Introduction by the Chair
2022 was a challenging year for the world as a whole. Conflict, including in Europe for the first time in decades, and growing concern about the state of the planet itself led to increasingly vocal and disruptive protests in many countries, polarizing opinions and intensifying the mood of pessimism in a world that was only just emerging from the shadows of a two-year-long pandemic. The resulting sharp rises in the price of energy, raw materials and other essential commodities has fueled inflation and fostered further insecurity across the planet.
In these turbulent operating conditions, DSM remained strong, focused and committed to delivering on its strategic objectives. Its diversified portfolio and comprehensive global reach afforded a measure of protection against the uncertainties into which the company’s operating environment was thrown. As a whole, we can be proud of DSM’s achievements in safeguarding essential supply lines and continuing to offer customers the exceptional standards of quality and reliability that they rightly expect. All three businesses saw overall continued resilient demand, but were confronted with an increasingly inflationary environment during the year, exacerbated by ongoing supply chain volatility. Multiple pricing initiatives were unable to fully offset the rate of increases in energy and raw materials costs. Sales volumes were solid, especially considering the tough comparison with the strong growth of 2021.
Even without the highly demanding macroeconomic conditions, 2022 would of course have been a momentous year for DSM. On 31 May we announced our intention to enter into a merger of equals with Firmenich, the world’s largest privately owned fragrance and taste company.
We began repositioning the company to be focused on Health, Nutrition & Bioscience, serving our customers via three market-orientated businesses, from the start of 2022. At the same time, we made arrangements for divesting our Materials businesses, finding new homes where the Engineering Materials and Protective Materials operations are able to continue their successful development trajectories and deliver innovative, value-adding and market-shaping solutions to their customers. These divestments mark the end of an era for DSM and the start of an exciting new future.
A crucial contributor to that future is DSM’s pipeline of innovation. The structural changes upon entering 2022 saw science and innovation more closely embedded within the Health, Nutrition & Bioscience businesses. DSM has earned a well-deserved reputation for ground-breaking scientific breakthroughs but by bringing together those who invent, make, and sell, we expect greater alignment all the way from ideation to commercialization, creating the best prospects for that R&D to make a difference in the market. It was both fascinating and exciting for us on the Supervisory Board to review the long-term innovation prospects and the potential advances that should benefit DSM, as well as all its stakeholders, in time. Firmenich shares complementary capabilities and the intended merger of equals will produce a leading creation and innovation partner in nutrition, beauty and well-being. The business combination agreement was the result of intense and detailed discussions whose aim was to create a new entity able to fully leverage the strengths of both parties. The Supervisory Board played a significant role in these negotiations, working very closely with our Co-CEOs, and is fully supportive of the transaction.
Against the background of these developments, DSM remained as committed as ever to urgent climate action, and to achieving net-zero by 2050 at the latest. The company continues to set increasingly stringent improvement targets in line with the latest climate science and with the aim of limiting global warming to no more than 1.5°C.
In view of DSM’s journey to become a company focused on Health, Nutrition & Bioscience, we decided to accord quality the same degree of supervisory scrutiny as safety, with effect from 1 January 2022. The two topics therefore enjoy parity in the considerations of both the Supervisory Board and the Executive Committee, each receiving attention at alternate meetings. The safety of all employees and contractors is of course ever-present in our minds. The increase in recordable injuries in 2022 was a disappointing development and we will be carefully monitoring all aspects of safety in the workplace in 2023 with the uncompromising aim of improving safety performance in 2023.
The year 2022 was a remarkable one in the life of DSM, creating the springboard for a new chapter in a long history of successful transformations. For the Supervisory Board, 2022 might be described as a ‘hybrid’ year, involving as it did very welcome face-to-face meetings as well as the continuation of some meetings online. My colleagues and I enjoyed our interactions with employees throughout the year, especially in the context of our site visit to Switzerland and we are appreciative of the hard work and commitment everyone continued to demonstrate in often extremely challenging circumstances. I would also like to thank the Co-CEOs, the Executive Committee, and my colleagues on the Supervisory Board for their vision and leadership throughout 2022.
Looking forward, I am deeply honored to have been chosen to chair the Board of Directors of the future DSM-Firmenich. I am inspired by the prospect of what we will all create together: a new entity committed to innovative transformations that will benefit not only the world we live in but also generations yet to come.
Thomas Leysen, Chair of the Supervisory Board