DSM Integrated Annual Report 2022

Introduction by the Chair of the Remuneration Committee

Growing concerns about climate change, international conflicts and rising energy prices, among other factors, set the tone in 2022. As a result, we faced a very challenging global operating environment, while insecurities and (especially in Europe) rising inflation put pressure on the daily lives of our employees. 2022 was also the year in which our game-changing merger of equals with Firmenich was announced. In preparation for this transformational move, the repositioning of the company to focus on Health, Nutrition & Bioscience that had been initiated in 2021 continued in 2022, in parallel with arrangements to find new homes for our Materials businesses.

Even as the world emerged from the COVID-19 pandemic, growing concerns about the planet and high inflation began to make themselves felt in the daily lives of our employees, who faced new insecurities and experienced the impact of these developments on their purchasing power. In view of this, we made special one-off payments to our employees in various countries to supplement local governmental programs aimed at reducing the impact of these developments. In addition, we paid special attention to living wages. Certified reviews against the WageIndicator’s benchmark were performed, resulting in an adjustment of salaries to respective regional/local standards.

In a challenging business environment, characterized by an overstrained labor market, rising energy costs and the impact of supply chain disruptions, among other factors, DSM delivered a solid performance over the course of 2022. While sales volumes were approximately equal to 2021, pricing actions to counter higher energy and raw materials costs, resulted in higher revenues. However, the price-cost gap remained significant for parts of the business. Neither the Adjusted EBITDA target nor the Cash Flow target included in the Short-Term Incentive (STI) scheme have been achieved. Our Safety performance during 2022 was disappointing by our own high standards and likewise did not contribute to the achievement of our STI result. However, we remained on track regarding the Brighter Living Solutions Plus goal. Given the significant external and internal changes the organization underwent, we were particularly proud to see Employee Engagement remain strong with an engagement index of 77% indicating that our employees are supportive of our ongoing transformation to become a leading Health, Nutrition & Bioscience company. The vesting of the Performance Share Units (PSUs) granted in 2019 was driven by the result on the Total Shareholder Return (TSR) target and the outperformance against our sustainability goals.

In 2022, we continued our strategic journey to become a company focused on Health, Nutrition & Bioscience, better placed to deploy our resources and capabilities to address the urgent societal and environmental challenges linked to the way the world produces and consumes food. Major steps were taken in this respect. New homes were found for the Materials businesses, enabling them to maximize their full potential to drive the important industrial shift to a bio-based and circular economy. Our operating structure was simplified and streamlined to deliver on our new operating model. At the end of May, we announced our intention to enter into a merger of equals with Firmenich, the world’s largest privately-owned fragrance and taste company, to form a leading creation and innovation partner in nutrition, beauty, and well-being.

In view of the upcoming merger, we decided to interrupt the project concerning the review of the Remuneration policy, as the merger will have an impact on the governance and decision-making processes regarding remuneration. A detailed benchmarking study conducted in early 2022 confirmed that DSM lags behind the market as far as the remuneration of the Managing Board is concerned. Referencing a peer group consisting of companies headquartered in Europe and comparable to DSM (pre-merger) in terms of size and complexity, we learned that the remuneration of DSM’s Co-CEOs is positioned around the lower quartile of the market. An appropriate step-up would be needed to bring the remuneration close to the market median, as described in our policy.

The 2022 remuneration reported herein is fully aligned with the pursuit of DSM’s strategic objectives. In addition, we continued in 2022 to remain focused on customer-centricity, large innovation projects, integrating acquired businesses, cost control, and operational excellence.

This Remuneration report provides a summary of the remuneration policy for the Managing Board of Koninklijke DSM N.V. and the Supervisory Board of Koninklijke DSM N.V. respectively, as well as an overview of the remuneration of the members of the Managing Board and the Supervisory Board in the financial year 2022. The full remuneration policy as approved by the AGM in 2019 is published on the company website. This report is prepared in accordance with the relevant parts of Section 135 Book 2 of the Dutch Civil Code.

Carla Mahieu
Chair, Remuneration Committee

Annual General Meeting of Shareholders
Brighter Living Solutions Plus

Brighter Living Solutions Plus (BLS+) is DSM’s program for the development of sustainable, innovative solutions with environmental and/or social benefits, creating shared value for our stakeholders. BLS+ are products, services and technologies that, considered over their life cycle, offer a benefit recognized by key stakeholders, underpinned with substantiating evidence, whilst having no urgent negative signals. Three performance levels are defined, where the product is:

  • ‘Outperforming’ its peers within the market
  • ‘Performing’ within the market
  • ‘In Transition’, to identify products that either do not meet the DSM minimum requirements, or where an urgent negative signal has been identified

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

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.
Earnings Before Interest, Taxes, Depreciation and Amortization
Living wage
The remuneration received for a standard working time by an employee in a particular place sufficient to afford a decent standard of living for the employee and his/her family. Elements of a decent standard of living include food, water, housing, education, healthcare, transport, clothing, and other essential needs, including provision for unexpected events.
Short-Term Incentive
Total shareholder return (TSR)
Total shareholder return is capital gain plus dividend paid.