philips Group

Employees involved in regular performance and career development reviews

by gender in %


Employees	86%
Female	79%
Male	91%
I choose not to self-identify	95%

We continue to stimulate cross-moves (across Businesses, between Zones or Functions) to promote

collaboration and give people challenging learning experiences. During the recent reorganization,

we largely staffed senior leadership positions with internal talent, with a specific focus on cross-

functional talent pipelining.


	218


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Leadership

We believe leaders drive culture, which drives performance. In 2024, we empowered our leaders to

ignite our refreshed culture of impact with care in their teams. We recognized the responsibility

and challenges they face – our endeavor is to support them, and we do so by:

• Clarifying and simplifying expectations.

• Streamlining communication to them, with clear call to action.

• Building their capability through skill building programs, coaching, self-paced learning paths,

and bite-sized modules and a playbook for developing high performing teams. We hosted

dedicated workshops to onboard and upskill leaders on our refreshed culture and gave them

‘freedom in a frame’ to bring this to life in their teams.

• Continuing to invest in our high potential leaders through refreshed Talent Acceleration

programs. These programs are multi-month, immersive learning experiences that aim to

accelerate the development of our top performing leaders to the next level as well as create a

future-ready pipeline of leaders, tuned to the needs of the company. We covered over 200 of

our top leaders on critical succession plans through these programs for this year.

In return, we hold our leaders accountable for role modeling in the culture, developing their people

and driving performance in their teams and we developed and launched short modules to build

deeper capability in change, care, and engagement.

Learning

Philips is dedicated to fostering a culture of learning and growth that empowers our people to do

their jobs better, advance in their careers, and live our 'Impact with Care' culture every day. In

2024, we continued our efforts to ensure that learning is seamlessly integrated into the overall

talent ecosystem, positioning it as a key driver of employee retention, engagement, and enhanced

employee experience.

Our learning and development agenda focused on providing opportunities for employees to

acquire the skills and experiences that align with both personal career growth and the strategic

needs of the business. Building on our transformation of Philips University into a comprehensive

Capability Development Platform, we emphasized experience-based career development,

empowering our employees to lead with confidence and drive results.

Continuing our strategy of offering a ‘digital first’ employee experience, we expanded our

investments in digital learning solutions that enable personal, team, and organizational growth.

Through improved data analytics and simplified ways of working, we consistently align our learning

offerings with the evolving needs of our business and workforce.

By the end of 2024, 580,370 trainings were completed through Philips University (internal platform

only) resulting in a total of 727,364 training hours. The course completed by the largest number of

employees was the General Business Principles 2024.

By the end of 2024, 3,013,163 trainings were completed through Quality Management Learning

(internal platform only), with a total of 2,436,765 training hours. These training completions relate

to our emphasis, via training deployments, on Patient Safety and Quality-related topics, and

represent training for all our employees who work on our Philips products or related services.

Courses completed by the largest number of employees in the Quality Management Learning

domain include Philips Patient Safety and Quality Essentials, Complaints and Customer Feedback

Awareness.

For Philips in total, 3,593,533 trainings were completed with a total of 3,164,130 training hours,

resulting in an average number of training hours of 47,5 per employee.

Philips Group

Training hours by gender


	Average training hours
Female	38.3
Male	53.5
I choose not to self-identify	82.4
Average hours Philips	47.5

Philips training and performance metrics methodology:

Employees are defined as Philips payroll employees, excluding contingent workers, interns, long

term leavers, Heartfelt Program workers in Japan, WGP workers in the Netherlands, and vendor

FTEs; including FTEs at newly acquired companies.

The data for performance reviews is prepared using Workday reports. The participation in

performance reviews is calculated based on eligibility for participation in the online process in

Workday as agreed by management. This enables us to track this figure more accurately.

Training hours data is prepared using consolidated reporting from our four learning systems.

Note V Diversity, Inclusion and Well-Being

We are a diverse team made up of 68,419 individuals across over 70 countries, all with different

backgrounds, perspectives, and experiences. We fully value and leverage these differences to

ensure that creativity and innovation can flourish.

In our ongoing effort to increase transparency and develop leadership through non-discriminatory

means, we share data on the representation of women throughout our Businesses, Regions and

Functions, including a quarterly review with the Executive Committee. We closely monitor the

inflow, advancement and outflow of talent, as well as their engagement and employee experience

via our bi-annual Philips Employee Survey, which makes it possible to customize goals and intervene

where appropriate. We continue important initiatives that address psychological safety, health and


	219


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

well-being, inclusion and equal employment opportunities. Through these initiatives we further

embed our ambition to be an equal-opportunity employer, offering an inclusive work place to a

diverse workforce to drive our business and innovation, and mirror the diversity of our worldwide

customer base.

Diverse representation of talent

Philips aims to have 35% of senior management positions held by women, by the end of 2025.

The achievement of this globally applying aspirational goal may be impacted by conflicting local

rules and regulations.

Philips Group

Trend for % of women in senior management positions


Year	2020	2021	2022	2023	2024
% of women in senior management positions	27%	28%	30%	31%	33%

Senior management positions (including senior directors and executives) amount to 1,105

employees, 361 women (33%), 744 men (67%) at the end of 2024. At year-end, one out of three

members of the Board of Management was female, with five out of thirteen members of the

Executive Committee being female. On the date of this report, composition of the Board of

Management had not changed, while (upon the announced retirement of Edwin Paalvast) seven

out of fourteen members of the Executive Committee will be female.

The below graph shows employee headcount by gender. At Philips, employees are registered as

female or male, or can choose not to disclose their gender, to reflect requirements of the countries

we operate in.

Philips Group

Gender diversity in %



Staff	Professionals	Management	Executives	Total

‘22

‘23

‘24

‘22

‘23

‘24

‘22

‘23

‘24

‘22

‘23

‘24

‘22

‘23

‘24

At Philips, we aim for a multi-generational workforce, as a key factor to foster creativity,

productivity and innovation. The different life experiences of a multi-generational workforce allows

us to include diverse perspectives and points of view in our collaborative decision-making.

Philips Group

Employees by age group


Employee distribution by age group in headcount (and %)	Under 30	30 to 50	Above 50	Total
	11,427 (17%)	40,639 (61%)	14,612 (22%)	66,678

To support an inclusive culture, we monitor the demographics of our workforce, including

employees that identify as having a disability. This enables us to understand where we are

underrepresented as compared to industry and regional standards and to allow for accommodation

as needed at our work locations. Persons with disabilities are defined as persons who have long-

term physical, mental, intellectual or sensory impairments which in interaction with various barriers

may hinder their full and effective participation in society on an equal basis with others. At year-

end 2024, 3% of our employees have disclosed a disability either through self-identification or

validation by a medical professional. This percentage only includes countries where it is legally

allowed to collect and disclose data on persons with disabilities.

Global Diversity Council

Our Global Diversity Council is comprised of 10 senior leaders representing our Businesses, Regions

and Functions. The Council provides governance and oversight on diversity efforts, sponsors our

Employee Resource Groups, promotes company-wide behavior change, and communicates on

progress.

Commitment to non-discriminatory practices

Employee Resource Groups (ERGs) provide an inclusive space for employees to support and care for

one another, develop skills, experience meaningful cultural connections, expand their knowledge,

all while strengthening relationships among the Philips community. Philips currently has 12 ERGs

globally that are open to all, with over 10,000 employees participating. We monitor compliance

with local rules and regulations, as they may change from time to time, including, for example,

with regard to leadership development through nondiscriminatory means.

Health & Well-being

In 2024, we evolved our (mental) health and well-being framework to incorporate two additional

pillars of well-being – career and environmental – enhancing our holistic approach and integrating

global and local programs. We continued to address mental health by further rolling out the

Employee Assistance Program (EAP).

We grew our Mental Health Champion program to over 400 Champions across the globe,

providing accredited training for peer-to-peer confidential support. We developed compassionate

leadership training for all our people managers, as well as encouraging dialogues around self-care,

building trust and resilience.


	220


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Along with International Women’s Day, PRIDE and International Day of People with Disability,

Philips also recognized self-care month and World Mental Health Day, with a variety of virtual

mental well-being sessions and resilience practices that engaged employees across our Regions. In

collaboration with Philips University, the Philips Energy Management well-being program was

further extended across the organization.

Work-life balance

At Philips, we realize the positive effects that family-related leave programs have on employee

engagement, retention, well-being, and productivity. It provides a structured and approved period

for employees to temporarily step away from their work responsibilities to create more work-life

balance. This break allows them to focus on their family’s needs, particularly in the crucial early

stages of parenthood. Family-related leave leads to improved employee morale and helps us to

reach our gender ambitions.

Philips adheres to the local legislation and regulations when defining and capturing entitlement and

usage of family-related leave. The overarching definition states family-related leave includes

maternity leave, paternity leave, parental leave, and carers’ leave that is available under national

law, collective agreements or other policies and regulations.

99.5% of our employees are entitled to take family-related leave, defined as those who are covered

by regulations, organizational policies, agreements, contracts or collective bargaining agreements

that contain family-related leave entitlements. Data from the top 10 countries (by employee

headcount) was collected and used to estimate the total number of entitled employees that took

family-related leave, based on geographical (regional) variables. Using this method may not

adequately represent the diversity of leave practices across all countries in each region and may

lead to data inaccuracy. However, as employees in the top 10 countries account for 83% of all

employees, this risk is limited. Based on described estimations, 7% of the entitled employees (8%

women and 6% men) took family-related leave in 2024.

External awards

Many stakeholders—including customers, potential partners, and employees—view third-party

assessments as valuable, objective indicators. This past year we were honored with awards

recognizing our efforts in Inclusive Culture, Gender Diversity, and Human Rights Equality. Our

achievements in 2024 included prestigious accolades such as Forbes Best Employers for Women,

Forbes World’s Best Employer, Financial Times Best Employer for Diversity, and a top rating on the

Human Rights Campaign’s Corporate Equality Index. These recognitions underscore our ongoing

dedication to fostering an inclusive and equitable workplace.

External partnerships

As we continue to focus on integrating inclusion, belonging and equity into the employee

experience, we see value in partnering with diverse professional network organizations and job

boards to sharpen our focus on the development and retention of our internal diverse talent and

increasing representation of diverse talent across our organization. In 2024, we renewed a

partnership with the National Black MBA Association and introduced partnerships with the National

Sales Network, Circa, Mogul and Rise and Lead.

Philips diversity metrics methodology:

Philips prepares diversity metrics (gender in senior management and age distribution) using the

Philips employee definition, in line with the ESRS definition of employees, and Workday reports.

Philips defines senior management as Corporate Grade 90 (senior director) and above, which does

not differ from previous description. Philips defines management as Corporate Grade 80 (director)

and Corporate Grade 90 (senior director). The distribution of employees by age group is split into

three categories: under 30 years old; 30-50 years old; over 50 years old.

Persons with disability uses the Philips employee definition, in line with the ESRS definition of

employees. Disability data is collected manually in countries where we operate with headcount. In

some countries disability is registered through self-identification, while in others it is registered with

medical documentation. Philips adheres to the local legislation and regulations when defining,

registering and disclosing information on persons with disabilities among employees, as well as

when setting local strategies and targets. Due to the localized nature of the metric, there is no

consistent global process in place to collect or validate the data, and official medical records are not

a requirement across all countries.

Work-life balance data is collected manually in countries where we operate with headcount and

uses Philips employee definition, in line with the ESRS definition of employees. Work-life balance

data on entitled employees who took family-related leave is collected from our largest countries by

headcount and further estimated.

Note VI Employee engagement

Our People Engagement Survey (PES) saw increased participation, leading to a response rate of

84%, which means that almost 58,000 employees participated.

The PES is a key component of our listening strategy, informing our Business and People strategy

on employee sentiment and potential impacts, risks and opportunities. The results are taken up by

the Executive Committee and further cascaded for follow-up actions in their organizations and

teams, informing how we work and areas in need of attention.

Despite the ongoing changes within the organization, we observed a positive trend in the

Employee Engagement Index, with an increase of 5% to 78% in 2024. While this improvement is

encouraging and indicates that the organization is adapting well to the changes, it is worth noting

that this figure is still 2% below the high performance norm.


	221


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Employee Engagement Index


	2022	2023	2024
Favorable	77%	73%	78%
Neutral	15%	17%	15%
Unfavorable	8%	10%	7%

In a changing environment, we listened actively to our employees to provide them with greater

clarity on future direction and enable them to proactively deal with change to meet our customer

and patient needs. In 2024 we continued our specific focus on Patient Safety and Quality and with

this continued focus the engagement on this key topic continues to grow. Patient safety and

quality is our license to operate, and we continue embedding this culture in everything we do. The

organizational shifts made as part of our plan to create value have also boosted confidence in our

ability to effectively support customers.

Using the Customer Experience Index, we look at how well employees think we focus on customer

needs. These inputs are actively exchanged with the Customer Experience team.

Our employee engagement is primarily driven by a clear understanding of our customer needs and

delivering on commitments that we make to each other. The results of the PES indicate that

employees feel they can be themselves and have trusting relationships at work. Another significant

factor driving engagement is our high scores on the Diversity & Inclusion index, which is around the

industry benchmark.

The PES represents interests and views of employees and is analyzed by various demographic

groups to ensure consideration of underrepresented groups: leadership levels, geographic location,

gender, Business Units/Regions/Functions, and tenure, as well as corporate grades. The survey is

sent to all Philips employees

Philips Employee Engagement Index (EEI) calculation methodology:

The Employee Engagement Index (EEI) is the single measure of the overall level of employee

engagement at Philips. It is a combination of perceptions and attitudes related to employee

satisfaction, commitment and advocacy.

Employee Engagement is measured by four statements on a five-point scale that are widely used in

the industry. Favorable is % strongly agree + % agree, neutral is % neutral, and unfavorable is %

disagree + % strongly disagree.

The reported figures are based on the Employee Engagement Survey. The total score for employee

engagement is an average of the quarterly results of the survey. The results are calculated by taking

the average of the answered questions of the surveys.

Note VII Equal opportunities and equal pay

At Philips, we continue our commitment to being an equal-opportunity employer, ensuring that

hiring, promotions, and pay decisions are based on merit, qualifications and performance. Labor

rates and pay for manual workers across the globe are carefully monitored to align with, and ideally

exceed, the living wage for each country or region. This approach reflects a commitment to fairness

and equal worth, recognizing that every worker deserves compensation that supports a decent

standard of living, covering essentials like housing, food, healthcare, and education (see Living

Wage and Adequate Wage). By prioritizing local living wage standards, we aim to foster economic

equity and respect the diverse economic conditions of different regions while valuing the

contributions of our workers as vital members of the global workforce.

Pay rates for manufacturing workers differ globally due to variations in economic development,

labor market conditions, and cost of living. Countries with advanced economies and higher living

standards often result in higher wages, driven by robust labor protections, union influence, and

demand for skilled workers. In countries that are usually industrialized economies, wages tend to

be lower, reflecting a balance between industrial growth and lower labor costs. These differences

underscore the complex interplay of global economics, local market forces, and the value placed on

labor.

2024 is the first year Philips is publishing an unadjusted gender pay gap. This measure represents

the overall difference in average hourly earnings between men and women, without adjusting for

factors like job role, experience, education, hours worked, or country of employment. It is

calculated by comparing the average hourly pay for men to the average hourly pay for women,

across the various employee groups (see next table). This measure highlights disparities in earnings

across groups but does not explain the reasons behind them.

The 3-year gender pay gap figures show a consistent trend across different grade groupings. The

unadjusted pay gap is highest in the Staff grouping, increasing from 24% in 2022 to 29% in 2024.

As this number represents an average over all countries, having a higher proportion of male Staff in

countries with a higher cost of living and average pay would cause a pay gap in the statistics. The

increase in the unadjusted pay gap in the Staff grouping is caused by the fact that the relative

portion of female employees in higher cost of living countries has decreased. When we look at the

unadjusted pay gap in the Staff grouping on a country-by-country basis, we see that the pay gap

remains approximately flat over the years. The ‘Staff’ category typically refers to workers engaged

in manual labor, often within important areas such as manufacturing. These roles are essential to

building, sustaining and maintaining our products, and their work is characterized by its hands-on,

skill-based nature.

The Professional and Management grade groupings have maintained relatively low pay gaps of 2%

and 1% over the three years. The Executive grade grouping saw the pay gap decreasing to 2% in

2024.


	222


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Unadjusted Pay Gap


	Unadjusted Pay Gap
Group	31/12/2022*	31/12/2023*	31/12/2024
Staff	24%	27%	29%
Professional	2%	2%	2%
Management	1%	1%	1%
Executive	5%	9%	2%
Total	15%	15%	14%

*EY did not provide assurance over the comparative information presented

The overall pay gap across all grade groupings slightly improvement to 14% in 2024.

Encouragingly, the pay gap in the Management and Executive grade groupings remains relatively

low, reflecting progress toward greater gender parity at higher-grade levels. We are working to

identify and address the root causes for the remaining gaps, and to decrease and even close them

over time.

Philips pay equity disclosures methodology:

Next to the gender pay gap, we also report on the pay ratio between the highest paid individual

and the median employee (see 5-year development of CEO and BoM versus average employee

remuneration costs compared to company performance).

Both the gender pay gap data and median data is prepared using Workday reports. For the median

data, Workday data serves as a base and includes bonus pay, annualized estimates, and estimates

for benefits in cash and benefits in kind. We perform a deep-dive on the median employee. Both of

these metrics are based on the Philips employee definition in line with the ESRS definition of

employees.

Note VIII Living Wage and Adequate Wage

One of our key ESG commitments is to pay our employees at least a living wage. The Living Wage

is a concept defined by Anker and Anker (2017) as “Remuneration received by a worker in a

particular place sufficient to afford a decent standard of living for the worker and her or his 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”.

Based on the Living Wage analysis conducted for 2024, all Philips employees received wages and

benefits that are consistent with at least the minimum Living Wage standard for an individual.

Furthermore, approximately 98% of Philips employees received wages and benefits that are

consistent with at least the minimum Living Wage standard for a family (based on reference data

from WageIndicator).

The Adequate Wage is a concept defined in disclosure requirement S1-10 in the ESRS S1 as “A

wage that provides for the satisfaction of the needs of the worker and his / her family in the light

of national economic and social conditions.” Philips also conducted a comparison of employee

wages against the relevant Adequate Wage reference data, while following the principles outlined

by the relevant articles in ESRS disclosure requirement S1-10 as closely as possible. The outcome is

that Philips pays all employees at least an Adequate Wage.

Philips living and adequate wage methodology:

Living wage data is determined by comparing data from WageIndicator and Workday.

The adequate wage analysis is performed using employee payroll data. The adequate wage

threshold is determined by assessing established existing international, national or sub-national

legislation, official norms or collective agreements, based on an assessment of a wage level needed

for a decent standard of living; any national or sub-national minimum wage established by

legislation or collective bargaining; and/or Wage Indicator benchmarks.

Note IX Employee volunteering

Employees at Philips are entitled to 8 hours or one full day of paid time off to volunteer, once a

year. This can be with a local community project or an established non-governmental organization

whose work can impact access to healthcare. Some Regions also encourage employees to support

corporate social responsibility projects which are typically outlined in local volunteering policies.

Examples in 2024 include:

• Germany : In Hamburg, 70 Philips employees and 60 other volunteers planted 3,150 native trees

and shrub seedlings, covering 1,050 square meters. This initiative is expected to become a self-

sustaining forest by 2026.

• India: Philips employees engaged in various CSR activities, including fulfilling over 1,000

children’s wishes through ’The Philips Wish Tree’, donating blood, supporting heart surgeries for

children, conducting a Telemedicine Drive, and partnering for pediatric heart surgeries.

• Japan : Philips Japan participated in the Yamathon Charity Event, walking the 30 stations of the

JR Yamanote Line within 12 hours, raising significant funds for a children’s hospice. Additionally,

our employees made efforts towards sustainability, reducing office amenity use and fuel

consumption.


	223


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Note X Building employability

At Philips, our goal to offer the best place to work for people who share our passion is not limited

to employees on our payroll. In the Netherlands, for example, we run a special employment

program, WGP (Werkgelegenheidsplan, or Philips Employment Scheme), to offer vulnerable groups

of external jobseekers a work experience placement, usually combined with training. Since the

scheme’s launch in 1983, 13,475 people have participated, and around 80% found a regular job

after taking part. In 2024, we had an inflow of 60 candidates, bringing the total number of

participants in 2024 to 118. The WGP program is also accessible to refugees, and in 2024 we had 9

refugees participating.

Note XI Health and Safety

Outlook 2025-2030

The value of safety at work is changing, in light of the growing importance and corporate

recognition of environment, social and governance (ESG) and sustainability; mental and physical

well-being; psychological safety and human and organizational performance. The health and safety

of our people is core to Philips purpose. Our culture of “Impact with care for patients, people, and

the planet” starts with taking care of ourselves and each other. Our purpose is to improve people’s

health and well-being, and therefore, we value a safe work environment and the health and well-

being of our employees. As we strive to look after the physical and mental health of our people,

the H&S Leadership team embarked on a learning journey for further improvement in 2024. The

team conducted a thorough review of internal and external H&S audit findings, conducted

interviews with a wide range of stakeholders in the company, carried out SWOT analysis, and

reviewed and prioritized key focus areas. This information was used to develop a H&S strategic

roadmap 2025-2030.

In 2024, the following key strategic programs were identified to drive further execution to our

vision:

• Leadership-led safety culture to further drive accountability and ownership for people safety.

• Standardization and simplification of Philips’ Corporate Safety Standards (PCSS) to allow for

prioritized risk management and consistent implementation of H&S minimum requirements

worldwide. This includes providing guidance notes, templates, best practices, training

documents and work instructions.

• Safety by Design to integrate health and safety requirements from the start, considering people

and ergonomic aspects during the manufacturing, transportation, installation and maintenance

phases.

• Design and rollout of an Environment, Health and Safety digital platform with advanced

performance reporting and analytics to inform decision making. The platform will cover the

following modules: incident management, concern reporting, action planning, chemicals

management, risk management and audit.

These programs will be further supported by strengthening our risk management programs,

compliance assurance, employee participation, health promotion, and competence management.

Policies, Procedures and Management Systems: Philips continued to build a comprehensive

global Health & Safety Management System with the deployment of 11 updated Philips Corporate

Safety Standards (PCSS) in 2024. The Health & Safety (H&S) framework was further streamlined,

leading to the deployment of 64 PCSS by the end of 2024, compared with 66 in 2023. The PCSS

are supported with training materials in Philips University and Guidance Notes. The Occupational

Health & Safety Policy was reviewed and published in December 2024. Its main objectives include

the prevention of injuries, illnesses and incidents by fostering a healthy and safe working

environment for everyone, compliance with legal requirements and a systematic approach for

continuous improvement. The policy outlines the Occupational Health and Safety (OHS) guiding

principles for Philips’ management and employees, contractors and visitors. It applies to everyone

working for, or on behalf of Philips, covering all activities worldwide. This policy is publicly available,

and is communicated to all Philips employees and is applicable to contractors working for, or on

behalf of Philips. Management System Certifications ISO 45001 are in place for 25 manufacturing

locations. A total of 19 ISO 45001 certificates for non-manufacturing organizations have been

obtained, with further certifications planned. More than 47% of the total Philips workforce,

including 3rd party workers, is covered by ISO 45001 certification.

Compliance and audit: In 2024, Philips continued using the ENHESA Compliance tracking tool at

all locations where Philips has a significant presence. The locations conduct reviews of applicable

regulations to stay ahead of new requirements and ensure compliance. 9 H&S audits were

performed in manufacturing and research & development, office and field service organizations to

identify best practices and continuous improvement opportunities.

Risk assessments: The high-level risk assessment process, using the Philips Corporate Risk

Assessment protocol, is implemented across all entities to provide a strategic overview of the risk

profile. This approach has identified exceptional risks at specific locations as well as systemic risks

across Philips. Systemic risks were addressed through company-wide H&S campaigns to drive

performance improvements. Risk assessments were also reviewed during the Assurance letter

process, and Philips entities have a better understanding of the risks they face, and the controls

needed to address them.

Management reviews: The Philips Health and Safety Assurance letter was completed. This

process requires a full Health and Safety review at every level of the organization that verifies that

the Philips H&S policy is understood, a verified H&S Management System is in place, compliance

requirements are met, risk assessments have been completed with plans in place to control/reduce

significant risks, and sufficient resources (including adequate staff) are in place. The process is

initiated at the lowest organizational level and raised progressively to more senior leadership and

finally to Executive level, with review and sign-off at each stage.

Training and Communication: A library of Underwriters Ltd. (UL) safety e-learning courses (537

H&S courses in 11 languages) was made available in Philips University. Three new H&S campaigns

were launched – Healthy lifestyle, Learning from incidents, and Machine safety – and one health

awareness topic was circulated throughout our community (blood pressure health).


	224


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Health and Safety programs:

In 2024, 127 Champions were trained in Ergonomics to support job analysis and incident

investigations and help drive ergonomic improvements.

Ergonomic and Machine safety assessments were carried out by our subject matter experts at a

number of sites to raise awareness and identify priorities for improvement. Working groups were

created to allow for frequent information exchange and to monitor progress.

Global requirements for radiation protection training were published and a new scenario training

for field personnel was organized. Started quarterly regional meetings with H&S community to

share best practices, prioritize improvement opportunities and further harmonize on radiation

protection topics (PPE, dosimetry, risk analysis).

Together with Group Sustainability, considerable effort was put into improving cross-functional

alignment and management of chemicals. Deployment and training of the improved Process

Framework on chemical management started in Q3 2024.

Increased emphasis was placed on proactive metrics while retaining the existing recordable accident

rate. The metrics are aggregated into a scorecard, to provide one consolidated proactive

performance metric, which is presented at business level. Specific proactive safety metrics include:

• Gemba walks completed: 42,287 (target: 10,145)

• Ride-alongs completed: 3,867 (target 1,765)

• BBS Observations completed: 8,985 (target: 4,998)

• Trainings completed: 172,352 (target 53,446)

Please find here the overview of the number of incidents associated with work-related injuries, ill

health and fatalities of our own workforce.

Philips Group

Health and Safety metrics


	2023	2024
Number of recordable work related accidents	165	151
Employees	155	144
Non-employees	10	7
Rate of recordable work related accidents¹	1.14	1.08
Employees	1.11	1.05
Non-employees	1.57	1.98
Number of work related ill health	7	1
Employees	6	1
Non-employees	1	0
Number of days lost²	2,549	2,623
Employees	2,333	2,570
Non-employees	216	53

1A rate based on 1,000,000 hours worked, indicates the number of work-related injuries per 500 full time

people in the workforce over a 1-year timeframe.

2 Due to work-related injuries and fatalities from work-related accidents, work-related ill health and fatalities

from ill health.

No fatalities occurred with our own workforce or other workers, working on our sites in 2024.

Performance results

At Philips, we strive for an injury-free and illness-free work environment. Since 2016, the Total

Recordable Cases (TRC) rate and Lost Workday Injury Case (LWIC) rate have been defined as Key

Performance Indicators (KPIs). A recordable case is defined as a case where an injured employee is

unable to work for one or more days, undergoes medical treatment or sustains an occupational

illness. Lost Workday Cases are defined as occupational injury cases where an injured person is

unable to work for one or more days after the injury. We set yearly TRC targets for the company,

businesses, manufacturing and R&D sites.

We recorded 151 TRCs in 2024, with a 12% reduction compared to the 172 cases in 2023. The

TRC rate decreased from 0.24 per hundred FTEs in 2023 to 0.21 in 2024. The following tables have

been included to provide a comparable overview.

Philips Group

Total recordable cases per 100 FTE


	2020	2021	2022	2023	2024
Diagnosis & Treatment	0.45	0.53	0.41	0.43	0.29
Connected Care	0.31	0.31	0.19	0.27	0.19
Personal Health	0.30	0.24	0.27	0.21	0.18
Other	0.16	0.21	0.17	0.18	0.20
Philips Group	0.24	0.29	0.23	0.24	0.21


	225


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

We also recorded 77 Lost Workday Injury Cases (LWIC). This represents a 13% decrease compared

with 90 in 2023. The LWIC rate decreased to 0.11 per 100 FTEs in 2024, compared with 0.12 in

2023.

The number of days lost from work-related injuries from work-related accidents decreased by 74

days to 2,623 days in 2024.

Philips Group

Lost workday injuries per 100 FTEs


	2020	2021	2022	2023	2024
Diagnosis & Treatment	0.27	0.28	0.21	0.28	0.16
Connected Care	0.11	0.09	0.09	0.13	0.07
Personal Health	0.22	0.16	0.09	0.09	0.08
Other	0.06	0.12	0.08	0.09	0.10
Philips Group	0.12	0.16	0.11	0.12	0.11

Diagnosis & Treatment

In the Diagnosis & Treatment segment, the number of Health and Safety incidents decreased in

2024 to 21 LWICs compared to 36 in 2023. The LWIC rate decreased to 0.16 compared to 0.28 in

2023. The total number of recordable cases for the Diagnosis & Treatment segment decreased to

38 (56 in 2023), mainly due to less recorded incidents in our factories in the United Sates.

Connected Care

In the Connected Care segment, the number of Health and Safety incidents decreased in 2024 to 4

LWICs (8 in 2023). Correspondingly, the LWIC rate decreased to 0.07 compared to 0.13 in 2023.

The total number of recordable cases for the Connected Care segment decreased to 11 in 2024

(16 in 2023), mainly driven by our factory in the United Sates.

Personal Health

In the Personal Health segment, the number of Health and Safety incidents were comparable to

2023, with 7 registered LWICs. The LWIC rate decreased slightly to 0.08 in 2024. There were 15

recordable cases in the Personal Health segment in 2024 (17 in 2023). This decrease was mainly

driven by less recorded incidents in Austria.

Philips’ Health and Safety methodology:

Health and Safety data is reported globally via our sustainability reporting system including all

manufacturing locations, R&D sites, field service organizations and offices. There are few non-

reporting organizations, these are mainly small offices. With this approach, the total coverage of

Health and Safety reporting is above 98%. The data are reported and validated each month. The

H&S performance is calculated based on the reported data. The remainder is not extrapolated due

to its insignificance. The Total Recordable Cases (TRC) rate is defined as a KPI for work-related cases

where an employee is injured or becomes ill and is unable to work in the same capacity for one or

more days following a workplace incident or has medical treatment above first-aid treatment. We

also provide the Lost Workday Injury Cases (LWIC) rate, which measures work-related injuries

(predominantly occurring in manufacturing operations and field service organizations) where the

incident leads to at least one lost work day. Fatalities are reported for staff, contractors, visitors and

other workers working on our sites.

Note XII Workforce details

The total number of Philips employees was 66,678 at the end of 2024, compared with 69,656 at

the end of 2023, a decrease of 2,978 employees. The total number of non-employees (contingent

workers) in headcount at Philips at the end of 2024 was 1,741.

Philips Group

Employees per worker type in Headcount


	2023	2024
Philips employees	68,039	66,678
Contingent workers	2,163*	1,741
Total	70,202	68,419

*EY did not provide assurance over the comparative information presented

By year-end 2024, Philips completed its previously announced plans to reduce its workforce by

10,000 roles globally by 2025. These reductions were part of our multi-year plan designed to create

value with sustainable impact, and Philips sought to support those who were directly impacted by

the reductions in finding new roles.

Subject to local country legislation, our support offers include:

• social plan or respective severance policy

• outplacement services and support through our Employee Assistance Program

• work placement agency, where applicable, for employment-to-employment support

• redeployment – where possible – as applicable by local legislation and in the context of the

hiring restrictions

Philips Group

Employees per segment in FTEs at year-end


	2022*	2023*	2024
Diagnosis & Treatment	26,840	25,773	24,544
Connected Care	19,759	17,385	16,829
Personal Health	7,858	7,535	7,991
Other	22,777	18,963	18,459
Philips Group	77,233	69,656	67,823

*EY did not provide assurance over the comparative information presented


	226


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Employment in FTEs at year-end


	2022*	2023*	2024
Balance as of January 1	78,189	77,233	69,656
Consolidation changes:
Acquisitions	87	27	-
Divestments	(33)	(353)	(227)
Other changes	(1,010)	(7,251)	(1,606)
Balance as of December 31	77,233	69,656	67,823

*EY did not provide assurance over the comparative information presented

Geographic footprint

Approximately 56% (2023: 56%) of the Philips workforce is located in Mature geographies and

44% (2023: 44%) in Growth geographies. In 2024, the number of employees in Mature

geographies decreased by 1,066. The number of employees in Growth geographies decreased by

768.

Philips Group

Employees per geographic area in FTEs at year-end


	2022*	2023*	2024
Western Europe	19,297	16,900	16,537
North America	20,618	18,094	17,544
Other mature geographies	4,576	4,105	3,952
Mature geographies	44,491	39,099	38,033
Growth geographies	32,742	30,558	29,790
Philips Group	77,233	69,656	67,823

*EY did not provide assurance over the comparative information presented

In addition, the below table shows the spread of employees across countries where Philips has the

highest presence in terms of headcount (at least 10% of the total employee population).

Philips Group

Employees headcount in countries representing at least 10% of total workforce


Country	Number of employees
USA	16,639
The Netherlands	8,566
India	8,166
China	6,716

Employee turnover

In 2024, employee turnover amounted to 14.8%, of which 7.5% was voluntary, compared to

17.6% (9.5% voluntary) in 2023.

Philips Group

Employee turnover 2024 in number of employees


	Staff	Professionals	Management	Executives	Total
Female	2,781	1,620	176	15	4,592
I choose not to self-identify	3	4			7
Male	2,218	2,825	338	37	5,418
Philips Group	5,002	4,449	514	52	10,017

Philips Group

Employee turnover 2024


	Staff	Professionals	Management	Executives	Total
Female	23.0%	12.2%	13.1%	19.0%	17.1%
I choose not to self-identify	17.6%	14.8%			15.9%
Male	17.0%	11.5%	12.1%	18.8%	13.3%
Philips Group	19.8%	11.7%	12.4%	18.8%	14.8%

Philips Group

Voluntary turnover 2024


	Staff	Professionals	Management	Executives	Total
Female	9.8%	6.9%	5.7%	2.5%	8.1%
I choose not to self-identify	11.8%	7.4%			9.1%
Male	9.1%	6.3%	4.5%	7.1%	7.1%
Philips Group	9.4%	6.5%	4.9%	5.8%	7.6%

Philips Group

Employees (excluding contingent workers) by working type in headcount at year-end


	Female	I choose not to self-identify	Male	Total
Permanent employees	23,551	42	39,038	62,631
Temporary employees	3,054	1	991	4,046
Other			1	1
Philips Group	26,605	43	40,030	66,678


	227


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Employees headcount by contract type and region at year-end


	Permanent employees	Temporary employees	Other	Philips Group
Western Europe	17,172	268	1	17,441
North America	17,176	5		17,181
Other mature geographies	1,814	91		1,905
Mature geographies	36,162	364	1	36,527
Growth geographies	26,469	3,682		30,151
Philips Group	62,631	4,046	1	66,678

Philips’ Employee disclosures methodologies:

All reported employee data is actual and based on year-end numbers.

Employees are defined as individuals who are in an employment relationship with the undertaking

according to national law or practice.

Philips employees include permanent (with an undefined end-date contract) and temporary (with a

defined end-date contract) employees. There is no non-guaranteed hours employment (without a

guarantee of a minimum or fixed number of working hours) at Philips. Please refer to Income from

operations for link to the relevant financial statements data.

Non-employees are defined as contingent workers. The characteristics of non-employee workers

in our own workforce, in line with the ESRS definition of non-employees, is prepared using

Workday reports.

The rate of employee turnover reported is calculated in headcount as a monthly average across

the reporting period. The calculation is based on the sum of Philips employees’ voluntary and

involuntary turnover.

Collective bargaining and social dialogue

Philips Group

Collective bargaining and social dialogue coverage


		Collective bargaining coverage		Social dialogue
Coverage rate type	Coverage rate	Employees - EEA (for countries with >50 employees, representing >10% of total employees	Employees - Non- EEA (for countries with >50 employees, representing >10% of total employees	Workplace representation (EEA only) (for countries with >50 employees, representing >10% of total employees
1	0-19%		AsiaPac, India, North America, UK & Ireland
2	20-39%	Denmark	LATAM
3	40-59%	Belgium, Germany
4	60-79%
5	80-100%	Austria, Finland, France, Italy, Netherlands, Norway, Spain, Sweden		Austria, Belgium, Czechia, Denmark, Finland, France, Germany, Italy, Netherlands, Norway, Poland, Portugal, Romania, Spain, Sweden

We strive to follow International Labor Organization principles with respect to local legislation and

legitimate associations representing employees’ collective interest, with whom we can enter

dialogue about workplace issues. Philips employees in some countries are covered by collective

bargaining agreements, as well as social dialogue in the form of workers’ councils and unions.

Regular meeting with Workers’ Councils, unions and other associations representing employees’

collective interest ensure that we address all relevant material topics for our workforce, including

human rights. The above table shows the breakdown of EEA and non-EEA country coverage in

terms of collective bargaining agreements, where we have a >10% representation of our total

workforce. The number of employees in the European Economic Area (EEA) at year-end 2024 was

12,583, and the percentage of employees in the EEA covered by a collective bargaining agreement

is 71%. Globally, 23% of Philips employees are covered by a collective bargaining agreement.

In some EEA countries, there are several collective bargaining agreements related to various

industrial trade unions; however, each employee is covered by no more than one agreement.

Additionally, EEA countries are also covered by the European Works Council (EWP) agreement.

Social protection

Philips is committed to fair employment practices. Social protection is provided to employees in line

with local regulations. In 2024, in accordance with the ESRS we assessed the social protection

coverage in the 70 countries where we employ people.


	228


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Sickness

All employees are covered against loss of income in the event of sickness. In the 22 countries where

the government does not cover for loss of income, social protection is Philips-enhanced, in line with

local practices. In France, only employees with a tenure of 12 months or longer are eligible.

Unemployment

In line with local practices, employees are not covered for loss of income in case of unemployment

in Bangladesh, Colombia, Costa Rica, Egypt, Ghana, India, Indonesia, Kenya, Lebanon, Mexico,

Panama, Peru, Philippines, Qatar, and Sri Lanka. In Israel, only employees with a tenure of 18

months or longer are eligible. In Japan, UAE, only employees with a tenure of 12 months or longer

are eligible. In Malaysia, and Saudi Arabia, foreign employees are not eligible for unemployment

benefits.

Employment injury and acquired disability

All employees are covered against loss of income in the event of employment injury and/or

acquired disability. While in China employees are not directly covered for loss of income due to

employment injury and/or acquired disability, all are enrolled in an insurance plan required by the

government. In France, only employees with a tenure of 12 months or longer are eligible.

Parental leave

Employees are covered against loss of income during parental leave in all countries where we

employ people. In 8 of the countries where the government does not cover for loss of income, it is

Philips enhanced, in line with local practices. In Egypt, Ghana, Kenya, Lebanon, Saudi Arabia,

Serbia, South Africa, Turkey and UAE only maternity leave is available. In Colombia, France,

Hungary, and Sweden, only employees with a tenure of 12 months or longer are eligible. In

Romania, only employees with at least 12 months of work experience including outside of Philips

are eligible (from the last 24 months before a child's birth).

Retirement

Employees in Ghana, Kenya and Myanmar are not covered for loss of income in the event of

retirement neither by the government nor by Philips, in line with local practices. In Saudi Arabia,

foreign employees are not eligible for retirement benefits.

Philips collective bargaining and social dialogue methodologies:

Collective bargaining and social dialogue data is collected manually in countries where we

operate, using headcount figures.

Social protection data, which applies to Philips employees, is collected in the countries in which

we operate. It is based on local legislation and Philips policy.

8.5.2Workers in the value chain

In this section we describe the relevant topics for workers in the value chain, with a focus on

actions and results. Relevant methodologies and assumptions have been included.

Note XIII Supplier sustainability & Workers in the value chain

Philips’ purpose to improve people’s health and well-being extends throughout our value chain. At

Philips, we have a direct business relationship with approximately 4,400 product and component

suppliers and 15,100 service providers. Our supply chain sustainability strategy is evaluated annually

through a structured process, combined with multi-stakeholder dialogues. From this, we have

developed multiple ESG programs aimed at driving sustainable improvement and relevant targets.

These programs cover compliance with our policies, improvement of our suppliers’ sustainability

performance, our approach towards responsible sourcing of minerals, and reducing the

environmental impact of our supply base. Supplier engagement in these programs is driven by

screening ESG opportunities and risks, evaluating materiality and impact along the lines of material,

industry, and country (geographical) characteristics. For more information on ESG governance,

including targets setting, please refer to ESG governance, strategy and policies.

Procurement and supplier information sessions are scheduled on an ongoing basis. During these

sessions, our supplier ESG expectations are shared and clarified. Training courses are organized to

support suppliers in meeting those expectations. In addition, suppliers are supported in improving

their ESG performance via individual training. Where data is available, suppliers are informed on

their performance compared to industry peers, best practices are shared, and their adoption

encouraged. During the sourcing process, supplier ESG indicators are evaluated. In addition to

minimum requirements set out in our Code of Conduct, suppliers with a better ESG performance

are considered favorably.

Actions and resources in relation to Workers in the value chain

The implementation of our supplier sustainability program is performed by our supplier

sustainability team, with representatives in different parts of the world. The implementation of this

program does not require material operational nor capital expenditures (OpEx and CapEx). We do

not expect a significant change in OpEx nor CapEx to this purpose in short-, medium-, or long-

term.

Policies and Standards

Via policies, standards and position statements Philips communicates its ESG expectations and

requirements towards its business relationships. The following policies, standards, and position

papers, which are publicly available on Philips’ website, are in place to address material ESG topics

in the value chain: our Human Rights Policy reaffirms our commitment to identify, prevent, and

mitigate adverse human rights, and directly applies to the activities of the Philips group, including

all its businesses, regions, and functions. Our commitment to human rights, including labor rights

of workers, extends to other parts of our value chain, affecting our business partners, suppliers and

customers. Philips is committed to supporting and respecting human rights, as set out in the

International Bill of Human Rights and the International Labor Organization (ILO) Declaration on

Fundamental Principles and Rights at Work. We also follow the guidance given in the United


	229


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Nations Guiding Principles on Business and Human Rights (UNGP) and the Organization for

Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.

Furthermore, Philips has been a signatory to the UN Global Compact since 2007.

The Position Paper on Responsible Sourcing of Minerals specifically relates to human rights issues

related to the extraction of minerals. Philips’ efforts to respect human rights extend to issues

further up the supply chain, for instance to prevent human rights abuses in the extractives sector,

especially related to conflict minerals and cobalt. We are committed to not purchasing raw

materials, subassemblies, or supplies, known to contain conflict minerals from conflict-affected and

high-risk areas (CAHRAs), including the Democratic Republic of the Congo (DRC) and adjoining

countries, among others. Philips does not directly source minerals from mines as these are typically

several tiers removed from our direct suppliers. Nevertheless, we recognize that from our position

in the supply chain as a downstream company we can have an impact in addressing the

sustainability issues related to mining of minerals through implementation of due diligence

mechanism and robust multi‐stakeholder engagement. Philips fully supports and complies with the

OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected

and High-Risk Areas (OECD Guidance).

The Supplier Sustainability Declaration (SSD) sets out the standards and behaviors Philips requires

from its suppliers. The SSD is based on the Responsible Business Alliance (RBA) Code of Conduct, in

combination with several additional Philips specific expected behaviors. The Code is in alignment

with the UN Guiding Principles on Business and Human Rights and key international human rights

standards, including the ILO Declaration on Fundamental Principles and Rights at Work and the UN

Universal Declaration of Human Rights. It covers topics such as Forced Labor, Child Labor, Human

Trafficking, Health & Safety, Environment, Ethics, and Management Systems. The RBA is the

world’s largest industry coalition dedicated to responsible business conduct in global supply chains.

As a Regular member of the RBA, Philips is required to commit publicly to the RBA Code of

Conduct and actively pursue conformance to the Code and its standards, which must be regarded

as a total supply chain initiative.

The Regulated Substances List (RSL)

The RSL specifies the chemical substances regulated by legislation. Suppliers are required to follow

all the requirements stated in the RSL. Substances are marked as restricted or declarable.

All suppliers are required to commit to the SSD and RSL. Through integration of a Sustainability

Agreement in our purchasing agreements, suppliers declare compliance to both the SSD and RSL.

Upon request, they provide additional information and evidence.

Risks and Vulnerable Groups

Philips utilizes a Risk Assessment Platform as a fundamental component of its risk assessment

model. The platform employs a dynamic scoring method, which assesses regions across five critical

supply chain pillars: Labor, Health and Safety, Environment, Business Ethics, and Management

Systems. The scoring method utilizes several indices with data from verified and reputable public

sources to generate a final score, including but not limited to the Workers Rights Index

(International Trade Union Confederation), Children’s Rights in the Workplace Index (UNICEF and

Global Child Forum), Global Slavery Index - Proportion in Slavery and Vulnerability (Walk Free

Foundation). Through this methodology, each region is assigned a risk score and categorized into

one of four risk bands: Extreme risk, High risk, Medium risk, or Low risk. These data-driven insights,

presented in the form of risk maps, enable Philips to strategically focus its efforts to enhance supply

chain sustainability while improving the lives of workers within the value chain.

Philips recognizes the need to prioritize ethical business practices and mitigate risks associated with

suppliers located in countries classified as extreme risk. Philips acknowledges the complexities

inherent in its operations, particularly concerning its ambitions to provide access to care for all. In

the limited instances where we do procure from extreme risk countries, we implement additional

controls and due diligence measures to mitigate risks for workers within the value chain, ensuring

alignment with ethical standards and sustainability commitments. Philips has proactively enrolled

suppliers from these countries in its Beyond Auditing program to assess them against rigorous

standards and foster collaborative efforts towards continuous improvement. Leveraging insights

from Beyond Auditing assessments in high-risk countries and embracing technological

advancements such as AI and predictive analytics, Philips is committed to expanding the enrollment

of suppliers from other geographies. This strategic approach underscores Philips’ commitment to

enhancing supply chain sustainability and driving positive change.

Our risk assessment extends beyond geographical boundaries to encompass the inherent risks for

workers in value chain in certain industries and commodities. While geographic location may play a

significant role, the nature of the industry and commodity itself can amplify vulnerabilities within

the supply chain. These risks include precarious working conditions, limited legal protections,

challenges in accessing grievance mechanisms, as well as long working hours, inadequate rest

breaks, and exposure to hazardous conditions.

Furthermore, our commitment to responsible sourcing extends to addressing the challenges posed

by Conflict Minerals, including cobalt. Conflict minerals, such as tantalum, tin, tungsten, and gold

(3TG), sourced from conflict-affected and high-risk areas, present significant human rights and

ethical challenges within the supply chain. Additionally, cobalt, a critical component in lithium-ion

batteries used in electronic devices, is often mined under hazardous conditions in regions such as

the Democratic Republic of Congo (DRC), leading to concerns about child labor, unsafe working

conditions, and environmental degradation.

Philips acknowledges responsibility to respect human rights, making it imperative to address the

welfare of vulnerable groups. These groups encompass children, migrants, minorities, indigenous

populations, refugees, and persons with disabilities, among others. They face various risks, such as

inadequate working conditions, including long hours and unsafe environments, as well as

discrimination, child and forced labor. The UN Guiding Principles on Business and Human Rights

emphasize the importance of safeguarding the rights of these vulnerable groups, highlighting the

need for companies to identify, prevent, and mitigate any adverse human rights impacts they may

face. In line with the approach towards vulnerable groups in our own operations, Philips aims to

actively address the unique challenges faced by vulnerable groups within its supply chain. Insights


	230


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

into specific challenges of these vulnerable groups are collected via the Beyond Auditing

engagement, stakeholder dialog events, and via its memberships to several organizations such as

the Responsible Business Alliance, UN Global Compact, Responsible Minerals Initiative and

European Partnership for Responsible Mining.

Engagement programs

Through several engagement programs, Philips connects with its supply chain stakeholders to

identify, prevent and mitigate adverse Human Rights and Environmental impacts. These programs

are typically organized per topic and/or stakeholder group to drive effective engagement.

Supplier Sustainability Compliance

In the Supplier Sustainability Compliance program, all up and downstream suppliers are required to

commit to the Supplier Sustainability Declaration and Regulated Substances List. The aim of this

program is to clearly and formally share Philips ESG expectations. Through integration of a

Sustainability Agreement in our purchasing agreements, suppliers declare compliance to both the

SSD and RSL. Adherence to the SSD is monitored in the Beyond Auditing program. Adherence to

the RSL is validated via the collection of substance declarations on a regular basis.

Beyond Auditing Program

The Beyond Auditing program was introduced in 2016 to replace Philips' former Supplier Auditing

program. The Beyond Auditing program focuses on:

• a systematic process to improve the sustainability of our supply chain through continuous

improvement against a set of recognized and global references

• preventing adverse impacts via improved ESG maturity

• mitigating and remediating adverse impacts via collaboration, increased transparency, clear

commitments, and agreed targets

• encouraging our suppliers, industry peers and cross-industry peers to adopt our approach

This systematic approach is shown in the figure below and is a high-level representation of the SSP

program.

First, a set of references, international standards, and Philips requirements are used to develop the

Frame of Reference, which covers (1) Management systems, (2) Environment, (3) Health & Safety,

(4) Business Ethics, and (5) Human Rights. For each, the maturity level of suppliers is identified in

the Program Execution Wheel, which assesses suppliers against the Plan–Do–Check–Act (PDCA)

cycle. Suppliers are then categorized through the Supplier Classification model, which differentiates

on the basis of supplier maturity, resulting in supplier-specific proposals for improvement. There are

four different sub-segments: BiC (Best in Class), SSIP (Supplier Sustainability Improvement Plan), DIY

(Do It Yourself) and PZT (Potential Zero Tolerance). The SSP process is monitored and adjusted

through continuous feedback loops. The outcome of the SSP assessment is a supplier sustainability

score ranging from 0 to 100. This score is based on supplier performance in the five areas

mentioned earlier.

Selection and classification

Supplier selection for the program is based on significance. During the lifecycle of the supplier

relationship, significance of up and downstream suppliers is determined through an assessment of

the supplier’s associated ESG risks and opportunities including material, industry, and geographical

characteristics, as well as annual spend. In 2024, 168 of our suppliers were considered significant.

After the initial assessment, the engagement strategy is tailored based on the suppliers’ current

performance in terms of sustainability. The frequency of the engagement is determined by the

supplier’s score. Suppliers with low maturity scores are typically engaged with yearly, suppliers with

high maturity scores every three years. To support further supply chain ESG development, also non-

significant suppliers are added to the program. By following up regularly, Philips is able to measure

the effectiveness of the engagement over time.

Code of conduct and deep dive assessment

The assessments take place virtually as well as on site, depending on the geographical location and

the maturity of the supplier. The suppliers in scope will be assessed against the standard of the

reference framework by a dedicated Philips ESG assessment team. The assessment is designed to

identify risks as well as opportunities. Via document and on-site verification, including direct

engagement with workers, a maturity score is determined after which the supplier is supported by

Philips’ assessment team in creating an improvement plan.

Suppliers who score medium to high during the code of conduct assessment, and as such have

managed to demonstrate a reliable foundation of code of conduct implementation, are invited to

participate in deep-dive assessments. These deep dive assessments support suppliers, via a similar

methodology, to reach higher maturity levels in the domains of Human Rights, Carbon Reduction

and Supplier ESG Management (Philips tier 2 suppliers). The Human Rights deep-dive is similar to

Philips’ internal Human Rights Impact Assessment. This deep dive includes multiple stakeholder

interviews and interaction with workers and/or their representatives, appropriately respecting

privacy and anonymity of interviewees. The Supplier ESG Management deep dive is similar to

Philips’ Beyond Auditing approach. Tier 1 suppliers participating in this deep dive receive support

from Philips to assess their own suppliers (and thus Philips Tier 2). Tooling and training materials are

made available to support the suppliers’ capabilities to run these assessments.


	231


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Potential Zero Tolerance

Whenever during the beyond auditing assessments, Potential Zero Tolerances (PZT) are identified, a

supplier is assigned a PZT status. The PZT status is a temporary status and requires immediate

attention and action. Depending on the categorization, suppliers are engaged in different ways to

improve their sustainability performance through agreed improvement plans.

If a (Potential) Zero Tolerance is identified, immediate action is taken. If the requested additional

information and evidence lead to the conclusion that there is no structural Zero Tolerance, the

supplier’s status will be changed and the supplier will go back to the original track in the program.

If the conclusion gives rise to a structural Zero Tolerance, the supplier is required to:

• propose a corrective action plan to mitigate and/or resolve the identified Zero Tolerance(s)

• commit to structurally resolving the Zero Tolerance

• provide regular updates and evidence

• avoid quick-fixing to prevent reoccurrence

Philips defines six Zero Tolerances, which relate to adverse ESG impact in the supply chain:

• fake or falsified records

• child and/or forced labor

• immediate threats to the environment

• immediate threats to worker health and safety

• failure to comply with regulatory and/or Philips requirements

• workers’ monthly income (covering salary for regular hours and overtime, tax deductions, social

insurance) failing to meet regulatory requirements

Results

In 2024, 105 suppliers were added to the Beyond Auditing program (compared to 158 added in

2023). Of the population of suppliers that entered the program in the years before 2024 and have

been assessed at least once in the past three years, 455 suppliers were still active in 2024

(compared to 392 in 2023). The combined group represents 82% of our significant suppliers who

are in the program. In 2024, 69 tier 2 suppliers entered the program as part of the ESG Supplier

Management Deep Dive, resulting a total number of 207 second tier suppliers engaged with in the

last three years.

In 2024, the overall year-on-year improvement in performance was 39% for suppliers that received

their first re-assessment in 2024. Measuring the effectiveness of the engagement and its positive

outcomes on the overall supplier maturity score, 88% of suppliers who were engaged with actually

showed improved conditions for workers. This figure includes suppliers assessed in the last three

years, for which the supplier has communicated their number of employees via the self-assessment

questionnaire, which was validated during the on-site assessment. For those workers, labor

conditions improved, the risk of serious injury reduced, and the negative environmental impact of

suppliers was brought down. For a detailed break-down of percentage improvements realized by

active suppliers in the past year, by comparing the assessment in 2024 to their previous assessment,

refer to the following table:


	232


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

SSP 2024 performance: pro-rata improvements in %


Topics	Policy	Procedures	Implementation	Management responsibility	Communication	Risk control	Target-setting & tracking	Corrective action approach	Supplier management
Environment	9%	7%	6%	11%	-4%	27%	9%	8%	7%
Health and Safety	10%	18%	39%	3%	6%	24%	30%	-6%	-9%
Business Ethics	21%	24%	27%	72%	34%	37%	22%	-10%	8%
Human Capital	18%	12%	33%	6%	9%	12%	10%	19%	-1%

Categories which showed the biggest improvement are:

• Management responsibility, Risk control and Target setting and tracking of Environmental

topics: establishing an environmental management organization, improving the audit process to

periodically assess conformance, including compliance with applicable laws and regulations

pertaining to environmental topics, as well as the target setting and tracking on topics such as

Greenhouse Gas Emissions.

• Implementation and Target-setting & tracking of Health & Safety topics: improving working

conditions of workers in the value chain, including setting targets and tracking progress.

• Business Ethics, especially in the domains of management responsibility, communication, and

risk control.

• Implementation for Human Capital: improving the approach to implement policies and

procedures into formal records for the supplier’s human capital system.

In 2024, eight zero tolerances were found across the following categories: Health and Safety,

Labor, and Environmental impact. Four cases were successfully closed in 2024 after confirmation of

completion of the corrective action plan. Four zero tolerances, found in the last semester of 2024,

are being addressed in ongoing corrective actions.

As part of our commitment to improve the lives of 1 million workers in the supply chain by 2025,

Philips measures the impact of the Beyond Auditing engagements through the number of lives

improved in the supply chain. This is derived from the improvements that suppliers make in their

performance. The number of workers impacted at suppliers participating in the Beyond Auditing

program was approximately 936,000 in 2024.

Philips Group

Lives improved in the supply chain in thousands of Lives


	2022	2023	2024
Lives improved in the supply chain	459	723	936

Additional progress made in 2024

Philips is actively applying the latest insights in data science and machine learning methods to make

the SSP program more efficient. By using reference data collected through over 1,600 assessments

in the past years, Philips is working towards integrating maturity and improvement predictions in

the program. This is expected to support us in determining the sustainability maturity of suppliers,

while also increasing the effectiveness of our supplier improvement approach.

On an annual basis, Philips experts organize quality trainings in the sustainability area for suppliers

in the scope of the SSP program.

Responsible sourcing of minerals

The supply chains for minerals are long and complex. Philips does not source minerals directly from

mines as there are typically 7+ tiers between end-user companies like Philips and the mines where

the minerals are extracted. The extraction of minerals can take place in conflict-affected and high-

risk regions, where mining is often informal and unregulated, and carried out at artisanal small-

scale mines (ASM). These ASMs are vulnerable to exploitation by armed groups and local traders.

Within this context, there is an increased risk of severe human rights violations (forced labor, child

labor or widespread sexual violence), unsafe working conditions or environmental concerns.

Philips addresses the complexities of minerals supply chains through a continuous due diligence

process, combined with active participation in multi-stakeholder initiatives to promote the

responsible sourcing of minerals.

Conflict minerals due diligence

Each year, Philips investigates its supply chain to identify smelters of tin, tantalum, tungsten and

gold in its supply chain and we have committed to not purchasing raw materials, sub-assemblies, or

supplies found to contain conflict minerals.

Philips applies collective cross-industry leverage through active engagement via the Responsible

Minerals Initiative (RMI). RMI identifies smelters that can demonstrate, through an independent

third-party audit, that the minerals they procure are conflict-free. In 2024, Philips continued to

actively direct its supply chain towards these smelters.

The Philips Conflict Minerals Due Diligence framework, measures and outcomes are described in

the Conflict Minerals Report that we file annually to the US Securities and Exchange Commission

(SEC). The conflict minerals report is also publicly available on Philips’ website. Philips fully supports

and complies with the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals

from Conflict-Affected and High-Risk Areas (OECD Guidance).

Each year, we work with our suppliers on the quality of their due diligence reporting by setting

minimum criteria for the Conflict Minerals Reporting Templates (CMRT). For the 2024 Conflict

Minerals Report, Philips strengthened the acceptance criteria for CMRTs as it intensified the


	233


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

required due diligence performed by suppliers towards the use of smelters of high concern. In

addition, we strive to reduce the number of non-identified smelters. The percentage of CMRTs that

satisfied minimum acceptance criteria has increased by 13 percentage points to 78%. Philips tracks

the effectiveness and impact of its program via the response rate of suppliers, as well as CMRTs

that satisfied minimum acceptance criteria.

Philips Group

Conflict Minerals Due Diligence results


Key performance indicator	2022	2023	2024
Response rate of suppliers (%)	95%	95%	97%
CMRTs that reached minimum acceptance criteria (%)	78%	65%	78%
Non-listed smelters in our supply chain (#)	0	0	0

Responsible Sourcing approach of Philips

Due diligence approach

OECD Five-Step Framework for Risk-Based Due Diligence in the Mineral Supply Chain


1		2		3		4		5

Establish strong company management systems	u	Identify and assess risks in the supply chain	u	Analyze and design a strategy	u	Independent third-party audit	u	Report on supply chain due diligence

Multi-stakeholder initiatives

Working together with other stakeholders to apply leverage

Cobalt

Philips has performed due diligence on cobalt since 2019. We use cobalt predominantly in lithium-

ion batteries. As part of this initiative, we engaged suppliers that provide materials containing

cobalt. In 2024, we again reached a 100% response rate (2023: 100%).

Supplier decarbonization program

Since 2003, Philips has looked at ways to improve the environmental performance of its suppliers.

When it comes to climate change, we have adopted a multi-pronged approach: reducing the

environmental impact of our products, committing to carbon neutrality in our own operations, and

engaging with our supply chain to reduce their carbon footprint. Through initiatives such as the

CDP supply chain program, Philips motivates its suppliers to disclose emissions, embed board

responsibility on climate change, and actively work on reduction activities.

In October 2021, during COP26, Philips announced its target to have at least 50% of its suppliers

(based on spend) committed to science-based targets for carbon reduction by 2025.

Philips Group

% of suppliers committed to science-based targets


	2022	2023	2024
% of suppliers committed to Science Based Targets	41%	46%	48%

We consider suppliers to have committed to science-based targets when this is communicated via

the Science Based Targets initiative (SBTi), the suppliers’ CDP disclosures, or public websites and

announcements (on a ’Science Based Target’, ’Net Zero Target’, or equivalent). Multiple activities

have been deployed to help us achieve this climate target. We consider spend to be relevant if it

relates to product and component suppliers and relevant service providers, like logistics and

information technology suppliers.

CDP engagement: Since 2011 we have been partnering with CDP Supply Chain, through which

we invite suppliers to disclose their environmental performance and carbon intensity. In 2024, there

was a response rate of 88% (2023: 93%). With 504 of our biggest suppliers included in the CDP

engagement program in 2024, CDP confirmed Philips is in the top tier in terms of its supplier

engagement coverage and was recognized again as a Supplier Engagement leader by CDP.

Of the group that responded, 59% engaged in emission-reduction initiatives (2023: 60%).

In addition, 51% committed to carbon emission targets (2023: 48%). In the 2024 survey, our

suppliers reported 37 million metric tonnes CO2-e savings from improvement projects undertaken

in 2024.

Philips Group

Supplier response rate to CDP questionnaire


	2022	2023	2024
Supplier response rate to CDP questionnaire	85%	93%	88%

Data-driven insights: Through accurate data insights, Philips’ buyers are enabled to consider

climate action in their supplier selection. In 2024, 48% of our purchases (in spend) were made at

suppliers that have committed to science-based CO2-e reduction targets.


	234


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Capability building: We support suppliers in advancing their company approach to climate action,

offering guidance that is tailored to their climate action maturity. In 2024, we further grew the

offering of tailored feedback and guidance for 80% of our suppliers to support their growth in

capabilities and help improve their approach.

Opportunities for decarbonization: Through on-site assessments we identify energy efficiency

opportunities that enable our suppliers to make cost-effective carbon reductions. Our team

calculates for the supplier what the cost impact would be, and also the return. In 2024, 22 on-site

assessments took place (2023: 19), which resulted in tailored plans for improvement.

Governance and Grievance mechanisms

Philips’ governance on human rights is overseen by the Steering Committee on Business and

Human Rights, led by senior executives from several functions across the company. This committee

ensures that Philips’ responsibility for Human Rights is upheld across the organization. In addition,

the company has also appointed a dedicated Human Rights Manager, who ensures alignment of

Philips’ activities with its commitment to Human Rights. Steering Committee members report to the

Board of Management on a quarterly basis.

A dedicated supplier sustainability department coordinates the supplier sustainability engagement

programs. This department constantly updates procurement functions on suppliers’ sustainability

performance in the engagement programs, including identified risks and Zero Tolerances. By

staying informed about suppliers’ sustainability performance, procurement leadership can make

informed sourcing decisions that avoid negative impact, strengthen responsible sourcing practices

and as such contributing to Philips ESG objectives, as well as setting and reviewing targets.

Multiple communication channels exist to serve as grievance mechanisms for early-warning risk

awareness. Apart from direct contact opportunities in the engagement programs, Philips has the

Philips Speak Up policy and underlying Speak Up mechanism that enables its stakeholders

(including employees, former employees and third parties) to inform Philips of any concerns they

may have. Internally, its personnel can (anonymously) report possible violations of Philips General

Business Principles. In addition, stakeholders can use the email address

conflict_free_minerals@Philips.com or existing industry grievance mechanisms like RMI to file

complaints related to 3TG.

In addition, Philips requires suppliers to have grievance mechanisms in place as indicated in the

code of conduct. Related to this requirement is the protection of identify and non-retaliation as set

out in de code. In the code of conduct assessments, the presence of grievance mechanisms is

checked. In the Human Rights Impact assessments also the awareness, effectiveness and the trust

in the mechanism is evaluated. During 2024, Philips has adopted the effectiveness check to the

code of conduct assessment as well. Whenever improvements in the mechanisms at suppliers are

required, the progress will be evaluated via the regular beyond auditing engagement approach.

Related to the above mentioned, Philips does not expect significant operational expenditures (OpEx)

nor capital expenditures (CapEx) to execute the supplier engagement programs on short-,

medium-, or long-term.

Stakeholder dialogs and multi-stakeholder initiatives

Working in partnerships with stakeholders is crucial to deliver on our vision to make the world

healthier and more sustainable through innovation. Insights gained through our stakeholder

engagement process are used as input to manage and update our supplier sustainability strategy,

engagement programs and targets. In 2024, Philips organized a dedicated supply chain and human

rights stakeholder dialog to collect input from a diverse group of stakeholders. The group

represents diverse interests, including stakeholders representing the interest of workers in the value

chain. During the 2024 stakeholder dialog, non-governmental organizations, universities, investors,

suppliers, partners and peers have participated.

Philips is a founding partner of EPRM and has been a strategic member since its inception in May

2016. EPRM is a multi-stakeholder partnership between governments, companies, and civil society

actors working toward more sustainable minerals supply chains. The goal of EPRM is to create

better social and economic conditions for mine workers and local mining communities by

increasing the number of mines that adopt responsible mining practices in Conflict-Affected and

High-Risk Areas (CAHRAs). EPRM is an accompanying measure to the EU Conflict Minerals

Regulation dedicated to making real change ‘on the ground’. Through EPRM, Philips supports

activities to improve responsible mining practices in mining areas in CAHRAs and shares our

knowledge and practice in conducting due diligence. Since 2018, Philips has actively participated in

several working groups focused on strengthening the responsible production of minerals, as well as

improving responsible sourcing practices.

Payment practices

Philips strives to ensure timely cash flows to its business partners (vendors), especially with respect

to Small and Medium-sized Enterprises (SMEs). Philips has insights in the standard payment terms,

the actual payments and whether payments are meeting the contract payment terms. The

performance is shown in the next table, and includes anomalies and disputed payments due to

which payments may be late.


	235


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Payment practice performance

Philips Group

Key payment practice data


Supplier Type	Region	Standard Payment Term (Days)	Average Actual Payment Term (Days)	% Met the Contract Payment Term
SME	Americas	Country Specific – Note legal requirements.	41	85%
No SME	Americas	95 days standard – deviations may exist due to legal requirements or specific contractual agreements.	64	84%
SME	Asia Pacific	Country Specific – Note legal requirements.	73	86%
No SME	Asia Pacific	95 days standard – deviations may exist due to legal requirements or specific contractual agreements.	89	100%
SME	Europe Middle East Africa	Country Specific – Note legal requirements.	58	89%
No SME	Europe Middle East Africa	65 days standard – deviations may exist due to legal requirements or specific contractual agreements.	60	96%
Total Philips	Global	N/A	78	96%

The number of legal proceedings during 2024 for late payments is 0. Of these, the number relating

to SMEs is 0.

Philips payment practices methodology:

Philips has approximately 4,400 product and component suppliers and 15,100 service providers.

The payment practice monitoring and previous table is based on a sample size of 50,000 payments

across regions, and to SMEs as well as No SMEs. The sample selected has the same relative

distribution across categories as total Philips. It is assumed that this sampling is representative of the

total Philips.

For the payment practice performance monitoring, Philips suppliers are categorized as SME (Small

Medium Enterprise) and No SME. The EU definition of SME is used, meaning that the enterprise has

less than 250 employees and their turnover is less than or equal to EUR 50 million euros or their

balance sheet total is less than EUR 43 million euros.

For Supplier’s entities located in Asia Pacific (APAC), North America (NAM) and Latin America

(LATAM), the payment term shall be 95 days EOM (ninety-five days from the end of the month in

which the correct invoice is received), and 55% of our suppliers are located in APAC, NAM and

LATAM. For Supplier’s entities located in the rest of the world, the payment term shall be 65 days

EOM (sixty-five days from the end of the month in which the correct invoice is received), and 45%

of our supplier are located in the rest of the world which includes Europe, Middle East and Africa

(EMEA). Exceptions to the above contractual payment terms can be the result of:

• Specific country rules and regulations that are legally binding upon Philips and therewith

restricting the payment terms to be applied.

• Specific (sub-)categories referred to as “Non-Purchasing Spend” which includes invoices related

to taxes, sales-related cost including rebates, customs, personnel related payments, banks,

donations, charities, and the like.

• Specific supply market conditions (e.g., shortages, local market practices, etc.)

Philips suppliers are also categorized by region. Each region has its own standard payment terms.

According to Philips' policy, the average actual payment term for 2024 is the average days taken to

pay all invoices posted and paid within that fiscal year. The "% Met Standard Payment Terms"

indicates the proportion of on-time payments according to the agreed terms. As a principle, Philips

calculates payment terms from the date that the correct invoice is received.

Note XIV Human rights

For information on Human rights, including policies, targets and actions, please refer to Human

rights.

8.5.3Consumers and end users

The topic within the DMA where Philips has a material positive impact on the consumer and end-

user is Access to (quality & affordable) care. Philips aims to improve people’s health and well-being

through meaningful innovation. We set ourselves the target to improve the lives of 2.5 billion

people by 2030, including 400 million lives in underserved communities. We deliver on the latter by

providing Access to Care for patients in underserved communities and improve people's lives by

providing the technology to healthcare professionals and patients to address Public health risks. For

more information please refer to Improving people’s lives.

The topics within the DMA that potentially have significant negative impact directly on the

consumer and end-user are Product responsibility & safety and Big data, AI & Cybersecurity. Every

Product or Service Philips creates inherently comes with a potential impact on Product responsibility


	236


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

& safety. Philips’ activities could present Big data or AI & Cybersecurity impacts and could be

created through the activities of the Philips value chain in its strategy and business model. As an

integral part of its strategy and business model, Philips takes action to manage potential negative

impacts through its risk management and internal control framework. Please refer to Risk

management and internal control for more information.

Note XV Measuring health impacts

In 2024, we continued the research to measure our social impact to assess the positive

contributions to health effects offered by publicly traded companies related to medical devices. We

further piloted the methodology and evaluated another use case of the potential measurable

impact of Ultrasound devices.

Case study*): IGT medical devices

An analysis of 204 countries estimated the impact of IGT medical devices on reducing cancer

(tracheal, bronchus, lung, and kidney) and cardiovascular mortality in different world areas, aligning

with UN SDG targets 3.2 and 3.4:

• A global assessment of IGT diagnosis indicates that a procedure may prevent between 0.02 and

1.91 deaths per medical device per year, with a global geometric mean of 0.18 and 90% CI

[0.08, 0.37].

• Cardiovascular mortality prevention benefits of using IGT medical devices are the highest in

Central and Eastern European countries.

*)Sanchez-Pina (2023), Assessment of Positive Contributions to Health of Publicly Traded Companies related

to Medical Devices, Department of Environmental Health Harvard T.H. Chan School of Public Health

Note XVI Lives improved

For information on Lives improved, including policies, targets and actions, please refer to Improving

people's lives .

Philips’ Lives improved methodology:

The key performance indicator (KPI) on ‘lives improved’ and the scope are defined in the

methodology document that can be found in Methodology for calculating Lives Improved. We used

opinions from Philips experts and estimates for some parts of the calculations. Philips has made

strong commitments to improve people’s health and well-being. To track our impact, Philips

identifies countries where the need for access to healthcare is highest. This is determined by four

selected health indicators, as provided by United Nations Sustainable Development Goal 3, which

focuses on health and well-being. The specific methodology for how we determine an underserved

health community can be found in the same document.

Note XVII Product responsibility and safety

For information on Product responsibility and safety, please refer to Patient safety, quality and

regulatory.

Philips did not define targets for this entity specific topic, but closely monitors the impacts, risks and

opportunities, for example through its Enterprise Risk management process. In addition, Philips

tracks total training hours for employees in the Quality Management Learning (QML) system.

Note XVIII Other social information

Philips Foundation

Philips Foundation is a registered non-profit organization established in 2014 – then founded to be

the centralized corporate social responsibility platform of Philips. Expert volunteers from Royal

Philips assisted in the execution of Philips Foundation’s programs.

Philips Foundation fulfills its mission by deploying Philips’ expertise in innovative healthcare

technology and solutions, exploring viable, scalable and sustainable healthcare delivery models to

serve vulnerable people, and collaborating with key societal organizations and partners worldwide.

Philips Foundation, through its Impact Investments entity, is also investing in enterprises with

innovations in the healthcare space, enabling underserved communities to have access to

examinations for early detection of medical conditions and timely referral to the right healthcare

services. Philips Foundation fosters innovations that are fit for purpose, address local needs, are

accessible and affordable, are set up for scaling, and are financially sustainable to help ensure

lasting healthcare provision.

Since the launch of Philips Foundation, hundreds of grant-based initiatives have been completed or

are in progress throughout the world – engaging employees, providing healthcare technologies and

solutions, and overcoming healthcare challenges in close connection with organizations operating

locally. Philips Foundation Impact Investments B.V., a subsidiary set up in 2021, expanded its

portfolio to a total of 14 ventures in 2024. Philips Foundation aims to accelerate the development

of potentially high-impact opportunities to enhance access to care and reduce healthcare inequality

by nurturing early-stage social enterprises through investments and non-financial support. In 2024,

Philips Foundation’s initiatives improved the lives of almost 2.1 million people and provided access

to healthcare to around 40 million people in some of the most underserved regions across the

globe. Philips Foundation retains the ambition to provide access to quality healthcare for around

100 million underserved people annually by 2030. 

In 2024, Philips Foundation continued its program of new and ongoing projects, mainly oriented

towards the deployment of technology-based solutions, exploring and supporting scalable ways to

strengthen community and primary care. With projects covering many phases of people’s health

journeys, Philips Foundation focused on the early detection of cardiovascular and respiratory

diseases and cancers, and improving maternal and child health. It also responded to emergency

situations such as natural disasters and political conflicts, and addressed overlooked health

priorities, such as childhood pneumonia, which are often under-addressed in resource-limited


	237


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

regions. Philips Foundation aims to strengthen capacity of healthcare facilities and local health

workers in underserved areas by leveraging Philips’ expertise in healthcare technologies for quality

and informed triage, timely treatment or referral to the right service.

In 2024, Philips Foundation further built upon the expertise of Philips employees, social

entrepreneurs, academics, medical experts, and others to explore innovative paths to strengthen

healthcare access. This included investing in Mamotest's technology to enable faster and more

accurate AI-driven analysis of mammograms, allowing women in underserved communities across

Latin America to receive a reliable diagnosis sooner. The extended partnership with SAS Brasil

resulted in the launch of a pioneering innovation lab in Brazil, aimed at advancing digital health in

primary care. Furthermore, Philips Foundation scaled its commitment to tackling rheumatic heart

disease by collaborating with the World Heart Federation to bring impactful solutions to Indonesia.

For more information about Philips Foundation, its purpose and scope, as well as its latest annual

report, visit the website.

8.6Governance information

This section provides additional information on (some of) the Business conduct (ESRS G1)

parameters reported in Governance. For policies related to Business conduct, please refer to the

Policy Overview table . Disclosures on material entity specific topics and the relevant links can be

found in the Double Materiality Assessment. Philips did not define targets for some of these entity

specific topics, like Geopolitical events, but closely monitors the impacts, risks and opportunities,

for example through its Enterprise Risk management process.

Note XIX Philips SpeakUp (Ethics Line)

In line with Philips SpeakUp Policy, potential violations of our GBP or any other concern that may

constitute a direct threat to Philips’ corporate integrity, are reported through the Philips SpeakUp

program. Philips SpeakUp is available to internal stakeholders and also extends to external

stakeholders, including customers and end-users. The Philips SpeakUp Policy sets out safeguards for

reporters and participants in an investigation, which includes the prohibition of (attempted)

retaliation.

In 2024, a total of 805 concerns were reported via Philips SpeakUp (Ethics Line) and through our

network of GBP Compliance Officers, an increase of 5.4% year-on-year (2023: 764 concerns). This

is a continuation of the year-on-year upward trend. We believe the upward trend in reporting

remains in line with our multi-year efforts to encourage our employees to express their concerns.

In percentage terms, North America remains the region with the highest case inflow (2024: 44%;

2023: 47%). The percentage increase in reports is visible in APAC, which is responsible for 25% of

all reported concerns (2023: 20%). The EMEA region showed a small increase (2024: 19%; 2023:

18%). Latin America, responsible for 12% of reported concerns in 2024, showed a decline (2023:

15%).

Philips Group

Breakdown of reported GBP concerns in number of reports


	2020	2021	2022	2023	2024
Health & Safety	9	26	19	13	9
Treatment of employees	320	342	365	459	529
- Equal and fair treatment	55	52	31	53	47
- Employee development	9	5	20	41	80
- Employee privacy	10	8	11	6	12
- Employee relations	18	13	6	2	1
- Respectful treatment	163	160	226	240	258
- Remuneration	9	28	7	12	15
- Severe human rights incidents*		1
- Conflict of interest	1	6	7	3	13
- Working hours	14	27	10	14	12
- HR other	41	42	47	88	91
Legal	33	28	30	61	48
Quality	11	11	18	30	33
Business Integrity	138	127	112	137	132
Procurement	7	12	4		4
Security**	3	5	8	10	13
Other	24	20	54	54	37
Total	545	571	610	764	805

*Examples include forced labor, human trafficking and child labor.

**Security includes physical and IT Security. In previous years, this category was classified as IT.

Most common types of concerns reported

Treatment of employees

As in previous years, the type of concern most commonly reported related to the category

‘Treatment of employees’. In 2024, there were 529 reports in this category, compared with 459 in

2023. This represents 66% of the total number of concerns, slightly higher than in 2023 (60%).

The majority of the concerns reported in the ‘Treatment of employees’ category relate to

‘Respectful treatment’. The ‘Respectful treatment’ sub-category generally relates to concerns about

verbal abuse, (sexual) harassment, and hostile work environments. In the ‘Treatment of employees’

category, 48% of cases originated from North America, a decrease compared to 2023 (51%). In

2024, no material fines, penalties or damages were paid for incidents of discrimination, harassment

and severe human rights incidents (e.g., forced labor, human trafficking or child labor).

Business integrity

The second most-reported type of concern relates to ‘Business Integrity’, which accounted for 16%

of total cases reported in 2024, down from 18% in 2023. These concerns originated primarily from

the APAC region (36%), followed by North America (23%), Latin America (22%) and EMEA (19%).


	238


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The majority of concerns reported in the category ‘Business Integrity’ relate to potential fraudulent

behavior. The category ‘Business Integrity’ also includes concerns related to alleged violations of

anti-corruption and anti-bribery laws. In 2024, Philips was not convicted or fined for any violation

of such laws (either directly or through actors in the company’s value chain).

Substantiated/unsubstantiated concerns

Philips Group

Classification of concerns investigated in numbers of reports


	2022		2023		2024
Category	substantiated	unsubstantiated	substantiated	unsubstantiated	substantiated	unsubstantiated
Health & Safety	3	18	2	14		10
Treatment of employees	87	271	89	370	121	417
Legal	8	17	9	40	7	48
Quality	4	14	7	29	6	31
Business Integrity	60	90	71	77	69	84
Procurement	1	6			1	1
Security*	5	4	4	5	5	10
Other	8	41	14	43	3	52
Total	176	461	196	578	212	653

*Security includes physical and IT Security. In previous years, this category was classified as IT.

In 2024, a total of 865 reports were closed. Of these 865 reports, 212 were substantiated (i.e. were

found to constitute a breach of our General Business Principles), which represents 25% of the cases

closed in 2024 (also 25% in 2023). 23% of ‘Treatment of employees’ cases were substantiated,

compared with 19% in 2023 (2022: 28%). In addition, 45% of the ‘Business integrity’ reports

were closed as substantiated, compared with 48% in 2023 (2022: 49%). In 2024, 653 cases were

unsubstantiated, which represents 75% of the cases closed in 2024. Of these 653 cases, 48 were

resolved by means of alternative dispute resolution (ADR). ADR is a newly established procedure

that was introduced in 2024 to more effectively resolve de minimis concerns related to 'Treatment

of employees' reports that do not amount to a violation of the Philips General Business Principles.

Follow-up action

Depending on the outcome of the investigation, appropriate follow-up action is taken. Follow-up

action can be remedial and/or disciplinary in nature. Remedial action can vary from strengthening

the business processes and procedures, enhanced monitoring, training and coaching, and

increasing awareness of the expected standard of business conduct. Disciplinary measures may

include written warnings and termination of employment. In 2024, disciplinary action was taken in

150 cases, and remedial action in 198. These actions are tracked through our network of GBP

compliance officers. The effectiveness of the SpeakUp program and the follow-up actions taken is

tested as part of the bi-annual Business Integrity Survey, see General Business Principles (GBP).

Philips’ General Business Principles methodology:

Alleged GBP violations are registered in our web-based reporting tool and followed up in line with

our SpeakUp Policy.

Note XX Advocacy activities and expenses

Philips prioritizes its advocacy in three key regions where building strong relationships and

collaborations is instrumental for us: the EU, the US and China.

Philips' advocacy also extends to critical global health issues, such as addressing stroke and driving

the decarbonization of healthcare systems. In 2024, Philips participated in global platforms such as

the World Health Assembly, COP29, COP16, and the UN General Assembly. Most advocacy efforts

are concentrated on the following areas.

European Union

• The impact of innovation policy, medical devices regulations and artificial intelligence (AI) on the

medical technology sector and consequently on patients.

• The geopolitical tensions on trade and international supply chains.

• The development of roadmaps for acting earlier on NCDs, such as cardiovascular disease, stroke

and oncology.

United States

• The use of artificial intelligence (AI) and cybersecurity in healthcare.

• The impact of innovation, tax, reimbursement and market access policies on the future of

healthcare at both state and federal level.

• The geopolitical tensions and their impact on trade and international supply chains.

China

• Strong clinical partnerships, particularly relevant to China’s healthcare challenges, supplying

national top hospitals with tailor-made solutions for their clinical and research needs,

decarbonizing the healthcare sector, and improving the resilience of healthcare.

• The impact of geopolitical tensions on trade and international supply chains, and our localization

strategy.

Health Systems Sustainability and Resilience

Historic resolution World Health Assembly recognizing climate change as imminent health

threat

In 2024, the Alliance for Transformative Action on Climate and Health (ATACH) further solidified its

role for global collaboration in addressing the health impacts of climate change. Under the

leadership of the World Health Organization (WHO) and its partners, ATACH championed initiatives

to accelerate the transition to climate-resilient, sustainable, and low-carbon health systems.


	239


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips has been an active participant in ATACH's initiatives via its trade association DITTA,

advocating for transformative change across the healthcare sector. The collaborative efforts within

ATACH contributed to the historic resolution at the World Health Assembly (WHA) 2024, which

formally recognized climate change as an imminent health threat and committed member states to

actionable measures. This resolution reinforces the critical role of partnerships like ATACH in driving

global progress toward sustainable health systems.

Partnerships for Health Systems Sustainability and Resilience (PHSSR)

Philips collaborates closely with a diverse international network of stakeholders to establish

strategic partnerships and conduct industry research. In 2020, Philips joined forces with esteemed

organizations including the World Economic Forum, AstraZeneca, KPMG, the London School of

Economics, the WHO Foundation, and the Center for Asia Pacific Resilience and Innovation (CAPRI)

to form the Partnership for Health System Sustainability and Resilience (PHSSR). This non-profit,

multi-sector, global collaboration is united in its goal to build more sustainable and resilient health

systems. To support this goal, the PHSSR is active in over 30 countries, and has published 32

reports to date on its commissioned independent research, providing evidence-based

recommendations on health system strengthening.

This work, which includes country specific findings as well as combined overarching global insights,

is conducted by national experts with first-hand knowledge and experience of the domestic health

systems studied. Many health systems are under severe strain as mounting pressures and growing

demands have escalated to a critical level. The PHSSR seeks to facilitate cross-border and cross-

sectoral collaboration to accelerate the strengthening of health systems by enabling international

knowledge exchange and collaboration with health system stakeholders.

Engaging with healthcare professionals and key opinion leaders: Future Health Index

The Future Health Index is a research-based platform designed to help determine the readiness of

countries to address global health challenges and build sustainable, fit-for-purpose national health

systems. By examining the role of technology in the health system, the aim of the Future Health

Index is to provide actionable insights to healthcare leaders, healthcare professionals and

governments.

The Future Health Index 2024 report is based on proprietary research among almost 3,000

healthcare leaders, conducted across 14 countries. It is the largest global survey analyzing the

priorities and perspectives of healthcare leaders. The report explores how healthcare leaders view

their organization’s ability to deliver timely, high-quality care to everyone. The report focuses on the

gaps that stand in these leaders’ way and how they plan to overcome them. The ninth edition

shows that healthcare leaders are turning to new care delivery models and AI-enabled innovation

to address pressure due to workforce shortages, financial burdens, and growing demand.

Globally aligned purchasing criteria for medical imaging equipment

Globally agreed sustainable purchasing criteria were published by the newly launched initiative by

the Medical Equipment Pro-active Alliance for Sustainable Healthcare (MEPA), with the trade

association COCIR as a founding member. Buyers of health technology can play a significant role in

driving green purchasing reforms, shifting demand and re-shaping global supply chains to

collectively help drive and scale sustainable practices in radiology and healthcare overall. The criteria

provide companies and purchasers with a common framework and guidance on how to improve

the sustainability of their imaging equipment, enabling them to ask the right questions. The almost

50 criteria draw on existing standards and industry best practices in sustainable procurement,

addressing both individual products, as well as suppliers’ sustainability performance. Topic areas

range from climate change mitigation over the sustainable use of resources, to corporate ESG

performance.

Social Impact

In the social dimension, Philips collaborates with numerous international partners to deliver

sustainable value and drive global change. These efforts align with the UN’s Sustainable

Development Goal 3. Our aim is to reduce our shared environmental footprint and increase our

social impact as part of the commitment to improve 2 billion lives by 2025.

Universal Health Coverage (UHC) by 2030

Universal Health Coverage (UHC) means that all people have access to the full range of quality

health services they need, when and where they need them, without financial hardship. The

UHC2030 agenda is about ensuring that by 2030 all people can obtain the health services they

need without suffering financial hardship. This will not only improve health and health equity but

also help reduce poverty, create jobs, drive inclusive economic growth, promote gender equality,

and protect populations from epidemics. We can only achieve health for all, the commitment made

by United Nations member states, if the public, private and non-profit sectors work together. As

member of its Private-Sector Constituency, Philips actively supports the UHC2030 mission.

Access to care in underserved communities

Fifty percent of the world population does not have access to essential health services. Through

dedicated teams across the company’s businesses and regions, and with shared-value public-private

partnerships, Philips is developing innovative digital solutions and deploying new business and

financing models that are both sustainable and scalable, to strengthen health systems while

lowering costs and bringing care closer to those financially vulnerable.

Each day, nearly 800 women around the world die from preventable causes related to pregnancy

and childbirth, with nearly 95% of all maternal deaths happening in low- and middle-income

countries. When it comes to pregnant mothers and babies, ultrasound is the safest option, but

there are several barriers to the use of traditional ultrasound scans in low- and middle-income

countries (LMICs), such as a shortage of health care professionals trained in ultrasound and limited

access to essential medical equipment with the appropriate workflow. By leveraging its expertise in

portable ultrasound solutions, and in close collaboration with the Gates Foundation, Philips is

developing AI-based applications built into the Philips Lumify handheld ultrasound device, that can

assist frontline health workers to effectively capture and interpret ultrasound images. With

sonographers in short supply around the world, this approach provides the opportunity for

expectant mothers to understand the health of their child at an early stage of pregnancy. The new


	240


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

ultrasound-based prototype technology is a preventative measure, aimed at increasing access to

maternal care, helping to further reduce fetal mortality and morbidity in the future.

The Partnership for Maternal, Newborn, and Child Health (PMNCH) continues to be an important

platform for Philips in advocating for health and well-being. Together with PMNCH as the world’s

largest alliance for women’s, children’s, and adolescents’ health and well-being, Philips seeks to

advocate and collaborate for affordable access to high-quality maternal care during pregnancy and

after childbirth, to bring care close to those who need it most.

Recognizing the funding gap to achieve UHC, Philips continues its work in impact finance. Philips is

working with impact finance organizations to unlock more funding into the healthcare space, with

a key role for catalytic capital and blended-finance mechanisms. In 2024, Philips remained an active

Steering Committee member of the Health Finance Coalition (HFC), a coalition of leading health

donors, investors, and technical partners seeking to scale blended finance solutions to help achieve

SDG3 and Universal Health Coverage in Africa. The Transform Health Fund, where Philips engaged

as a co-shaper together with HFC and as an anchor investor, achieved its final close above target at

US$ 111.5m. The first investments have been made, focusing on supply chain transformation and

innovative care delivery models serving low-income patients in Africa.

Philips is committed to driving the Digital Connected Care Coalition (DCCC, initiated by Philips and

partners in 2019), a global public-private coalition that aims to scale digital health solutions in

LMICs as a means to reach UHC. DCCC members pool resources and capabilities to jointly address

unmet medical needs. In 2024, significant progress was made on DCCC-supported projects

focused on availing primary healthcare through a digitally enhanced model, strengthening health

data infrastructures, and improving care delivery through health and wellness centers.

Philips also partners with the Philips Foundation to improve access to care in some of the most

underserved and financially vulnerable communities globally. In 2024, the Philips Foundation

celebrated its ten years anniversary. Refer to the Philips Foundation to learn more.

Climate Action and Circularity

Regarding its environmental responsibility, Philips focuses on making a material impact, which

means prioritizing initiatives that deliver tangible value. Our strategy is in line with the UN’s

Sustainable Development Goals 12 and 13.

Achievements with customers to decarbonize healthcare

Philips helps healthcare organizations worldwide assess and mitigate their environmental impact

while enabling better care and outcomes for more patients at lower cost. In 2024, Philips

announced significant greenhouse gas (GHG) emissions reduction results following collaboration

with customers worldwide to assess and mitigate their carbon footprints, while also enhancing

patient care and customer operational efficiency. Key achievements include:

• Jackson Health System (US): A 47% projected reduction in CO2-e emissions by replacing legacy

patient monitors, comprising 508 tonnes equipment lifecycle CO2-e reduction and 177 tonnes

CO2-e reduction due to battery and paper savings.

• Champalimaud Foundation (Portugal): 24% emissions reduction per exam in its radiology and

nuclear medicine department in the first year, with a goal to halve the carbon footprint of its

diagnostic and interventional imaging departments by 2028.

• Rennes University Hospital (France): Opportunities identified to reduce annual emissions of the

cath lab through energy savings and sustainable equipment upgrades.

• County Durham and Darlington NHS Foundation Trust (UK): A sustainability blueprint developed

for the Trust’s ICU, focusing on waste reduction and energy efficiency.

• Vanderbilt University Medical Center (US): A seminal cradle-to-grave analysis of hospital-based

radiology services by the Department of Radiology at Vanderbilt University Medical Center and

Royal Philips found the energy consumption from imaging equipment accounted for more than

50% of the greenhouse gas emissions and shed light on areas to focus future evidence-based

strategies to decarbonize. In November 2024, the results of this collaboration were published by

trade publication Radiology.

• Tsinghua University (China): Philips embarked on a research collaboration project with Tsinghua

University about the decarbonization pathway for medical equipment. The current project which

is ongoing, aims to study and calculate the energy consumption of China's magnetic resonance

(MR) devices as well as establishing a research framework for the decarbonization pathway of

large-scale medical equipment in China.

Partnerships for Circularity

In 2024, Philips has continued to engage with multiple stakeholders to drive circular practices

worldwide. Philips is a consortium member of ‘Evidence-based Strategies to create Circular

Hospitals: Applying the 10-Rs framework to healthcare’ (ESCH-R), which started this year. The

consortium is funded by the Dutch Research Council, with the ambition to accelerate the adoption

of circular interventions in hospitals to reduce the environmental footprint of healthcare.

We have actively participated in the Global Circularity Protocol that aims to be a framework to

guide companies in target-setting, measuring, reporting and disclosing progress on circularity,

combined also with policy guidance to accelerate the shift towards a circular economy. This

initiative is spearheaded by the World Business Council for Sustainable Development (WBSCD), in

collaboration with the One Planet network (OPN). Our participation has been as advisory committee

members and also in the technical working group. This year, as part of the Global Circularity

Protocol, ‘Landscape Analysis of Circularity-related Corporate Performance & Accountability and

Policy & Regulation’ and ‘Impact Analysis on Climate, Nature, Equity and Business performance’

were published, announcing among others that the Global Circularity Protocol has the potential to

reduce global material consumption by 4% to 5% between 2026 to 2050, leading to a 6% to 7%

reduction of GHG emissions and an additional decrease of air pollution (PM2.5), on average by

11% to 12% per year.

Through our partnership with Ellen MacArthur Foundation (EMF), we have collaborated with other

key partners to create and submit a briefing paper to the GHG Protocol to improve climate

emission accounting that supports the circular economy. Our findings highlight how current

methodologies can lead to inaccurate or incomplete emission calculations, and also include

suggested revisions to the GHG Protocol, standards and guidance.


	241


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Together with other parties, Philips contributed to the Circularity Gap report issued by Circularity

Gap Reporting Initiative, providing clarity on the gaps to close on a global scale, and on the

necessary contribution and scaling of circularity to systematically address climate change.

In 2024, Philips was awarded the Cannes Lions Grand Prix award in the Creative Business

Transformation category, for its "Better than New" initiative, which brought attention to its new

refurbished product portfolio (Philips Refurb Edition) launched in Europe, with Germany as the lead

country. Philips Refurb Edition products are part of Philips' commitment to sustainable and circular

practices without compromising on quality or affordability. Each product undergoes rigorous

inspections and cleaning by a team of experts, along with component replacements as needed –

and is shipped with the same 2-year warranty as new products.

For more information on Philips’ Circular Economy Program, please refer to section Resource use

and circular economy.

Partnerships for Climate Action

Encouraging progress shared by the World Economic Forum during NY Climate Week, following

the Alliance of CEO Climate leaders, representing some of the world’s largest global companies,

including Philips. Alliance members achieved aggregate emissions reductions of 10% between

2019 and 2022. This is a significant decrease and well ahead of the emissions reductions achieved

by some of the world’s biggest economies. It demonstrates that green growth is not just an idea

for the future but a real value driver today. Work will continue, with a focus on mobilizing business

action and accelerating Scope 3 emission reduction, i.e. in the product use phase and across global

supply chains.

Philips Supplier Sustainability approach secured finalist position for Philips in Fortune’s 2024

‘Change the World’ rankings for its ongoing commitment to improving the health of people and

the planet through supply-chain sustainability innovation.

Following Cero Generation’s 70MW Italian agrivoltaic project, backed by agreements with Philips

and Heineken that went live in November 2023. Next, Philips secured a long-term renewable

electricity agreement in 2024, from innovative fishery-solar PV. This agreement enables Philips’

Suzhou facility in Jiangsu Province (China) to operate 100% on green energy and helps Philips to

reduce approximately 9,200 tonnes of CO2-e annually. It also supports China’s push to use more

low-carbon energy alternatives.

For more information on Philips’ Climate Action Program, please refer to section Climate change.

World Economic Forum (WEF)

Philips engages with the World Economic Forum (WEF), the international organization for public-

private cooperation committed to improving the state of the world, through year-round Strategic

Partnership activities. The WEF convenes political, business, and civil society leaders to shape global,

regional, and industry agendas. In 2024, Philips participated in the WEF Annual Meeting in Davos,

driving discussions on sustainable and just healthcare systems, including climate-focused healthcare

models, innovations to improve healthcare access for women, and the importance of public-private

partnerships in transforming healthcare. Philips also contributed to regional WEF events and side

conferences, such as the International Business Council (IBC), the network of Global Future

Councils focused on innovative resilience strategies, the Sustainable Development Impact Meetings

(SDIM) during the UN General Assembly, and the Annual Meeting of the New Champions in China.

SDG Tent at WEF Annual Meeting in Davos

Since 2023, Philips has been the hosting partner of the SDG Tent. For almost 20 years, the SDG

Tent has been a critical hub for SDG-focused conversations and initiatives during the WEF Annual

Meeting in Davos. It is a unique and unbiased meeting point gathering key actors from the private

and public sectors, accessible to all in Davos. Philips agreed to take over as hosting partner from

Royal DSM, starting with the 2024 WEF Annual Meeting, offering an additional opportunity to

contribute towards driving progress on the UN Social Development Goals. In January 2024, the

Tent hosted 34 events over 4 days, attracting more than 3,000 visitors and many more online.

Artificial Intelligence (AI)

In 2024, Philips continued its strong partnership with the European Society of Radiology (ESR) at

#ECR2024 and demonstrated how Philips AI-enabled solutions can help radiologists address some

of their most pressing challenges, including cost of care, staff shortages, and improving patient

outcomes, while at the same time reducing environmental impact.

Moreover, at the 2024 Healthcare Information and Management Systems Society Global Health

Conference & Exhibition (HIMSS24), Philips emphasized the significant role of artificial intelligence

(AI) in healthcare. They highlighted how AI assists clinicians in diagnosing and treating patients

more effectively and enables healthcare providers to operate more efficiently. Additionally, Philips

discussed the potential of generative AI to alleviate clinicians from time-consuming administrative

tasks, addressing the imbalance between rising patient demand and the current shortage of clinical

professionals.

Partly due to the recent developments in generative AI, there is increasing worldwide attention to

develop and deploy AI solutions in a responsible way. Philips is committed to responsible AI with

our CEO, Roy Jakobs, co-chairing the US National Academy of Medicine’s Steering Committee on

AI Code of Conduct, which aims to provide a framework to ensure that AI solutions applied in

healthcare perform accurately, safely, reliably and ethically.

Advocacy Expenses in 2024

Philips does not make direct or indirect contributions, in money or in kind, to political parties,

organizations, or individuals in politics. However, we engage with a range of stakeholders—

including global partnerships, industry associations, and key events organizers—to influence policy

development and support business opportunities. This informed and effective advocacy is essential

to achieving our vision for healthcare transformation and sustainability.

Philips' General Business Principles (GBP) establish our standard for integrity, guiding ethical

behaviour, transparency, and accountability. While the Government & Public Affairs team oversees


	242


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

lobbying per the European Sustainability Reporting Directives (ESRS), GBP compliance is primarily

managed by leaders across Philips’ Businesses, Functions, and Regions. Philips management teams

ensure our healthcare advocacy aligns with our commitments to environmental, social, and

governance (ESG) principles, underscoring our pledge to responsible stakeholder engagement.

Philips is also registered in the EU Transparency Register (REG Number 035366013790-68) to

enhance transparency in our advocacy efforts. For more information, please visit our EU

Transparency Register.

The expenses included in this section are classified into five categories based on contribution level

and reported for global partnerships, annual events, trade associations. We are reporting only on

expenses equal to or greater than EUR 40,000. We have grouped these, where applicable, into five

bandwidths based on contribution level: EUR 1,300,000–1,000,000; EUR 1,000,000–750,000; EUR

750,000–250,000; EUR 250,000–100,000; and EUR 100,000–40,000.

Global Partnerships

Our global partnerships represent long-term collaborations with organizations that share our values

and vision. These engagements involve substantial contributions to support initiatives, research, and

programs aimed at addressing healthcare challenges and fostering innovation. Please note that

many of the earlier-mentioned partnerships do not require expenses; hence, they have not been

included in the listing.

Philips Group

Global Partnership

EUR 750,000 - EUR 250,000

International Consortium for Health Outcomes Measurement (ICHOM)

EUR 250,000 - EUR 100,000

Ellen MacArthur Foundation (EMF)

Partnership for Health System Sustainability and Resilience (PHSSR)

World Business Council for Sustainable Development (WBCSD)

World Stroke Organization (WSO)

Annual Events and General Contributions

Philips actively engages with annual events as platforms for knowledge exchange, networking, and

industry growth. These events provide opportunities to connect with key stakeholders, showcase

our expertise, contribute to the transformation of healthcare, and advance the decarbonization

process within the healthcare industry.

Philips Group

Annual Events and General Contributions

EUR 1,000,000 - EUR 750,000

World Economic Forum (WEF)

EUR 250,000 - EUR 100,000

2024 HIMSS Global Health Conference & Exhibition

Trade Associations

Our memberships in trade associations are essential for staying informed about industry

developments and standards. We contribute significantly to these associations to support advocacy

efforts, research, and collective industry initiatives that benefit Philips and the healthcare sector. In

this trade association overview, we also indicate the relevant country or geographical market area

for each association, where applicable.

Philips Group

Trade Associations

EUR 1,300,000 - EUR 1,000,000

Advanced Medical Technology Association (AdvaMed) – United States

EUR 250,000 - EUR 100,000

APACMed – Asia-Pacific

CardioVascular Coalition (CVC) – United States

Dutch Employers' Federation (VNO-NCW) – Netherlands

Electrical and Electronic Manufacturers' Association (ZVEI) – Germany

European Coordination Committee of the Radiological, Electromedical and Healthcare IT Industry (COCIR) –

European Union

Medical Device Manufacturers Association (MDMA) – United States

Medical Imaging & Technology Alliance (MITA) – United States

MedTech Europe – European Union

EUR 100,000 - EUR 40,000

Appliance Industry in Europe (APPLiA) – European Union

Coalition for Imaging and Bioengineering Research (CIBR) – United States

Council for Quality Respiratory Care (CQRC) – United States

DigitalEurope – European Union

European Round Table for Industry (ERT) – European Union

Philips Political Action Committee

In the United States, in compliance with U.S. federal law, Philips does not make corporate

contributions to federal candidates and federal political committees. Additionally, Philips does not

make corporate political contributions to any U.S. state and local campaign committees, state and

local political committees, state and local political parties, and other state and local 527 political

organizations. The company supports the Philips North America LLC Employee Political Action

Committee (Philips PAC) that makes contributions to federal, state and local candidates, political

committees, political parties, and other 527 political organizations. Philips PAC is funded exclusively

by voluntary contributions from U.S. employees who are eligible, in accordance with federal law, to

contribute to the Philips PAC. U.S. federal law prohibits reimbursing employees, directly or

indirectly, for contributions to Philips PAC. Please refer to the U.S. Federal Election Commission

website for more information pertaining to Philips PAC financial activity.

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement

4 For the level of assurance EY provides for each element of MDR, we refer to the topical sections where the MDRs are related to for the applicable assurance level


	243


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

8.7ESRS cross-reference table


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
ESRS 2 General disclosures	Disclosure Requirement BP-1 – General basis for preparation of sustainability		Sustainability statement: General basis for preparation	169	Limited Assurance
	Disclosure Requirement BP-2 – Disclosures in relation to specific circumstances		Sustainability statement: General basis for preparation	169	Limited Assurance
	Disclosure Requirement GOV-1 – The role of the administrative, management and supervisory bodies	SFDR/BRR	Environmental, Social and Governance: ESG governance Supervisory Board report: composition, diversity and self-evaluation Other Board-related matters: Diversity	40 64 268	Limited Assurance
	Disclosure Requirement GOV-2 – Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies		Environmental, Social and Governance: ESG governance	40	Limited Assurance
	Disclosure Requirement GOV-3 - Integration of sustainability-related performance in incentive schemes		Remuneration Report: Non-financial Annual Incentive Remuneration Report: Long-term Sustainability objectives	76 80	Limited Assurance
	Disclosure Requirement GOV-4 - Statement on due diligence	SFDR	ESG governance, strategy and policies: Governance	170	Limited Assurance
	Disclosure Requirement GOV-5 - Risk management and internal controls over sustainability reporting		Environmental, Social and Governance: ESG governance Governance: Financial reporting and sustainability reporting	40 58	Limited Assurance
	Disclosure Requirement SBM-1 – Strategy, business model and value chain	SFDR/P3/BRR	Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy	54 170	Limited Assurance
	Disclosure Requirement SBM-2 – Interests and views of stakeholders		Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy	54 170	Limited Assurance
	Disclosure Requirement SBM-3 - Material impacts, risks and opportunities and their interaction with strategy and business model		Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy Sustainability statement: IRO Table	54 170 174	Reasonable Assurance
	Disclosure Requirement IRO-1 - Description of the processes to identify and assess material impacts, risks and opportunities		Sustainability statement: Double Materiality Assessment	171	Reasonable Assurance
	Disclosure Requirement IRO-2 – Disclosure requirements in ESRS covered by the undertaking’s sustainability statement		Sustainability statement: Double Materiality Assessment	171	Limited Assurance
	Minimum disclosure requirement - Policies MDR-P – Policies adopted to manage material sustainability matters		ESG governance, strategy and policies: Policies Double Materiality Assessment: Policy Overview	171 180	4
	Minimum disclosure requirement - Actions MDR-A – Actions and resources in relation to material sustainability matters		ESG governance, strategy and policies: Actions	171	⁴
	Minimum disclosure requirement – Metrics MDR-M – Metrics in relation to material sustainability matters		Sustainability statement: Tracking our 2025 ESG program Sustainability statement: Double Materiality Assessment	166 171	⁴
	Minimum disclosure requirement – Targets MDR-T – Tracking effectiveness of policies and actions through targets		Sustainability statement: Tracking our 2025 ESG program Sustainability statement: Double Materiality Assessment	166 171	⁴

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement


	244


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
ESRS E1 Climate change	Disclosure requirement related to ESRS 2 GOV-3 Integration of sustainability-related performance in incentive schemes		Remuneration Report: Non-financial Annual Incentive Remuneration Report: Long-term Sustainability objectives	76 80	Limited Assurance
	Disclosure Requirement E1-1 – Transition plan for climate change mitigation	EUCL/P3/BRR	Climate change: Philips transition plan	189	Limited Assurance
	Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model		Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy Sustainability statement: IRO Table Climate change: Impact, risk and opportunity management	54 170 174 188	Reasonable Assurance
	Disclosure requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material climate-related impacts, risks and opportunities		Governance: Working with stakeholders and advocacy Sustainability statement: Double Materiality Assessment Climate change: Impact, risk and opportunity management	54 171 188	Reasonable Assurance
	Disclosure Requirement E1-2 – Policies related to climate change mitigation and adaptation		Double Materiality Assessment: Policy Overview Climate change: Policies, metrics and targets	180 183	Reasonable Assurance
	Disclosure Requirement E1-3 – Actions and resources in relation to climate change policies		Climate change: Actions associated with climate change Climate change: Resources allocated to climate change	184 194	Limited Assurance
	Disclosure Requirement E1-4 – Targets related to climate change mitigation and adaptation	SFDR/P3/BRR	Climate change: Policies, metrics and targets Climate change: Designing energy-efficient products	183 189	Limited Assurance
	Disclosure Requirement E1-5 – Energy consumption and mix	SFDR	Climate change: Philips’ energy consumption and mix	184	Reasonable Assurance
	Disclosure Requirement E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions	SFDR/P3/BRR	Climate change: Philips’ gross Scopes 1, 2, 3 and Total GHG emissions	185	Reasonable Assurance
	Disclosure Requirement E1-7 – GHG removals and GHG mitigation projects financed through carbon credits	EUCL	Climate change: Philips’ GHG removals and GHG mitigation projects financed through carbon credits	187	Reasonable Assurance
	Disclosure Requirement E1-8 – Internal carbon pricing		Climate change: Philips’ Internal carbon pricing	188	Reasonable Assurance
	Disclosure Requirement E1-9 – Anticipated financial effects from material physical and transition risks and potential climate-related opportunities	P3/BRR	Environmental information: Climate change		Philips makes use of the phase-in provision
ESRS E5 Resource use and circular economy	Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material resource use and circular economy-related impacts, risks and opportunities		Governance: Working with stakeholders and advocacy Sustainability statement: Double Materiality Assessment Resource use and circular economy: Impact, risk and opportunity management	54 171 200	Reasonable Assurance
	Disclosure Requirement E5-1 – Policies related to resource use and circular economy		Double Materiality Assessment: Policy Overview Resource use and circular economy: Policies, metrics and targets	180 196	Reasonable Assurance
	Disclosure Requirement E5-2 – Actions and resources related to resource use and circular economy		Resource use and circular economy: Actions Resource use and circular economy: Allocated Resources to Resource use and circular economy	198 200	Limited Assurance
	Disclosure Requirement E5-3 – Targets related to resource use and circular economy		Resource use and circular economy: Policies, metrics and targets	196	Limited Assurance
	Disclosure Requirement E5-4 – Resource inflows		Resource use and circular economy: Policies, metrics and targets	196	Reasonable Assurance
	Disclosure Requirement E5-5 – Resource outflows	SFDR	Resource use and circular economy: Policies, metrics and targets Resource use and circular economy: Waste	196 203	Reasonable Assurance
	Disclosure Requirement E5-6 – Anticipated financial effects from resource use and circular economy-related impacts, risks and opportunities	1,2,3	Environmental information: Resource use and circular economy		Philips makes use of the phase-in provision

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement


	245


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
ESRS S1 Own workforce	Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders		ESG governance, strategy and policies: Strategy Social: Our organization, people and culture	170 46	Limited Assurance
	Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business model	SFDR	Social: Human rights ESG governance, strategy and policies: Strategy Sustainability statement: IRO Table Social information: Management of key material people topics (Impacts, Risks and Opportunities) Social information: Human rights	47 170 174 215 235	Reasonable Assurance
	Disclosure Requirement S1-1 – Policies related to own workforce	SFDR/BRR	Double Materiality Assessment: Policy Overview Social information: Policies, metrics and targets	180 215	Reasonable Assurance
	Disclosure Requirement S1-2 – Processes for engaging with own workers and workers’ representatives about impacts		Social: Our organization, people and culture Own workforce: Workforce of the future Own workforce: Employee engagement	46 216 220	Limited Assurance
	Disclosure Requirement S1-3 – Processes to remediate negative impacts and channels for own workers to raise concerns channels for own workers to raise concerns	SFDR	Governance: General Business Principles (GBP) Governance information: Philips SpeakUp (Ethics Line)	51 237	Limited Assurance
	Disclosure Requirement S1-4 – Taking action on material impacts on own workforce, and approaches to mitigating material risks and pursuing material opportunities related to own workforce, and effectiveness of those actions		Governance: General Business Principles (GBP) Governance information: Philips SpeakUp (Ethics Line)	51 237	Limited Assurance
	Disclosure Requirement S1-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities		Sustainability statement: Tracking our 2025 ESG program Social information: Policies, metrics and targets	166 215	Limited Assurance
	Disclosure Requirement S1-6 – Characteristics of the undertaking’s employees		Social statements: Workforce details	225	Reasonable Assurance
	Disclosure Requirement S1-7 – Characteristics of non-employee workers in the undertaking’s own workforce		Social information: Workforce details	225	Limited Assurance
	Disclosure Requirement S1-8 – Collective bargaining coverage and social dialogue		Workforce details: Collective bargaining coverage and social dialogue	227	Reasonable Assurance
	Disclosure Requirement S1-9 – Diversity metrics		Social information: Diversity, Inclusion and Well-being	218	Reasonable Assurance
	Disclosure Requirement S1-10 – Adequate wages		Social information: Living Wage and Adequate Wage	222	Limited Assurance
	Disclosure Requirement S1-11 – Social protection		Workforce details: Social protection	227	Limited Assurance
	Disclosure Requirement S1-12– Persons with disabilities		Social information: Diversity, Inclusion and Well-being	218	Limited Assurance
	Disclosure Requirement S1-13 – Training and skills development metrics		Workforce of the future: Career development Workforce of the future: Learning	217 218	Limited Assurance
	Disclosure Requirement S1-14 – Health and safety metrics	SFDR/BRR	Social information: Health and Safety	223	Reasonable Assurance
	Disclosure Requirement S1-15 – Work-life balance metrics	1,2,3	Social information: Diversity, Inclusion and Well-being	220	Limited Assurance
	Disclosure Requirement S1-16 – Compensation metrics (pay gap and total compensation)	SFDR/BRR	Supervisory Board: Remuneration report 2024 Social information: Equal opportunities and equal pay	83 221	Limited Assurance
	Disclosure Requirement S1-17 – Incidents, complaints and severe human rights impacts	SFDR/BRR	Governance information: Philips SpeakUp (Ethics Line)	237	Reasonable Assurance

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement


	246


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
ESRS S2 Workers in the value chain	Disclosure Requirement related to ESRS 2 SBM-2 Interests and views of stakeholders		Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy Workforce of the future: Total Workforce Strategy Supplier Sustainability & Workers in the value chain: Stakeholder dialogs and multi-stakeholder initiatives	54 170 216 234	Limited Assurance
	Disclosure Requirement related to ESRS 2 SBM-3 Material impacts, risks and opportunities and their interaction with strategy and business model	SFDR	Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy Sustainability statement: IRO Table Workforce of the future: Total Workforce Strategy	54 170 174 216	Reasonable Assurance
	Disclosure Requirement S2-1 – Policies related to value chain workers	SFDR/BRR	Double Materiality Assessment: Policy Overview Supplier Sustainability & Workers in the value chain: Policies and Standards	180 228	Reasonable Assurance
	Disclosure Requirement S2-2 – Processes for engaging with value chain workers about impacts		Supplier Sustainability & Workers in the value chain: Stakeholder dialogs and multi-stakeholder initiatives	234	Limited Assurance
	Disclosure Requirement S2-3 – Processes to remediate negative impacts and channels for value chain workers to raise concerns	1	Supplier Sustainability & Workers in the value chain: Selection and classification Supplier Sustainability & Workers in the value chain: Governance and Grievance mechanisms	230 234	Limited Assurance
	Disclosure Requirement S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions	SFDR	Supplier Sustainability & Workers in the value chain Supplier Sustainability & Workers in the value chain: Actions and resources in relation to Workers in the value chain	228 228	Limited Assurance
	Disclosure Requirement S2-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities	2,3	Sustainability statement: Tracking our 2025 ESG program Supplier Sustainability & Workers in the value chain: Results	166 231	Limited Assurance

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement


	247


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
ESRS S4 Consumers and end- users	Disclosure Requirement related to ESRS 2 SBM-2 – Interests and views of stakeholders		Social: Improving people's lives Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy	46 54 170	Limited Assurance
	Disclosure Requirement related to ESRS 2 SBM-3 – Material impacts, risks and opportunities and their interaction with strategy and business mode		Social: Improving people's lives Governance: Patient safety, quality and regulatory Governance: Working with stakeholders and advocacy ESG governance, strategy and policies: Strategy Sustainability statement: IRO Table	46 50 54 170 174	Reasonable Assurance
	Disclosure Requirement S4-1 – Policies related to consumers and end-users	SFDR/BRR	Governance: General Business Principles (GBP) ESG governance, strategy and policies: Policies Double Materiality Assessment: Policy Overview Governance information: Philips SpeakUp (Ethics Line)	51 171 180 237	Reasonable Assurance
	Disclosure Requirement S4-2 – Processes for engaging with consumers and end-users about impacts		Social: Improving people's lives Governance: General Business Principles (GBP) Governance: Working with stakeholders and advocacy Governance information: Philips SpeakUp (Ethics Line)	46 51 54 237	Limited Assurance
	Disclosure Requirement S4-3 – Processes to remediate negative impacts and channels for consumers and end-users to raise concerns		Social: Improving people's lives Governance: Patient safety, quality and regulatory Governance: General Business Principles (GBP) Governance information: Philips SpeakUp (Ethics Line)	46 50 51 237	Limited Assurance
	Disclosure Requirement S4-4 – Taking action on material impacts on consumers and end- users, and approaches to managing material risks and pursuing material opportunities related to consumers and end-users, and effectiveness of those actions	SFDR	Social: Improving people's lives Governance: Patient safety, quality and regulatory Consumers and end-users: Product responsibility and safety	46 50 236	Limited Assurance
	Disclosure Requirement S4-5 – Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities	1,2,3	Social: Improving people's lives Sustainability statement: Tracking our 2025 ESG program Sustainability statement: Double Materiality Assessment	46 166 171	Limited Assurance
ESRS G1 Business conduct	Disclosure Requirement related to ESRS 2 GOV-1 – The role of the administrative, supervisory and management bodies		Environmental, Social and Governance: ESG governance Governance: Corporate governance	40 48	Limited Assurance
	Disclosure Requirement related to ESRS 2 IRO-1 – Description of the processes to identify and assess material impacts, risks and opportunities		Sustainability statement: Double Materiality Assessment Governance information: Philips SpeakUp (Ethics Line)	171 237	Reasonable Assurance
	Disclosure Requirement G1-1– Corporate culture and Business conduct policies and corporate culture	SFDR	Governance:The Philips integrated operating model Governance: General Business Principles (GBP) Governance information: Philips SpeakUp (Ethics Line)	49 51 237	Reasonable assurance
	Disclosure Requirement G1-2 – Management of relationships with suppliers		Business: Supply chain and procurement Social: Supplier sustainability Supplier Sustainability & Workers in the value chain: Selection and classification	23 48 230	Limited Assurance
	Disclosure Requirement G1-3 – Prevention and detection of corruption and bribery		Governance: General Business Principles (GBP) Governance information: Philips SpeakUp (Ethics Line)	51 237	Reasonable Assurance
	Disclosure Requirement G1-4 – Confirmed incidents of corruption or bribery	SFDR/BRR	Governance: General Business Principles (GBP) Governance information: Philips SpeakUp (Ethics Line)	51 237	Reasonable Assurance
	Disclosure Requirement G1-5 – Political influence and lobbying activities		Advocacy activities and expenses Advocacy activities and expenses: Advocacy Expenses	238 241	Limited Assurance
	Disclosure Requirement G1-6 – Payment practices		Supplier Sustainability & Workers in the value chain: Payment practices	234	Limited Assurance

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement


	248


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
Entity specific Environmental Profit & Loss (EP&L) account	Entity-Specific Disclosure Requirements ESRS		Environmental: Measuring our environmental impact (Environmental Profit & Loss statement 2024) Environmental information: Resource use and circular economy: Philips Environmental Profit & Loss account and Material Flow reporting methodology	40 201	Reasonable Assurance
Entity specific Green/ EcoDesigned Innovation (NPI)	Entity-Specific Disclosure Requirements ESRS		Environmental: Resource use and circular economy: EcoDesign Environmental information: Resource use and circular economy: EcoDesign Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	44 201 204	Limited Assurance
Entity specific Green/ EcoDesigned Innovation (spend)	Entity-Specific Disclosure Requirements ESRS		Environmental: Resource use and circular economy: EcoDesign Environmental information: Resource use and circular economy: EcoDesign Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	44 201 204	Reasonable Assurance
Entity specific EcoHero Revenue	Entity-Specific Disclosure Requirements ESRS		Environmental information: EcoHero Revenues and Green Revenues Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	202 204	Reasonable Assurance
Entity specific Circular Revenue	Entity-Specific Disclosure Requirements ESRS		Environmental information: Resource use and circular economy: Circular revenues Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	198 204	Reasonable Assurance
Entity specific Circular Materials Management	Entity-Specific Disclosure Requirements ESRS	1,2,3	Environmental: Resource use and circular economy Resource use and circular economy: Policies, metrics and targets Resource use and circular economy: Waste Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	43 196 203 204	Reasonable Assurance
Entity specific Closing the Loop	Entity-Specific Disclosure Requirements ESRS		Environmental: Resource use and circular economy Resource use and circular economy: Policies, metrics and targets Resource use and circular economy: Circular end-of-use management Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	43 196 199 204	Reasonable Assurance
Entity specific Zero Waste to Landfill	Entity-Specific Disclosure Requirements ESRS		Environmental: Resource use and circular economy Resource use and circular economy: Policies, metrics and targets Resource use and circular economy: Waste Environmental information: Resource use and circular economy: Philips methodologies for 2025 circularity targets	43 196 203 204	Reasonable Assurance
Entity specific Women in leadership positions	Entity-Specific Disclosure Requirements ESRS		Our organization, people and culture: Leadership and people capabilities Social information: Diversity, Inclusion and Well-being Diversity, Inclusion and Well-being: Diverse representation of talent Diversity, Inclusion and Well-being: Philips diversity metrics methodology	47 218 219 220	Reasonable Assurance
Entity specific Employee Engagement Index	Entity-Specific Disclosure Requirements ESRS		Our organization, people and culture: Our culture Social information: Employee engagement Employee engagement: Philips Employee Engagement Index (EEI) calculation methodology	46 220 221	Limited Assurance

1 Disclosure requirements and related datapoints derived from other EU legislation listed in Appendix B of ESRS 2 which Philips deems material have been included in the cross-reference table

2 EU Climate Law (EUCL), Sustainable Finance Disclosure Regulation (SFDR), Climate Benchmark Standards Regulation (BRR), EBA Pillar 3 Disclosure Requirements (P3)

3 The page references a specific element of information which addresses the relevant datapoint prescribed by the corresponding Disclosure Requirement


	249


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


CSRD Topic 1	CSRD Disclosure requirement	Other EU legislation 2	Reference	Pages 3	Assurance level
Entity specific Living wage	Entity-Specific Disclosure Requirements ESRS		Social information: Equal opportunities and equal pay Social information: Living Wage and Adequate Wage Living Wage and Adequate Wage: Philips living and adequate wage methodology	221 222 222	Limited Assurance
Entity specific Human rights impact assessments	Entity-Specific Disclosure Requirements ESRS		Social: Human rights Supplier Sustainability & Workers in the value chain: Governance and Grievance mechanisms Social information: Human rights	47 234 235	Limited Assurance
Entity specific Supplier Sustainability Program	Entity-Specific Disclosure Requirements ESRS		Social information: Supplier Sustainability & Workers in the value chain	228	Reasonable Assurance
Entity specific Lives improved	Entity-Specific Disclosure Requirements ESRS		Social: Improving people's lives Social information: Lives Improved	46 236	Reasonable Assurance
Entity specific Product responsibility & Safety	Entity-Specific Disclosure Requirements ESRS		Governance: Patient safety, quality and regulatory Human rights: Consumers and end users Social information: Product responsibility and safety	50 235 236	Reasonable Assurance
Entity specific Big data & privacy	Entity-Specific Disclosure Requirements ESRS		Governance: Cybersecurity Human rights: Consumers and end users	52 235	Limited Assurance
Entity specific Competition & Market access	Entity-Specific Disclosure Requirements ESRS		Governance: General Business Principles (GBP)	51	Limited Assurance
Entity specific Geopolitical events	Entity-Specific Disclosure Requirements ESRS		Governance: Tax contribution Governance: Working with stakeholders and advocacy	53 54	Limited Assurance
Entity specific Tax transparency	Entity-Specific Disclosure Requirements ESRS	1,2,3	Governance: Tax contribution	53	Reasonable Assurance

Disclosure requirements and related datapoints which are derived from other EU legislation which Philips deems non-material have been included in the below table.

Philips Group

Other EU legislation


CSRD Disclosure requirement	Regulation	Materiality
ESRS E2-4	SFDR	Not Material
ESRS E3-1	SFDR	Not Material
ESRS E3-4	SFDR	Not Material
ESRS 2 - SBM3 - E4	SFDR	Not Material
ESRS E4-2	SFDR	Not Material
ESRS S3-1	SFDR/BRR	Not Material
ESRS S3-4	SFDR	Not Material


	250


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9Further information


	251


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.1References to the content of this Annual Report

Financial statements

Chapter 6 ‘Group financial statements’ and Chapter 7 ’Company financial statements’ together

contain the statutory financial statements of Koninklijke Philips N.V., the parent company of the

Philips group. These statements are subject to adoption by the company’s shareholders at the 2025

Annual General Meeting of Shareholders.

Management report

The following sections and chapters form the management report within the meaning of article

2:391 of the Dutch Civil Code:

• Our Management

• Strategy

• Financial performance

• Environmental, Social and Governance

• Sub-section ‘Diversity’ in Report of the Corporate Governance and Nomination & Selection

Committee

• Sustainability statement

• Further information, but excluding Independent auditor’s reports

The sections Strategy, Financial performance, Environmental, Social and Governance, and

Sustainability statement provide an extensive analysis of the developments during the financial year

2024 and the results. These sections also provide information on the business outlook, investments,

financing, personnel and research and development.

For ‘Additional information’ within the meaning of article 2:392 of the Dutch Civil Code, please

refer to Independent auditor’s report on financial statements and the Appropriation of profits.

Please refer to Forward-looking statements and other information for more information about

forward-looking statements, third-party market share data, fair value information, and revisions

and reclassifications.

Sustainability statement

On the date of this Annual Report, the European Corporate Sustainability Reporting Directive

(CSRD) has not been transposed and implemented in Dutch law. However, Royal Philips has

anticipated such implementation, reporting on environmental, social and governance (ESG) in its

sustainability statement included in this Annual Report.

The sustainability statement within the meaning of the European Sustainability Reporting Standards

(ESRS) is included in chapter 8 Sustainability statement of this Annual Report and includes by

reference chapter 4 Environmental, Social and Governance, as well as certain other sections of this

Annual Report referred to in ESRS cross-reference table.

9.2Management’s statements and report

The statements and report below are provided by Roy Jakobs, Charlotte Hanneman and Marnix van

Ginneken, together constituting the entire Board of Management of Koninklijke Philips N.V., on the

date of this Annual Report.

Management’s statement pursuant to best practice provision 1.4.3 of the

Dutch Corporate Governance Code

On the basis of the outcome of the processes embedded in the company’s risk management and

internal control framework (refer to Risk management and Internal Control), the Board of

Management confirms that: (i) the management report (within the meaning of section 2:391 of the

Dutch Civil Code) provides sufficient insights into any failings in the effectiveness of the internal risk

management and control systems; (ii) such systems provide a reasonable level of assurance that the

financial reporting does not contain any material inaccuracies; (iii) based on the current state of

affairs, it is justified that the financial reporting is prepared on a going concern basis; and (iv) the

management report states those material risk and uncertainties that are relevant to the expected

continuity of the company for a period of 12 months after the preparation of the report. The

financial statements fairly represent the financial condition and result of operations of the company

and they provide the required disclosures.

In view of the above, the Board of Management believes that it is in compliance with best practice

provision 1.4.2 of the Dutch Corporate Governance Code. It should be noted that the above does

not imply that the internal risk management and control system provide certainty as to the

realization of the operational and financial business objectives, nor can they prevent all

misstatements, inaccuracies, errors, fraud or non-compliances with rules and regulations. The

above statement on internal control should not be construed as a statement in response to the

requirements of section 404 of the US Sarbanes-Oxley Act. The statement as to compliance with

section 404 is set forth below in this section Management’s statements and report.

Management’s statement pursuant to section 5:25c paragraph 2 sub c of the

Dutch Financial Supervision Act (Wet op het financieel toezicht)

The Board of Management of Koninklijke Philips N.V. hereby declares that, to the best of its

knowledge, the Group financial statements and Company financial statements give a true and fair

view of the assets, liabilities, financial position and profit or loss of the company and the

undertakings included in the consolidation taken as a whole and that the management report

specified in References to the content of this Annual Report gives a true and fair view concerning

the position as per the balance sheet date, the development and performance of the business

during the financial year of the company and the undertakings included in the consolidation taken

as a whole, together with a description of the principal risks that they face.

Management’s annual report on internal control over financial reporting

pursuant to section 404 of the US Sarbanes-Oxley Act

The Board of Management of Koninklijke Philips N.V. (Royal Philips) is responsible for establishing

and maintaining an adequate system of internal control over financial reporting (as such term is


	252


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

defined in Rule 13a-15 (f) under the US Securities Exchange Act). Internal control over financial

reporting is a process to provide reasonable assurance regarding the reliability of our financial

reporting for external purposes in accordance with IFRS as issued by the IASB.

Internal control over financial reporting includes maintaining records that, in reasonable detail,

accurately and fairly reflect our transactions; providing reasonable assurance that transactions are

recorded as necessary for preparation of our financial statements; providing reasonable assurance

that receipts and expenditures of company assets are made in accordance with management

authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition

of company assets that could have a material effect on our financial statements would be

prevented or detected on a timely basis. Because of its inherent limitations, internal control over

financial reporting is not intended to provide absolute assurance that a misstatement of our

financial statements would be prevented or detected. Also, projections of any evaluation of the

effectiveness of internal control over financial reporting to future periods are subject to the risk that

the controls may become inadequate because of changes in conditions, or that the degree of

compliance with the policies or procedures may deteriorate.

The Board of Management conducted an assessment of Royal Philips' internal control over financial

reporting based on the “Internal Control Integrated Framework (2013)” established by the

Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Based on the Board of Management’s assessment of the effectiveness of Royal Philips' internal

control over financial reporting as of December 31, 2024, it has concluded that, as of

December 31, 2024, Royal Philips' internal control over Group financial reporting is considered

effective.

The effectiveness of the Royal Philips’ internal control over financial reporting as of December 31,

2024, as included in this section Group financial statements, has been audited by EY Accountants

B.V., an independent registered public accounting firm, as stated in their report which follows

hereafter.

Changes in internal control over financial reporting

There were no changes in our internal control over financial reporting during 2024 that have

materially affected, or are reasonably likely to materially affect, our internal control over financial

reporting.

9.3Independent auditor’s reports

Introduction

EY Accountants B.V. (the legal successor of Ernst & Young Accountants LLP), has issued several

reports which have been included in this section Independent auditor’s reports.

First, the report set out in section Independent auditor’s report on internal control over financial

reporting, is provided in compliance with standards of the Public Company Accounting Oversight

Board in the US and includes an opinion on the effectiveness of internal control over financial

reporting as of December 31, 2024, based on COSO criteria. Management’s report on internal

control over financial reporting is set out in Management’s statements and report.

Second, as our external auditor, EY Accountants B.V. issued a report on the 2024 consolidated

financial statements and the company financial statements, in accordance with Dutch law,

including the Dutch standards on Auditing, of Koninklijke Philips N.V., which is set out in

Independent auditor’s report on financial statements.

Our independent auditor has also issued a report on the consolidated financial statements 2024

and 2023 in accordance with the standards of the Public Company Accounting Oversight Board in

the US, which will be included in the Annual Report on Form 20-F expected to be filed with the US

Securities and Exchange Commission on February 21, 2025.

Third, the company engaged EY Accountants B.V. as external provider of assurance as regards the

compliance of the company’s sustainability statement included in this Annual Report. Their report is

set out in Independent auditor’s assurance report on ESG information. Reference is also made to

External assurance.

9.3.1Independent auditor’s report on internal control over financial reporting

Report of Independent Registered Public Accounting Firm

To: the Supervisory Board and Shareholders of Koninklijke Philips N.V

Opinion on Internal Control over Financial Reporting

We have audited Koninklijke Philips N.V.’s internal control over financial reporting as of December

31, 2024, based on criteria established in Internal Control — Integrated Framework issued by the

Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the

COSO criteria). In our opinion, Koninklijke Philips N.V. (the Company) maintained, in all material

respects, effective internal control over financial reporting as of December 31, 2024, based on the

COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting

Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of

December 31, 2024 and 2023, the related consolidated statements of income, comprehensive

income, cash flows and changes in equity for each of the three years in the period ended

December 31, 2024, and the related notes and our report dated February 21, 2025 expressed an

unqualified opinion thereon.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial

reporting, and for its assessment of the effectiveness of internal control over financial reporting

included in the accompanying section Management’s report on internal control, of this Annual

Report. Our responsibility is to express an opinion on the Company’s internal control over financial

reporting based on our audit. We are a public accounting firm registered with the PCAOB and are

required to be independent with respect to the Company in accordance with the U.S. federal


	253


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

securities laws and the applicable rules and regulations of the Securities and Exchange Commission

and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether effective

internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting,

assessing the risk that a material weakness exists, testing and evaluating the design and operating

effectiveness of internal control based on the assessed risk, and performing such other procedures

as we considered necessary in the circumstances. We believe that our audit provides a reasonable

basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements

for external purposes in accordance with generally accepted accounting principles. A company’s

internal control over financial reporting includes those policies and procedures that (1) pertain to

the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the assets of the company; (2) provide reasonable assurance that transactions

are recorded as necessary to permit preparation of financial statements in accordance with

generally accepted accounting principles, and that receipts and expenditures of the company are

being made only in accordance with authorizations of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the

financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or

detect misstatements. Also, projections of any evaluation of effectiveness to future periods are

subject to the risk that controls may become inadequate because of changes in conditions, or that

the degree of compliance with the policies or procedures may deteriorate.

EY Accountants B.V

/s/ EY Accountants B.V.

Amsterdam, the Netherlands

February 21, 2025

9.3.2Independent auditor’s report on financial statements

To: the Supervisory Board and Shareholders of Koninklijke Philips N.V.

Report on the audit of the financial statements 2024 included in the annual

report

Our opinion

We have audited the accompanying financial statements 2024 of Koninklijke Philips N.V. (Philips, or

the Company), based in Eindhoven, the Netherlands. The financial statements comprise the group

and company financial statements.

In our opinion:

• The group financial statements give a true and fair view of the financial position of Koninklijke

Philips N.V. as of December 31, 2024 and of its result and its cash flows for 2024 in accordance

with International Financial Reporting Standards as adopted in the European Union (IFRSs-EU)

and with Part 9 of Book 2 of the Dutch Civil Code

• The company financial statements give a true and fair view of the financial position of

Koninklijke Philips N.V. as of December 31, 2024 and of its result for 2024 in accordance with

Part 9 of Book 2 of the Dutch Civil Code

The group financial statements comprise:

• The consolidated balance sheet as of December 31, 2024

• The following statements for 2024: the consolidated statements of income, comprehensive

income, cash flows and changes in equity

• The notes comprising material accounting policy information and other explanatory information

The company financial statements comprise:

• The company balance sheet as of December 31, 2024

• The company statement of income for 2024

• 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 Koninklijke Philips N.V. in accordance with the EU Regulation on specific

requirements regarding statutory audit of public-interest entities, the Wet toezicht

accountantsorganisaties (Wta, Audit firms supervision act), 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 relevant independence

regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en

beroepsregels accountants (VGBA, Dutch Code of Ethics for professional accountants).


	254


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

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

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 following information in support of our opinion

and any findings were addressed in this context, and we do not provide a separate opinion or

conclusion on these matters.

Our understanding of the business

Koninklijke Philips N.V. is a health technology company delivering personal health solutions and

professional health solutions for healthcare providers and their patients. The group is structured in

operating reporting units (hereinafter: components) and we tailored our group audit approach

accordingly. We paid specific attention in our audit to a number of areas driven by the operations

of the group, as set out in our Key Audit Matters, as well as in our risk assessment.

We determined materiality and identified and assessed the risks of material misstatement of the

financial statements, whether due to fraud or error, in order to design audit procedures responsive

to those risks and to obtain audit evidence that is sufficient and appropriate to provide a basis for

our opinion.

Materiality


Materiality	€90 million (2023: €75 million).
Benchmark applied	0.5% of sales (2023: 0.4% of sales).
Explanation	We determined materiality based on our understanding of the Company’s business and our perception of the financial information needs of users of the financial statements. We consider sales an important metric for the activities of the Company. The benchmark applied is in line with our 2023 audit.

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 in excess of €4.5 million, which are

identified during the audit, 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

Koninklijke Philips N.V. is at the head of a group of entities. The financial information of this group

is included in the financial statements.

We are responsible for planning and performing the group audit to obtain sufficient appropriate

audit evidence regarding the financial information of the entities or business units within the group

as a basis for forming an opinion on the financial statements. We are also responsible for the

direction, supervision, review and evaluation of the audit work performed for purposes of the

group audit. We bear the full responsibility for the auditor’s report.

Based on our understanding of the group and its environment, the applicable financial framework

and the group’s system of internal control, we identified and assessed risks of material

misstatement of the financial statements and the significant accounts and disclosures. Based on this

risk assessment, we determined the nature, timing and extent of audit work performed, including

the components at which to perform audit work. For this determination we considered the nature

of the relevant events and conditions underlying the identified risks of material misstatements for

the financial statements, the association of these risks to components and the materiality or

financial size of the components relative to the group. We communicated the audit work to be

performed and identified risks through instructions for component auditors as well as requesting

component auditors to communicate matters related to the financial information of the component

that is relevant to identifying and assessing risks. This resulted in a coverage of 91% of sales and

85% of total assets. For other components, we performed analytical procedures to corroborate

that our risk assessment and scoping remained appropriate throughout the audit.

Based on our assessment of the risk of material misstatement to Koninklijke Philips N.V.’s financial

statements, we selected 6 components which required an audit of the complete financial

information. Furthermore, we selected 32 components requiring audit procedures on specific

account balances or specified audit procedures on significant accounts. For financial statement

account balances such as capitalized development costs, restructuring costs, Health Systems sales

and Personal Health sales running on the primary IT systems, Respironics field action provision and

other product warranty provisions, payroll and goodwill, we performed (centralized) audit work

ourselves.

We hosted audit meetings with component auditors to discuss the group audit, the group risk

assessment, audit approach and instructions. Based on our risk assessment, we performed in-

person site visits at component locations in the United States, China, Indonesia and India. These site

visits encompassed some, or all, of the following activities: observing the component operations,

co-developing the audit approach responsive to the risks of material misstatements, reviewing

related working papers and conclusions, meeting with local and regional management teams. In

general, we interacted regularly with the component teams during various stages of the audit.

Where deemed appropriate, we attended certain component closing meetings with management.

By performing the audit work mentioned above at the entities or business units within the group,

together with additional work at group level, we have been able to obtain sufficient and

appropriate audit evidence about the group’s financial information to provide an opinion on the

financial statements.

Teaming, use of specialists and internal audit

We ensured that the audit teams both at group and at component levels included the appropriate

skills and competencies which are needed for the audit of a listed client in the health technology

industry. We included specialists in the areas of IT audit, forensics, treasury, and income tax and


	255


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

have made use of our own experts for valuation of derivatives, environmental liabilities, share based

payments and business valuation, as well as actuarial experts.

We performed our audit in cooperation with internal audit of Koninklijke Philips N.V., leveraging

their in-depth knowledge of Koninklijke Philips N.V. and work performed. We agreed on the joint

coordination of the audit planning, the nature and scope of the work to be performed, reporting

and documentation. We evaluated and tested the relevant work performed by Internal Audit to

satisfy ourselves that the work was adequate for our purposes and established what work had to

be performed by our own professionals.

Our focus on climate-related risks

Climate-related risks can impact financial reporting. The Board of Management has summarized

Philips’ commitments and obligations in relation to climate, and reported in Chapter 8 Sustainability

statement how the Company is addressing climate-related and environmental risks.

As part of our audit of the financial statements, we evaluated the extent to which climate-related

risks and the Company’s commitments and (constructive) obligations are taken into account in

estimates and significant assumptions applied by Koninklijke Philips N.V. Furthermore, we read the

management report and considered whether there is any material inconsistency between the non-

financial information in Chapter 8 Sustainability statement and the financial statements.

Based on the audit procedures performed, we do not deem climate-related risks to have a material

impact on the financial reporting judgments, estimates or significant assumptions as of December

31, 2024 and as such we have not identified a key audit matter.

Our focus on fraud and non-compliance with laws and regulations

Our responsibility

Although we are not responsible for preventing fraud or non-compliance and we cannot be

expected to detect non-compliance with all laws and regulations, it is our responsibility to obtain

reasonable assurance that the financial statements, taken as a whole, are free from material

misstatement, whether caused by fraud or error. The risk of not detecting a material misstatement

resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,

forgery, intentional omissions, misrepresentations, or the override of internal control.

Our audit response related to fraud risks

We identified and assessed the risks of material misstatements of the financial statements due to

fraud. During our audit we obtained an understanding of Philips and its environment and the

components of the system of internal control, including the risk assessment process and the Board

of Management’s process for responding to the risks of fraud and monitoring the system of

internal control including how the Supervisory Board exercises oversight, as well as the outcomes.

We refer to Chapter 4, Section 3.9 of the management report for the Board of Management’s

fraud risk assessment and Chapter 5, Section 3.3 of the Supervisory Board report in which the

Audit Committee reflects on this fraud risk assessment.

We evaluated the design and relevant aspects of the system of internal control and in particular the

fraud risk assessment, as well as the code of conduct, whistle blower procedures and incident

registration. We evaluated the design and the implementation and, where considered appropriate,

tested the operating effectiveness of internal controls designed to mitigate fraud risks.

As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to

financial reporting fraud, misappropriation of assets and bribery and corruption, in close co-

operation with our forensic and legal specialists. We evaluated whether these factors indicate that

a risk of material misstatement due to fraud is present.

We incorporated elements of unpredictability in our audit. We also considered the outcome of our

other audit procedures and evaluated whether any findings were indicative of fraud or non-

compliance.

We addressed the risks related to management override of controls, as this risk is present in all

organizations. For these risks, we have performed procedures, among others to evaluate key

accounting estimates for management bias that may represent a risk of material misstatement due

to fraud, in particular relating to important judgment areas and significant accounting estimates as

disclosed in Note 1 to the group financial statements. We have also used data analysis to identify

and address high-risk journal entries and evaluated the business rationale (or lack thereof) of

significant extraordinary transactions, including those with related parties.

When identifying and assessing fraud risks, we presumed that there are risks of fraud in sales

recognition. We refer to our Key Audit Matter related to ‘Revenue recognition — Sales to

distributors and retailers, and installable sales orders’ for further information.

We considered available information and made inquiries of relevant executives, directors, internal

audit, legal, compliance, human resources, regional directors and the Supervisory Board.

The fraud risks we identified, inquiries and other available information did not lead to specific

indications for fraud or suspected fraud potentially materially impacting the view of the financial

statements.

Our audit response related to risks of non-compliance with laws and regulations

We performed appropriate audit procedures regarding compliance with the provisions of those

laws and regulations that have a direct effect on the determination of material amounts and

disclosures in the financial statements. Furthermore, we assessed factors related to the risks of non-

compliance with laws and regulations that could reasonably be expected to have a material effect

on the financial statements from our general industry experience, through discussions with the

Board of Management, reading minutes, inspection of internal audit and compliance reports and

performing test of controls and substantive tests of details on classes of transactions, account

balances or disclosures.


	256


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Given the Company is a global organization, operating in multiple jurisdictions, in our assessment

of the risk of non-compliance with laws and regulations, we also considered the potential risk from

Philips’ interactions with third-party distributors and governmental agencies. We refer to Chapter 9,

Section 5.4 Compliance Risks in the management report. Our audit approach included the

following steps: 1) obtain an understanding of the environment and the Company to enable the

detection of non-compliance with laws and regulations related to bribery and corruption, 2) obtain

an understanding of the internal control environment and the measures for mitigating those risks

(by the Company) in the light of applicable anti-corruption laws and regulations and 3) execute

controls-based and substantive audit procedures in order to obtain sufficient evidence for the

mitigation of the risk of material misstatement of the financial statements due non-compliance

with laws and regulations related to bribery and corruption.

We also inspected lawyers’ letters and correspondence with regulatory authorities and remained

alert to any indication of (suspected) non-compliance throughout the audit. Finally, we obtained

written representations that all known or alleged instances of non-compliance with laws and

regulations have been disclosed to us.

We refer to our Key Audit Matter related to the ‘Measurement of provisions and disclosures for

legal claims, litigations and contingent liabilities’ for further information as to our procedures in this

regard.

Our audit response related to going concern

As disclosed in Chapter 6, Section 6 Basis of preparation in Note 1 to the group financial

statements, the financial statements have been prepared on a going concern basis. When

preparing the financial statements, the Board of Management made a specific assessment of the

Company’s ability to continue as a going concern and to continue its operations for the foreseeable

future.

We discussed and evaluated the specific assessment with the Board of Management, exercising

professional judgment and maintaining professional skepticism.

We considered whether the Board of Management’s going concern assessment, based on our

knowledge and understanding obtained through our audit of the financial statements or otherwise,

contains all relevant events or conditions that may cast significant doubt on the Company’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.

Based on our procedures performed, we did not identify material uncertainties about going

concern. 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.

Our key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance

in our audit of the financial statements. We have communicated the key audit matters to the

Supervisory Board.

In comparison with previous year, we removed two key audit matters: ‘Measurement and

disclosure of the Respironics field action provision related to Sleep & Respiratory Care products’ and

‘Valuation of Goodwill for Cash Generating Unit Sleep & Respiratory Care’, both due to our

reassessment of the related risks of material misstatements for the financial statements 2024. There

are no relevant changes to the nature of the other key audit matters.


	257


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Revenue recognition – Sales to distributors and retailers, and installable sales orders
Risk	As disclosed in more detail in Note 6 of the Notes to the consolidated financial statements , the Company recognizes revenue when it transfers control over a good or service to a customer. Transfer of control varies depending on the individual terms of the contract of sale. For consumer-type products in the Personal Health segment, control is transferred when the product is shipped and delivered to the customer and title and risk have passed to the customer (depending on the delivery conditions) and acceptance of the product has been obtained. We identified a fraud risk related to improper revenue recognition within the Personal Health segment, by inaccurately recognizing revenues for orders where control transfers upon delivery at distributors and retailers.. In addition, the sales in the Diagnosis & Treatment (D&T) and Connected Care (CC) segments of the Company include the sale of equipment which requires installation and formal acceptance by the customer before control over the goods and services are transferred to the customer and these installable sales orders can be recognized as revenue. We identified a risk of management accelerating revenue recognition through override of customer acceptance controls for installable sales orders.
Our audit approach	Our audit procedures included, amongst others, evaluating the appropriateness of the Company’s revenue recognition policies in accordance with IFRS 15 ‘Revenue from Contracts with Customers’ and whether the policies have been applied consistently or whether changes, if any, are appropriate in the circumstances. As part of our audit procedures, we obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls that address the risks of material misstatement relating to the occurrence of revenue recognized for sales to distributors and retailers (Personal Health) and installable sales orders (D&T and CC). Specifically for sales in the D&T and CC segments, we tested the Company’s controls over customers’ acceptance of installed equipment. With respect to revenue recognized for sales to distributors and retailers (Personal Health), we tested revenue transactions before the year-end for sales to distributors and retailers where control transfers upon delivery at customer. We incorporated unpredictability into the nature and extent of these procedures. Furthermore, we tested the accuracy of incoterms recorded in the Company’s IT application. Furthermore, with respect to the installable sales orders we have tested, among other procedures, sales orders recognized before yearend by obtaining formal customer acceptance documentation to evidence occurrence of sales in the appropriate period. We have integrated unpredictability into the nature, timing and extent of these procedures by also testing random sales transactions for installable sales orders.
Key observations	We evaluated that revenue recognized for sales to distributors and retailers (Personal Health) and installable sales orders (Health Systems) is reasonable.


Measurement of provisions and disclosures for legal claims, litigations and contingent liabilities
Risk	The Company and certain of its group companies and former group companies are involved as a party in legal proceedings, including regulatory and other governmental proceedings, as well as being investigated by governmental authorities for alleged non-compliance with laws and regulations. As more fully described in Note 19, Provisions, and Note 24, Contingencies, this includes legal claims, and litigation related to the Respironics recall and discussions with and information provided to the Department of Justice (DoJ), certain United States' State Attorneys General and the Securities and Exchange Commission (SEC) regarding ongoing investigations. In Note 24, the Company has disclosed present obligations with a probable outflow of economic resources where the amount cannot be reliably estimated, as well as certain possible obligations arising from past events. The Company recognizes provisions for legal claims and litigation when it has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation, and the amount can be estimated reliably. At December 31, 2024, the provision balance recorded for these obligations is EUR 1,079 million. A significant portion of this balance is derived from a settlement in relation to the personal injury and medical monitoring class action complaints in the United States (US) for which the Company recorded a provision of EUR 984 million in 2024. Auditing the provisions for legal claims and litigation, and the disclosure for provisions and contingent liabilities is complex due to the judgment applied by management in predicting the outcome of the matters and estimating the potential impact if the outcomes are unfavorable and the amounts involved are, or can be, material to the group financial statements as a whole.
Our audit approach	Our audit procedures included, amongst others, evaluating the appropriateness of the Company’s accounting policies related to provisions and disclosures for legal claims, litigations, and contingent liabilities in accordance with IAS 37 Provisions, contingent liabilities, and contingent assets, and whether the accounting policies have been applied consistently or whether changes, if any, are appropriate in the circumstances. We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls relating to the identification and evaluation of legal claims, litigation and investigations, and the measurement and continuous re- assessment of the related provisions, contingent liabilities, and disclosures. To evaluate the potential impact of these matters and test the Company’s estimate of provisions for legal claims and litigation and the disclosure for provisions and contingent liabilities our procedures included, among others, discussion of the legal claims, litigation and investigations with both internal and external legal counsel and receiving confirmation letters from both internal and external legal counsel involved in these matters. We also discussed the allegations with the Company’s finance department, inspected relevant correspondence with authorities, and inspected the minutes of the meetings of the Audit Committee, Supervisory Board, Board of Management and Executive Committee. For claims settled during the year, we read the related settlement agreements and agreed the cash payments to these, as appropriate. Specifically related to ongoing investigations into alleged non-compliance with laws and regulations regarding events leading to the Respironics recall, we were supported by forensic specialists and legal specialists in assessing certain technical aspects of the alleged non-compliance matters, legal claims, and litigation. To assess the completeness of the provisions and contingent liabilities, we reviewed publicly available information, such as press releases, notifications issued by regulatory bodies, media reports and publications. For the personal injury litigation and medical monitoring class action settlement in the US, we obtained the settlement agreement and agreed the terms and conditions to the amount recorded for the provision. We evaluated the adequacy of the Company’s disclosure for provisions for legal claims and litigation, and contingent liabilities, as included in the group financial statements.
Key observations	We consider the Board of Management’s assessment and conclusion on the expected outcome of the above matters reasonable, and the accounting of legal claims and litigation adequate. We evaluated that the disclosures in the group financial statements related to provisions, contingent liabilities, and contingent assets are adequate.


	258


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information


Recognition of deferred tax assets in the United States
Risk	The net deferred tax assets of EUR 1,835 million consist of deferred tax assets of EUR 1,916 million and deferred tax liabilities of EUR 81 million. As more fully described in Note 8, Income Taxes, of the total deferred tax assets of EUR 1,916 million as of December 31, 2024, EUR 1,188 million is recognized in respect of entities in various countries where there have been tax losses in the current or preceding financial year, primarily the United States (US). Deferred tax assets are recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that there will be future taxable profits against which these can be utilized. Determining whether such taxable profits are probable involves significant judgment, which includes but is not limited to, the availability and timing of reversal of offsetting deferred tax liabilities, the projection of available future tax profits and the expected period of recovery. Auditing the recognition of deferred tax assets in the US was complex because it involved significant judgment and management assumptions related to projections used to determine future taxable income, which were derived from the Company’s strategic plan, and estimation uncertainty in determining the expected period of recovery.
Our audit approach	Our audit procedures included, amongst others, evaluating the appropriateness of the tax accounting in accordance with IAS 12 “Income Taxes” and whether the accounting policies have been applied consistently or whether changes, if any, are appropriate in the circumstances. We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the recognition of deferred tax assets in the US. This included controls over management’s process related to the assessment of the model used to project future taxable income, the assumptions used in the income projections, and controls over the mathematical accuracy of the calculation. To evaluate management’s recognition of the US deferred tax assets, we performed procedures to test the projections of future taxable income, based on the Company’s strategic plan, including assessment of the historical accuracy of management’s forecasting assumptions. We also benchmarked the projections of future taxable income to industry trends, performed sensitivity analyses over the key forecasting inputs, evaluated the risk-adjusted scenarios, and tested the mathematical accuracy of management’s model. With the assistance of our tax professionals, we assessed the reasonableness of the expected period of recovery by analyzing the timing and right of offset of certain deferred tax assets with deferred tax liabilities. We also evaluated the adequacy of management’s disclosures around deferred tax assets as included in the group financial statements.
Key observations	We consider management’s assumptions and estimates made in determining the recoverability of the deferred tax assets in the US to be reasonable. We evaluated that the disclosures related to the deferred tax assets in the US in the group financial statements are adequate.

Report on other information included in the annual report

The annual report contains other information in addition to the financial statements and our

auditor’s report thereon.

Based on the following procedures performed, we conclude that the other information:

• Is consistent with the financial statements and does not contain material misstatements.

• Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the

management report (excluding the sustainability statement) and the other information as

required by Part 9 of Book 2 of the Dutch Civil Code and as required by Sections 2:135b and

2:145 sub-section 2 of the Dutch Civil Code for the remuneration report.

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 and Section 2:135b sub-Section 7 of the Dutch Civil Code and the

Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of

those performed in our audit of the financial statements.

The Board of Management is responsible for the preparation of the other information, including

the management report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other

information required by Part 9 of Book 2 of the Dutch Civil Code. The Board of Management and

the Supervisory Board are responsible for ensuring that the remuneration report is drawn up and

published in accordance with sections 2:135b and 2:145 sub-section 2 of the Dutch Civil Code. In

accordance with the Dutch Corporate Governance Code, the Supervisory Board renders account of

the implementation of the remuneration policy in 2024 in the remuneration report, as prepared by

the Remuneration Committee.

Report on other legal and regulatory requirements and ESEF

Engagement

Following the appointment by the General Meeting on May 7, 2015, we were engaged by the

Supervisory Board as auditor of Koninklijke Philips N.V. on October 22, 2015, as of the audit for the

year 2016 and have operated as statutory auditor ever since that date.

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 audit of public-interest entities.

European Single Electronic Reporting Format (ESEF)

Koninklijke Philips N.V. has prepared the 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 annual report, prepared in the XHTML format, including the (partially) marked-

up group financial statements, as included in the reporting package by Koninklijke Philips N.V.,

complies in all material respects with the RTS on ESEF.


	259


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The Board of Management is responsible for preparing the annual report, including the financial

statements, in accordance with the RTS on ESEF, whereby the Board of Management combines the

various components into a single reporting package.

Our responsibility is to obtain reasonable assurance for our opinion whether the 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 amongst others:

• Obtaining an understanding of the Company’s financial reporting process, including the

preparation of the reporting package

• Identifying and assessing the risks that the 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

has been prepared in accordance with the technical specifications as included in the RTS on ESEF

• Examining the information related to the group 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.

Description of responsibilities regarding the financial statements

Responsibilities of the Board of Management and the Supervisory Board for the financial

statements

The Board of Management is responsible for the preparation and fair presentation of the financial

statements in accordance with IFRSs-EU and Part 9 of Book 2 of the Dutch Civil Code. Furthermore,

the Board of Management is responsible for such internal control as the Board of Management

determines is necessary to enable the preparation of financial statements that are free from

material misstatement, whether due to fraud or error.

As part of the preparation of the financial statements, the Board of Management is responsible for

assessing the Company’s ability to continue as a going concern. Based on the financial reporting

frameworks mentioned, the Board of Management should prepare the financial statements using

the going concern basis of accounting unless the Board of Management either intends to liquidate

the Company or to cease operations or has no realistic alternative but to do so. The Board of

Management 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 the Company’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 misstatements, whether due to fraud or error 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.

We have exercised professional judgment and have maintained professional skepticism throughout

the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence

requirements. The ‘Information in support of our opinion’ section above includes an informative

summary of our responsibilities and the work performed as the basis for our opinion.

Our audit further included among others:

• Performing audit procedures responsive to the risks identified, and obtaining audit evidence that

is sufficient and appropriate to provide a basis for our opinion

• 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 the Company’s internal control

• Evaluating the appropriateness of accounting policies used and the reasonableness of

accounting estimates and related disclosures made by the Board of Management

• Evaluating the overall presentation, structure and content of the financial statements, including

the disclosures

• Evaluating whether the financial statements represent the underlying transactions and events in

a manner that achieves fair presentation.

Communication

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

audit committee of the Supervisory Board in accordance with Article 11 of the EU Regulation on

specific requirements regarding statutory audit 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.


	260


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

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.`

Amsterdam, February 21, 2025

EY Accountants B.V.

Signed by F.J. Blenderman

9.3.3Limited assurance report of the independent auditor on the sustainability

statement

To: the Supervisory Board and Shareholders of Koninklijke Philips N.V.

Our conclusion

We have performed a limited assurance engagement on the consolidated sustainability statement

for 2024 of Koninklijke Philips N.V. based in Eindhoven (hereinafter: Philips or the Company) in

Chapter 8 Sustainability statement of the accompanying management report including the

information incorporated in the sustainability statement by reference (hereinafter: the sustainability

statement).

Based on our procedures performed and the evidence obtained, nothing has come to our attention

that causes us to believe that the sustainability statement is not, in all material respects:

• Prepared in accordance with the European Sustainability Reporting Standards (ESRS) as adopted

by the European Commission and compliant with the double materiality assessment process

carried out by the Company to identify the information reported pursuant to the ESRS

• Compliant with the reporting requirements provided for in Article 8 of Regulation (EU) 2020/852

(Taxonomy Regulation)

Our conclusion has been formed on the basis of the matters outlined in this limited assurance

report.

Basis for our conclusion

We have performed our limited assurance engagement on the sustainability statement in

accordance with Dutch law, including Dutch Standard 3810N, “Assurance-opdrachten inzake

duurzaamheidsverslaggeving” (Assurance engagements relating to sustainability reporting), which

is a specified Dutch standard that is based on the International Standard on Assurance

Engagements (ISAE) 3000 (Revised), “Assurance engagements other than audits or reviews of

historical financial information”.

Our assurance engagement was aimed to obtain a limited level of assurance that the sustainability

statement is free from material misstatements. The procedures vary in nature and timing from, and

are less in extent than for, a reasonable assurance engagement. Consequently, the level of

assurance obtained in a limited assurance engagement is substantially lower than the assurance

that would have been obtained had a reasonable assurance engagement been performed.

Our responsibilities in this regard are further described in the section ‘Our responsibilities for the

limited assurance engagement on the sustainability statement of our report.

We are independent of Koninklijke Philips N.V. 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 relevant independence

regulations in the Netherlands. This includes that we do not perform any activities that could result

in a conflict of interest with our independent assurance engagement and we are not involved in the

preparation of the sustainability statement, as doing so may compromise our independence.

Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants

(VGBA, Dutch Code of Ethics for Professional Accountants). The ViO and VGBA are at least as

demanding as the International code of ethics for professional accountants (including International

independence standards) of the International Ethics Standards Board for Accountants (the IESBA

Code) as relevant to limited assurance engagements on sustainability statements of public interest

entities in the European Union.

We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a

basis for our conclusion.

Emphasis of matter

The sustainability statement has been prepared in a context of new sustainability reporting

standards, requiring entity-specific interpretations and addressing inherent measurement or

evaluation uncertainties. In this context, we want to emphasize the following matters:

Emphasis on the most significant uncertainties affecting the quantitative metrics and

monetary amounts

We draw attention to section 8.2 General basis for preparation paragraph Sources of estimation

and outcome uncertainty in the sustainability statement that identifies the quantitative metrics and

monetary amounts that are subject to a high level of measurement uncertainty and discloses

information about the sources of measurement uncertainty and the assumptions, approximations

and judgements the Company has made in measuring these in compliance with the ESRS. The

significant uncertainties relate to estimates and assumptions used and reliance on third-party

evidence in the metrics “Lives Improved”, “Environmental Profit & Loss statement”, and “Scope 3

emissions” and are further elaborated in the “Methodology for calculating Lives Improved”, version

2024 (Lives Improved methodology), the “Methodology for calculating the Environmental Proﬁt &

Loss Account and Material Flow”, version 2024 (EPL and Material Flow methodology) and the

“Methodology for calculating scope 3 emissions”, version 2024 (Scope 3 Accounting

methodology), as available on the website of Philips.


	261


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The comparability of sustainability information between entities and over time may be affected by

the lack of historical sustainability information in accordance with the ESRS and by the absence of a

uniform practice on which to draw, to evaluate and measure this information. This allows for the

application of different, but acceptable, measurement techniques, especially in the initial years.

Emphasis on the double materiality assessment process

We draw attention to section 8.3 Double Materiality Assessment in the sustainability statement.

This disclosure explains future improvements in the ongoing due diligence and double materiality

assessment process, including robust engagement with affected stakeholders. Due diligence is an

on-going practice that responds to and may trigger changes in the Company’s strategy, business

model, activities, business relationships, operating, sourcing and selling contexts. The double

materiality assessment process requires the Company to make key judgments and use thresholds

and may also be impacted in time by sector-specific standards to be adopted.

Therefore, the sustainability statement may not include every impact, risk and opportunity or

additional entity-specific disclosure that each individual stakeholder (group) may consider important

in its own particular assessment.

Our conclusion is not modified in respect of these matters.

Comparative information not assured

The following sustainability information relating to the years prior to 2024 included in the

sustainability statement, has not been part of this assurance engagement. Consequently, we do not

provide any assurance on this comparative information and thereto related disclosures in the

sustainability statement. The following sustainability information has not been part of an assurance

engagement:

• S1-6 contingent worker (type of workers) – reporting year 2023

• S1-6 employees per segment, employment by consolidation changes, employees per geographic

areas in FTE – reporting years 2022 and 2023

• S1-16 pay gap – reporting years 2022 and 2023

Our conclusion is not modified in respect of this matter.

Limitation to the scope of our assurance engagement

In reporting forward-looking information in accordance with the ESRS, the Board of Management

describes the underlying assumptions and methods of producing the information, as well as other

factors that provide evidence that it reflects the actual plans or decisions made by the Company

(actions). Forward-looking information relates to events and actions that have not yet occurred and

may never occur. The actual outcome is likely to be different since anticipated events frequently do

not occur as expected. We do not provide assurance on the achievability of forward-looking

information.

Our conclusion is not modified in respect of this matter.

Responsibilities of the Board of Management and the Supervisory Board for the

sustainability statement

The Board of Management is responsible for the preparation of the sustainability statement in

accordance with the ESRS, including the double materiality assessment process carried out by the

Company as the basis for the sustainability statement and disclosure of material impacts, risks and

opportunities in accordance with the ESRS. As part of the preparation of the sustainability

statement, the Board of Management is responsible for compliance with the reporting

requirements provided for in Article 8 of Regulation (EU) 2020/852 (Taxonomy Regulation).

The Board of Management is also responsible for selecting and applying additional entity-specific

disclosures to enable users to understand the Company’s sustainability-related impacts, risks or

opportunities and for determining that these additional entity-specific disclosures are suitable in the

circumstances and in accordance with the ESRS.

Furthermore, the Board of Management is responsible for such internal control as it determines is

necessary to enable the preparation of the sustainability statement that is free from material

misstatement, whether due to fraud or error.

The Supervisory Board is responsible for overseeing the sustainability reporting process including

the double materiality assessment process carried out by the Company.

Our responsibilities for the limited assurance engagement on the sustainability

statement

Our responsibility is to plan and perform the limited assurance engagement in a manner that allows

us to obtain sufficient and appropriate assurance evidence for our conclusion.

We apply the applicable quality management requirements pursuant to the Nadere voorschriften

kwaliteitsmanagement (NVKM, regulations for quality management) and the International Standard

on Quality Management (ISQM) 1, and accordingly maintain a comprehensive system of quality

management including documented policies and procedures regarding compliance with ethical

requirements, professional standards and other relevant legal and regulatory requirements.

Our limited assurance engagement included amongst others:

• Performing inquiries and an analysis of the external environment and obtaining an

understanding of relevant sustainability themes and issues, the characteristics of the Company,

its activities and the value chain and its key intangible resources in order to assess the double

materiality assessment process carried out by the Company as the basis for the sustainability

statement and disclosure of all material sustainability-related impacts, risks and opportunities in

accordance with the ESRS

• Obtaining through inquiries a general understanding of the internal control environment, the

Company’s processes for gathering and reporting entity-related and value chain information, the

information systems and the Company’s risk assessment process relevant to the preparation of

the sustainability statement and for identifying the Company’s activities, determining eligible

and aligned economic activities and prepare the disclosures provided for in Article 8 of


	262


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Regulation (EU) 2020/852 (Taxonomy Regulation), without obtaining assurance information

about the implementation or testing the operating effectiveness of controls

• Assessing the double materiality assessment process carried out by the Company and identifying

and assessing areas of the sustainability statement, including the disclosures provided for in

Article 8 of Regulation (EU) 2020/852 (Taxonomy Regulation), where misleading or unbalanced

information or material misstatements, whether due to fraud or error, are likely to arise

(‘selected disclosures’). Designing and performing further assurance procedures aimed at

assessing that the sustainability statement is free from material misstatements responsive to this

risk analysis.

• Considering whether the description of the double materiality assessment process in the

sustainability statement made by the Board of Management appears consistent with the process

carried out by the Company

• Determining the nature and extent of the procedures to be performed for specific Philips

industrial sites. For this, the nature, extent and/or risk profile of these components are decisive.

We have performed site visits to Pune in India and Shanghai and Suzhou in China which are

aimed at, on a local level, obtaining understanding of the design and implementation of controls

• Performing analytical review procedures on quantitative information in the sustainability

statement, including consideration of data and trends

• Assessing whether the Company’s methods for developing estimates are appropriate and have

been consistently applied for selected disclosures. We considered data and trends, however our

procedures did not include testing the data on which the estimates are based or separately

developing our own estimates against which to evaluate the Board of Management’s estimates

• Analyzing, on a limited sample basis, relevant internal and external documentation available to

the Company (including publicly available information or information from actors throughout its

value chain) for selected disclosures

• Reading the other information in the Annual Report to identify material inconsistencies, if any,

with the sustainability statement

• Considering whether the disclosures provided to address the reporting requirements provided

for in Article 8 of Regulation (EU) 2020/852 (Taxonomy Regulation) for each of the

environmental objectives, reconcile with the underlying records of the Company and are

consistent or coherent with the sustainability statement, appear reasonable, in particular

whether the eligible economic activities meet the cumulative conditions to qualify as aligned and

whether the technical screening criteria are met, and whether the key performance indicators

disclosures have been defined and calculated in accordance with the Taxonomy reference

framework, and comply with the reporting requirements provided for in Article 8 of Regulation

(EU) 2020/852 (Taxonomy Regulation), including the format in which the activities are presented

• Considering the overall presentation, structure and fundamental qualitative characteristics of

information (relevance and faithful representation: complete, neutral and accurate) reported in

the sustainability statement, including the reporting requirements provided for in Article 8 of

Regulation (EU) 2020/852 (Taxonomy Regulation)

• Considering, based on our limited assurance procedures and evaluation of the evidence

obtained, whether the sustainability statement as a whole, is free from material misstatements

and prepared in accordance with the ESRS.

Communication

We communicate with the Supervisory Board regarding, among other matters, the planned scope

and timing of the assurance engagement and significant findings that we identify during our

assurance engagement.

Additional reasonable assurance report on selected sustainability information

We have performed additional assurance procedures aimed to obtain reasonable assurance on

selected disclosure requirements and selected entity-specific KPIs and disclosures in the

sustainability statement (the selected sustainability information) as disclosed in section 8.7 ESRS

cross-reference table indicated with “reasonable assurance” in the column “assurance level”:

In our opinion, the selected sustainability information is prepared, in all material respects, in

accordance with the corresponding Disclosure Requirements of the ESRS and criteria developed by

the Company and disclosed in section 8.2 General basis for preparation of the sustainability

statement (the applicable criteria).

The Board of Management is responsible for the preparation of the selected sustainability

information in accordance with the applicable criteria. The Board of Management is also

responsible for selecting and applying the criteria and for determining that these criteria are

suitable for the legitimate information needs of the intended users and compliant with the

applicable ESRS requirements.

Our responsibility is to obtain sufficient and appropriate evidence for our opinion. In addition to the

procedures performed for our limited assurance engagement on the sustainability statement, our

reasonable assurance procedures on the selected sustainability information included amongst

others:

• Evaluating the appropriateness of the criteria applied, their consistent application and related

disclosures on the selected sustainability information. This includes the evaluation of the

reasonableness of estimates made by the Board of Management

• Identifying and assessing the risks that the selected sustainability information contains material

misstatements, whether due to fraud or error, designing and performing further assurance

procedures responsive to those risks, and obtaining assurance evidence that is sufficient and

appropriate to provide a basis for our opinion.

• Obtaining an understanding of the systems and processes for collecting, reporting, and

consolidating the selected sustainability information, including obtaining an understanding of

the internal control environment relevant to our assurance engagement, but not for the purpose

of expressing an opinion on the effectiveness of the Company’s internal control

• Reading minutes of the meetings of Board of Management, the Supervisory Board and other

meetings that are important for the content of the selected sustainability information

• Evaluating the suitability of assumptions and sources from third parties used for the calculation

underlying the impact data as included in section 8.5.3 Consumers and end users and section

8.4 Environmental information paragraphs Philips Environmental Profit & Loss account and

Material Flow reporting methodology and Philips’ Emission calculation of the Annual Report and


	263


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

further explained in the “Lives Improved methodology”, the “EPL and Material Flow

methodology” and the “Scope 3 Accounting methodology”

• Obtaining assurance evidence that the selected sustainability information reconciles with

underlying records of the Company

• Evaluating, on a sample basis, relevant internal and external documentation to determine the

reliability of the selected sustainability information

• Evaluating the data and trends

• Evaluating whether the selected sustainability information is presented and disclosed free from

material misstatement in accordance with the criteria applied

Eindhoven, February 21, 2025

EY Accountants B.V.

signed by A.B.E. Laan


	264


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.4Corporate governance report

9.4.1Introduction

Management and oversight responsibilities and accountability within our company are ultimately

guided by the corporate governance of the parent company of the Philips group, Koninklijke Philips

N.V. (Royal Philips). Royal Philips is a company organized under Dutch law and its shares have been

listed on the Amsterdam stock exchange (Euronext Amsterdam) since 1912. Furthermore, its shares

have been traded in the United States since 1962 and have been listed on the New York Stock

Exchange since 1987.

Royal Philips has a two-tier board structure consisting of a Board of Management and a Supervisory

Board, each of which is accountable to the General Meeting of Shareholders for the fulfillment of

its respective duties. The members of the Board of Management, supported by the other members

of the Executive Committee drive the company’s management agenda and share responsibility for

the continuity of the Philips group, focusing on sustainable long-term value creation. Our

independent Supervisory Board supervises the Board of Management and the Executive Committee

and advises them on general policies related to the activities of the company, including setting and

executing the strategy of the Philips group. These responsibilities include the oversight of the

Environmental, Social and Governance (ESG) dimensions and their integration into the company’s

overarching strategy, which is a responsibility of the Supervisory Board as a whole because of their

significance .

The company is governed by Dutch corporate and securities laws, its Articles of Association, and

the Rules of Procedure of the Board of Management and the Executive Committee and of the

Supervisory Board, respectively. Its corporate governance framework is also based on the Dutch

Corporate Governance Code (dated December 20, 2022) and US laws and regulations applicable to

Foreign Private Issuers.

In this Corporate governance report, the company addresses the main elements of its corporate

governance structure, reports on how it applies the principles and best practices of the Dutch

Corporate Governance Code, and provides the information required by the Dutch governmental

Decree on Corporate Governance ( Besluit inhoud bestuursverslag ) and governmental Decree on

Article 10 Takeover Directive ( Besluit artikel 10 overnamerichtlijn ). When deemed necessary in the

interests of the company, the company may deviate from aspects of the company’s corporate

governance structure, and any such deviations will be disclosed in the company’s Corporate

governance report.

In compliance with the Dutch Corporate Governance Code, other parts of the management report

(within the meaning of article 2:391 of the Dutch Civil Code) included in the Annual Report address

the strategy and culture of Philips aimed at sustainable long-term value creation. As described in

more detail in Strategic focus , Philips’ strategy is driven by our purpose: to improve people’s health

and well-being through meaningful innovation. The Message from the CEO explains how this

strategy was executed in 2024; refer also to Financial performance . Furthermore, reference is made

to the Philips integrated operating model , which, among others, includes standards for behaviors,

quality, and integrity within Philips.

Philips’ strategy, and the way it has been developed by the Board of Management, under the

supervision of the Supervisory Board as a whole, clearly integrates the company’s impact in the field

of sustainability, including the effects on people and planet. Refer to Driving impact for people and

planet in section 2.1, and chapter 4 (Environmental, Social and Governance) for references to all

other information on Environmental, Social and Governance included in our sustainability report.

We engage with our stakeholders and use a double materiality analysis to identify the ESG topics

that we believe have the greatest impact: those having financial materiality (the impact of society

on Philips) as well as those having impact materiality (the impact of Philips on society); refer to

section 4.3.8 (Working with stakeholders and advocacy) and section 8.3 (Double Materiality

Assessment). Our materiality assessment underpins the relevance of our fully integrated approach

to doing business responsibly and sustainably, including a comprehensive set of key commitments

across all the ESG dimensions that guide execution of our strategy; refer to Our key ESG

commitments. As one of these commitments, Philips considers its tax payments as a significant

contribution to the communities in which it operates, and an integral part of its social value

creation; refer to section 4.3.7 (Tax contribution).

9.4.2Board of Management and Executive Committee

Introduction

The Board of Management is entrusted with the management of the company. Certain key officers

have been appointed to support the Board of Management in the fulfillment of its managerial

duties. The members of the Board of Management and these key officers together constitute the

Executive Committee, which currently consists of 13 members. In this Corporate governance

report, wherever the Executive Committee is mentioned, this also includes the members of the

Board of Management, unless the context requires otherwise. Please refer to Members of the

Board of Management and Executive Committee for an overview of the current members.

Under the chairmanship of the President/Chief Executive Officer (CEO), and supported by the other

members of the Executive Committee, the members of the Board of Management drive the

company’s management agenda and share responsibility for the continuity of the Philips group.

Please refer to the Rules of Procedure of the Board of Management and the Executive Committee,

which are published on the company’s website, for a description of further responsibilities and

tasks, as well as procedures for meetings, resolutions, and minutes.

In fulfilling their duties, the members of the Board of Management and Executive Committee are

guided by the interests of the company and its affiliated enterprise, taking into account the

interests of its stakeholders. The Board of Management and the Executive Committee have

adopted a division of responsibilities based on the Functions and Businesses, each of which is

monitored and reviewed by the individual members. The Board of Management is accountable for

the actions and decisions of the Executive Committee and has ultimate responsibility for the

company’s external reporting (including reporting to the shareholders of the company).


	265


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

The Board of Management and the Executive Committee are supervised by the Supervisory Board.

Members of the Board of Management and the Executive Committee will be present in the

meetings of the Supervisory Board, if so invited. In addition, the CEO and other members of the

Board of Management (and if needed, the other members of the Executive Committee) meet on a

regular basis with the Chairman and other members of the Supervisory Board. The Board of

Management and the Executive Committee are required to keep the Supervisory Board informed of

all facts and developments concerning Philips that the Supervisory Board may need to be aware of

in order to function as required and to properly carry out its duties.

Certain important decisions of the Board of Management require Supervisory Board approval,

including decisions concerning: the operational and financial objectives of the company and the

strategy designed to achieve these objectives; the issue, repurchase or cancellation of shares; and

major acquisitions or divestments.

Appointment and composition

Members of the Board of Management, including the CEO, are appointed by the General Meeting

of Shareholders upon a binding recommendation drawn up by the Supervisory Board after

consultation with the CEO. This binding recommendation may be overruled by a resolution of the

General Meeting of Shareholders adopted by a simple majority of the votes cast and representing

at least one-third of the issued share capital. If a simple majority of the votes cast is in favor of the

resolution to overrule the binding recommendation, but such majority does not represent at least

one-third of the issued share capital, a new meeting may be convened, at which the resolution may

be passed by a simple majority of the votes cast, regardless of the portion of the issued share

capital represented by such majority. In the event that a binding recommendation has been

overruled, a new binding recommendation shall be submitted to the General Meeting of

Shareholders. If such second binding recommendation has been overruled, the General Meeting of

Shareholders shall be free to appoint a board member.

The CEO and the other members of the Board of Management are appointed for a (maximum)

term of four years, it being understood that this term expires at the closing of the General Meeting

of Shareholders to be held in the fourth calendar year after the year of their appointment or, if

applicable, at a later retirement date or other contractual termination date in the fourth year,

unless the General Meeting of Shareholders resolves otherwise. The same applies in the case of re-

appointment, which is possible for consecutive terms of (a maximum of) four years. A

(re-)appointment schedule for the Board of Management is published on the company’s website.

Pursuant to Dutch law, the members of the Board of Management are engaged by means of a

services agreement (overeenkomst van opdracht). The term of the services agreement is aligned

with the term for which the relevant member has been appointed by the General Meeting of

Shareholders. In the event of termination of the services agreement by the company, severance

payment is limited to a maximum of one year’s base salary. The services agreements provide no

additional termination benefits.

Members of the Board of Management may be suspended by the Supervisory Board and by the

General Meeting of Shareholders, and members of the Board of Management may be dismissed by

the General Meeting of Shareholders (in each case in accordance with the Articles of Association).

A shareholders’ resolution to suspend or dismiss a member of the Board of Management, other

than a resolution proposed by the Board of Management or the Supervisory Board, may only be

adopted by a simple majority of the votes cast, representing at least one-third of the issued share

capital. The other members of the Executive Committee are appointed, suspended and dismissed

by the CEO, subject to approval by the Supervisory Board.

9.4.3Supervisory Board

Introduction

The Supervisory Board oversees the policies, management and general affairs of Philips, and assists

the Board of Management and the Executive Committee with advice on general policies related to

the activities of the company. In fulfilling their duties, the members of the Supervisory Board shall

be guided by the interests of the company and its affiliated enterprise, taking into account the

interests of its stakeholders.

In the two-tier corporate structure under Dutch law, the Supervisory Board is a separate body that

is independent of the Board of Management and the company. Its independent character is also

reflected in the requirement that members of the Supervisory Board can be neither a member of

the Board of Management nor an employee of the company. Currently, the Supervisory Board as a

whole is considered independent, as 10 out of 11 members are independent under the Dutch

Corporate Governance Code, and for Mr Ribadeau-Dumas the independence exception of best

practice provision 2.1.7(iii) of the Dutch Corporate Governance Code is deemed to apply.

Furthermore, all members of its Audit Committee are independent under the rules of the US

Securities and Exchange Commission, applicable to the Audit Committee.

The Supervisory Board must approve certain important decisions of the Board of Management,

including decisions concerning the operational, business and financial objectives of the company

and the strategy designed to achieve these objectives; the issue, repurchase or cancellation of

shares; and major acquisitions or divestments. The Supervisory Board and its individual members

each have a responsibility to request from the Board of Management, the Executive Committee

and the external auditor all information that the Supervisory Board needs in order to be able to

carry out its duties properly as a supervisory body.

Please refer to the Rules of Procedure of the Supervisory Board, which are published on the

company’s website, for a description of further responsibilities and tasks, as well as procedures for

meetings, resolutions and minutes.

In its report (included in the company’s Annual Report), the Supervisory Board describes the

composition and functioning of the Supervisory Board and its committees, their activities in the

financial year, the number of committee meetings held and the main items discussed. Please refer

to Supervisory Board report . Please also refer to Supervisory Board for an overview of the current

members of the Supervisory Board.


	266


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Appointment and composition

Members of the Supervisory Board are appointed by the General Meeting of Shareholders upon a

binding recommendation drawn up by the Supervisory Board. This binding recommendation may

be overruled by a resolution of the General Meeting of Shareholders adopted by a simple majority

of the votes cast and representing at least one-third of the issued share capital. If a simple majority

of the votes cast is in favor of the resolution to overrule the binding recommendation, but such

majority does not represent at least one-third of the issued share capital, a new meeting may be

convened. At this new meeting the resolution may be passed by a simple majority of the votes cast,

regardless of the portion of the issued share capital represented by such majority. In the event that

a binding recommendation has been overruled, a new binding recommendation shall be submitted

to the General Meeting of Shareholders. If such second binding recommendation has been

overruled, the General Meeting of Shareholders shall be free to appoint a board member.

The term of appointment of members of the Supervisory Board expires at the closing of the

General Meeting of Shareholders to be held after a period of four years following their

appointment. There is no age limit requiring the retirement of board members.

In line with the Dutch Corporate Governance Code, members of the Supervisory Board are eligible

for re-appointment for a fixed term of four years once, and may subsequently be re-appointed for a

period of two years, which appointment may be extended by at most two years. The report of the

Supervisory Board must state the reasons for any re-appointment beyond an eight-year period.

A (re-)appointment schedule for the Supervisory Board is published on the company’s website.

Members of the Supervisory Board may be suspended or dismissed by the General Meeting of

Shareholders in accordance with the Articles of Association. A resolution to suspend or dismiss a

member of the Supervisory Board, other than a resolution proposed by the Supervisory Board, may

only be adopted by a simple majority of the votes cast, representing at least one third of the issued

share capital.

Candidates for appointment to the Supervisory Board are selected taking into account the

company’s Diversity Policy, which is published on the company’s website. The Supervisory Board’s

composition furthermore follows the profile included in the Rules of Procedure of the Supervisory

Board, and the size of the board may vary as it considers appropriate to support its profile. Please

refer to Supervisory Board report by the Supervisory Board . Typically, newly appointed members of

the Supervisory Board follow an induction program and interact with Executive Committee

members for deep-dives on matters such as strategy, finance and investor relations, quality,

governance, legal, sustainability and digitization.

Effective 2022, Dutch law provides a mandatory gender quota, requiring that at least one-third of

the Supervisory Board members are women and at least one-third men (for calculation purposes, a

total number of board members that cannot be divided by three must be rounded up to the next

number that can be divided by three). The quota is applicable to (i) the appointment of new

Supervisory Board members, and (ii) the re-appointment of acting board members after eight years

following their initial appointment. Except in certain exceptional circumstances, any appointment or

re-appointment resulting in a Supervisory Board composition that does not meet (or no longer

meets) the quota, will be invalid (null and void).

As announced on August 14, 2023, Philips and Exor N.V. entered into a Relationship Agreement

on August 13, 2023, which has been published on the company's website. The relationship

agreement includes Exor’s commitment to be a long-term minority investor in Philips and its right

to propose one member to the Supervisory Board. In this context, it is noted that, for as long as

Exor has such nomination right pursuant to the relationship agreement, the independence

exception of best practice provision 2.1.7(iii) of the Dutch Corporate Governance Code is deemed

to apply to any Exor nominee that has been appointed upon such nomination in accordance with

the Relationship Agreement.

Supervisory Board committees

The Supervisory Board, while retaining overall responsibility, has assigned certain tasks to four

committees: the Corporate Governance and Nomination & Selection Committee, the Remuneration

Committee, the Audit Committee, and the Quality & Regulatory Committee. Each committee

reports to the full Supervisory Board. Please refer to the charters of the respective committees,

which are published on the company’s website as part of the Rules of Procedure of the Supervisory

Board, for a description of their responsibilities, composition, meetings and working procedures.

The Corporate Governance and Nomination & Selection Committee is responsible for preparing

selection criteria and appointment procedures for members of the Supervisory Board, the Board of

Management and the Executive Committee. The Committee makes proposals to the Supervisory

Board for the (re)appointment of such members, and periodically assesses their functioning. The

Committee also periodically assesses the Executive Committee succession planning and the

Diversity Policy, and supervises the policy of the Executive Committee on the selection criteria and

appointment procedures for Philips executives. At least once a year, the Committee reviews the

corporate governance principles applicable to the company, and advises the Supervisory Board on

any changes to these principles that it deems appropriate.

The Remuneration Committee is responsible for preparing decisions of the Supervisory Board on

the remuneration of individual members of the Board of Management and the Executive

Committee. The Committee prepares an annual remuneration report, which is published on the

company’s website by the Supervisory Board ahead of the Annual General Meeting of

Shareholders. In performing its duties and responsibilities, the Remuneration Committee is assisted

by an external consultant and an in-house remuneration expert.

The Audit Committee assists the Supervisory Board in fulfilling its oversight responsibilities for: the

integrity of the company’s financial statements; the financial and non-financial (ESG) reporting

processes; the effectiveness (also in respect of the reporting process) of the risk management and

internal controls framework; the internal and external audit process; the internal and external

auditor’s qualifications, independence and performance; and the company’s process for monitoring

compliance with laws and regulations and the General Business Principles (including related


	267


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

manuals, training and tools). It reviews the company’s annual and interim financial statements,

including non-financial information, prior to publication and advises the Supervisory Board on the

adequacy and appropriateness of internal control policies and internal audit programs and their

findings. The Committee furthermore supervises the Internal Audit Function, maintains contact

with and supervises the external auditor and prepares the nomination of the external auditor for

appointment by the General Meeting of Shareholders.

The composition of the Audit Committee meets the relevant requirements under Dutch law and

the applicable US rules. All of the members are considered to be independent and financially

literate, and the Audit Committee as a whole has competence relevant to the sector in which the

company is operating. In addition, Liz Doherty is designated as an Audit Committee financial

expert, as defined under the regulations of the US Securities and Exchange Commission. The

Supervisory Board considers the expertise and experience available in the Audit Committee, in

conjunction with the possibility to take advice from internal and external experts and advisors, to be

sufficient for the fulfillment of the tasks and responsibilities of the Audit Committee.

The Quality & Regulatory Committee has been established by the Supervisory Board in view of the

central importance of the quality and (patient) safety of the company’s products, systems, services

and software, as well as the development, testing, manufacturing, marketing and servicing thereof,

and the regulatory requirements relating thereto. The Quality & Regulatory Committee assists the

Supervisory Board in fulfilling its oversight responsibilities in this area, while recognizing that the

Audit Committee assists the Supervisory Board in its oversight of other areas of regulatory,

compliance and legal matters.

9.4.4Other Board-related matters

Remuneration and share ownership

The remuneration of the individual members of the Board of Management is determined by the

Supervisory Board, taking into account the remuneration policy adopted by the General Meeting of

Shareholders. The remuneration of the individual members of the Supervisory Board is determined

by the General Meeting of Shareholders, also on the basis of a remuneration policy.

The current remuneration policies for the Board of Management and the Supervisory Board,

respectively, were adopted in 2024 and are published on the company’s website. Pursuant to

Dutch law, the shareholders are entitled to vote on the adoption of the separate remuneration

policies for the Board of Management and the Supervisory Board at the Annual General Meeting of

Shareholders (at least) every four years. The adoption of a remuneration policy will require a special

majority of three-quarters of the votes cast (as the Articles of Association do not provide for a lower

majority).

A description of the composition of the remuneration paid and owed to the individual members of

the Board of Management and the Supervisory Board is included in the annual remuneration report

(as prepared by the Remuneration Committee, adopted by the Supervisory Board and published on

the company’s website). Shareholders have an advisory vote at each Annual General Meeting of

Shareholders on the remuneration report relating to the preceding financial year.

Pursuant to Dutch law, the Supervisory Board is authorized to reduce or eliminate unpaid bonuses

awarded to members of the Board of Management if payment or delivery of the bonus would be

unacceptable according to the principles of reasonableness and fairness. The company, which in

this respect may also be represented by the Supervisory Board or a special representative appointed

for this purpose by the General Meeting of Shareholders, may also request return of bonuses

already paid or delivered insofar as these have been granted on the basis of incorrect information

on the fulfillment of the relevant performance criteria or other conditions. Bonuses are broadly

defined as ‘non-fixed’ (variable) remuneration – either in cash or in the form of share-based

compensation – that is conditional in whole or in part on the achievement of certain targets or the

occurrence of certain circumstances. The explanatory notes to the balance sheet shall report on any

moderation and/or claim for repayment of Board of Management remuneration. No such reduction

of unpaid bonuses or requests for repayment occurred during the financial year 2024.

In compliance with the Dutch Corporate Governance Code, the company does not grant personal

loans to, or guarantees on behalf of, members of the Board of Management or the Supervisory

Board. No such loans were granted and no such guarantees were issued in 2024, nor were any

loans or guarantees outstanding as of December 31, 2024.

Also in compliance with the Dutch Corporate Governance Code, the Articles of Association provide

that shares or rights to shares shall not be granted to members of the Supervisory Board.

Members of the Board of Management and the Supervisory Board may only hold shares in the

company for the purpose of long-term investment and must refrain from short-term transactions in

Philips securities. According to Philips’ internal rules of conduct with respect to inside information,

members of the Board of Management and the Supervisory Board are only allowed to trade in

Philips securities (including the exercise of stock options) during ‘windows’ of 20 business days

following the publication of annual and quarterly results (provided further the person involved has

no inside information regarding Philips at that time, unless an exemption is available). Furthermore,

members of the Board of Management and the Supervisory Board are prohibited from trading,

directly or indirectly, in securities of any of the companies belonging to Philips’ peer group (as

determined by the Supervisory Board) during one week preceding the disclosure of Philips’ annual

or quarterly results.

Transactions in Philips shares carried out by members of the Board of Management and the

Supervisory Board are reported to the Dutch Authority for the Financial Markets (AFM) in

accordance with the EU Market Abuse Regulation and, if necessary, to other relevant authorities.

Indemnification

Unless Dutch law provides otherwise, the members of the Board of Management and of the

Supervisory Board shall be reimbursed by the company for various costs and expenses, such as the

reasonable costs of defending claims, as formalized in the Articles of Association. Under certain

circumstances, described in the Articles of Association, such as an act or failure to act by a member

of the Board of Management or a member of the Supervisory Board that can be characterized as

intentional ( opzettelijk ), intentionally reckless ( bewust roekeloos ) or seriously culpable ( ernstig


	268


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

verwijtbaar ), there will be no entitlement to this reimbursement unless the law or the principles of

reasonableness and fairness require otherwise. The company has also taken out liability insurance

(D&O – Directors & Officers) for the persons concerned.

Diversity

The selection of candidates for appointment is always based on merit. Candidates for appointment

to the Supervisory Board, the Board of Management and the Executive Committee are selected also

taking into account the company’s Diversity Policy for the Supervisory Board, the Board of

Management and the Executive Committee. This Diversity Policy aims at a sufficient diversity of

views and the expertise needed for a good understanding of current affairs and longer-term risks

and opportunities related to the Company’s business, and is published on the company’s website.

Effective 2022, Dutch law provides that (re-)appointments of members of the Supervisory Board

must be in accordance with a mandatory gender quota, requiring that at least one-third of the

Supervisory Board members are women (and at least one-third are men). There are certain

exceptions where the gender quota does not apply, such as the re-appointments within eight years

of the initial appointment and (re-)appointments made in exceptional circumstances.

For more details on the Diversity Policy for the Supervisory Board, the Board of Management and

the Executive Committee, refer to Report of the Corporate Governance and Nomination &

Selection Committee ; for more information on the profile and composition of the Supervisory

Board refer to Supervisory Board report .

Philips’ commitment to Inclusion & Diversity is also reflected in the company-wide General Business

Principles, the Inclusion & Diversity Policy and the Fair Employment Policy.

Conflicts of interest

Dutch law on conflicts of interest provides that members of the Board of Management or

Supervisory Board may not participate in the adoption of resolutions if they have a direct or indirect

personal conflict of interest with the company or related enterprise. If all members of the Board of

Management have a conflict of interest, the resolution concerned will be considered by the

Supervisory Board. If all members of the Supervisory Board have a conflict of interest, the resolution

concerned must be considered by the General Meeting of Shareholders.

In compliance with the Dutch Corporate Governance Code, the company’s corporate governance

includes rules to specify situations in which a potential or actual conflict may exist, procedures to

avoid such conflicts of interest as much as possible, and procedures to deal with such conflicts

should they arise. Relevant matters relating to conflicts of interest, if any, must be mentioned in the

Annual Report (specifically the management report) for the financial year in question. No decision

to enter into any such material transaction in which there is a conflict of interest with a member of

the Board of Management or the Supervisory Board, or with any major shareholder (holding at

least 10% of the company’s shares) was taken during the financial year 2024.

Outside directorships

In compliance with the Dutch Corporate Governance Code, members of the Board of Management

require the approval of the Supervisory Board before they can accept a position as a member of a

supervisory board or a position as a non-executive director on a one-tier board (Non-Executive

Directorship) at another company. The Supervisory Board must be notified of other important

positions (to be) held by a member of the Board of Management.

Dutch law provides for certain limitations on the number of Non-Executive Directorships a member

of the Board of Management or Supervisory Board may hold. No member of the Board of

Management shall hold more than two Non-Executive Directorships at ‘large’ companies (naamloze

vennootschappen or besloten vennootschappen) or ‘large’ foundations (stichtingen), as defined

under Dutch law, and no member of the Board of Management shall hold the position of chairman

of another one-tier board or the position of chairman of another supervisory board. No member of

the Supervisory Board shall hold more than five Non-Executive Directorships at such companies or

foundations, with a position as chairman counting for two. During the financial year 2024 all

members of the Board of Management and the Supervisory Board complied with the limitations

described above in this paragraph.

9.4.5General Meeting of Shareholders

Meetings

T he Annual General Meeting of Shareholders shall be held no later than six months after the end

of the financial year. The agenda for the meeting typically includes: an advisory vote on the

remuneration report; discussion of the Annual Report; the adoption of the financial statements;

policy on additions to reserves and dividends; any proposed dividends or other distributions;

discharge of the members of the Board of Management and the Supervisory Board; and any other

matters proposed by the Supervisory Board, the Board of Management or shareholders in

accordance with Dutch law and the Articles of Association.

Shareholders’ meetings are convened by public notice via the company’s website, and registered

shareholders are notified by letter or by electronic means of communication at least 42 days prior

to the day of the relevant meeting. Shareholders who wish to exercise the rights attached to their

shares in respect of a shareholders’ meeting are required to register for such meeting. Shareholders

may attend a meeting in person, vote by proxy (via an independent third party) or grant a power of

attorney to a third party to attend the meeting and vote on their behalf. Details on registration for

meetings, attendance and proxy voting will be included in the notice convening the relevant

meeting.

Pursuant to Dutch law, the record date for the exercise of voting rights and rights relating to

shareholders’ meetings is set at the 28th day prior to the day of the relevant meeting. Shareholders

registered on such date are entitled to attend the meeting and to exercise the other shareholder

rights (at the relevant meeting) notwithstanding any subsequent sale of their shares after the

record date.


	269


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

In accordance with the Articles of Association and Dutch law, requests from shareholders for items

to be included on the agenda will generally be honored, subject to the company’s rights to refuse

to include the requested agenda item under Dutch law, provided that such requests are made in

writing at least 60 days before a General Meeting of Shareholders to the Board of Management

and the Supervisory Board by shareholders representing at least 1% of the company’s outstanding

capital or, according to the official price list of Euronext Amsterdam, representing a value of at least

EUR 50 million. Written requests may be submitted electronically and shall comply with the

procedure stipulated by the Board of Management, which is posted on the company’s website.

Pursuant to Dutch law, shareholders requesting an item to be included on the agenda of a meeting

have an obligation to disclose their full economic interest (i.e., long position and short position) to

the company. The company has the obligation to publish such disclosures on its website.

Main powers of the General Meeting of Shareholders

The main powers of the General Meeting of Shareholders are:

• to appoint, suspend and dismiss members of the Board of Management and the Supervisory

Board

• to adopt remuneration policies for the Board of Management and the Supervisory Board, to

determine the remuneration of the individual members of the Supervisory Board and to approve

long-term incentive (equity-based) plans for the Board of Management

• to adopt the annual accounts, to declare dividends and to discharge the Board of Management

and the Supervisory Board from any liability in respect of the performance of their respective

duties for the previous financial year

• to appoint the company’s external auditor

• to adopt amendments to the Articles of Association and proposals to dissolve or liquidate the

company

• to issue shares or rights to shares

• to restrict or exclude pre-emptive rights of shareholders and to repurchase or cancel outstanding

• in accordance with Dutch law, to approve decisions of the Board of Management that are so

far-reaching that they would greatly change the identity or nature of the company or the

business

The company applies principle 4.1 of the Dutch Corporate Governance Code within the framework

of the Articles of Association and Dutch law and in the manner described in this Corporate

governance report. All issued and outstanding shares carry voting rights and each share confers the

right to cast one vote in a shareholders’ meeting. Pursuant to Dutch law, no votes may be cast at a

General Meeting of Shareholders in respect of shares that are held by the company. There are no

special statutory rights attached to the shares of the company, and no restrictions on the voting

rights of the company’s shares exist. Subject to certain exceptions provided by Dutch law and/or

the Articles of Association, resolutions of the General Meeting of Shareholders are passed by an

absolute majority of votes cast and do not require a quorum.

Share capital: issue and repurchase of (rights to) shares

The authorized share capital of the company amounts to EUR 800 million, divided into 2 billion

common shares with a nominal value of 20 eurocents each and 2 billion preference shares also

with a nominal value of 20 eurocents each. On December 31, 2024, the issued share capital

amounted to EUR 187,987,876.80 divided into 939,939,384 common shares and no preference

shares. All shares are fully paid-up. There are currently no limitations, either under Dutch law or the

Articles of Association, to the transfer of the common shares.

Only Euroclear shares are traded on Euronext Amsterdam. Only New York Registry Shares are

traded on the New York Stock Exchange. Pursuant to article 10:138(2) of the Dutch Civil Code, the

laws of the State of New York are applicable to the proprietary regime with respect to the New

York Registry Shares, which proprietary regime includes the requirements for a transfer of, or the

creation of an in rem right in, such New York Registry Shares. Euroclear shares and New York

Registry Shares may be exchanged for each other.

As per December 31, 2024, approximately 91% of the common shares were held through the

system of Euroclear Nederland (Euroclear shares) and approximately 9% of the common shares

were represented by New York Registry Shares issued in the name of approximately 765 holders of

record. The latter include Cede & Co. Cede & Co acts as nominee for The Depository Trust

Company, which holds the shares (indirectly) for individual investors as beneficiaries. Deutsche Bank

Trust Company Americas is Philips’ New York transfer agent, registrar and dividend disbursing

agent. Since certain shares are held by brokers and other nominees, these numbers may not be

representative of the actual number of US beneficial holders or the number of New York Registry

Shares beneficially held by US residents.

At the 2024 Annual General Meeting of Shareholders, it was resolved to authorize the Board of

Management, subject to the approval of the Supervisory Board, to issue shares or to grant rights to

acquire shares in the company, as well as to restrict or exclude the pre-emption right accruing to

shareholders up to and including November 6, 2025. This authorization is limited to a maximum of

10% of the number of shares issued as of May 7, 2024.

In addition, at the 2024 Annual General Meeting of Shareholders, it was resolved to authorize the

Board of Management, subject to the approval of the Supervisory Board, to acquire shares in the

company within the limits of the Articles of Association and within a certain price range up to and

including November 6, 2025. The maximum number of shares the company may hold will not

exceed 10% of the issued share capital as of May 7, 2024. The number of shares may be increased

by 10% of the issued capital as of that same date in connection with the execution of share

repurchase programs for capital reduction programs.


	270


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.4.6Annual financial statements and external audit

The annual financial statements are prepared by the Board of Management and reviewed by the

Supervisory Board upon the advice of its Audit Committee, taking into account the report of the

external auditor. Upon approval by the Supervisory Board, the accounts are signed by all members

of both the Board of Management and the Supervisory Board and are published together with the

opinion of the external auditor. The Board of Management is responsible, under the supervision of

the Supervisory Board, for the quality and completeness of such publicly disclosed financial reports.

The annual financial statements are presented for discussion and adoption at the Annual General

Meeting of Shareholders, to be convened subsequently.

The external auditor is appointed by the General Meeting of Shareholders in accordance with the

Articles of Association. Philips’ external auditor, Ernst & Young Accountants LLP, an independent

registered public accounting firm, was appointed by the General Meeting of Shareholders held on

May 7, 2015, for a term of four years starting January 1, 2016, was re-appointed at the Annual

General Meeting of Shareholders held on May 9, 2019, for a term of three years starting January 1,

2020, was re-appointed at the Annual General Meeting of Shareholders held on May 10, 2022, for

a term of one year starting January 1, 2023, and was re-appointed at the Annual General Meeting

of Shareholders held on May 9, 2023, for a term of one year starting January 1, 2024.

In 2023, following a competitive audit tender completed under the leadership of the Audit

Committee in anticipation of the expiration of EY Accountants B.V.'s (the legal successor of Ernst &

Young Accountants LLP) statutory audit mandate, the Supervisory Board, upon the

recommendation of the Audit Committee, recommended the appointment of

PricewaterhouseCoopers Accountants N.V. as the company’s new external auditor to the General

Meeting of Shareholders. PricewaterhouseCoopers Accountants N.V., an independent registered

public accounting firm, was appointed at the Annual General Meeting of Shareholders held on

May 9, 2023, as the company’s new external auditor for a term of four years starting January 1,

2025. As a result, following completion of EY Accountants B.V.'s audit of our financial statements

as of and for the year ended December 31, 2024, and the audit of the effectiveness of internal

control over financial reporting as of December 31, 2024, PricewaterhouseCoopers Accountants

N.V. will become Philips’ external auditor.

European and Dutch law requires the separation of audit and certain non-audit services. The

external auditor may only provide audit and audit-related services and is prohibited from providing

any other services. This is reflected in the Auditor Policy, which is published on the company’s

website. The policy is also in line with (and in some ways stricter than) applicable US rules, under

which the appointed external auditor must be independent from the company both in fact and

appearance.

The Auditor Policy specifies certain audit services and audit-related services (also known as

assurance services) that will or may be provided by the external auditor, and includes rules for the

pre-approval by the Audit Committee of such services. Audit services must be pre-approved on the

basis of the annual audit services engagement agreed with the external auditor. Proposed audit-

related services may be pre-approved at the beginning of the year by the Audit Committee (annual

pre-approval) or may be pre-approved during the year by the Audit Committee with respect to a

particular engagement (specific pre-approval). The annual pre-approval is based on a detailed,

itemized list of services to be provided, which is designed to ensure that there is no management

discretion in determining whether a service has been approved, and to ensure that the Audit

Committee is informed of each of the services it is pre-approving. Unless pre-approval with respect

to a specific service has been given at the beginning of the year, each proposed service requires

specific pre-approval during the year. Any annually pre-approved services where the fee for the

engagement is expected to exceed pre-approved cost levels or budgeted amounts will also require

specific pre-approval. The term of any annual pre-approval is 12 months from the date of the pre-

approval unless the Audit Committee states otherwise. During 2024, there were no services

provided to the company by the external auditor that were not pre-approved by the Audit

Committee.

9.4.7Stichting Preferente Aandelen Philips

Stichting Preferente Aandelen Philips, a foundation ( stichting ) organized under Dutch law, has been

granted the right to acquire preference shares in the capital of Royal Philips, as stated in the

company’s Articles of Association. In addition, the Foundation has the right to file a petition with

the Enterprise Chamber of the Amsterdam Court of Appeal to commence an inquiry procedure

within the meaning of article 2:344 of the Dutch Civil Code.

The object of the Foundation is to represent the interests of Royal Philips, the enterprises

maintained by the company and its affiliated companies within the company’s group, in such a way

that the interests of the company, these enterprises and all parties involved with them are

safeguarded as effectively as possible, and that they are afforded maximum protection against

influences which, in conflict with those interests, may undermine the autonomy and identity of

Philips and those enterprises, and also to do anything related to the above ends or conducive to

them. The Foundation's object includes the protection of Philips against (an attempt at) an

unsolicited takeover or other attempt to exert (de facto) control of the company. The arrangement

will allow Philips to determine its position in relation to the relevant third party (or parties) and its

(their) plans, to seek alternatives and to defend the company’s interests and those of its

stakeholders.

The mere notification that the Foundation exercises its right to acquire preference shares will result

in such shares being effectively issued. The Foundation may exercise this right for as many

preference shares as there are common shares in the company outstanding at that time. No

preference shares have been issued as of December 31, 2024.

The members of the self-electing Board of the Foundation are Messrs J.P. de Kreij, J.V.

Timmermans, J. van der Veer and P.N. Wakkie. No Philips Supervisory Board or Board of

Management members or Philips officers are represented on the board of the Foundation.

Other protective measures

Other than the arrangements made with the Foundation referred to above, the company does not

have any measures that exclusively or almost exclusively have the purpose of defending against


	271


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

unsolicited public offers for shares in the capital of the company. It should be noted that the Board

of Management and the Supervisory Board remain under all circumstances authorized to exercise

all powers vested in them to promote the interests of Philips.

The company has issued certain corporate bonds, the provisions of which contain a Change of

Control Triggering Event or a Change of Control Put Event. Upon the occurrence of such events,

the company might be required to offer to redeem or purchase any outstanding bonds at certain

pre-determined prices. Please also refer to Debt . Furthermore, the Relationship Agreement entered

into between the company and its long-term minority investor Exor N.V. (published on the

company’s website) includes certain temporary lock-up obligations for Exor that fall away when any

third party has ‘Acquired’ an ‘Interest’ of 50% or more in the company.

9.4.8Investor relations

Philips is continuously focused on maintaining strong and open relations with its shareholders. In

addition to communication with its shareholders at shareholders’ meetings, the company may discuss

its financial results during conference calls, which are broadly accessible. The company also publishes

annual, semi-annual and quarterly reports and press releases, and informs investors via its website.

From time to time the company communicates with investors and analysts via roadshows, broker

conferences and a Capital Markets Day, which are announced in advance on the company’s

website. The purpose of these engagements is to further inform the market of the results, strategy

and decisions made, as well as to receive feedback from shareholders. It is the company’s policy to

post presentations to investors and analysts on its website. Philips applies the best practice

provision 4.2.3 of the Dutch Corporate Governance Code, which it does not view (in line with

market practice) as extending to less important analyst meetings and presentations.

Furthermore, Philips engages in bilateral communications with investors and analysts. These

communications take place either at the initiative of the company or at the initiative of investors/

analysts. The company is generally represented by its Investor Relations department during these

interactions, however, on a limited number of occasions the Investor Relations department is

accompanied by one or more members of the senior management. The subject matter of the

bilateral communications ranges from individual queries from investors/analysts to more elaborate

discussions following disclosures that the company has made, such as its annual and quarterly

reports. Philips complies with applicable rules and regulations on fair and non-selective disclosure

and equal treatment of shareholders.

9.4.9Major shareholders as filed with the AFM

The Dutch Act on Financial Supervision imposes an obligation on persons holding certain interests

to disclose ( inter alia ) percentage holdings in the capital and/or voting rights in the company when

such holdings reach, exceed or fall below 3, 5, 10, 15, 20, 25, 30, 40, 50, 60, 75 and 95 percent

(as a result of an acquisition or disposal by a person, or as a result of a change in the company’s

total number of voting rights or capital issued). Certain derivatives (settled in kind or in cash) are

also taken into account when calculating the capital interest. The statutory obligation to disclose

capital interest relates not only to gross long positions, but also to gross short positions. Required

disclosures must be made to the Dutch Authority for the Financial Markets (AFM) without delay.

The AFM then notifies the company of such disclosures and includes them in a register, which is

published on the AFM’s website. Furthermore, an obligation to disclose (net) short positions is set

out in the EU Regulation on Short Selling.

The AFM register shows the following notifications of substantial holdings and/or voting rights at or

above the 3% threshold: Exor N.V.: substantial holding of 15.00% and 15.00% of the voting rights

(August 13, 2023); Artisan Investments GP LLC: substantial holding of 10.01% and 10.01% of the

voting rights (June 28, 2024); BlackRock, Inc.: substantial holding of 4.38% and 5.56% of the

voting rights (February 12, 2025); T. Rowe Price Group, Inc.: substantial holding of 3.05% and

3.04% of the voting rights (October 29, 2024), EdgePoint Investment Group Inc.: substantial

holding of 0.00% and 3.10% of the voting rights (October 28, 2024).

9.4.10Corporate information

The company began as a limited partnership with the name Philips & Co in Eindhoven, the

Netherlands, in 1891, and was converted into the company with limited liability N.V. Philips

Gloeilampenfabrieken on September 11, 1912. The company’s name was changed to Philips

Electronics N.V. on May 6, 1994, to Koninklijke Philips Electronics N.V. on April 1, 1998, and to

Koninklijke Philips N.V. on May 15, 2013.

The majority of the shares in Royal Philips are held through the system maintained by the Dutch

Central Securities Depository (Euroclear Nederland). In the past, Philips has also issued (physical)

bearer share certificates ('Share Certificates'). A limited number of Share Certificates have not been

surrendered yet, though the holders of Share Certificates are still entitled to a corresponding

number of shares in Royal Philips. It is noted that, as a result of Dutch legislation that became

effective in July 2019, the relevant shares were registered in the name of Royal Philips by operation

of law per January 1, 2021. Owners of Share Certificates will continue to be entitled to a

corresponding number of shares, but may not exercise the rights attached to such shares until they

surrender their Share Certificates. Owners of Share Certificates may come forward to do so and to

receive a corresponding number of shares until January 1, 2026, at the latest. As per January 2,

2026, entitlements attached to the Share Certificates not surrendered will expire by operation of

law. For more information, please contact the Investor Relations department by email,

investor.relations@philips.com, or telephone, +31-20-59 77222.

The statutory seat of the company is Eindhoven, the Netherlands, and the statutory list of all

subsidiaries and affiliated companies, prepared in accordance with the relevant legal requirements

(Dutch Civil Code, Book 2, articles 379 and 414), forms part of the notes to the financial

statements and is deposited at the office of the Commercial Register in Eindhoven, the Netherlands

(file no. 17001910). The executive offices of the company are located at the Philips Center,

Amstelplein 2, 1096 BC Amsterdam, the Netherlands, telephone +31-20-59 77777.

The Board of Management and the Supervisory Board are of the opinion that the principles and

best practice provisions of the Dutch Corporate Governance Code that are addressed to the boards

are being applied. The full text of the Dutch Corporate Governance Code can be found on the

website of the Monitoring Commission Corporate Governance Code (www.mccg.nl).


	272


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.5Risk factors and responses

Philips believes the risks set out below are the material risks affecting Philips and its securities. These

risk factors may not, however, include all the risks that ultimately may affect Philips. Some risks not

yet known to Philips, or currently believed not to be material, may ultimately have a major impact

on Philips’ business, revenue, income, assets, liquidity, capital resources, reputation and/or ability to

achieve its business and ESG objectives. Please note that this section is not intended to describe

risks that have materialized, as these are addressed in other sections and referenced where

relevant. Philips defines risks in four main categories: Strategic, Operational, Financial and

reporting, and Compliance. Philips presents the risk factors within each category in order of current

view of their expected significance. Compared to the previous year we have further prioritized risk

factors relating to geopolitics and macro-economics and to artificial intelligence. We have

continued high prioritization of risk factors related to patient safety and quality, supply chain, and

the simplification of how we work. Although still relevant, we have de-emphasized risk factors

related to global inflation. This does not mean that a lower-listed risk factor may not have a

material and adverse impact on Philips’ business, revenue, income, assets, liquidity, capital

resources, reputation, and/or ability to achieve its business and ESG objectives. Furthermore, other

risk factors not listed below may ultimately prove to have more significant adverse consequences

than the listed risk factors.

We aim to manage risk within our risk appetite. Pursuing strategic opportunities within the

dynamics of the health technology industry typically requires a higher appetite towards the

corresponding strategic risks. We may accept considerable strategic risks in a responsible way given

the necessity to invest in research and development and to manage the portfolio of businesses to

ensure we continually revitalize our offerings. For selected options with very high strategic impact,

we may occasionally take a risk seeking approach subject to careful evaluation. Toward operational

risks, we overall take a balanced-to-prudent approach, aiming to optimize productivity and

minimize downside risks considering the need for continuity of the delivery of our products,

services and sustainability commitments; efficient execution; and reliable and secure IT systems.

Where operational risks may impact the quality of our products and services and the safety of

patients, we take an averse approach. Regarding financial and reporting risks, we adopt a prudent-

to-balanced approach aiming at the financial sustainability of the company, investor commitment

and stakeholder trust. We manage these risks with the intention of retaining our current strong

investment-grade credit rating. As Philips is committed to act with integrity always, we take an

averse-to-prudent approach to any risk that would result in breach of compliance with our General

Business Principles and mandatory laws and regulations.

In the following sections we provide a description of each material risk factor we have identified, as

well as our main risk mitigating responses, which we believe help us to manage these risks.

However, we may not be successful in deploying some or all of the described mitigating actions

effectively, or these actions may not achieve the anticipated effect. If specific circumstances occur

or are not sufficiently mitigated, our value creation objectives could be materially adversely

affected. In addition, risks and uncertainties could cause actual results to vary from those described

(including those described in forward-looking statements), could impact our ability to meet our

targets, or could negatively impact the reputation of, or sentiment toward Philips, our products,

and our brand. The risk responses described below are designed to manage risks toward, and

should be read in conjunction with, the risk appetite as described above.

9.5.1Strategic risks

Philips’ global operations are exposed to geopolitical and macro-economic

changes

Philips’ business and operations can be adversely impacted by unfavorable macro-economic

conditions and geopolitical instability in global and individual markets. In 2024, Mature

geographies accounted for 73% of Philips’ revenues, while Growth geographies accounted for the

remaining 27% . While Mature geographies are currently the main source of Philips’ revenues,

Growth geographies (excluding China) are an increasing source of revenues. Philips produces,

sources, and designs its products and services mainly from the United States (US), the European

Union (EU) – primarily the Netherlands, and China, and most of Philips’ assets are located in these

geographies. Changes in politics and monetary, trade, tax policies and sanction laws in the US, the

EU and China may trigger reactions and countermeasures and may also have an adverse impact on

other markets in which Philips is active. Philips continues to expect global market conditions to

remain highly uncertain and volatile due to geopolitical and macro-economic factors.

Philips observes an increasing trend of geopolitical tensions and deglobalization which intensifies

protectionism. Examples of protectionism measures are trade policies, tariffs, custom duties,

taxation, import or export controls and sanctions, local value creation and production requirements,

technology and data storage and movement restrictions, talent mobility restrictions, nationalization

of assets, and restrictions on repatriation of returns from foreign investments. Tariffs and other

restrictions on imports announced and proposed by US President Donald Trump and his

administration, and retaliatory trade measures in response thereto, have the potential to impact

international trade relations and supply chains, with notable consequences for the EU. In addition,

protectionism may increase general uncertainty on the development of local regulations that may

result in proliferation of and changes to such regulations, causing the company to comply with

disparate, evolving standards. Philips observes this trend in the major markets in which it operates

and has a particular concern on the development of the US-China relationship and China’s drive to

expand its global political footprint and become self-sufficient in critical technologies, including

health-related ones. China's anti-corruption campaign may also negatively impact demand within

the medical industry. If this trend continues, geopolitical relations deteriorate and economies

decouple, then it is expected that existing global trade and investment restrictions will remain or

increase. Further regulatory and compliance challenges for doing business globally may emerge and

deteriorate, resulting in continued pressure on market growth and investments.

Uncertainty and challenges regarding various global macro-economic factors continue to persist.

Examples of general factors potentially affecting Philips are an overall weakening economic growth

and the trend of declining growth of the Chinese economy in particular, reduced government

spending, declining customer and consumer confidence and spending, high inflation and interest

rates, and the emergence of economic impacts related to the climate crisis. Although the ability to

manage pandemics (for example, resurgences of COVID-19 or mutations thereof) has improved,


	273


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

pandemics may continue to affect Philips’ operations in the future. Examples of healthcare-specific

potential factors include rising uncertainty over the future direction of public healthcare policy and

the risk of declining public investment in healthcare ecosystems. These factors could affect

customer demand and sales as well as our manufacturing costs, operating expenses (including

wages), and other expenses. We may not be able to compensate for loss of sales through overall

sales growth or manage increased costs by improving productivity and increasing our prices to

offset increased costs in a timely manner, if at all, which could have a material impact on our

revenue, gross margins, profitability and cash flows.

The Russia-Ukraine war has increased global economic and political uncertainty. Governments in

the US, the UK, the EU, Canada, and Japan have each imposed export controls on certain products

and sanctions on certain industry sectors and institutions in Russia, and additional controls and

sanctions could be enacted in the future. Similarly, conflicts in Israel and the Middle East may

further increase economic and political uncertainty and may affect the company’s results of

operations, financial position and cash flows. Philips is present in Israel with several subsidiaries,

mainly in Diagnosis & Treatment and Connected Care, that are primarily involved in manufacturing

and research and development activities. The outcome of the recent elections in the US and the

upcoming elections in certain member states of the EU could also have an impact on the course of

these conflicts. The ongoing conflicts may heighten the impact of other risks factors described

herein, including but not limited to: volatility in prices for transportation, energy, commodities and

other raw materials; disruptions in the global supply chain; decreased customer and consumer

confidence and spending; increased cyberattacks; intensified protectionism; political and social

instability; increased exposure to foreign currency fluctuations; rising inflation and interest rates;

and constraints, volatility or disruptions in the credit and capital markets. It is possible that the

conflicts in Ukraine and Russia and the Middle East may escalate or expand and current or future

sanctions and resulting geopolitical and macro-economic disruptions could be significant. We

cannot predict the impact that conflicts may have on the global economy in the future.

Changes in geopolitical and macro-economic conditions are difficult to predict, and the factors

described above, or other factors, may lead to adverse impacts on global trade levels and flows,

economic growth, and financial markets and political stability, all of which could adversely affect

the demand for, and supply of, Philips products and services. This may result in a material adverse

impact on Philips’ business, financial condition, and operating results. These factors could also

make it more difficult to budget and to make reliable financial forecasts, or could have a negative

impact on Philips’ access to funding.

Risk response: Philips monitors economic, political, and general societal changes and, where

necessary, develops response strategies to such events. We closely monitor market conditions such

as inflation, interest rates and foreign currency developments to enable timely response through

cost reduction or pricing measures. High-risk markets (for example, markets exposed to high

volatility and have experienced hyperinflation) are regularly assessed for emerging risks, and if

necessary, capital structure planning is performed. The Philips Group Crisis Operations team has

activated response teams that are running programs on Russia and Ukraine as well as on Israel and

the Middle East. To be less exposed to the uncertainty caused by the Russia-Ukraine war we actively

reduced balance sheet exposure in these markets. The response to conflicts in Israel is more

complex as we also maintain a manufacturing footprint in the country. Developments in Israel are

being monitored carefully by the response team to ensure the safety of our workforce in the

country.

Philips is active in more than 100 countries, and we believe that this global footprint allows us to

better deal with adverse local market developments. Philips establishes a strong local presence in

both mature and growth geographies through market-specific strategies (for example for China,

the US, and the EU). These market strategies cover various local value-creation aspects such as

innovation, manufacturing and assembly; hosting of health data; and capability development.

These strategies also leverage our in-depth knowledge of healthcare and consumer needs,

Research & Development, Quality Management Systems, sustainable global business models, and

brand. This local presence enables Philips to create value and tailor its propositions to local market

needs. In addition to local measures, Philips also optimizes its integrated supply chain organization,

supplier base, and global manufacturing footprint to enable agile responses to large and rapid

shifts in demand and supply globally.

Philips may be unable to keep pace with the changing health technology

environment

With Philips’ focus on health technology, our business model is transforming from transactional,

product-focused business models to customer- and patient-centric, outcome-oriented business

models, with multi-year customer partnerships enabled by a portfolio of innovative devices,

solutions, platforms, insights and value-added services. If this transformation is not targeted at

successful products and services or is made too slowly or is not successful, Philips may not meet the

expectations of customers, patients or other stakeholders in the health technology business

environment. We may face a loss of customer relevance, fail to capture growth, and lose market

share. In addition, because of our health technology focus, Philips may have a reduced ability to

offset potential negative impacts (including, but not limited to, impacts on sales, operating results,

liabilities, compliance, and financing) on its health technology business by other businesses through

a more diversified portfolio. As a result of its focus on health technology, Philips is deepening

customer engagement and entering into long-term solutions and services business arrangements,

becoming more dependent on a number of key customers for long-term recurring revenues, thus

increasing the risk that the loss of, or a significant reduction in, orders from one or more of our key

customers could cause a significant decline in our revenues. As Philips looks to increase our use of

indirect sales channels, Philips will increasingly rely on successfully leveraging new and existing

partners to support customers and patients. Any of these factors may have a material adverse

impact on Philips’ brand value and reputation, business, financial condition, and operating results.

More specific health technology risks and their potential impacts are included in the Operational,

Financial and Compliance risk sections below as well as in the note Contingencies.


	274


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Risk response: Philips is running multiple interconnected initiatives intended to enable, strengthen

and accelerate various aspects of our business model to the standards of the health technology

business environment. These initiatives include, but are not limited to, patient safety, quality,

patient-centric innovation, environmental and social impact, productivity and compliance. For

examples of responses to these various aspects we refer to the related risk factors in this section.

Furthermore, the Philips integrated business model is intended to promote accountability and agility

as we pursue the end-to-end alignment of our governance, processes and IT systems to maintain a

people- and patient-centric portfolio of offerings. We are making our solutions and insights

available through Software-as-a-Service (SaaS) and Platform-as-a-Service (PaaS) and increasingly

with the use of Artificial Intelligence (AI). We are also expanding digital customer engagement and

e-commerce channels, as well as activation of our offerings in markets, either directly or through

our managed network of partners. We run a partner management program aimed to maintain a

strong network of committed partners who share our patient-centric mindset. Where Philips

engages in long-term service-based business models, we aim to run a disciplined deal process with

strict acceptance criteria. Our integrated portfolio of products, solutions and services covers the

various stages in health, including healthy living, prevention, diagnosis, treatment and home care,

without significant dependence on a single product, solution, service or market.

Philips may be unable to gain leadership in health informatics and artificial

intelligence

New digital technologies and ways of conducting business are fundamentally changing the health

technology industry, and thus our competitive business environment. A key industry trend is the

shift toward cloud-based Software-as-a-Service (SaaS) business models and remotely upgradable,

serviceable systems. These new types of offerings are enabled by hybrid cloud/on-premise digital

platforms. Another trend is the application of (generative) artificial intelligence (AI) and machine

learning technologies to drive quality and efficiency in clinical and operational workflows.

Customers are seeking solutions that convert data from our imaging and monitoring systems into

actionable insights within workflows.

Philips is expanding the use of AI in the development of its technologies and is increasingly

incorporating AI capabilities in its products and services to improve customer experiences and drive

efficiencies. The development of AI technologies is complex and Philips may fall behind established

and new digital competitors if Philips does not develop the requisite capabilities to innovate its

portfolio of AI-enabled products and services, adjust its business models and find ways to globally

commercialize new products and services at scale and in a timely, competitive and ethically and

legally compliant manner. This could result in an inability to satisfy customer and patient needs,

thereby missing out on revenue and margin growth opportunities, which may have a material

adverse impact on Philips’ business, financial condition and operating results.

Risk response: In 2023, Philips brought all healthcare informatics businesses together into one end-

to-end business, called Enterprise Informatics. Taking this enterprise-wide view, Philips unlocks

insights at scale from combined imaging and monitoring data pools to improve workflows,

enhance the caregiver and patient experience, and elevate care delivery. Enterprise Informatics has

positioned Philips as a global leader and trusted partner for healthcare informatics, including

integrated diagnostics, enterprise imaging, virtual care enablement, and point-of-care insights and

analytics. The business has an end-to-end software-oriented operating model, value chain and go-

to-market capabilities tailored for informatics, and corresponding business model to enable it to

move at a faster pace and deliver the differentiated advantage Enterprise Informatics brings to

Philips and value to our customers.

Philips is delivering on a set of key initiatives within the Enterprise Informatics business to accelerate

the transformation of informatics-enabled propositions, some examples include the following.

Philips has partnered with leading industry partners, such as Amazon Web Services, to modernize

existing informatics propositions (such as Radiology Picture Archiving and Communications System

(PACS), Enterprise Digital Pathology Systems, cardiology informatics) to a SaaS model in the cloud

and accelerate the migration and adoption for its customer installed base. To increase market

penetration of Enterprise Informatics, Philips continues to invest in vendor-neutral offerings. This

allows us to engage with a broader set of customers, beyond the current installed base where

Philips might not have any hardware presence. Vendor-neutrality can be used to familiarize

customers with the value that Philips offers and potentially create more value for Philips.

Philips is also developing new informatics propositions with explicit data and AI strategies, such as

acute care management with clinical decision support. The business is partnering with clinical and

technology providers across our value chain to further enable the business to extend its propositions

with state-of-the-art data and AI (including generative AI) capabilities, enabling Philips businesses to

provide AI-enabled applications that can offer insights at scale to customers. To do this securely,

with speed and consistency with industry best practice, Philips is implementing a global data and AI

strategy across its businesses and invests in the further increase of our maturity on data engineering

capabilities required to scale its AI product and pipeline. This data, software, and AI expertise is also

leveraged to transform Philips’ traditional modality businesses, such as imaging and monitoring,

towards ‘software-defined systems’ with features, functions, and services that are primarily defined

in software and continually upgraded over the lifetime to enable continuous value delivery to our

customers (such as the enhancement of magnetic resonance systems with AI-based reconstruction

or remote sensing capabilities, and preventative maintenance services).

Acquisitions could fail to deliver on Philips’ business plans and value creation

expectations, and we may not be able to successfully integrate acquired

operations

Although Philips focuses on organic growth to deliver patient- and people-driven innovation at

scale, selected acquisitions remain part of Philips’ growth strategy. We may not be able to integrate

acquisitions successfully or efficiently with our existing operations, culture and systems, which may

expose Philips to risks in areas such as sales and service, logistics, quality, regulatory compliance,

legal claims, information technology, and finance. Integration challenges may adversely impact the

realization of value creation expectations. Transactions may incur significant costs, result in

unforeseen operating difficulties, divert management attention from other business priorities, and

may ultimately be unsuccessful. Cost savings expected to be implemented, or other assumptions

underlying the business case relating to a particular acquisition, may not be realized. If we are


	275


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

unable to successfully define, or accomplish any of our objectives in respect of any of our new

acquisitions, we may not realize the anticipated benefits of such acquisitions and we may

experience lower than anticipated profits, or even incur losses. Acquisitions may also lead to a

substantial increase in long-lived assets, including goodwill, which may later be subject to write-

down or impairment if an acquired business does not perform as expected, which may have a

material adverse effect on Philips’ earnings.

Risk response: Philips maintains an active Mergers and Acquisitions funnel per business to monitor

organizational fit. Philips aims to use a structured and disciplined acquisition process with strict

acceptance criteria, budgets and tollgates, and time allocated for critical review of due diligence,

including integration risks and expected integration benefits. A broad range of internal and external

functional experts are involved in this process. Philips develops and deploys a high-quality post-

acquisition integration playbook with set milestones and conducts value-creation progress reviews

with the responsible business leader throughout the integration of each acquisition.

Philips may be unable to meet internal or external aims or expectations with

respect to ESG-related matters

Environmental, Social and Governance (ESG) factors may directly and indirectly impact Philips

Businesses or the business environment in which Philips operates. For instance, customers may

choose products or services based on sustainability or other ESG criteria. At the same time, also

ESG adverse sentiments exist among certain stakeholders, and we may face scrutiny, reputational

risk, product boycotts, lawsuits or market access restrictions from these parties regarding our ESG-

related initiatives. Philips may, from time to time, disclose ESG-related initiatives or aims in

connection with the conduct of its business and operations. For example, Philips has adopted

initiatives with respect to reducing greenhouse gas emissions in its supply chain. However, there is

no guarantee that Philips will be able to implement such initiatives or meet such aims within

anticipated timeframes, considering, for example, the technological limitations in the research and

development process. Philips is also increasingly focused on products and services incorporating

AI, and the development and use of our products and services incorporating AI may require more

energy than similar products or services not incorporating AI. In addition, there is an increasing

focus on ESG matters (both "pro-ESG" and "anti-ESG") from Philips stakeholders – including

customers, consumers, employees, regulators, and investors, and those stakeholders may also

have ESG-related expectations with respect to Philips’ business and operations. For example,

customers may focus on ESG-related criteria in buying our products e.g., through green

procurement standards.

Any inability by Philips to address concerns or meet expectations about ESG-related matters could

negatively impact sentiment toward Philips, our products, and our brand. Improper or incorrect

sustainability claims and low ESG scores could also potentially impact Philips' reputation and affect

sales. There are an increasing number of regulatory and legislative initiatives in the EU and other

jurisdictions to address ESG issues, which will (once implemented) require Philips to significantly

increase the scope of mandatory ESG disclosures, and will introduce or extend a duty of care,

requiring Philips to identify and act on adverse environmental and human rights impacts across

the organization and operations, and potentially the entire value chain, beyond or different from

our current efforts.

These regulatory and legislative initiatives, in turn, could also affect how customers or other

stakeholders perceive our products or business operations. If our products or business operations

do not meet the criteria for sustainability according to, for example, the EU Taxonomy Regulation

(including the related delegated regulations) or any other similar regulations, this may negatively

affect how customers or other stakeholders view Philips. Philips may fail to fulfill internal or

external ESG-related initiatives, aims, goals, targets or expectations, or be perceived to do so, or

we may fail to report performance or developments adequately or accurately with respect to such

initiatives, aims, goals, targets or expectations. In addition, Philips could be criticized or held

responsible if the scope of its initiatives, aims, goals or targets regarding ESG matters is deemed

insufficient. Any of these factors may have an adverse impact on Philips’ reputation and brand

value, competitiveness, or on Philips’ business, financial condition and operating results.

Risk response: We have adopted comprehensive and integrated Environmental, Social and

Governance (ESG) framework including certain key commitments for the period 2020-2025.

Environmental: We are working to minimize our impact on the planet by taking climate actions,

driving the transition to a circular economy, implementing EcoDesign in our products, and

partnering with our suppliers to reduce their environmental footprint. Social: We aim to deliver

social impact by improving people’s health and well-being, offering the best place to work, and

engaging with our suppliers and the communities where we operate. Governance: At Philips,

everything we do is anchored by ethical and responsible practices. Our corporate governance, the

Philips integrated operating model, General Business Principles and robust risk management and

internal control framework help us maintain the highest standards. Under ultimate supervision of

our Supervisory Board, our Board of Management monitors progress and assesses risks in relation

to our ESG strategy and makes recommendations for the continuous improvement of our ESG

endeavors. For more information, please refer to chapter 4 (Environmental, Social and Governance).

Philips may be unable to secure and maintain intellectual property rights for its

products and services or may infringe others’ intellectual property rights

Philips is dependent on its ability to obtain and maintain licenses and other intellectual property (IP)

rights covering its products and services and its design and manufacturing processes. The IP

portfolio is the result of an extensive IP generation process that could be influenced by a number of

factors, including innovation and acquisitions. The value of the IP portfolio is dependent on the

successful promotion and market acceptance of standards (co-)developed by Philips. This is

particularly applicable to the segment ‘Other’, where licenses from Philips to third parties generate

IP royalties and contribute to Philips’ results of operations. The timing of licenses from Philips to

third parties and associated revenues from IP royalties are uncertain and may vary significantly from

period to period. Additionally, royalties are often based on sales by third parties, creating an

exposure to macro-economic effects and continuity of these third parties. A loss or impairment in

connection with such licenses to third parties could have a material adverse impact on Philips’

financial condition and operating results. The use of artificial Intelligence AI in the development of

our products and services could also cause loss of IP. The legal landscape and subsequent legal


	276


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

protection for the use of AI remains uncertain, and development of the law in this area could

impact our ability to enforce our proprietary rights or protect against infringing uses. Philips is also

exposed to the risk that a third party may claim to own IP rights to technology applied in Philips

products and services. The use or adoption of AI technologies into our products and services may

heighten the risk of exposure to claims of copyright infringement or other IP misappropriation. If

any such claims of infringement of these IP rights are successful, Philips may be required to pay

damages to such third parties or may incur other costs or losses.

Risk response: Philips has an Intellectual Property & Standards organization (IP&S) that proactively

pursues the creation of new IP and the protection of existing IP in close co-operation with Philips’

operating businesses and the Innovation & Strategy function. IP&S is a leading industrial IP

organization providing IP solutions to Philips to support Philips’ growth, competitiveness and

profitability. In addition, Philips believes our business is not materially dependent on any particular

third-party patent or license, or any particular group of third-party patents and licenses.

9.5.2Operational risks

Products and services may fail quality or security standards, which could

adversely affect patient safety or customer operations

As a health technology company and innovator, our products and services must comply with the

rules and regulations that govern our operations, processes, and ways of working. Risks associated

with non-compliance to patient safety, quality, regulatory, or security standards can occur

throughout the lifecycle of our products or services, inclusive of pre-market activities (such as

product design, production and supplier quality activities) and post-market activities. As we increase

the adoption of artificial intelligence (AI) to support our customers, we may become more exposed

to the risks associated with the use of such technologies, such as lack of transparency, cybersecurity

and data provenance, toxicity, bias and deficient or inaccurate outputs and other unintended

consequences that are not easily detectable or are inconsistent with our policies and values.

Consequences of identified risks include patient harm, negatively impacting customers' operations

and healthcare professionals' ability to provide care, and unauthorized access to confidential data,

including patient records and medical devices. In turn, these may result in damage to our brand,

reputation, competitive disadvantage, legal liability and regulatory enforcement, all of which may

have a material adverse impact on Philips’ business, reputation, financial condition, and operating

results.

Risk response: As patient safety and quality is at the heart of everything we do, we have stepped

up accountability ensuring that our products and services- new and in-use in the field by our

customers- meet product quality, safety and security standards. Through targeted efforts we are

strengthening processes involved in the design, development, supplier control, production,

installation, monitoring, and servicing of Philips health technology, products, and services. For

example, we invest in early medical safety assessment as well as early detection of safety signals

and active monitoring by the Medical Office. We are focusing on Design Controls to verify and

validate that product designs are robust prior to manufacture. We invest in systems, capabilities

and training to facilitate identification, correction, and prevention of potential patient safety or

quality issues. We emphasize testing and inspection quality checks across the product lifecycle,

which involves in-process manufacturing, product release, installation, and servicing controls. We

drive continuous improvement through addressing yield, non-conformance rates, stop-use orders,

field recalls, repairs, financial claims, and liabilities. This year, we strengthened medical safety and

implemented the Philips Safety Board, and further enhanced post-market surveillance and

corrections and removals monitoring. With regards to AI, we mitigate that associated risks by

establishing key capabilities and governance, tooling, and processes. Moreover, we invest in

improvements to our overall ways of working through our Medical Office as an integral partner of

the Philips process and improving our Quality Management Systems (QMS) by reducing complexity

and reducing the number of QMSs in which we operate for more effective and efficient execution.

We train all employees across Philips to recognize the need to meet product quality or security

standards and through a focus on fostering a culture of quality and patient safety, Philips

employees are working together to mitigate operational and compliance risks. Also refer to the

section Patient safety, quality and regulatory as well as the notes Provisions and Contingencies.

Philips may be unable to ensure a resilient supply chain

Most of Philips’ operations are conducted internationally, which exposes Philips to supply chain

challenges and uncertainties. Philips produces and procures products and parts in various countries

globally. The production and shipping of products and parts, whether from Philips or from third

parties, could be interrupted and may face increasing costs by various external factors, such as

regional conflicts (e.g., the Middle East), sanctions, tariffs or other trade measures, natural

disasters, extreme weather events (the effects of which may be exacerbated by climate change),

and geopolitical developments.

While macro trends around materials availability have improved in 2024, Philips medical systems

stay in production for longer periods than the life cycle of their semi-conductors and require

continuous rejuvenation of their electronic components. Philips may fail to timely obtain or replace

such components from existing supplies, and alternative sources of components could involve

significant costs and regulatory challenges and may not be available to us on reasonable terms,

adversely affecting our business and financial performance.

Our suppliers and our third-party service providers may also be exposed to labor shortages and

potentially worsening macro-economic and geopolitical trends, as well as both acute and chronic

physical climate risks. These factors may cause business interruptions, property damage, and

inventory loss, increasing lead times and adversely impacting our production capacity, which may

negatively affect the delivery of products and services to customers, for example the postponement

of equipment installations in hospitals. If Philips is not able to respond swiftly to those factors, this

may result in an inability to deliver on customer needs, ultimately resulting in loss of revenue and

margin.

Philips purchases raw materials, including rare-earth metals, copper, steel, aluminum, noble gases

and oil-related products. Philips’ business depends on the availability of raw materials and energy,

and there is no assurance that such raw materials and energy will be available for purchase in the

future or available at current costs. Particularly, the introduction of more stringent regulatory or


	277


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

legislative measures to internalize negative externalities, such as the Carbon Border Adjustment

Mechanism (CBAM), can be expected in response to the threats posed by climate change and

environmental degradation. In this context, reference is also made to the EU Corporate

Sustainability Due Diligence Directive (CSDDD) introducing or extending a duty of care, requiring

Philips to identify and act on adverse environmental and human rights impacts across its supply

chain. These initiatives have the potential to affect market dynamics (e.g., green premiums) and the

availability of sustainable resources, which may, in turn, increase Philips’ costs associated with

purchasing materials and components. The rise in global climate commitments and new regulations

on Energy Attribute Certificates (EACs) and Power Purchasing Agreements (PPAs) may also drive

fluctuations in energy costs and affect the availability of EACs and PPAs.

Some commodities have been subject to volatile markets, and such volatility is expected to continue

and costs to increase. Costs may also increase as a result of stricter climate-change-related laws and

regulations. Such legislation could require investments in technology to reduce energy use and

greenhouse gas emissions, beyond what we expect in our existing plans, or could result in

additional and increased pricing for negative externalities (e.g., carbon pricing). If Philips is not able

to compensate for increased costs of energy, (sub-)components, (raw) materials, and transportation

– either by reducing reliance thereon or passing on increased costs to customers – then price

increases could have a material adverse impact on Philips’ business, financial condition, and

operating results.

Philips may increase its dependency on a concentration of external suppliers, as a result of the

continuing process of creating a leaner supply base and launching initiatives to replace internal

capabilities with outsourced products and services. These initiatives also need to be balanced with

local-market value-creation requirements, including those relating to local manufacturing and data

storage.

Although Philips works closely with its suppliers to avoid supply discontinuities, there can be no

assurance that Philips will not encounter future supply issues, causing disruptions or unfavorable

conditions. Furthermore, while the materials supply has improved in 2024, the challenges in our

capability for the planning and synchronization of supply with demand continue, which, combined

with a drive for inventory reduction and cash flow improvements, can lead to further materials

running out of stock. That could have a material adverse impact on Philips’ business, financial

condition and operating results.

Risk response: Philips has put in place a process to assess and reduce the supply risk of its critical

products. The two-pronged mitigation approach addresses the supplier risk and the component

obsolescence risk of its printed circuit board assembly (PCBA). The supplier risk management

framework assesses and manages suppliers from various perspectives, such as strategic fit, financial

stability, operational performance and quality, sustainability, compliance, and location. We also

maintain close relationships with our suppliers and maintain an ongoing dialogue on our forecast.

The PCBA refresh process identifies components that are either obsolete or that have an

announced future obsolescence date, and proactively replaces them, ensuring continuous

availability of active components. Furthermore, Philips is engaging with senior government officials,

strategic suppliers and foundries to prioritize healthcare supplies, directly working on component

issues across all tiers of suppliers and diversifying sourcing of high-risk components. These actions,

together with a trend in improved materials availability in markets, have yielded a normalized

materials supply in 2024 and have reduced the cost of spot buys. Internally, Philips is making

balanced investments in global and local supply chain capabilities to improve end-to-end planning,

synchronization of supply with demand, and data management.

We continue to deploy our strategy for a more regional versus global approach to our end-to-end

network design, taking into account factors such as customer proximity, leveraging manufacturing

capabilities, our environmental footprint, and efficiency. We are using our multi-modality sites, in

combination with contract manufacturing partners, to regionally ‘multi-source’ many of our

products.

Philips manages carbon pricing risk by reducing its full value-chain carbon footprint, as well as

partnering with suppliers to reduce their environmental footprint and closely monitor carbon

regulations, including carbon taxes. Philips manages the risk of rising commodity prices by several

means, including engaging in long-term contracts and keeping physical inventories. Philips closely

monitors price developments and takes pricing action where appropriate. Philips conducts various

scenario assessments and develops response strategies to events potentially impacting its supply

chain, such as geopolitical changes, regional conflicts, natural disasters, emerging markets volatility,

and pandemics. We run various global warming and weather scenarios on the geographical

footprint of our facilities, as well as our suppliers’ facilities, in line with the recommendations of the

Task Force on Climate-Related Financial Disclosures.

Initial investments have been made to improve our end-to-end visibility by digitizing our priority

information flows. With the implementation of integrated planning for Personal Health, we have

significantly enhanced our planning capabilities, such as advanced scenario planning and inventory

management. This enables us to improve customer and consumer experience, by anticipating – and

more quickly responding – to changing circumstances, with more control over our inventory.

Philips maintains robust data protection measures. Regular security audits, encryption protocols,

and continuous monitoring are used to address vulnerabilities in the data models that we use. We

work with industry leading suppliers, that have a proven track record on data security, including the

partners we leverage for AI models and/or data.

Philips may face challenges in simplifying the organization and the ways of

working

Having an integrated operating model promoting agility with clear accountability is a priority to

improve the execution of our strategy. If we do not effectively simplify the organization and our

ways of working, which include, but are not limited to, changes in structure and governance,

policies, processes, IT systems and data, we may be limited in our ability to fully realize our business

ambitions and to create with sustainable impact, meeting critical patient and customer needs,

delivering integral value propositions, growing the business, and/or maintaining business continuity.


	278


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips may need to undertake further changes and related restructuring in the future if the

operating model ultimately proves to be wholly or partly unsuccessful.

To simplify ways of working and improve performance, Philips continuously seeks to create a more

open, standardized, and cost-effective IT landscape. Approaches include outsourcing, off-shoring,

integration, and consolidation of IT systems. These changes may elevate third-party dependency

risks regarding the delivery of IT services, the availability of IT systems, and the functionality offered

by IT systems. Although Philips has sought to strengthen security measures and quality controls

related to these systems, these measures may prove to be insufficient or unsuccessful, which may

lead to a material adverse impact on Philips’ business, financial condition, and operating results.

Risk response: Philips’ processes are captured in our process framework, where we manage end-to-

end connections and define the critical process elements. The process framework provides the

foundation for all our management systems, including quality, environmental, and health and

safety, to ensure a compliant approach for processes, systems, data and competencies for a specific

management area.

Philips uses structured IT risk management methodologies to identify and address risks to our

critical business applications. Our ongoing IT Business Continuity Management activities include

real-time monitoring of availability and redundancies, as well as testing and upgrading of

applications. We regularly validate IT systems with our IT change management capabilities, we

make sure that changes of an IT system are executed in a controlled way and sufficiently tested to

minimize the impact of business disruptions in the case of failures of the system.

Philips is dependent on its people for leadership and specialized skills and may

be unable to attract and retain personnel

The attraction and retention of talented employees is critical to Philips’ success, and the loss of

employees with specialized skills could result in business interruptions, especially given the strong

competition for talent in key capability segments. Philips is competing with other companies for the

best talent and most sought-after skills, and there is no assurance of succeeding in attracting and

retaining the highly qualified employees needed in the future. Wage inflation is increasing the

competition for talent, as well as the cost of labor. This may negatively impact our ability to realize

our plan for creating value with sustainable impact, and if we are unable to offset the increased

costs of labor through higher selling prices and increased productivity, then rising costs could also

have a material adverse impact on Philips’ business, financial condition and operating results.

Risk response: Philips continuously assesses capability gaps for its key positions and has initiatives in

place to close any employee capability gaps. This includes monitoring and understanding the drivers

behind attrition, maintaining appropriate remuneration structures aimed at attracting and retaining

talent, and leveraging its purpose and contribution to societal and environmental challenges, as a

differentiating proposition for employees. Philips measures employee engagement through regular

surveys and benchmarks the results across the organization against high-performing external

norms. Philips performs deep-dives where necessary and drives improvement actions to address any

gaps.

Philips could be exposed to a significant enterprise cybersecurity breach

Philips relies on information technology to operate and manage its businesses, as well as store and

process confidential data (relating to patients, employees, customers, intellectual property, suppliers

and other partners). Philips products, solutions and services increasingly contain sophisticated and

complex information technology, and the use of artificial intelligence (AI) capabilities may further

heighten the risks related to cybersecurity attacks and other disruptions to information systems. The

healthcare industry is subject to strict privacy, security and safety regulations. At the same time,

geopolitical conflicts and criminal activity continue to drive increases in the number, and

sophistication of, cyberattacks globally. Considering the general increase in cybercrime, our

customers and other stakeholders are becoming more demanding regarding the cybersecurity of

our products and services. As a global health technology company, Philips is inherently and

increasingly exposed to the risk of cyberattacks and potential impact of attacks on (our) suppliers.

Information systems may be damaged, disrupted (including the provision of services to customers),

or shut down due to cyberattacks. In addition, breaches in the security of our systems (or the

systems of our customers, suppliers, or other partners) could result in the misappropriation,

destruction, or unauthorized disclosure of confidential information (including intellectual property)

or personal data belonging to us or our employees, customers, suppliers or other partners. These

risks are particularly significant with respect to the safety and medical records of patients.

Cyberattacks may result in substantial costs and other negative consequences, which may include,

but are not limited to, lost revenues, reputational damage, remediation and enhancement costs,

penalties, and other liabilities to regulators, customers and other partners. Philips has not

encountered any material breaches or other major cybersecurity incidents in 2024. While Philips

deals with the operational threat of cybercrime on a continuous basis and has so far been able to

prevent significant damage or significant monetary cost in taking corrective action, there can be no

assurance that future cyberattacks will not result in material or other consequences than as

described above, which may result in a material adverse impact on Philips’ business, financial

condition and operating results.

Risk response: Philips has an established Group Security function and implemented security

management processes and controls, and monitors risk trends on material security topics, such as

the risk of security breaches and ransomware attacks, in our information systems and our products

and services. The Philips Board of Management continually monitors the risks, as well as required

investments and progress made on the programs to reduce security risk. Risk workshops are held

across the company to calibrate cybersecurity risks. Philips is deploying security risk management

further into our Businesses and Functions to enhance the completeness and quality of overall risk

reporting, and to manage identified improvement actions.

Philips assesses against industry best practices and latest regulatory requirements (NIS2,CRA, FDA,

NMPA, ISO, etc.) and continuously improves key security controls (e.g., strengthening endpoints,

email security, and network security, and conducting global vulnerability scans, including mitigation

of vulnerabilities). The IT function is tasked with keeping IT systems up to date and supporting the

design and development of applications with security in mind. We run initiatives to enhance

security awareness for all Philips staff. For example, there are mandatory security trainings and

specific phishing trainings, multiple times a year, and we give additional focus to groups who need


	279


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

it across the company. Philips continuously improves the Philips integrated operating model to

support adequate security management of products and services via Quality Management Systems.

Philips maintains relationships and cooperates with several government intelligence and law

enforcement agencies, other multinationals through the Multinational Information Sharing and

Analysis Centers, the CISO Circle of Trust foundation, Gartner Research Board for CISO’s as well as

taking a leading role with healthcare-specific Information Sharing and Analysis Centers (ISACs) and

Cyber Emergency Response Teams (CERTs), to remain abreast of new threats.

Philips may face challenges to drive excellence and speed in bringing

innovations to market

It is important that Philips delivers its innovations in close collaboration with its customers on a

timely basis and at scale. The emergence of new low-cost competitors, particularly in Asia, the

emergence of healthcare solutions with low-carbon environmental footprint, the continuously and

rapidly changing field of artificial intelligence (AI) and data-driven solutions, and the increasing

importance of product security and cybersecurity, further underlines the importance of

improvements in the innovation process. Success in launching innovations depends on a number of

factors, including development of value propositions, architecture and platform creation, product

development, market acceptance, production, and delivery ramp-up. It is also dependent on

addressing potential quality issues or other defects in the early stages of introduction, and on

attracting and retaining skilled employees. Costs of developing new products and solutions may

partially be reflected on Philips’ balance sheet and may be subject to write-down or impairment

depending on the performance of such products or services. The significance and timing of such

write-downs or impairments are uncertain, as is the ultimate commercial success of new product

introductions. Accordingly, Philips cannot determine in advance the ultimate effect that innovations

will have on its financial condition and operating results. If Philips fails to create and commercialize

its innovations timely and at scale, it may lose market share and competitiveness, which could have

a material adverse effect on its financial condition and operating results.

Risk response: Philips has invested EUR 1.9 billion in R&D in 2024. Our Business Units are

accountable for meeting customer needs and as such innovation activities are close to the

customer. Philips is in continuous dialogue with customers to understand their needs and to

reaffirm that its strategy is translated into a balanced portfolio of products, software, services and

integrated solutions with a corresponding innovation pipeline close to its strategic core. Ways of

working are anchored in standardized processes and tools in all aspects of customer-needs-focused

innovation (from exploration to launch in the market and eventually customer success

management). Philips also conducts research and advances technologies by closely working with

leading strategic innovation partners. In addition, a number of initiatives are running to improve

innovation capabilities, within the businesses and across all regions, in areas such as software and

systems engineering, data and AI, product and cybersecurity and usability. These initiatives, taken

together, will improve innovation effectiveness, efficiency, quality, and regulatory compliance.

9.5.3Financial and reporting risks

Philips is exposed to a variety of treasury and financing risks, including liquidity,

currency, credit and country risk

Negative developments impacting the liquidity of global capital markets could affect Philips’ ability

to raise or re-finance debt in the capital markets or could lead to significant increases in the cost of

such borrowing in the future. If the markets expect a downgrade by the rating agencies, or if such

a downgrade has actually taken place, this could increase the cost of borrowing, reduce our

potential investor base and adversely affect our business.

Philips’ financing and liquidity position may also impact its ability to implement or complete any

share-buyback program, or to distribute any dividends in accordance with its dividend policy or at

all. Any announced share-buyback program or dividend policy may also be amended, suspended or

terminated at any time, including at Philips’ discretion or as a result of applicable law, regulation or

regulatory guidance, and any such amendment, suspension or termination could negatively affect

the trading price of, increase trading price volatility of, or reduce the market liquidity of Philips

shares or other securities. Additionally, any share-buyback program or distribution of dividend

could diminish Philips’ cash or other reserves, which may impact its ability to finance future growth

and to pursue potential future strategic opportunities. Any share-buyback program or dividend

payment will depend on factors such as availability of financing, liquidity position, business outlook,

cash flow requirements and financial performance, the state of the market and the general

economic climate, and other factors, including tax and other regulatory considerations. Philips and

its subsidiaries may also be subject to limitations on the distribution of shareholders’ equity under

applicable law.

Philips operates in over 100 countries and its reported earnings and equity are therefore inevitably

exposed to fluctuations in the exchange rates of foreign currencies against the euro. Philips’ sales

and net investments in its foreign subsidiaries are sensitive in particular to movements in the US

dollar, Japanese yen, Chinese renminbi, and a wide range of other currencies from developed and

emerging economies. Philips’ sourcing and manufacturing spend is concentrated in the EU, the US

and China. Income from operations is particularly sensitive to movements in currencies of countries

where Philips has no or very small-scale manufacturing/local sourcing activities but significant sales

of its products or services, such as Japan, Canada, Australia, the United Kingdom, and a range of

emerging markets, such as Indonesia, India and Brazil.

In view of the long lifecycle of health technology solution sales and long-term strategic

partnerships, the financial risk of counterparties with outstanding payment obligations creates

exposure risks for Philips, particularly in relation to accounts receivable from customers, liquid

assets, and the fair value of derivatives and insurance contracts with financial counterparties. A

default by counterparties in such transactions can have a material adverse effect on Philips’

financial condition and operating results.


	280


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Contingent liabilities may have a significant impact on the company’s consolidated financial

position, results of operations and cash flows. For an overview of current cases please refer to the

note Contingencies .

Risk response: At Philips, liquidity is monitored by the Group Treasury department, which tracks the

actual cash flow for the Group against forecasts of the liquidity requirements on both a short- and

longer-term basis. This includes regular reviews of liquidity versus credit rating constraints and

scenario analysis to assess the risk of potential downgrades in credit ratings. Philips manages the

available liquidity for the Group in several ways e.g., by spreading maturities of external debt over

time and by having appropriate standby credit facilities available.

Philips hedges the anticipated net exposure of developed-market foreign currencies resulting from

sales, purchases and net investments in its foreign subsidiaries in those currencies. For emerging

markets, Philips mainly relies on pricing adjustments for its products and services to counteract any

expected depreciation of emerging-market currencies. Philips performs ongoing evaluations of the

financial and non-financial condition of its customers and other counterparties and uses various

tools to manage credit risks.

Please also refer to notes Details of treasury and other financial risks , Debt and Liquidity position.

Philips is exposed to tax risks which could have a significant adverse financial

impact

Philips is exposed to tax risks that could result in double taxation, penalties and interest payments.

The source of the risks could originate from local tax laws and regulations as well as international

and EU regulatory frameworks. These tax risks include transfer pricing risks on internal cross-border

deliveries of goods and services, as well as tax risks relating to changes in the transfer pricing

model. Examples of initiatives that may result in changing tax rules include, but are not limited to,

the OECD/G20 Inclusive Framework to address the allocation of income to user markets (Pillar One)

and a 15% minimum corporate income tax rate (Pillar Two). For Pillar One, it is too early to assess

the potential impact as all regulations have not been released yet.

The formal adoption of the Council Directive (EU) 2022/2523 (the Pillar Two Directive) in December

2022 aims to achieve a coordinated implementation of Pillar Two in EU member states. The Dutch

government adopted the Minimum Tax Rate Act 2024 (MTR Act) in December 2023 and the Pillar

Two legislation has been applicable in local law with effect from 2024 in the Netherlands, the EU

and multiple other countries around the world. However, US President Trump’s January 2025

Executive Order to withdraw from the OECD Pillar agreements brings uncertainty and potential risk

of retaliatory tax measures.

As Philips maintains substance in the form of relevant assets and personnel in the countries in

which it operates which is shown in our Country Activity and Tax Report, Philips meets the

transitional safe harbor rules enacted by OECD in most countries and therefore exposure to

taxation Pillar Two is currently limited. However, this is increasing Philips’ tax compliance burden

significantly globally.

Furthermore, Philips is exposed to tax risks related to acquisition and divestment, permanent

establishments, tax loss, interest and tax credits carried forward, and potential changes in tax law

that could result in higher tax expenses and payments. The risks may have a significant impact on

local financial tax results, which could adversely affect Philips’ financial condition and operating

results. The value of the deferred tax assets, such as tax losses carried forward, is subject to the

availability of sufficient taxable income within the tax loss-carry-forward period. Accordingly, there

can be no absolute assurance that all deferred tax assets, such as (net) tax losses and credits carried

forward, will be realized.

Potential tariffs and other restrictions on imports proposed by US President Trump and his

administration, and retaliatory trade measures in response thereto, have the potential to impact

international trade relations and supply chains, with notable consequences in the countries where

we are present in. In addition, protectionism may increase general uncertainty on the development

of local regulations in response to those measures. These uncertainties expose Philips to financial

risk linked to increased trade defense measures resulting in additional tariffs and customs duties.

Significant changes in import duties levied on the import of products could materially impact

Philips.

Risk response: Philips has a globally organized and experienced Tax function, which is accountable

for the definition and execution of the tax strategy and for the tax position of Philips worldwide. It

advises management on the tax implications of intended decisions, performs appropriate tax

planning to support business goals, and safeguards compliance with all local and international tax

laws. Philips has a Tax Control Framework in place, which is designed to create awareness of and

ensures adherence to current tax policies.

Philips is working towards full compliance with Pillar Two whereby we will be leveraging our

existing digital tax systems to support an efficient and high-quality process to determine countries

in scope, calculate the additional tax liability (if any) and enable timely filing.

Potential risks are carefully monitored and dealt with by tax specialists from relevant areas (e.g.,

corporate income tax, transfer pricing, indirect taxes, wage tax and tax accounting). There are

extensive controls in place on processes and systems to address these risks, which are discussed in

more detail in our Country Activity and Tax Report and in the note Income taxes.

Flaws in internal controls could adversely affect our financial reporting and

management process

Accurate disclosures provide investors and other market professionals with significant information

for a better understanding of Philips’ Businesses. Failures in internal controls or other issues with

respect to Philips’ public disclosures, including disclosures with respect to cybersecurity risks and

incidents, could create market uncertainty regarding the reliability of the information (including

financial data) presented. This could have a negative impact on the price of Philips securities. In

addition, the reliability of revenue and expenditure data is key for steering the Businesses and for

managing top-line and bottom-line growth. The long life cycle of health technology solution sales,

from order acceptance to accepted installation and servicing, together with the complexity of the


	281


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

accounting rules recognizing revenue in the accounts, presents a challenge in terms of ensuring

consistent and correct application of the accounting rules throughout Philips’ global business.

Significant changes in the way of working, such as the changes made to our operating model,

restructuring, and shifting processes to remote Global Business Services locations, may have an

adverse impact on the environment under which controls are executed, monitored, reviewed, and

tested. Any flaws in internal controls, or regulatory or investor actions in connection with flaws in

internal controls, could have a material adverse effect on Philips’ business, financial condition,

operation results, reputation and brand.

Risk response: The Philips’ Business Control Framework (PBCF) sets the standard for risk

management and internal control over financial reporting. Key components of the PBCF are the

standards on management, testing of controls, and our Finance Code of Ethics. The code is

designed to deter wrongdoings; to promote honest and ethical conduct; to ensure full, fair,

accurate, timely, and understandable disclosures; and to encourage internal reporting of

(suspected) violations.

9.5.4Compliance risks

Philips products and services may be exposed to the risk of non-compliance

with various regulations and standards involving quality, safety, and security

Our reputation and license to operate depend on our compliance with global regulations and

standards. Operating in a highly regulated health-technology industry, our products and services,

including parts and materials from suppliers, are subject to regulation by various government and

regulatory agencies e.g., FDA (US), EMA (Europe), NMPA (China), MHRA (UK), ASNM (France),

BfArM (Germany), and IGZ (the Netherlands). In the EU, the Medical Device Regulation (EU MDR)

became effective in May 2021 and imposes significant additional pre-market and post-market

requirements. The current EU MDR transitional provisions allow medical devices that were CE

marked under the previous directives (MDD and AIMDD) to continue being placed on the market or

put into service until 2027 or 2028 dependent upon the risk class of the equipment. Examples of

other product-related regulations are the EU’s Waste from Electrical and Electronic Equipment

(WEEE), Restriction of Hazardous Substances (RoHS), Registration, Evaluation, Authorization and

Restriction of Chemicals (REACH) and Energy-using Products (EuP) regulations. We are subject to

various domestic and foreign environmental laws and regulations, which are continuing to develop.

Any failure to comply with such laws and regulations could jeopardize product quality, safety, and

security or expose us to lawsuits, administrative penalties, and civil remedies, all of which may have

a material adverse impact on Philips’ business, financial condition, and operating results.

Philips has observed an increase in safety and security requirements in new and upcoming

legislation dealing with market access of consumer goods, medical devices, information and

communication technology products, cloud services, and specific areas such as data protection,

cybersecurity, AI, and supply chain.

The legal and regulatory environment relating to artificial intelligence (AI) is uncertain and rapidly

evolving due to concerns about bias, discrimination, transparency, and security. Despite training

and risk management efforts, AI models, particularly generative AI models, we use may produce

output or take action that is incorrect, that reflects biases included in the data on which they are

trained, that results in the release of private, confidential, or proprietary information, or that is

otherwise harmful. The complexity of AI models may make it difficult to understand why they are

generating particular outputs, increasing the challenges associated with assessing the proper

operation of AI models, understanding and monitoring the capabilities of the AI models, reducing

erroneous output, eliminating bias, and complying with regulations that require documentation or

explanation of the basis on which decisions are made. Further, we may rely on AI models

developed by third parties, and, to that extent, would be dependent in part on the manner in

which those third parties develop and train their models, including risks arising from the inclusion

of any unauthorized material in the training data for their models and the effectiveness of the steps

these third parties have taken to limit the risks associated with the output of their models, matters

over which we may have limited visibility. Any of these risks could expose us to liability or adverse

legal or regulatory consequences, and harm our reputation and the public perception of our

business or the effectiveness of our security measures.

Both regulators and customers require us to demonstrate legal compliance and adequate security

management using national and international standards and associated certifications. Non-

compliance with conditions imposed by regulatory authorities could result in product recalls,

temporary product unavailability, stoppages at production facilities, remediation costs, fines,

disgorgement of profits, and/or claims for damages. Product safety incidents or user concerns could

jeopardize patient safety and/or trigger inspections by the FDA or other regulatory agencies, which,

depending on the results of such inspections, could trigger the impacts described above, as well as

other consequences. These issues could adversely impact Philips’ financial condition or operating

results through lost revenue and cost of any required remedial actions, penalties or claims for

damages. They could also negatively impact Philips’ reputation, brand, relationship with customers

and market share. Philips is exposed to the ongoing impact of the Respironics voluntary recall/field

action and related matters. Please refer to the section Patient safety, quality and regulatory and the

note Contingencies.

Risk response: Philips is committed to complying with all applicable laws, regulations, and standards

as a means of delivering safe, effective, and high-quality products, services, and solutions. Our

Regulatory Affairs team closely monitors developments across the regulatory landscape, with

specialist teams operating at central, business, and regional levels. The Regulatory Science and

Policy team is helping to shape and define industry standards. Additionally, this team is involved

with improving processes and offers programs to make employees aware of and enable them to

comply with requirements. In the event of compliance issues, we actively engage with the

regulatory authorities to resolve, mitigate, and work on remediation, as required. We are actively

working on remediation related to the June 2021 voluntary recall notification for certain sleep and

respiratory care products by our subsidiary, In the first half of 2024, Philips Respironics reached an

agreement with the US Department of Justice (DoJ), acting on behalf of the US Food and Drug

Administration (FDA), regarding the terms of a consent decree to resolve the identified issues in


	282


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

relation to the Respironics Recall. The consent decree was entered by the court in April 2024. We

publish updates on the Respironics field action on our corporate website, www.philips.com.

For more information, refer to Patient safety. quality and regulatory and notes Provisions and

Contingencies.

Philips is exposed to the risks of non-compliance with business conduct rules

and regulations, including privacy and upcoming ESG disclosure and due

diligence requirements

In the execution of its strategy, Philips could be exposed to the risk of non-compliance with

business conduct rules and regulations and our General Business Principles, including, but not

limited to, patient safety, quality, anti-bribery,anti-money laundering, sanctions, healthcare

compliance, transparency, accountability and fairness in the development and use of artificial

intelligence (AI) tools, privacy and data protection, as well as existing and upcoming ESG disclosure

requirements and due diligence requirements. Examples of compliance risk areas include

commission – and incentive payments to third parties and remuneration payments to agents,

distributors, consultants and similar entities, as well as the acceptance of gifts, which may be

considered in some markets to be normal local business practice. The use of AI and ongoing

digitalization of Philips products and services, including its processing of personal data, increases

the importance of compliance, and the risk of non-compliance, with privacy, data protection and

similar laws. If we do not have sufficient rights to use the data on which AI relies or to the outputs

produced by AI applications, we may incur liability through the violation of certain laws, third-party

privacy or other rights or contracts to which we are a party. These risks could adversely affect

Philips’ financial condition, reputation and brand and trigger the additional risk of exposure to

governmental investigations, inquiries and legal proceedings and fines. There are an increasing

number of regulatory and legislative initiatives in the EU and other jurisdictions to address ESG

issues, which will (once implemented) require Philips to significantly increase the scope of

mandatory ESG disclosures. Examples of these initiatives are the EU Corporate Sustainability

Reporting Directive (CSRD) and European Sustainability Reporting Standards (ESRS), the European

Carbon Border Adjustment Mechanism (CBAM), and the EU Deforestation Regulation. Regulatory

and legislative initiatives such as the EU Corporate Sustainability Due Diligence Directive (CSDDD)

and case-law developed by courts will introduce or extend a duty of care, requiring Philips to

identify and act on adverse environmental and human rights impacts across the organization and

operations, and potentially the entire value chain, beyond or different from our current efforts.

Failure to meet these requirements could trigger the additional risk of exposure to inquiries from

supervisory bodies and adversely affect Philips’ reputation or could adversely impact Philips’

financial condition or operating results through lost revenue and cost of any required remedial

actions, penalties or claims for damages.

In addition, we may also face potentially conflicting supervisory directives, for example, as certain

US regulatory and non-US authorities have prioritized ESG-related issues, while others have

signaled pursuing potentially conflicting priorities. These circumstances, among others, may result

in pressure from investors, unfavorable reputational impacts, including inaccurate perceptions or a

misrepresentation of our actual ESG-related practices and diversion of management’s attention and

resources. Any failure, or perceived failure, by us to adhere to our public statements, comply fully

with developing interpretations of ESG-related laws and regulations (both “pro-ESG” and “anti-

ESG”), or meet evolving and varied stakeholder expectations and standards could adversely affect

Philips’ reputation or could adversely impact Philips’ financial condition or operating results through

lost revenue and cost of any required remedial actions, penalties or claims for damages.

For further details, please refer to the sub-section Legal proceedings within the note Contingencies.

Risk response: Over the years, we have extensively transformed the company and strengthened our

business processes. As part of that, we have invested substantially in adherence to our General

Business Principles (patient safety, quality and integrity always) through the deployment of

compliance and awareness programs, as well as the establishment of policies and processes that

reinforce adherence. With respect to privacy and data protection, Philips has established a privacy

compliance framework, which includes policies, standards and procedures (such as the Binding

Corporate Rules), with the aim of ensuring and demonstrating compliance with applicable data

protection laws and regulations. Over the years, the company has gained experience with ESG

disclosures, has been closely involved in the development of ESRS and has been working on

meeting disclosure requirements under the CSRD and ESRS since 2022.Please refer to chapters 4

(Environmental, Social and Governance) and 8 (Sustainability statement) of this Annual Report.

Please refer to chapters 4 Environmental, Social and Governance and 8 Sustainability statement of

this Annual Report.


	283


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.6ESG reporting frameworks

Building on our extensive experience of environmental and social impact measurement and of

providing transparency on ESG, historically, Philips has taken an active role – in collaboration with,

in particular, the International Financial Reporting Standards Foundation, World Economic Forum

and the EU – to help drive the evolution toward a standard ESG reporting framework.

World Economic Forum (WEF)

In 2020, the WEF’s International Business Council (IBC) published its core set of Stakeholder

Capitalism Metrics and disclosures. These can be used by companies to align their mainstream

reporting on performance against ESG indicators and track their contributions towards the SDGs on

a consistent basis. Our disclosure in line with this WEF framework can be found in How we create

value.

IIRC

We have prepared this integrated Annual Report considering the principles of the International

Integrated Reporting Council (IIRC) Integrated Reporting framework, which is now maintained by

the IFRS Foundation. We have also created an overview of our value creation process (please refer

to How we create value).

United Nations Global Compact

We signed up to the United Nations Global Compact in March 2007 to advance 10 universal

principles in the areas of human rights, labor, the environment and anti-corruption. Our General

Business Principles, our policies on Human Rights, our Sustainability and Environmental Policies, and

our Supplier Sustainability Declaration are the cornerstones that enable us to live up to the

standards set by the Global Compact. This is closely monitored and reported, as illustrated

throughout this report, which is also our annual Communication on Progress (COP) submitted to

the UN Global Compact Office.

We use this report to communicate on our progress toward the relevant Sustainable Development

Goals (SDGs), in particular SDG 3, SDG 12, and SDG 13. Please refer to Advocacy activities and

expenses for more details.


	284


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.7How we create value

The overview below is based on the International Integrated Reporting Council framework and includes resource inputs, value outcomes and societal impact across various financial and Environmental, Social and

Governance (ESG) dimensions. For further information, refer to the chapters Financial performance , and Environmental, Social and Governance .

Resource inputs

Human

• Employees 67,823, 120 -plus nationalities, 40% female

• Training 3,164,130 hours, 3,593,533 training completions

• 29,790 employees in Growth geographies

Intellectual

• Invested in R&D EUR 1.7 billion (Green/EcoDesigned

Innovation 263 million)

• Employees in R&D 10,843

Financial

• Equity EUR 12 billion

• Net debt* EUR 5.2 billion

Manufacturing

• Employees in production 27,478

• Industrial sites 23, cost of materials used EUR 4.2 billion

• Total assets EUR 29 billion

• Capital expenditures on property, plant and equipment

EUR 317 million

Natural

• Energy used in manufacturing 464,587 megawatt hours

• Water used 672,608 m 3

• Closing the loop' on all our professional medical

equipment by 2025

Social

• Philips Foundation

• Stakeholder engagement

• Volunteering policy

Value outcomes

Human

• Employee Engagement Index 78% favorable

• Sales per employee EUR 265,708

• Safety 151 Total Recordable Cases

Intellectual

• New patent filings 700

• Royalties EUR 466 million

• 137 design awards for the Philips brand

Financial

• Comparable sales growth*1%

• Adjusted EBITA* as a % of sales 11.5%

• Free cash flow* EUR 906 million

Manufacturing

• EUR 12.2 billion revenues from goods sold

Natural

• 76.4% Green/EcoDesigned Revenues

• 24.4% revenues from circular propositions

• Net CO2 emissions from own operations down to zero

kilotonnes

• 94 kilotonnes (estimated) from products, parts and

packaging used to put products on the market

• Waste 20,157 tonnes, of which 94% recirculated

Social

• Brand value USD 11.5 billion (Interbrand)

• Partnerships with UNICEF, Red Cross, Amref and Ashoka

Societal impact

Human

• Employee benefit expenses EUR 6,641 million, all staff

paid at least a Living Wage

• Appointed 54% of our roles from internal sources

• 33% of leadership positions held by women

Intellectual

• Around 40% of revenues from new products and

solutions introduced in the last three years

• Approximately 70% of sales from leadership positions

Financial

• Market capitalization EUR 23 billion at year-end

• Long-term credit rating BBB+1, Baa12, BBB+3 **

• Dividend EUR 768 million

Manufacturing

• 100% electricity from renewable sources

Natural

• Environmental impact of Philips operations up to EUR 272

million

• All 23 industrial sites 'zero waste to landfill' at year-end 2024

• Full value chain CO2 reductions approved by the Science

Based Targets initiative

Social

• 1.96 billion lives improved, of which 242 million in

underserved communities

• 936,000 employees impacted at suppliers participating in

the 'Beyond Auditing' program

• Total tax contribution EUR 3,263 million (taxes paid/withheld)

• Corporate income tax paid EUR 186 million

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

**1 Fitch, 2 Moody's, 3 S&P Global


	285


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.8Appropriation of profits

Pursuant to article 34 of the articles of association of the Company, a dividend will first be declared

on preference shares out of net income. The remainder of the net income, after any retention by

way of reserve with the approval of the Supervisory Board, shall be available for distribution to

holders of common shares subject to shareholder approval after year-end. As of December 31,

2024, the issued share capital consists only of common shares. No preference shares have been

issued. Article 33 of the articles of association of the company gives the Board of Management the

power to determine what portion of the net income shall be retained by way of reserve, subject to

the approval of the Supervisory Board.

9.9Reconciliation of non-IFRS information

In this Annual Report Philips presents certain financial measures when discussing Philips’

performance that are not measures of financial performance or liquidity under IFRS (‘non-IFRS’).

These non-IFRS measures (also known as non-GAAP or alternative performance measures) are

presented because management considers them important supplemental measures of Philips’

performance and believes that they are widely used in the industry in which Philips operates as a

means of evaluating a company’s operating performance and liquidity. Philips believes that an

understanding of its sales performance, profitability, financial strength and funding requirements is

enhanced by reporting the following non-IFRS measures:

• comparable sales growth

• EBITA

• Adjusted EBITA

• Adjusted EBITDA

• adjusted income from continuing operations attributable to shareholders

• adjusted income from continuing operations attributable to shareholders per common share (in

EUR) - diluted (Adjusted EPS)

• free cash flow

• net debt : group equity ratio

• Organic Return on Invested Capital (ROIC)

Non-IFRS measures do not have standardized meanings under IFRS and not all companies calculate

non-IFRS measures in the same manner or on a consistent basis. As a result, these measures may

not be comparable to measures used by other companies that have the same or similar names.

Accordingly, undue reliance should not be placed on the non-IFRS measures contained in this

Annual Report and they should not be considered as substitutes for sales, net income, net cash

provided by operating activities or other financial measures computed in accordance with IFRS.

This chapter contains the definitions of the non-IFRS measures used in this Annual Report as well as

reconciliations from the most directly comparable IFRS measures. The non-IFRS measures discussed

in this Annual Report are cross referenced to this chapter. These non-IFRS measures should not be

viewed in isolation or as alternatives to equivalent IFRS measures and should be used in conjunction

with the most directly comparable IFRS measures.

The non-IFRS financial measures presented are not measures of financial performance or liquidity

under IFRS, but measures used by management to monitor the underlying performance of Philips’

business and operations and, accordingly, they have not been audited or reviewed by Philips’

external auditors.

Additionally, Philips provides forward-looking targets for comparable sales growth, adjusted EBITA

margin improvement, free cash flow and organic ROIC, which are non-IFRS financial measures.

Philips has not provided a quantitative reconciliation of these targets to the most directly

comparable IFRS measures because certain information needed to reconcile these non-IFRS financial

measures to the most comparable IFRS financial measures are dependent on specific items or

impacts which are not yet determined, are subject to uncertainty and variability in timing and

amount due to their nature, are outside of Philips’ control, or cannot be predicted, including items

and impacts such as currency exchange rates, acquisitions and disposals, legal and tax gains and

losses and pension settlements, charges and costs such as impairments, restructuring and

acquisition-related charges, amortization of intangible assets and net capital expenditures.

Accordingly, reconciliations of these non-IFRS forward looking financial measures to the most

directly comparable IFRS financial measures are not available without unreasonable effort. Such

unavailable reconciling items could significantly impact the results of operations and financial

condition.

Comparable sales growth

Comparable sales growth represents the period-on-period growth in sales excluding the effects of

currency movements and changes in consolidation. As indicated in General information to the

Consolidated financial statements , foreign currency sales and costs are translated into Philips’

presentation currency, the euro, at the exchange rates prevailing at the respective transaction

dates. As a result of significant foreign currency sales and currency movements during the periods

presented, the effects of translating foreign currency sales amounts into euros could have a

material impact on the comparability of sales between periods. Therefore, these impacts are

excluded when presenting comparable sales in euros by translating the foreign currency sales of the

previous period and the current period into euros at the same average exchange rates. In addition,

the years presented were affected by a number of acquisitions and divestments, as a result of

which various activities were consolidated or deconsolidated. The effect of consolidation changes

has also been excluded in arriving at the comparable sales. For the purpose of calculating

comparable sales, when a previously consolidated entity is sold or control is lost, relevant sales of

that entity for the corresponding prior year period are excluded. Similarly, when an entity is

acquired and consolidated, relevant sales of that entity for the current year period are excluded.

Comparable sales growth is presented for the Philips group, operating segments and geographic

area. Philips believes that the presentation of comparable sales growth is meaningful for investors

to evaluate the performance of Philips’ business activities over time. Comparable sales growth may

be subject to limitations as an analytical tool for investors, because comparable sales growth figures

are not adjusted for other effects, such as increases or decreases in prices or quantity/volume. In

addition, interaction effects between currency movements and changes in consolidation are not

taken into account.


	286


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Sales growth composition by segment in %


	nominal growth	consolidation changes	currency effects	comparable growth
2024 versus 2023
Diagnosis & Treatment	(0.4)	0.0	1.7	1.3
Connected Care	(0.1)	0.8	1.3	2.0
Personal Health	(3.2)	0.0	2.5	(0.7)
Philips Group	(0.8)	0.3	1.7	1.2
2023 versus 2022
Diagnosis & Treatment	6.3	0.2	4.5	11.0
Connected Care	(2.5)	0.3	3.3	1.1
Personal Health	(0.7)	0.0	3.9	3.2
Philips Group	1.9	0.2	3.9	6.0
2022 versus 2021
Diagnosis & Treatment	6.1	0.0	(6.7)	(0.6)
Connected Care	(1.9)	0.0	(7.2)	(9.1)
Personal Health	5.7	0.0	(5.7)	0.1
Philips Group	3.9	(0.3)	(6.4)	(2.8)

Philips Group

Sales growth composition by geographic area in %


	nominal growth	consolidation changes	currency effects	comparable growth
2024 versus 2023
Western Europe	4.2	0.7	(0.4)	4.5
North America	1.2	0.4	0.5	2.2
Other mature geographies	(6.2)	0.1	5.0	(1.1)
Mature geographies	1.2	0.5	0.8	2.5
Growth geographies	(5.8)	(0.1)	3.8	(2.1)
Philips Group	(0.8)	0.3	1.7	1.2
2023 versus 2022
Western Europe	6.0	0.3	0.3	6.6
North America	(0.3)	0.2	2.7	2.5
Other mature geographies	(1.0)	0.1	8.2	7.3
Mature geographies	1.4	0.2	2.7	4.2
Growth geographies	3.4	0.2	6.9	10.5
Philips Group	1.9	0.2	3.9	6.0
2022 versus 2021
Western Europe	(1.2)	(1.3)	(0.4)	(2.8)
North America	11.9	0.2	(12.4)	(0.3)
Other mature geographies	(3.0)	0.0	2.5	(0.5)
Mature geographies	5.9	(0.3)	(6.7)	(1.1)
Growth geographies	(0.8)	(0.1)	(5.9)	(6.9)
Philips Group	3.9	(0.3)	(6.4)	(2.8)

EBITA and Adjusted EBITA

The term Adjusted EBITA is used to evaluate the performance of Philips and its segments. EBITA

represents Income from operations excluding amortization and impairment of acquired intangible

assets and impairment of goodwill. Adjusted EBITA represents EBITA excluding gains or losses from

restructuring costs, acquisition-related charges and other items.

Restructuring costs are defined as the estimated costs of initiated reorganizations, the most

significant of which have been approved by the Executive Committee, and which generally involve

the realignment of certain parts of the industrial and commercial organization.

Acquisition-related charges are defined as costs that are directly triggered by the acquisition of a

company, such as transaction costs, purchase accounting related costs and integration-related

expenses.

Other items are defined as any individual item with an income statement impact (loss or gain) that

is deemed by management to be both significant and incidental to normal business activity. This

includes the following: litigation costs and settlements in favor of (or against) the company, gains

(or losses) on sale of businesses or assets, remediation costs, impairment of assets, portfolio

realignment charges, environmental charges and other items which are individually above an

amount of EUR 20 million in a quarter, or an individual item which is above EUR 40 million across

multiple quarters. Refer to Restructuring, acquisition-related charges and other items in the Results

of operations section of Financial performance .

Philips considers the use of Adjusted EBITA appropriate as Philips uses it as a measure of segment

performance and as one of its strategic drivers to increase profitability through re-allocation of its

resources towards opportunities offering more consistent and higher returns. This is done with the

aim of making the underlying performance of the businesses more transparent.

EBITA excludes amortization and impairment of acquired intangible assets (which primarily relates

to brand names, customer relationships and technology) and impairment of goodwill as Philips

believes that such amounts are inconsistent in amount and frequency, are significantly impacted by

the timing and/or size of acquisitions and do not factor into its decisions on allocation of its

resources across segments. Although we exclude amortization and impairment of acquired

intangible assets from the Adjusted EBITA measure, Philips believes that it is important for investors

to understand that these acquired intangible assets contribute to revenue generation.

Philips believes Adjusted EBITA is useful to evaluate financial performance on a comparable basis

over time by factoring out restructuring costs, acquisition-related charges and other incidental

items which are not directly related to the operational performance of Philips Group or its

segments.


	287


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Adjusted EBITA may be subject to limitations as an analytical tool for investors, as it excludes

restructuring costs, acquisition-related charges and other incidental items and therefore does not

reflect the expense associated with such items, which may be significant and have a significant

effect on Philips’ net income.

Adjusted EBITA margin refers to Adjusted EBITA divided by sales expressed as a percentage.

Adjusted EBITA is not a recognized measure of financial performance under IFRS. The reconciliation

of Adjusted EBITA to the most directly comparable IFRS measure, Net income, for the years

indicated is presented in the following table. Net income is not allocated to segments as certain

income and expense line items are monitored on a centralized basis, resulting in them being shown

on a Philips Group level only.

Adjusted EBITDA

Adjusted EBITDA is defined as Income from operations excluding amortization and impairment of

intangible assets, impairment of goodwill, depreciation and impairment of property, plant and

equipment, restructuring costs, acquisition-related charges and other items.

Philips understands that Adjusted EBITDA is broadly used by analysts, rating agencies and investors

in their evaluation of different companies because it excludes certain items that can vary widely

across different industries or among companies within the same industry. Philips considers Adjusted

EBITDA useful when comparing its performance to other companies in the HealthTech industry.

However, Adjusted EBITDA may be subject to limitations as an analytical tool because of the range

of items excluded and their significance in a given reporting period. Furthermore, comparisons with

other companies may be complicated due to the absence of a standardized meaning and

calculation framework. Philips management compensates for the limitations of using Adjusted

EBITDA by using this measure to supplement IFRS results to provide a more complete

understanding of the factors and trends affecting the business rather than IFRS results alone. In

addition to the limitations noted above, Adjusted EBITDA excludes items that may be recurring in

nature and should not be disregarded in the evaluation of performance. However, we believe it is

useful to exclude such items to provide a supplemental analysis of current results and trends

compared to other periods. This is because certain excluded items can vary significantly depending

on specific underlying transactions or events. Also, the variability of such items may not relate

specifically to ongoing operating results or trends and certain excluded items, while potentially

recurring in future periods and may not be indicative of future results. Net income, for the years

indicated is included in the following table. Net income is not allocated to segments as certain

income and expense line items are monitored on a centralized basis, resulting in them being shown

on a Philips Group level only.


	288


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Reconciliation of Net income to Adjusted EBITA and Adjusted EBITDA in millions of EUR


	Philips Group	Diagnosis & Treatment	Connected Care	Personal Health	Other
2024
Net Income	(698)
Discontinued operations, net of income taxes	(142)
Income tax expense (benefit)	963
Investments in associates, net of income taxes	124
Financial expenses	387
Financial income	(105)
Income from operations	529	592	(466)	544	(142)
Amortization and impairment of acquired intangible assets	392	225	141	15	12
EBITA	921	817	(324)	559	(130)
Restructuring and acquisition-related charges	326	157	53	25	92
Other items:	830	45	765	-	20
Respironics litigation provision	984		984
Respironics insurance income	(538)		(538)
Respironics field-action running remediation costs	133		133		-
Respironics consent decree charges	113		113
Quality remediation actions	123	45	78
Remaining items	16		(4)	-	20
Adjusted EBITA	2,077	1,018	494	584	(18)
Depreciation, amortization and impairment of fixed assets and other intangible assets	998	240	262	102	394
Adding back impairment of fixed assets included in Restructuring and acquisition- related charges and Other items	(93)	(39)	(8)	(7)	(39)
Adjusted EBITDA	2,982	1,219	747	679	337

Philips Group

Reconciliation of Net income to Adjusted EBITA and Adjusted EBITDA in millions of EUR


	Philips Group	Diagnosis & Treatment	Connected Care	Personal Health	Other
2023
Net Income	(463)
Discontinued operations, net of income taxes	10
Income tax expense (benefit)	(73)
Investments in associates, net of income taxes	98
Financial expenses	376
Financial income	(63)
Income from operations	(115)	721	(1,199)	552	(190)
Amortization and impairment of acquired intangible assets	290	89	178	14	9
Impairment of goodwill	8	8	-	-	-
EBITA	183	818	(1,020)	567	(181)
Restructuring and acquisition-related charges	381	118	115	9	140
Other items:	1,358	92	1,275	22	(32)
Respironics litigation provision	575		575
Respironics field-action connected to the proposed consent decree	363		363
Respironics field-action running remediation costs	224		224
Quality remediation actions	175	81	94
Provision for a legal matter	31		31
Investment re-measurement loss	23			23
Gain on divestment of business	(35)				(35)
Remaining items	2	11	(12)	(1)	3
Adjusted EBITA	1,921	1,028	369	597	(73)
Depreciation, amortization and impairment of fixed assets and other intangible assets	971	217	267	101	385
Adding back impairment of fixed assets included in Restructuring and acquisition- related charges and Other items	(47)	(4)	(14)	-	(30)
Adjusted EBITDA	2,845	1,241	623	698	283


	289


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Philips Group

Reconciliation of Net income to Adjusted EBITA and Adjusted EBITDA in millions of EUR


	Philips Group	Diagnosis & Treatment	Connected Care	Personal Health	Other
2022
Net Income	(1,605)
Discontinued operations, net of income taxes	(13)
Income tax expense (benefit)	(113)
Investments in associates, net of income taxes	2
Financial expenses	258
Financial income	(58)
Income from operations	(1,529)	536	(2,347)	515	(233)
Amortization and impairment of acquired intangible assets	363	115	226	15	8
Impairment of goodwill	1,357		1,357
EBITA	192	651	(764)	530	(225)
Restructuring and acquisition-related charges	202	3	125	11	62
Other items:	925	133	750	(4)	46
Respironics field-action connected to the proposed consent decree	250		250
Respironics field-action running remediation costs	210		210
R&D project impairments	134	73	59	3
Portfolio realignment charges	109		109
Impairments of assets in S&RC	39		39
Provision for public investigations tender irregularities	60	60
Quality remediation actions	59		59
Remaining items	63	-	24	(6)	46
Adjusted EBITA	1,318	787	111	537	(117)
Depreciation, amortization and impairment of fixed assets and other intangible assets	1,239	302	420	117	400
Adding back impairment of fixed assets included in Restructuring and acquisition- related charges and Other items	(252)	(83)	(136)	(3)	(30)
Adjusted EBITDA	2,305	1,006	394	652	253

Adjusted income from continuing operations attributable to shareholders

The term Adjusted income from continuing operations attributable to shareholders represents

income from continuing operations less continuing operations non-controlling interests,

amortization and impairment of acquired intangible assets, impairment of goodwill, excluding gains

or losses from restructuring costs and acquisition-related charges, other items, adjustments to net

finance expenses, adjustments to investments in associates and adjustments to tax expense.

Shareholders refers to shareholders of Koninklijke Philips N.V.

Restructuring costs, acquisition-related charges and other items are all defined in the EBITA and

Adjusted EBITA section above.

Net finance expenses are defined as either the financial income or expense component of an

individual item already identified to be excluded as part of the Adjusted income from continuing

operations, fair value movements of equity investments in limited life funds recognized at fair value

through profit or loss or a financial income or expense component with an income statement

impact (gain or loss) that is deemed by management to be both significant and incidental to normal

business activity.

The adjustments to tax expense include the tax impact on adjustments to income from continuing

operations, as well as tax-only adjusting items (such as the derecognition of deferred tax assets).

Philips considers the use of Adjusted income from continuing operations attributable to

shareholders appropriate as Philips uses it as the basis for the Adjusted income from continuing

operations attributable to shareholders per common share (in EUR) - diluted, a non-IFRS measure.

Adjusted income from continuing operations attributable to shareholders may be subject to

limitations as an analytical tool for investors, as it excludes certain items and therefore does not

reflect the expense associated with such items, which may be significant and have a significant

effect on Philips’ net income. Net income, for the years indicated is included in the following table.

Net income is not allocated to segments as certain income and expense line items are monitored on

a centralized basis, resulting in them being shown on a Philips Group level only.

Adjusted income from continuing operations attributable to shareholders is not a recognized

measure of financial performance under IFRS. The reconciliation of Adjusted income from

continuing operations attributable to shareholders to the most directly comparable IFRS measure,

Net income, for the years indicated is included in the following table.


	290


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Adjusted income from continuing operations attributable to shareholders per

common share (in EUR) - diluted (Adjusted EPS)

Adjusted income from continuing operations attributable to shareholders per common share (in

EUR) - diluted is calculated by dividing the Adjusted income from continuing operations attributable

to shareholders by the diluted weighted average number of shares (after deduction of treasury

shares) outstanding during the period, as defined in General information to the Consolidated

financial statements, earnings per share section.

Philips considers the use of Adjusted income from continuing operations attributable to

shareholders per common share (in EUR) - diluted appropriate as it is a measure that is useful when

comparing its performance to other companies in the HealthTech industry. However, it may be

subject to limitations as an analytical tool for investors, as it uses Adjusted income from continuing

operations attributable to shareholders which has certain items excluded.

Adjusted income from continuing operations attributable to shareholders per common share (in

EUR) - diluted is not a recognized measure of financial performance under IFRS. The most directly

comparable IFRS measure, income from continuing operations attributable to shareholders per

common share (in EUR) - diluted for the years indicated, is included in the following table.

Philips Group

Adjusted income from continuing operations attributable to shareholders1 in millions of EUR unless

otherwise stated


	2022	2023	2024
Net income	(1,605)	(463)	(698)
Discontinued operations, net of income taxes	(13)	10	(142)
Income from continuing operations	(1,618)	(454)	(840)
Income from continuing operations attributable to non- controlling interests	(3)	(2)	(3)
Income from continuing operations attributable to shareholders¹	(1,622)	(456)	(843)
Adjustments for:
Amortization and impairment of acquired intangible assets	363	290	392
Impairment of goodwill	1,357	8
Restructuring costs and acquisition-related charges	202	381	326
Other items:	925	1,358	830
Respironics litigation provision		575	984
Respironics insurance income			(538)
Respironics consent decree charges	250	363	113
Respironics field-action running costs	210	224	133
Quality actions	59	175	123
R&D project impairments	134
Portfolio realignment charges	109
Impairment of assets in S&RC	39
Provision for public investigations tender irregularities	60
Provision for a legal matter		31
Investment re-measurement loss		23
Loss (gain) on divestment of business		(35)
Remaining items	63	2	16
Net finance income/expenses	(4)	18	23
Tax impact on adjusting items²	(376)	(450)	(370)
Tax effect of derecognition of US deferred tax asset			941
Adjusted Income from continuing operations attributable to shareholders 1	845	1,148	1,300
Earnings per common share:
Income from continuing operations attributable to shareholders¹ per common share (in EUR) - diluted	(1.70)	(0.48)	(0.90)
Adjusted income from continuing operations attributable to shareholders¹ per common share (in EUR) - diluted	0.89	1.21	1.39

1Shareholders refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted

retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of

2023.

2Includes deferred tax assets derecognized in the line below.


	291


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Free cash flow

Free cash flow is defined as net cash flows from operating activities minus net capital expenditures.

Net capital expenditures are comprised of the purchase of intangible assets, expenditures on

development assets, capital expenditures on property, plant and equipment and proceeds from

sales of property, plant and equipment.

Philips discloses free cash flow as a supplemental non-IFRS financial measure, as Philips believes it is

a meaningful measure to evaluate the performance of its business activities over time. Philips

understands that free cash flow is broadly used by analysts, rating agencies and investors in

assessing its performance. Philips also believes that the presentation of free cash flow provides

useful information to investors regarding the cash generated by the Philips operations after

deducting cash outflows for purchases of intangible assets, capitalization of product development,

expenditures on development assets, capital expenditures on property, plant and equipment and

proceeds from disposal of property, plant and equipment. Therefore, the measure gives an

indication of the long-term cash generating ability of the business. In addition, because free cash

flow is not impacted by purchases or sales of businesses and investments, it is generally less volatile

than the total of net cash provided by (used for) operating activities and net cash provided by (used

for) investing activities.

Free cash flow may be subject to limitations as an analytical tool for investors, as free cash flow is

not a measure of cash generated by operations available exclusively for discretionary expenditures

and Philips requires funds in addition to those required for capital expenditures for a wide variety of

non-discretionary expenditures, such as payments on outstanding debt, dividend payments or other

investing and financing activities. In addition, free cash flow does not reflect cash payments that

may be required in future for costs already incurred, such as restructuring costs.

Philips Group

Composition of free cash flow in millions of EUR


	2022	2023	2024
Net cash flows provided by operating activities	(173)	2,136	1,569
Net capital expenditures:	(788)	(554)	(663)
Purchase of intangible assets	(105)	(96)	(118)
Expenditures on development assets	(257)	(203)	(241)
Capital expenditures on property, plant and equipment	(444)	(345)	(317)
Proceeds from disposals of property, plant and equipment	18	90	13
Free cash flow	(961)	1,582	906

Net debt : group equity ratio

Net debt : group equity ratio is presented to express the financial strength of Philips. Net debt is

defined as the sum of long- and short-term debt minus cash and cash equivalents. Group equity is

defined as the sum of shareholders’ equity and non-controlling interests. This measure is used by

Philips Treasury management and investment analysts to evaluate financial strength and funding

requirements. This measure may be subject to limitations because cash and cash equivalents are

used for various purposes, not only debt repayment. The net debt calculation deducts all cash and

cash equivalents whereas these items are not necessarily available exclusively for debt repayment at

any given time.

Philips Group

Composition of net debt to group equity in millions of EUR unless otherwise stated


	2022	2023	2024
Long-term debt	7,270	7,035	7,113
Short-term debt	931	654	526
Total debt	8,201	7,689	7,639
Cash and cash equivalents	1,172	1,869	2,401
Net debt	7,028	5,820	5,238
Shareholders’ equity	13,249	12,028	12,006
Non-controlling interests	34	33	37
Group equity	13,283	12,061	12,043
Net debt : group equity ratio	35:65	33:67	30:70

Organic Return on Invested Capital

Organic Return on Invested Capital (ROIC) is defined as organic return which includes income from

operations for the year excluding the impact of: income or loss from operations of businesses

acquired in the five year period prior to the measurement date; the related tax effects on such

income or loss; certain other items; the tax impact on adjusting items and certain tax-only adjusting

items determined by management to be material in nature and require separate disclosure, divided

by average of the net operating capital at the end of each of the five quarters ending on the

relevant measurement date excluding the average net operating capital at the end of each of the

five quarters ending on the relevant measurement date of the businesses acquired in the five year

period prior to the measurement date, expressed as a percentage.

Net operating capital is defined as tangible fixed assets, intangible fixed assets, including goodwill,

inventories and receivable balances, minus payable balances and provisions, all as further defined

below. Net operating capital is adjusted to exclude assets and liabilities of businesses acquired in

the five year period prior to the relevant measurement date, and adjustments determined by

management to be necessary for comparability.

Other items are defined as material in nature and require separate disclosure and have the same

nature as the items excluded from Adjusted EBITA. In the years 2020-2022 these other items

included legal provisions, pension settlements, results of divestments, remediation costs,

impairment of assets and portfolio realignment charges. Refer to Restructuring, acquisition-related

charges and other items Net income, Income from operations (EBIT) and Adjusted EBITA within the

Results of operations section of Financial performance. Organic ROIC is calculated after taxes.

The term Organic Return on Invested Capital (ROIC) is used by management to evaluate Philips’

efficiency at allocating the capital under its control to profitable investments and how well the


	292


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

company uses capital to generate returns. Philips believes that Organic ROIC provides useful

information to investors because it excludes the impact of recently acquired businesses, giving a

more accurate representation of how the Philips integrated operating model is leveraged to drive

operational excellence and removes irregularity caused by various operating models of recently

acquired businesses. Philips also believes that excluding certain items determined by management

to be material in nature and requiring separate disclosure enhances comparability across several

periods. Organic ROIC may be subject to limitations as an analytical tool for investors, as it excludes

Income or Loss from operations of acquired businesses, the related tax effects on such income or

loss, the tax impact on adjusting items and certain tax-only adjusting items, which may have a

significant effect on ROIC. Organic ROIC is not a recognized measure of financial performance

under IFRS.

The most comparable IFRS measure to Organic ROIC is Return on total assets, calculated as Income

from operations for the year divided by total assets as of the end of the year.

Philips Group

Return on total assets in millions of EUR unless otherwise stated


	2022	2023	2024
Income from operations	(1,529)	(115)	529
Total assets	30,688	29,406	28,976
Return on total assets (%)	(5.0%)	(0.4%)	1.8%

The reconciliation of Average Net operating capital and the reconciliation of Net income to Organic

ROIC for the years ended December 31, 2022, 2023 and 2024 are included in the following tables.

Philips Group

Reconciliation of Average Net operating capital1 in millions of EUR


	2022	2023	2024
Tangible fixed assets	2,715	2,553	2,467
Intangible assets (including goodwill)	14,684	13,475	13,175
Inventories	3,999	3,984	3,499
Receivable balances²	5,043	4,981	4,761
Payable balances³	(7,129)	(6,810)	(6,440)
Provisions⁴	(2,313)	(2,420)	(2,909)
Group Average Net operating capital	16,999	15,763	14,554
Net operating capital of businesses acquired	(5,739)	(4,081)	(3,579)
Average Net operating capital	11,260	11,681	10,974

1All line items represent the average of each of the five quarters ending before the relevant measurement

date.

2Receivable balances consists of (Non-)Current receivables, Other (non-)current assets, (Non-)Current

derivative financial assets and Income tax receivable.

3Payable balances consist of Accounts payable, Accrued liabilities, (Non-)Current contract liabilities, Other

(Non-)current liabilities, (Non-) current derivative financial liabilities and (Non-)Current tax liabilities.

4Provisions consist of Long-term and Short-term provisions.

Philips Group

Reconciliation of Net Income to Organic ROIC in millions of EUR unless otherwise stated


	2022	2023	2024
Net Income	(1,605)	(463)	(698)
Discontinued operations, net of income taxes	(13)	10	(142)
Income tax expense (benefit)	(113)	(73)	963
Investments in associates, net of income taxes	2	98	124
Financial expenses	258	376	387
Financial income	(58)	(63)	(105)
Income from operations	(1,529)	(115)	529
Income tax (expense) benefit	113	73	(963)
Loss from operations of businesses acquired	178	253	174
Tax effects on loss from operations of businesses acquired	(45)	(56)	(41)
Goodwill impairment	1,357	8	-
Impairment of acquired intangible asset			132
Other items:	802	1,181	691
Respironics litigation provision		575	984
Respironics insurance income			(538)
Respironics consent decree charges	250	363	113
Respironics field-action running costs	210	224	133
R&D project impairments	134
Portfolio realignment charges	109
Impairment of assets in S&RC	39
Provision for specified legal matters	60	31
Investment re-measurement loss		23
Loss (gain) on divestment of business		(35)
Tax impact on adjusting item¹	(169)	(140)	(165)
Tax effect of derecognition of US deferred tax asset			941
Organic return	707	1,204	1,299
Average Net operating capital	11,260	11,681	10,974
Organic ROIC (%)	6.3%	10.3%	11.8%

1Includes deferred tax assets derecognized in the line below.


	293


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.10Other Key Performance Indicators

In addition to monitoring the IFRS and non-IFRS financial measures discussed under Financial

performance , Philips management also uses the following other key performance indicators to

monitor the performance of the business and to manage the business.

Philips Group

Other Key Performance Indicators


	2022	2023	2024
Lives improved, in billions	1.81	1.88	1.96
Operational carbon footprint, in kilotonnes CO₂- equivalent	438	418	474
Circular revenue	18.1%	20.0%	24.4%
Waste to landfill	0.0%	0.0%	0.0%
Closing the Loop	35.3%	20.5%	19.5%
Comparable order intake	(3)%	(6)%	1%

Lives Improved

The purpose of Philips is to improve people’s health and well-being through meaningful innovation

and we aim to improve the lives of 2 billion people a year by 2025, including 300 million in

underserved communities, rising to 2.5 billion and 400 million respectively by 2030. We use Lives

Improved as a measurement of our societal impact. In the course of 2021 we changed the

definition of ‘lives improved’ (effective January 2021) to align more closely with our purpose. The

new definition includes only products or solutions that contribute to people’s health and well-

being, and no longer includes the contribution from our Green Products and Solutions that support

a healthy ecosystem. Additionally, as we discontinued our Domestic Appliances business, we have

removed the impact of this business from the Lives Improved results. The combined impact of these

changes resulted in an overall drop of 223 million lives improved in 2021. We calculate Lives

Improved as the number of individual interactions for each product sold (based on market

intelligence and statistical data) and multiply by the number of those products delivered in a year

(eliminating double counting for multiple different product touches per individual). See Improving

people’s lives for more information on Lives Improved.

Operational Carbon Footprint

We aim to minimize our environmental impact and we use the Operational Carbon Footprint as

one of the measurements of our impact. We define Operational Carbon Footprint as the total

greenhouse gas emissions caused by an organization, event, product or person; expressed in

kilotonnes CO 2 -equivalent. We calculate our Operational Carbon Footprint on a monthly basis and

include industrial sites (manufacturing and assembly sites), non-industrial sites (offices, warehouses,

IT centers and R&D facilities), business travel (lease and rental cars and airplane travel) and logistics

(air, sea and road transport) See Climate change for more information on our Operational Carbon

Footprint.

Circular Revenues

Propositions that qualify for circular revenues must comply with the requirements for at least one of

the circular revenue categories. These include, among others, products with low weight or

containing a minimum threshold of recycled or bio-based plastics, as-a-service models, software

running on cloud, telehealth, upgrades, lifetime extensions, and refurbished equipment.

Waste to Landfill

At Philips, as a responsible company, we strive to reduce our environmental impact. We define

Waste to Landfill as total waste that is delivered for landfill and exclude one-time-only waste and

waste delivered to landfill due to regulatory requirements. We calculate Waste to Landfill in

kilotonnes per year. See Resource use and circular economy for more information on Waste to

Landfill.

Closing the Loop

Closing the loop means we are embedding a policy to responsibly take back all professional

medical equipment sold directly to customers as part of a trade-in offer or as a service at customer

request. As part of the policy, we will ensure that equipment coming back to us is, where feasible,

made available for refurbishment and/or parts recovery, or locally recycled in a certified way to

ensure it does not end up in landfill. We monitor the impact of our policies by measuring the

amount of equipment that we collect from our customers. We report on this as ‘reclaimed

equipment’.

Philips believes that the five other key performance indicators described above (Lives Improved,

Operational Carbon Footprint, Circular Revenues, Waste to Landfill and Closing the Loop) provide

important information to investors and are important to understanding the long-term performance

and prospects of the business. In addition, these other key performance indicators are also used for

management compensation purposes. Members of the Board of Management are eligible for

grants of performance shares under the Long-Term Incentive (LTI) Plan, and the vesting of the

performance shares is subject to performance over a period of 3 years and based on certain criteria,

including a 10% weighting for Sustainability Objectives, which Philips defines as the five other key

performance indicators described above: Lives Improved, Carbon Footprint, Circular Revenues,

Waste to Landfill and Closing the Loop. Philips believes that including these other key performance

indicators in our remuneration policy encourages management to act responsibly and sustainably,

supporting the company’s overall performance and enhancing the long-term value of the company.

See Remuneration of the Board of Management in 2024 for more information on the Philips Long-

Term Incentive (LTI) Plan.

Philips currently intends to propose a 2025 Remuneration Policy for the Board of Management

which would, among other things, provide for the vesting of performance shares subject to

performance over a period of 3 years and based on certain criteria, including a 20% weighting for

Sustainability Objectives, which would be defined under that plan as: Lives Improved, Carbon

Footprint, Circular Revenues and Employee Engagement Index. The 2025 Remuneration Policy is

subject to the approval of Philips shareholders at the 2025 AGM. See Remuneration of the Board of


	294


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Management in 2024 . For more information on the Philips Long-Term Incentive (LTI) Plans under

the 2020 Remuneration Policy and the currently proposed 2025 Remuneration Policy.

Comparable order intake

Comparable order intake represents the period-on-period growth, expressed as a percentage, in

order intake excluding the effects of currency movements and changes in consolidation.

Comparable order intake is reported for equipment and software in the Diagnoses & Treatment

and Connected Care segments, and is defined as the total contractually committed value of

equipment and software to be delivered within a specified timeframe, and is an approximation of

expected future revenue growth in the respective Businesses. Comparable order intake does not

derive from the financial statements and a quantitative reconciliation is thus not provided. In 2023,

comparable order book was tracked for Businesses that represented approximately 40% of 2023

sales.

Effective in the first quarter of 2024, Philips revised the order intake policy to reflect the full

contract value for software contracts that start generating revenue within an 18-month horizon,

instead of only the next 18-months-to-revenue horizon. This change has been implemented to

better align with the specific business model of our software businesses, simplify the order intake

process, and better align with peers. Prior-period comparable order intake percentages have been

restated accordingly. This revision did not resulted in any material changes to the order intake

percentages for the periods presented. Philips believes this policy eliminates major variances in

order intake growth and better reflects expected revenue in the short term from order intake

booked in the reporting period.

Philips uses comparable order intake as an indicator of business activity and performance.

Comparable order intake is not an alternative to revenue and may be subject to limitations as an

analytical tool due to differences in amount and timing between booking orders and revenue

recognition. Due to divergence in practice, other companies may calculate this or a similar measure

(such as order backlog) differently and therefore comparisons between companies may be

complicated.

Comparable order intake increased to 1% in 2024, compared to a 6% decline in 2023 .

Comparable order intake is presented when discussing Philips' group performance.

9.11Forward-looking statements and other information

Forward-looking statements

This document contains certain forward-looking statements with respect to the financial condition,

results of operations and business of Philips and certain of the plans and objectives of Philips with

respect to these items. Examples of forward-looking statements include statements made about

our strategy, estimates of sales growth, future Adjusted EBITA*, future restructuring and

acquisition-related charges and other costs, future developments in Philips’ organic business and

the completion of acquisitions and divestments. Forward-looking statements can be identified

generally as those containing words such as “anticipates”, “assumes”, “believes”, “estimates”,

“expects”, “should”, “will”, “will likely result”, “forecast”, “outlook”, “projects”, “may” or

similar expressions. By their nature, these statements involve risk and uncertainty because they

relate to future events and circumstances and there are many factors that could cause actual results

and developments to differ materially from those expressed or implied by these statements.

These factors include but are not limited to: macro-economic and geopolitical changes including

protectionism measures such as announced and proposed tariffs and retaliatory trade measures in

response thereto; Philips’ ability to keep pace with the changing health technology environment;

Philips’ ability to gain leadership in health informatics and artificial intelligence in response to

developments in the health technology industry; integration of acquisitions and their delivery on

business plans and value creation expectations; ability to meet expectations with respect to ESG-

related matters; securing and maintaining Philips’ intellectual property rights, and unauthorized use

of third-party intellectual property rights; failure of products and services to meet quality or security

standards, adversely affecting patient safety and customer operations; the resilience of our supply

chain; challenges in simplifying our organization and our ways of working; attracting and retaining

personnel; breach of cybersecurity; challenges in driving operational excellence and speed in

bringing innovations to market; treasury and financing risks; tax risks; reliability of internal controls;

compliance with regulations and standards involving quality, product safety, (cyber) security and

artificial intelligence; and compliance with business conduct rules and regulations including privacy,

existing and upcoming ESG disclosure and due diligence requirements.

As a result, Philips’ actual future results may differ materially from the plans, goals and expectations

set forth in such forward-looking statements. For a discussion of factors that could cause future

results to differ from such forward-looking statements, reference is made to the information in Risk

factors.

Third-party market share data

Statements regarding market share, contained in this document, including those regarding Philips’

competitive position, are based on outside sources such as specialized research institutes, industry

and dealer panels in combination with management estimates. Where full year information

regarding 2024 is not yet available to Philips, market share statements may also be based on

estimates and projections prepared by management and/or based on outside sources of

information. Management’s estimates of rankings are based on order intake or sales, depending on

the business.


	295


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Use of non-IFRS information

In presenting and discussing the Philips Group’s financial position, operating results and cash flows,

management uses certain non-IFRS financial measures. These non-IFRS financial measures should

not be viewed in isolation as alternatives to the equivalent IFRS measure and should be used in

conjunction with the most directly comparable IFRS measures. Non-IFRS financial measures do not

have standardized meaning under IFRS and therefore may not be comparable to similar measures

presented by other issuers. A reconciliation of these non-IFRS measures to the most directly

comparable IFRS measures is contained in Reconciliation of non-IFRS information.

Statutory financial statements and management report

The chapters Group financial statements and Company financial statements contain the statutory

financial statements of the company. The introduction to the chapter Group financial statements

sets out which parts of this Annual Report form the management report within the meaning of

Section 2:391 of the Dutch Civil Code.

*Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS

measure, refer to Reconciliation of non-IFRS information.


	296


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.12Investor information

9.12.1Share information

Philips Group

Share information at year-end 2024


Share listings	Euronext Amsterdam, New York Stock Exchange
Ticker code	PHIA, PHG
No. of shares issued	940 million
No. of shares issued and outstanding	925 million
Market capitalization	EUR 23 billion
Industry classification
MSCI: Health Care Equipment	35101010
ICB: Medical Equipment	4535
Members of indices	AEX, NYSE, STOXX Europe 600 Healthcare, MSCI Europe Health Care

The following information is based on a shareholder base analysis carried out for investor relations

purposes by an independent provider in December 2024.

Philips Group

Shareholders by region at year-end 1


	2024
United States	40%
Netherlands	18%
United Kingdom	11%
Switzerland	3%
Rest of Europe	9%
Retail and Other²	19%

1Approximate split based on shareholders identified.

2No geography identified for Retail and Other.

Philips Group

Shareholders by style at year-end1


	2024
Value	50%
Index	14%
GARP	11%
Growth	7%
Retail	9%
Other	7%
Hedge Fund	2%

1Approximate split based on shareholders identified.

9.12.2Financial calendar

The financial calendar for the current year, which contains the publication dates of significant

financial communications, is published on the company’s website https://www.philips.com/a-w/

about/investor-relations/events .

2025 Annual General Meeting of Shareholders

The Agenda and the explanatory notes to the Agenda for the Annual General Meeting of

Shareholders on May 8, 2025, will be published on the company’s website.

For the 2025 Annual General Meeting of Shareholders, a record date of April 10, 2025 will apply.

Those persons who, on that date, hold shares in the company, and are registered as such in one of

the registers designated by the Board of Management for the Annual General Meeting of

Shareholders, will be entitled to participate in, and vote at, the meeting.


	297


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.12.3Investor contact

Shareholder services

Shareholders and other interested parties can make inquiries about the Annual Report 2024 to:

Royal Philips

Annual Report Office

Philips Center

Amstelplein 2

1096 BC Amsterdam, The Netherlands

Email: annual.report@philips.com

The Annual Report on Form 20-F is filed electronically with the US Securities and Exchange

Commission.

Holders of shares listed on Euronext Amsterdam

Communications concerning share transfers, share certificates, dividends and change of address

should be directed to:

ABN AMRO Bank N.V.

Department Equity Capital Markets/Corporate Broking and Issuer Services HQ7212

Gustav Mahlerlaan 10,

1082 PP Amsterdam, The Netherlands

Telephone: +31-20-628-6070

Email: corporate.broking@nl.abnamro.com

Holders of New York Registry shares

Communications concerning share transfers, share certificates, dividends and change of address

should be directed to:

Deutsche Bank Trust Company Americas

C/O Equiniti Trust Company LLC

Peck Slip Station, PO Box 2050, New York NY 10272-2050

Telephone (toll-free US): +1-866-706-8374

Telephone (outside of US): +1-718-921-8137

Website: www.equiniti.com/us/ast-access

Email: adr@equiniti.com

International direct investment program

Royal Philips offers a Dividend Reinvestment and Direct Stock Purchase Plan designed for the US

market. This program provides existing shareholders and interested investors with an economical

and convenient way to purchase and sell Philips New York Registry shares (listed at the New York

Stock Exchange) and to reinvest cash dividends. Deutsche Bank (the registrar of Philips NY Registry

shares) has been authorized to implement and administer both plans for registered shareholders of

and new investors in Philips NY Registry shares. Philips does not administer or sponsor the Program

and assumes no obligation or liability for the operation of the plan. For further information on this

program and for enrollment forms, contact:

Deutsche Bank Trust Company Americas

C/O Equiniti Trust Company LLC

PO Box 10027, Newark NJ 07101

Telephone (toll free US): +1-866-706-8374

Telephone (outside of US): +1-718-921-8137

Website:www.equiniti.com/us/ast-access

Email: adr@equiniti.com

Analysts’ coverage

Royal Philips is covered by approximately 20 analysts. For a list of our current analysts, please refer

to: www.philips.com/a-w/about/investor/stock-info/analyst-coverage.html

How to reach us

Investor Relations contact

Royal Philips

Philips Center

Amstelplein 2

1096 BC Amsterdam, The Netherlands

Telephone: +31-20-59 77222

Website: www.philips.com/investor

Email:investor.relations@philips.com

Sustainability contact

Royal Philips

High Tech Campus 34, 4th floor

5656 AE Eindhoven, The Netherlands

Website: www.philips.com/sustainability

Email: philips.sustainability@philips.com

Press Office contact

Royal Philips

Philips Center

Amstelplein 2

1096 BC Amsterdam, The Netherlands

Email: group.communications@philips.com

For media contacts please refer to:

https://www.philips.com/a-w/about/news-and-insights/media-contacts.html

Registered address

High Tech Campus 52, 5656 AG Eindhoven, The Netherlands


	298


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

9.13Definitions and abbreviations

Actionable

In the context of the Respironics recall, actionable registrations are those that contain the necessary

information needed to complete the remediation and are not awaiting further information,

including from patient registrants.

Artificial Intelligence (AI)

While recognizing that Philips must abide by definitions of AI set by applicable regulations in

different regions in the world, Philips applies the AI definition from the Organization for Economic

Cooperation and Development (OECD): “An AI system is a machine-based system that, for explicit

or implicit objectives, infers, from the input it receives, how to generate outputs such as

predictions, content, recommendations, or decisions that can influence physical or virtual

environments. Different AI systems vary in their levels of autonomy and adaptiveness after

deployment.”

Biodiversity and Ecosystem services (BES)

Biodiversity is the variability among living organisms from all sources including terrestrial, marine

and other aquatic ecosystems and the ecological complexes of which they are part. This includes

diversity within species, between species and of ecosystems. Ecosystem services refers to the

contributions of ecosystems to the benefits that are used in economic and other human activity.

Biome

Global-scale zones, generally defined by the type of plant life that they support in response to

average rainfall and temperature patterns e.g. tundra, coral reefs or savannas.

Brominated flame retardants (BFR)

Brominated flame retardants are a group of chemicals that have an inhibitory effect on the ignition

of combustible organic materials. Of the commercialized chemical flame retardants, the brominated

variety are most widely used.

Business/Business Unit

In the Philips Operating Model, our three operating segments are made up of six Businesses, which

are in turn comprised of 17 Business Units. See also the entry under Segment.

CO 2 -equivalent

CO 2 -equivalent or carbon dioxide equivalent is a quantity that describes, for a given mixture and

amount of greenhouse gas, the amount of CO 2 that would have the same global warming

potential (GWP), when measured over a specified timescale (generally 100 years).

Circular economy

A circular economy aims to decouple economic growth from the consumption of natural resources

by optimizing their use, eliminating waste and pollution, and circulating products and materials for

as long as possible, while giving natural systems the opportunity to regenerate themselves.

Circular innovation

Innovation with the objective to create a product, service or solution contributing to circular

practices.

Circular Materials Management

Circular Materials Management is a KPI for promoting an increase in the proportion of waste

treated using waste management hierarchy levels that are circular: prevention, re-use, and

recycling. Circular Materials Management % is the proportion of materials managed circularly in

comparison to the total used materials baseline. The total used materials baseline is the total of

both circular and linear waste, excluding linear disposal of waste that is required by law. Circular

Materials Management includes recycling, re-use, prevention and other recovery (e.g. repurposing).

It excludes all linear disposal, which is classified as waste to energy, incineration and landfill.

Circular Revenues

Circular Revenues are revenues from Philips products, services and solutions that contribute to

circular practices. Circular revenues can be expressed as percentage % of the total Philips revenues.

Closing the Loop / reclaimed equipment

Closing the loop means we are embedding a policy to responsibly take back all professional

medical equipment sold directly to customers as part of a trade-in offer or as a service at customer

request. As part of the policy, we will ensure that equipment coming back to us is, where feasible,

made available for refurbishment and/or parts recovery, or locally recycled in a certified way to

ensure it does not end up in landfill. We monitor the impact of our policies by measuring the

amount of equipment that we collect from our customers. We report on this as ‘reclaimed

equipment’.

Dividend yield

The dividend yield is the annual dividend payment divided by Philips’ market capitalization. All

references to dividend yield are as of December 31 of the previous year.

EcoDesigned Innovation

Innovation with the objective to create a technology improving environmental impact or and

EcoDesigned product, service or solution.

EcoDesigned Products

An EcoDesigned Product must comply with all applicable legal requirements, Philips policies, and all

stated EcoDesigned Product requirements in our four focal areas: Energy, Substances, Circularity

and Packaging.

EcoHero Product

An EcoHero product meets all EcoDesign requirements applicable to new product introductions

and outperforms in at least one of the focal areas of EcoDesign (Energy, Packaging, Substances and

Circularity) either compared to their predecessor or relevant benchmarks, or meeting a set

threshold, supported by a sustainability claim.


	299


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

EcoHero Revenues

The revenue of products, services and solutions that meet the EcoHero requirements. EcoHero

revenues can be expressed as percentage % of the total Philips Hardware revenues.

Employee Engagement Index

The Employee Engagement Index (EEI), a value outcome measure as part of the International

Integrated Reporting Council framework, is measured at Philips by the People Engagement Survey.

This survey provides the single measure of the overall level of employee engagement at Philips, the

People Engagement Score, which is a combination of perceptions and attitudes related to

employee satisfaction, commitment and advocacy.

Energy-using Products (EuP)

An energy-using product is a product that uses, generates, transfers or measures energy (electricity,

gas, fossil fuel). Examples include boilers, computers, televisions, transformers, industrial fans and

industrial furnaces.

Functions

In the Philips Operating Model, Businesses are supported by lean Functions. The Functions deliver

cost-effective services, ensure legal and regulatory requirements are deployed, and propose

Enterprise policies, standards, guidance and infrastructure, as well as providing capabilities and

expertise (e.g., via Centers of Excellence).

Full-time equivalent employee (FTE)

Full-time equivalent is a way to measure a worker’s involvement in a project. An FTE of 1.0 means

that the person is equivalent to a full-time worker, while an FTE of 0.5 signals that the worker

works half-time.

Global Reporting Initiative (GRI)

The Global Reporting Initiative (GRI) is a network-based organization that pioneered the world’s

most widely used sustainability reporting framework. GRI is committed to the framework’s

continuous improvement and application worldwide. GRI’s core goals include the mainstreaming of

disclosure on environmental, social and governance performance.

Green Innovation Spend

Green Innovation comprises all R&D activities directly contributing to the intended development

and maintenance of EcoDesigned Innovation and Circular innovation.

Green Revenues

Green Revenues is revenues from EcoDesigned products, refurbished products, rentals, leases, as-a-

service, upgrades and green services. Green revenue can be expressed as percentage % of the total

Philips revenues.

Growth geographies

Growth geographies consists of the grouping 'Growth', which comprises the developing

geographies Asia Pacific (excluding Japan, South Korea, Australia and New Zealand), Latin America,

Central & Eastern Europe, Middle East & Turkey (excluding Israel) and Africa.

Hazardous substances

Hazardous substances are generally defined as substances posing imminent and substantial danger

to public health and welfare or the environment.

Income from operations (EBIT)

Income from operations as reported on the IFRS consolidated statement of income. The term EBIT

(earnings before interest and tax) has the same meaning as Income from operations.

Income from continuing operations

Income from continuing operations as reported on the IFRS consolidated statement of income,

which is net income from continuing operations, or net income excluding discontinued operations.

Lean

The basic insight of Lean thinking is that if every person is trained to identify wasted time and effort

in their own job and to better work together to improve processes by eliminating such waste, the

resulting enterprise will deliver more value at less expense.

Lives improved by Philips

To calculate how many lives we are improving, market intelligence and statistical data on the

number of people touched by the products contributing to the social or ecological dimension over

the lifetime of a product are multiplied by the number of those products delivered in a year. After

elimination of double counts – multiple different product touches per individual are only counted

once – the number of lives improved by our innovative solutions is calculated.

Locate, Evaluate, Assess, and Prepare (LEAP)

Integrated approach for the assessment of nature related issues that involves four phases: Locate,

Evaluate, Assess, and Prepare methodology to identify impact, dependencies, risks and

opportunities on nature.

Long-term strategic partnership

Multi-year contractual agreement that represents a partnership to enable long-term collaboration.

Mature geographies

Mature geographies are the highly developed markets constituting three geographic areas:

Western Europe, North America, and Other mature (including Japan, South Korea, Israel, Australia

and New Zealand).


	300


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Natural capital

The stock of renewable and non-renewable natural resources (e.g. plants, animals, air, water, soils,

minerals) that combine to yield a flow of benefits to people .

Nature

The natural world, with an emphasis on the diversity of living organisms (including people) and

their interactions among themselves and with their environment.

Net Promoter Score

Net Promoter Score ® , or NPS ® , measures customer experience and predicts business growth. NPS is

calculated by taking the answer to a key question on a 0-10 scale: How likely is it that you would

recommend {brand} to a friend or colleague?

Respondents are grouped as follows:

• Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, fueling

growth.

• Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to competitive

offerings.

• Detractors (score 0-6) are unhappy customers who can damage the brand and impede growth

through negative word-of-mouth.

Subtracting the percentage of Detractors from the percentage of Promoters yields the Net

Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a high of

100 (if every customer is a Promoter).

Operational carbon footprint

A carbon footprint is the total set of greenhouse gas emissions caused by an organization, event,

product or person; usually expressed in kilotonnes CO2-equivalent. Philips' operational carbon

footprint is calculated on a monthly basis and includes industrial sites (manufacturing and assembly

sites), non-industrial sites (offices, warehouses, IT centers and R&D facilities), business travel (lease

and rental cars and airplane travel) and logistics (air, sea and road transport).

Philips Lighting/Signify

References to 'Signify' in this Annual Report relate to Philips' former Lighting segment (prior to

deconsolidation as from the end of November 2017 and when reported as discontinued

operations), Philips Lighting N.V. (before or after such deconsolidation) or Signify N.V. (after its

renaming in May 2018), as the context requires.

Polyvinyl chloride (PVC)

Polyvinyl chloride, better known as PVC or vinyl, is an inexpensive plastic so versatile it has become

completely pervasive in modern society.

REACH

Registration, Evaluation, Authorization and Restriction of Chemicals (REACH;Regulation (EC) No

1907/2006) is a EU regulation that addresses the production and use (e.g. in products) of chemical

substances, and their potential impact on both human health and the environment. This regulation

is covered in the Philips Regulated Substances List.

Regulated Substance List

Philips Regulated Substances List (RSL) combines legal, industry, and voluntary Philips requirements

regarding chemical substances used in Philips products and their packaging, either on a

homogenous material level or present in the product as such. The RSL contains restricted and

declarable substances.

Respironics recall

The voluntary recall notification in the US and field safety notice outside the United States for

certain sleep and respiratory care products initiated by Philips Respironics in 2021.

Responsible Business Alliance (RBA)

The Responsible Business Alliance (formerly known as The Electronic Industry Citizenship Coalition

(EICC)) was established in 2004 to promote a common code of conduct for the electronics and

information and communications technology (ICT) industry. EICC now includes more than 100

global companies and their suppliers.

Restriction on Hazardous Substances (RoHS)

The RoHS Directive prohibits all new electrical and electronic equipment placed on the market in

the European Economic Area from containing lead, mercury, cadmium, hexavalent chromium, poly-

brominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE)and four phthalates (DEHP,

DBP, BBP and DiHP), except in certain specific applications, in concentrations greater than the

values decided by the European Commission. These values have been established as 0.01% by

weight per homogeneous material for cadmium and 0.1% for the other nine substances. This

regulation is covered in the Philips Regulated Substances List.

Segment

The Philips Operating Model identifies three operating segments – Diagnosis & Treatment,

Connected Care and Personal Health – comprised of six Businesses and 17 Business Units, as well

as segment Other. Other includes Innovation & Strategy, IP Royalties, Central Costs, and other small

items. See also the entry under Business/Business Unit.

Solution

A combination of Philips (and 3rd-party) systems, devices, software, consumables and services,

configured and delivered in a way to solve customer (segment)-specific needs and challenges.

Sustainable Development Goals

The Sustainable Development Goals (SDGs) are a collection of 17 global goals set by the United

Nations. The broad goals are interrelated though each has its own targets. The SDGs cover a broad

range of social and economic development issues. These include poverty, hunger, health,

education, climate change, water, sanitation, energy, environment and social justice.


	301


Contents	1 Our Management	2 Strategy	3 Financial performance	4 Environmental, Social and Governance	5 Supervisory Board	6 Group financial statements	7 Company financial statements	8 Sustainability statement	9 Further information

Sustainable Innovation

Innovation with the objective to create a sustainable product, service, or solution.

Sustainable product

Products and solutions that contribute to public health or to lowering the environmental footprint.

Philips has distinct categories of sustainable products: healthy products (care, healthy living), circular

products, EcoDesigned products.

VOC

Volatile organic compounds (VOCs) are organic chemicals that have a high vapor pressure at

ordinary room temperature. Their high vapor pressure results from a low boiling point, which

causes large numbers of molecules to evaporate or sublimate from the liquid or solid form of the

compound and enter the surrounding air, a trait known as volatility.

Voluntary turnover

Voluntary turnover covers all employees who resigned of their own volition.

Waste Electrical and Electronic Equipment (WEEE)

The Waste Electrical and Electronic Equipment Directive (WEEE Directive) is the European

Community directive on waste electrical and electronic equipment setting collection, recycling and

recovery targets for all types of electrical goods. The directive imposes the responsibility for the

disposal of waste electrical and electronic equipment on the manufacturers of such equipment.

Weighted Average Statutory Income Tax Rate (WASTR)

The reconciliation of the effective tax rate is based on the applicable statutory tax rate, which is a

weighted average of all applicable jurisdictions. This weighted average statutory tax rate (WASTR) is

the aggregation of the result before tax multiplied by the applicable statutory tax rate without

adjustment for losses, divided by the group result before tax.