Glossary

Explanation of some concepts and ratios

General

Biosciences¹

Biosciences are any of the sciences that deal with living organisms.

Brighter Living Solutions

Brighter Living Solutions (BLS) is DSM’s program for the development of sustainable, innovative solutions with environmental and/or social benefits, creating shared value for our stakeholders. Brighter Living Solutions are products, services and technologies that, considered over their life cycle, offer a superior environmental impact (ECO+) and/or a superior social impact (People+) when compared to the mainstream alternative for the same application. The impact of Brighter Living Solutions can be realized at any stage of the product life cycle, from raw materials through the manufacturing process to potential re-use and end-of-life disposal.

Within the program, DSM conducts an annual ‘Product Category Sustainability Review’ for all product categories. This review identifies environmental and social impact differentiators and risks for each of our product categories and confirms the mainstream reference solution. To substantiate the identified differentiators DSM uses comparative Life Cycle Assessments (LCAs) and/or expert opinions to determine whether a product has a superior performance and can be identified as a Brighter Living Solution.

Superior environmental and/or social impact: Eco+ and People+

ECO+ qualifications are made based on a comparative Environmental LCA using ISO-standards to evaluate environmental footprint, or documented expert opinion by business managers and internal sustainability experts.

The People+ qualifications are made based on our People LCA methodology, which has been developed in line with industry-leading initiatives such as the Roundtable for Product Social Metrics, or an expert opinion. The People LCA method helps to identify social impacts of products on the dimensions health, comfort and well-being, working conditions, and community development.

More information and definitions can be found on the company website.

FFP

EN 149 is a European standard of testing and marking requirements for filtering masks covering the nose, mouth and chin and may have inhalation and/or exhalation valves. This standard defines three classes of such particle half masks, called FFP1, FFP2 and FFP3, (FFP = Filtering Face Piece) according to their filtering efficiency.²

Integrated Reporting <IR> Framework — Value Creation model

The Value Creation diagram is based on the International Integrated Reporting Council’s Integrated Reporting <IR> framework and gives an overview of how we create value for our stakeholders based on six capital inputs.

Human capital (People)

We employ skilled and talented people from diverse backgrounds. We strive to provide employees with a safe and inspiring workplace as well as with the tools and training they need to be effective and to develop their abilities. We reward employees with competitive benefit packages.

Societal & relationship capital (People)

We engage with various stakeholders to ensure close alignment between our aims and societal needs. We generate value for stakeholders outside our direct value chains of employees, suppliers, customers and end-users; these include employees’ families, governments, local communities and civil society.

Natural capital (Planet)

We recognize that the world is an interconnected system of resources. For us, this represents a responsibility and a business opportunity. We aim to improve the environmental impact of our supply chain, operations and products and services, while developing innovative solutions that deliver sustainability benefits to customers and beyond.

Financial capital (Profit)

Providers of capital — shareholders and bondholders, banks and the financial markets — supply funds that we use in our business to create value, driving growth and delivering sustainable returns.

Intellectual capital (Profit)

We manufacture and distribute high-quality products and services safely, efficiently and responsibly, and strive to develop valuable, collaborative and long-term relationships with customers and suppliers. We pursue open innovation, connecting and collaborating with partners and investing in start-ups.

Manufactured capital (Profit)

We have unique competences in life sciences and materials sciences and connect these to deliver innovative solutions that nourish, protect and improve performance

People

Equal pay and gender pay gap

Equal pay is a legal requirement for men and women to be paid the same for performing the same or similar work or work that has been rated as being of equal value (by job evaluation). The gender pay gap zooms in on the difference between what men typically earn overall in an organization compared to women, irrespective of their role or seniority.

Eubiotics

The general term ‘Eubiotics’, is related to the Greek term ‘Eubiosis’ and relates to feed ingredients that support an optimal balance of microbiota in the gastrointestinal tract of livestock animals. They promote efficient gut performance so as to produce well-nourished animals that get the most from their feed, while at the same time sustaining their health and welfare and protecting the environment.

Frequency Index (FI)

The Frequency Index is a way to measure safety performance. The number of accidents of a particular category per 100 employees per year.

Inclusion Index

The Inclusion Index is a subset of items in the Employee Engagement (Pulse) Survey to specifically measure Inclusion. Inclusion is: “A working environment where all employees are a full and equal member of a team; where diverse perspectives are valued, and investment is made in their development; where people are respected and able to contribute as they are and not having to conform; where they can reach their potential, and where they can speak up without fear of retribution.”

Lives Reached

Lives Reached is a measure of consumers already reached through consumer products of third parties containing DSM products and solutions. This measure addresses key end-markets representing more than 25% of DSM’s total sales. These end-markets cover our business segments — Nutrition, Materials and Innovation Center.

The number of Lives Reached is calculated for each market separately and then aggregated. As a business-to-business company, our products reach end-consumers via third parties, so calculations per market are performed at global level. Consumer touch points are assumed to be unrelated, and overlap is eliminated using statistical methods (De Morgan’s Law and Probability Theory — Independence). The actual overlap may be larger or smaller than calculated based on this assumption.

Key assumptions are used to perform these calculations and include DSM’s market share, total consumer markets, share of wallet and consumer consumption behavior. These assumptions are made based on external market data where available, supplemented with market and business intelligence insights.

For more information on Lives Reached, see the company website.

Living wage

The remuneration received for a standard working time by an employee in a particular place sufficient to afford a decent standard of living for the employee and his/her family. Elements of a decent standard of living include food, water, housing, education, health care, transport, clothing, and other essential needs, including provision for unexpected events.

LWC rate DSM-own

The Lost Workday Case (LWC) rate DSM-own is the number of lost workday cases per 100 DSM employees in the past 12 months: LWC rate = 100 * (number of LWCs (past 12 months) / average effective manpower (past 12 months)).

Occupational Health Case

This refers to any abnormal condition or disorder requiring medical treatment — other than one resulting directly from an accident — caused by, or mainly caused by, repeated exposure to work-related factors.

PSI rate

The PSI rate is the number of Process Safety Incidents per 100 DSM employees and contractor employees in the past 12 months: PSI rate = 100 * (number of PSIs (past 12 months) / average effective manpower including contractor employees (past 12 months)).

REC rate DSM-all

The REC rate DSM-all is the number of recordable injuries per 100 DSM employees and contractor employees in the past 12 months: REC rate = 100 * (number of RECs (past 12 months) / average effective manpower including contractor employees (past 12 months)).

Safety, Health and Environment (SHE)

DSM’s policy is to maintain business activities and produce products that do not adversely affect safety or health, and that fit with the concept of sustainable development. The company does this by setting the following objectives: to provide an injury-free and incident-free workplace; to prevent all work-related disabilities or health problems; to control and minimize the risks associated with DSM’s products for their whole life cycle and to choose production processes and products such that the use of raw materials and energy is minimized; to evaluate and improve DSM’s practices, processes and products continuously in order to make them safe and acceptable to its employees, the customers, the public and the environment.

United Nations Global Compact

A strategic policy initiative for businesses that are committed to aligning their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment and anti-corruption.

United Nations’ Universal Declaration of Human Rights

On 10 December 1948, the General Assembly of the United Nations adopted and proclaimed the Universal Declaration of Human Rights. Following this historic act, the Assembly called upon all Member countries to publicize the text of the Declaration and “to cause it to be disseminated, displayed, read and expounded principally in schools and other educational institutions, without distinction based on the political status of countries or territories.”

Planet

Biofuel

A fuel which is derived from renewable organic resources, as distinct from one which is derived from non-renewable resources such as crude oil and natural gas.

Carbon footprint

The total set of direct and indirect greenhouse gas emissions expressed as CO₂eq.

Carbon price

The price that is paid to emit one ton CO₂eq into the atmosphere. DSM implements an internal carbon price of €50/t CO₂eq.

Circular economy

Circular economy refers to an economy that is restorative and in which materials flows are of two types: biological nutrients, designed to re-enter the biosphere safely, and technical nutrients, which are designed to circulate at high quality without entering the biosphere throughout their entire lifecycle.

CO₂

Carbon dioxide, a gas that naturally occurs in the atmosphere. It is part of the natural carbon cycle through photosynthesis and respiration. It is also generated as a by-product of combustion. Carbon dioxide is a greenhouse gas.

Chemical Oxygen Demand (COD)

COD is an indicator of the degree of pollution of waste water by organic substances.

Eco-efficiency

Eco-efficiency is a concept (created in 1992 by the WBCSD) that refers to the creation of more goods and services while using less resources and creating less waste and pollution throughout their entire life cycle. In the context of DSM’s SHE targets, eco-efficiency relates specifically to the reduction of emissions and energy and water consumption, relative to the production volumes of DSM’s plants.

Energy

Primary energy is energy that has not yet been subjected to a human engineered conversion process. It is the energy contained in unprocessed fuels.

Final (consumed) energy is the energy that is consumed by end-users. The difference between primary energy and final consumed energy is caused by the conversion process between the two as well as any transmission losses.

Essential for life

Essential for life refers to products that have a proven beneficial nutritional or pharmaceutical effect when used at the officially recommended dose.

Greenhouse gas emissions (GHG)

Scope 1: Direct GHG emissions
Direct GHG emissions occur from sources that are owned or controlled by the company (i.e., emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc.).

Scope 2: Indirect GHG emissions
Indirect GHG emissions relate to the generation of purchased energy (i.e., electricity, heat or cooling) consumed by the company. Purchased energy is defined as energy that is purchased or otherwise brought into the organizational boundary of the company. Scope 2 emissions physically occur at the facility where the energy is generated.

Scope 3: Value chain emissions
Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions.

Location-based emissions
Reflects the average GHG emissions intensity of grids on which electricity consumption occurs (using mostly national grid-average emission factor data). Corresponding emission factor: in most cases, the country emission factor.

Market-based emissions
Reflects GHG emissions from electricity supplies that companies have purposely chosen (or their lack of choice) and contracted. Corresponding emission factors:

• Supplier specific emission factor (provided by the supplier)
• Residual emission factor (country-based grid factor, corrected for allocated purchased electricity from renewable resources)

Greenhouse gas emissions (GHG) efficiency improvement

The GHGE efficiency improvement is the amount of GHG emissions per unit of output (specific emissions) in a given year compared to the specific emissions in the prior year. GHGE efficiency improvements are one of the ratios in the Long-Term Incentive part of the Managing Board remuneration and relate to a three-year period.

GRI

The Global Reporting Initiative (GRI) has developed Sustainability Reporting Guidelines that strive to increase the transparency and accountability of economic, environmental, and social performance. The GRI was established in 1997 in partnership with the UN Environment Programme. It is an international, multi-stakeholder and independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines. These Guidelines are for voluntary use by organizations for reporting on the economic, environmental, and social dimensions of their activities, products and services.

Guarantee of origin (GO)

A guarantee of origin is defined in EU Directive 2009/28/EC as “an electronic document which has the sole function of providing proof to a final customer that a given share or quantity of energy was produced from renewable sources as required by Article 3(6) of Directive 2003/54/EC.” The requirements of a GO are explained in Article 15 of the same Directive.

Levelized Cost of Energy (LCOE)

LCOE is a figure used to compare the average cost of energy coming from different sources. It measures the cost of energy production over the lifetime of an asset like a photovoltaic panel.

Loss of Primary Containment (LOPC)

Loss of Primary Containment is an unplanned or uncontrolled release of material from the container that is in direct contact with the material.

Net-zero emissions

The Intergovernmental Panel on Climate Change states: “Net-zero emissions are achieved when anthropogenic emissions of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period. Where multiple greenhouse gases are involved, the quantification of net zero emissions depends on the climate metric chosen to compare emissions of different gases (such as global warming potential, global temperature change potential, and others, as well as the chosen time horizon)”.

NO_x

Nitrogen oxides. These gases are released mainly during combustion and cause acidification.

Renewable resource

A natural resource which is replenished by natural processes at a rate comparable to, or faster than, its rate of consumption by humans or other users. The term covers perpetual resources such as solar radiation, tides, winds and hydroelectricity as well as fuels derived from organic matter (bio-based fuels).

SO₂

Sulfur dioxide. This gas is formed during the combustion of fossil fuels and causes acidification.

VOC

Volatile organic compounds. The term covers a wide range of chemical compounds, such as organic solvents, some of which can be harmful.

Water use and water consumption

Water use includes water used for ‘once-through cooling’ that is returned to the original water source after use. Water consumption is the portion of water used that is not returned to the original water source after being withdrawn.

Profit

General

In calculating financial profitability ratios, use is made of the average of the opening and closing values of balance sheet items in the year under review.

The financial indicators per ordinary share are calculated on the basis of the average number of ordinary shares outstanding (average daily number). In calculating Shareholders’ equity per ordinary share, however, the number of shares outstanding at year-end is used.

In calculating the figures per ordinary share and the ‘net profit as a percentage of average Shareholders’ equity available to holders of ordinary shares’, the amounts available to the holders of cumulative preference shares are deducted from the profits and from Shareholders’ equity.

Adjusted net operating free cash flow

The cash flow from operating activities, corrected for the cash flow of the APM adjustments, minus the cash flow of capital expenditures and drawing rights.

Capital employed

The total of the carrying amount of intangible assets and property, plant and equipment, inventories, trade receivables and other receivables, less trade payables, other current liabilities, investment grants and customer funding.

Capital expenditure

This includes all investments in intangible assets and property, plant and equipment.

Disposals

This includes the disposal of intangible assets and property, plant and equipment as well as the disposal of participating interests and other securities.

Earnings before interest, tax, depreciation and amortization (EBITDA)

EBITDA is the sum of operating profit plus depreciation and amortization. Adjusted EBITDA is the EBITDA adjusted for material items of profit or loss coming from acquisitions/divestments, restructuring and other circumstances that management deem it necessary to adjust in order to provide clear reporting on the development of the business.

Earnings per ordinary share

Net profit attributable to equity holders of Koninklijke DSM N.V. minus dividend on cumulative preference shares, divided by the average number of ordinary shares outstanding.

High-growth economies

High-growth economies relate to the following regions: Latin America, Middle East, Asia (excluding Japan) and Eastern Europe.

Innovation sales

Innovation sales are defined as sales from products and applications that have been introduced in the last five years.

Net debt

Net debt is the total of current and non-current borrowings less cash and cash equivalents, current investments and the net position of derivatives.

Operating working capital

The total of inventories and trade receivables, less trade payables. See also Working capital.

Organic sales growth

Organic sales growth is the total impact of volume and price/mix. Impact of acquisitions and divestments as well as currency impact are excluded.

Return on capital employed (ROCE)

Adjusted operating profit from continuing operations as a percentage of average capital employed.

Temporary vitamin effect

DSM’s best estimate of the effect on sales and Adjusted EBITDA of the exceptional supply disruptions in the industry that started toward the end of 2017 and ended in the third quarter of 2018, including derived measurements.

Total shareholder return (TSR)

Total shareholder return is capital gain plus dividend paid.

Underlying business

Sales and Adjusted EBITDA (including derived measurements), corrected for DSM’s best estimate of the temporary vitamin effect.

Working capital

The total of inventories and current receivables, less current payables. See also Operating working capital.

List of abbreviations