5.4 Sustainability governance

5.4.1 The role of the administrative, management and supervisory bodies

General

The Board of Directors and Supervisory Board are the highest decision-making bodies within the Nedap organization. On 1 January 2024, the Supervisory Board installed two committees, the Remuneration Committee and the Audit and Risk Committee. The Board of Directors and the Supervisory Board are responsible for setting out the guiding principles for how we do business, as outlined primarily in our code of conduct. They have the expertise on business conduct matters to effectively fulfil their responsibilities.

Board of Directors

Composition and diversity

The Board of Directors consists of three members, the CEO (Mr. R. M. Wegman), CFO (Ms. D. van der Sluijs) and CCO (Mr. R. Schuurman). All three are executive members. There is no representation of employees nor other workers within the Board of Directors. This is also not a common practice in the Netherlands. Information about the members of the Board of Directors is included in subsection Board of Directors in section 3.3 Corporate Governance.

The Board of Directors' gender diversity was as follows in 2024: 33.33% female and 66.67% male, a one-to-two female-to-male ratio. Nedap does not formally report on any other aspects of diversity. The Nedap Diversity, Equity and Inclusion (DEI) policy applies, which includes a gender diversity target for the Board of Directors of at least one-third male and one-third female representation.

Each member of the Board of Directors offers a diverse range of experience and expertise in international business, consistent with Nedap's global presence and activities in various markets. The CEO and CCO previously led business units at Nedap, including in interim roles. Board members have also previously held positions on governance bodies of Nedap subsidiaries. Additionally, board members regularly visit subsidiary companies and stay in frequent contact through other channels. The business unit leaders regularly inform the Board of Directors on relevant business matters, including material IROs. Consequently, the Board of Directors continuously enhances its understanding of Nedap's markets, products and global offices.

Roles and responsibilities

The Board of Directors as a whole is responsible for overseeing the identified sustainability impacts, risks and opportunities. This is described in the previous sections about our strategy and business model and material sustainability matters. The Board of Directors plays a critical role in overseeing governance processes, controls and procedures to manage and evaluate IROs. The CFO’s role is to ensure compliance with CSRD requirements, oversee sustainability reporting and manage associated risks and opportunities. In overseeing various internal decisions and activities, the Board of Directors gains continuous insight into progress toward IRO-related targets. Examples include employee questionnaires, the Women Leadership Initiatives survey, energy-related upgrades to buildings and the renewal of vehicle lease contracts. Additionally, we plan to establish a systematic approach for monitoring progress by administrative, management and supervisory bodies.

The terms of reference of the Board of Directors describe its responsibility for the continuity of Nedap and its associated companies. As part of this mandate, the Board of Directors focuses on long-term value creation. Its responsibilities include developing and implementing the strategy consistent with Nedap’s objectives and risk profile, driving results and addressing the relevant sustainability aspects of doing business.

Risk management is an essential part of Nedap's business strategy. For more information, including dedicated controls and procedures for the management of IROs, please see section 3.2 Risk management & internal controls.

The Board of Directors is accountable to the Supervisory Board, including its Audit and Risk Committee and the annual general meeting (AGM). It is the Board of Directors' responsibility to ensure that the company’s sustainability efforts align with its overall strategic goals and targets. However, we do not apply dedicated controls and procedures to the management of IROs. The Board of Directors was involved in setting the targets included in this sustainability statement. In addition, the Board of Directors regularly reviews the progress and effectiveness of processes that are delegated to various parts of the organization, making adjustments as needed. This ensures that sustainability goals are met without compromising the company’s business performance and profitability.

Expertise and skills related to sustainability matters

The Board of Directors has hired and appointed a team of employees dedicated to sustainability, consisting of full-time experts and subject matter experts who are involved in sustainability on a part-time basis. Each member of the sustainability team focuses on an individual IRO and is considered an expert on that topic. We provide additional information on the available expertise related to our IROs in the topical sections of this Sustainability statement. The Board of Directors has direct access to this team of sustainability experts. The sustainability team reports directly to the Board of Directors and to the CFO specifically. In addition, the Board of Directors has access to teams with expertise on sub-topics. Finally, the board members have, and continue to develop, their own expertise and experience related to various sustainability topics. Each year, the Board of Directors evaluates their skills and expertise on sustainability matters, and any educational and training needs necessary for overseeing material IROs are assessed, considered and followed up on.

Supervisory Board

Composition and diversity

The Supervisory Board consists of five members. As Nedap has a two-tier (dual) board structure, all are non-executive members. Membership of the Nedap Supervisory Board conforms to the profile described. The Supervisory Board is composed entirely of independent members (100%), ensuring full independence both from Nedap and from one another. Please see section 4.1 Report of the Supervisory Board for more information about the profile and details of the Supervisory Board.

The Supervisory Board does not include representation from employees or other workers. One-third of the Supervisory Board (at Nedap, this is currently the president of the Supervisory Board) is subject to an enhanced right of recommendation by the works council. All members have a background in one or more of the sectors, products or geographical regions in which Nedap is active.

The Supervisory Board consists of five members:
Mr. P. A. M. van Bommel (chair)
Mr. J. M. L. van Engelen (vice-chair)
Ms. M. Pijnenborg
Mr. S. C. Santema
Ms. M. A. Scheltema

The Supervisory Board’s gender diversity was as follows in 2024: 40% female and 60% male, a two-to-three female-to-male ratio. Nedap does not formally report on any other aspects of diversity. The profile of the Supervisory Board and the Nedap DEI policy apply.

On 1 January 2024, the Supervisory Board established two committees, the Audit and Risk Committee and the Remuneration Committee, to keep the execution of tasks, decision-making and meetings of the Supervisory Board efficient and effective, with the right focus. For details, please see the subsection below.

Role and responsibilities

The Supervisory Board supervises, evaluates progress and performance, maintains a healthy and transparent system of checks and balances, and assists the Board of Directors with advice where necessary. The Supervisory Board also assesses the effectiveness of internal risk management and control systems and the integrity and quality of the financial reporting. Reference is made to the terms of reference of the Supervisory Board in section 4.1 Report of the Supervisory Board. The Supervisory Board oversees the strategy of the Board of Directors, including the assessment of IROs. The strategy, including the risk table (which can be found in section 3.2 Risk management & internal controls), is discussed regularly in the Supervisory Board meetings, following an annual meeting schedule with the Board of Directors and relevant business unit leaders. The Supervisory Board was also closely involved in the DMA process of Nedap. Sustainability is a recurring agenda item at the Supervisory Board’s quarterly meetings, where members are updated on target setting and progress on stated targets.

Expertise and skills related to sustainability matters

Each member of the Supervisory Board brings relevant knowledge, expertise and interests with regard to sustainability, derived from their diverse backgrounds. Together, they have the expertise and skills required to effectively oversee sustainability matters. The information about the skills of the Supervisory Board is disclosed in the subsection Supervisory Board composition and skills matrix of section 4.1 Report of the Supervisory Board, which we incorporate by reference. Each year, any educational and training needs necessary for overseeing material IROs are assessed and followed up on.

Audit and Risk Committee

Composition and diversity

The Audit and Risk Committee consists of three members:
Ms. M. A. Scheltema (chair)
Ms. M. Pijnenborg
Mr. S. C. Santema

66.67% female and 33.33% male, all non-executive members.

Role and responsibilities

The Audit and Risk Committee advises the Supervisory Board regarding its duties as described in its terms of reference and helps facilitate the Supervisory Board's decision-making process. The Supervisory Board as a whole remains responsible for the performance of its duties. The Audit and Risk Committee shall in any event focus on the supervision of the Board of Directors with regard to: a) the relationship with the internal and external auditor and, if applicable, other external parties involved in the audit of sustainability information, including compliance with their recommendations and follow-up on comments; b) Nedap's financing; c) Nedap's application of information and communication technology, including cybersecurity risks; and d) Nedap's tax policy.

The Audit and Risk Committee monitors, among other things, the effectiveness of Nedap's internal control systems, internal audit system and risk management system (see terms of reference Audit and Risk Committee). These are recurring items on the committee’s agenda. 

With respect to sustainability matters, the Audit and Risk Committee focuses on monitoring the integrity and quality of the company's financial and sustainability reporting, and the financial and sustainability reporting process. Additionally, the committee prepares proposals to ensure the integrity of the process.

Remuneration Committee

Composition and diversity

The Remuneration Committee consists of three members:
Mr. J. M. L. van Engelen (chair)
Mr. P. A. M. van Bommel
Ms. M. Pijnenborg

66.67% male, 33.33 % female, all non-executive members.

Role and responsibilities

The role and responsibilities of the Remuneration Committee are described in its terms of reference.
The Remuneration Committee advises the Supervisory Board regarding its duties described in the terms of reference and helps facilitate the decision-making of the Supervisory Board in this respect. The Supervisory Board as a whole remains responsible for the performance of its duties. The duties of the Remuneration Committee include the selection and appointment of members of the Board of Directors and Supervisory Board.
The Remuneration Committee's duties regarding remuneration include making a clear and understandable proposal to the Supervisory Board regarding the remuneration policy for the Board of Directors, making a proposal to the Supervisory Board regarding the remuneration of the individual members of the Board of Directors, and preparing the remuneration report. The Remuneration Committee has the same duty with respect to proposals regarding the Supervisory Board's remuneration toward the AGM.

5.4.2 Sustainability information and governance within leadership

The sustainability team reports to the Board of Directors, specifically the CFO. The CFO reports the status of the sustainability team's activities to the Board of Directors. Expertise teams, such as the finance, legal and compliance teams, also report to the Board of Directors. The Board of Directors reports to or informs the Supervisory Board and requests approval where applicable.

The Supervisory Board delegates certain topics to its committees. These committees prepare reports and help facilitate the Supervisory Board's decision-making process. The Supervisory Board as a whole remains responsible.

The IROs, sustainability due diligence, and the results and effectiveness of relevant policies and their respective actions, targets and metrics were discussed at least once during the reporting year and were subsequently acted upon.

The business unit and solution leaders are responsible for their strategic plans, which include sustainability targets. They report to the Board of Directors. The business unit leaders discuss their strategic plans with the Supervisory Board annually. This ensures that our management and supervisory bodies consider the IROs when making decisions about the strategy of Nedap.

The above-mentioned expertise teams have procedures, dedicated controls and dashboards in place to monitor, among other things, progress on set targets. The internal auditor also closely monitors relevant processes and progress. Reference is made to section 3.2 Risk management & internal controls of the annual report, which describes the internal control and risk management systems.

5.4.3 Integration of sustainability-related performance in incentive schemes

The subsection Remuneration and employment and management terms of section 3.3 Corporate Governance outlines the role of sustainability goals in the performance evaluation criteria that influence remuneration for the Board of Directors. The remuneration of the Supervisory Board members is fixed, and no sustainability-related incentive scheme applies. The details of the remuneration policy, which we incorporate by reference, of the Board of Directors is disclosed in subsection Remuneration summary of section 4.2 2024 Remuneration report and the remuneration policy of the Supervisory Board in subsection Supervisory Board member remuneration of section 4.2 2024 Remuneration report.

Key characteristics of the incentive schemes of the Board of Directors

The remuneration policy of the Board of Directors focuses on the company's continuity and sustainable long-term value creation, aligned with Nedap's vision and strategy. Their remuneration consists of a fixed and variable component. Of the variable component, 50% is based on financial performance criteria, 25% on employee engagement criteria and 25% on sustainable organization and earnings model criteria.

Assessing the performance of the Board of Directors

The variable annual income depends on Nedap's performance across six performance criteria in a given financial year. At the beginning of each year, the Supervisory Board sets the targets to be achieved (target levels) tailored to the annual budget. After the end of the year, the Supervisory Board assesses the Board of Directors' performance against these predetermined targets.

Half of the award depends on four financial performance criteria, each carrying equal weight. The other half of the award depends on two non-financial performance criteria of equal weight:

  • Engagement of employees: Nedap considers employee engagement essential to long-term value creation. Employee engagement is measured annually, and the target level corresponds with the performance of Dutch companies in the highest quartile. If Nedap is not in the highest quartile, no award is issued. Each year, the Supervisory Board outlines a point of attention to improve the level of employee engagement. The progress on this point of attention may warrant adjusting the remuneration above or below the target level. Each year, the Supervisory Board reports on the selected point of attention in the remuneration report.

  • A sustainable organizational and earnings model is an essential success factor for long-term, qualitative value creation. Each year, the Supervisory Board sets specific objectives related to the following three topics:

    • Progress toward achieving the company’s sustainability targets, with corporate social responsibility (CSR) as the priority.

    • Strategic positioning and proposition portfolio.

    • Operational effectiveness.

Half of the variable remuneration awarded must be invested in Nedap depositary receipts which must be retained for five years. After four years, one bonus depositary receipt will be awarded for every four depositary receipts held. When the targets are achieved, the variable annual income is 60% of the fixed annual income. This means that 62.5% of remuneration is fixed annual income, and 37.5% is variable annual income. 

The Supervisory Board's guideline for determining the remuneration amount is to ensure a moderate pay ratio internally and to keep it at or below the median remuneration level of the external peer group.
The variable annual income award is determined using the additive method, where each criterion is assessed individually and the awards are added up, resulting in a total percentage of the fixed annual income.

Climate-related considerations are not factored into the remuneration policies for 2024, and the Supervisory Board did not set any organizational and earnings model targets for the Board of Directors pertaining to climate actions. Therefore, the remuneration of the Board of Directors in 2024 is not linked to climate-related considerations.

Governance process for determining, approving and updating the remuneration policy

Remuneration of the Board of Directors

The remuneration policy for the Board of Directors is determined by the Supervisory Board. The Remuneration Committee submits a proposal, and the works council and previous year's AGM produce a recommendation. The Supervisory Board takes the proposal and advice into consideration. The Supervisory Board submits the policy to the AGM for adoption once every four years, accompanied by a positive recommendation from the works council. For the policy to be adopted by the AGM, the legal requirement that at least 75% of the votes cast are in favor of the policy, applies.

Remuneration of the Supervisory Board

The Supervisory Board submits a proposal, prepared by the Remuneration Committee, for its own remuneration policy to the AGM for adoption. For the policy to be adopted by the AGM, the legal requirement that at least 75% of the votes cast are in favor of the policy, applies.

The remuneration of the Supervisory Board is consistent with the best practices of the Dutch Corporate Governance Code 2022.

5.4.4 Statement on due diligence

Nedap performs due diligence on material transactions, in which sustainability plays a role. We audit our major suppliers periodically, scoring our suppliers on various topics, including their sustainability measures. When selecting new suppliers, such as new data centers to host our applications from, we take environmental aspects into consideration.

Nedap's commitment to responsible business conduct aligns with the United Nations Global Compact principles. We recognize our role in identifying and addressing both potential and actual impacts across our value chain, therefore we emphasize a proactive approach to our environmental and human rights due diligence efforts.

Our due diligence process involves assessing the effects of our business activities on people and the environment, acting on the findings of the assessment, tracking progress and openly communicating our actions and their impacts.

By 2025, we will refine our human rights policy and due diligence approach to suit Nedap's unique context in the Netherlands. Our approach to environmental due diligence and to minimizing negative impacts is focused on prevention. We extend this ethos to our customers as well, with the goal of empowering them to consider sustainability in decision-making. More information on our due diligence process and sustainability efforts in 2024 can be found in the Environmental and Governance sections of this Sustainability statement. 

Below, we provide an overview of the due diligence process, which has been disclosed throughout the report.

For more information on the elements of our due diligence process, please refer to the respective topical sections of this Sustainability statement.

We recognize that our due diligence process is continuous and may prompt adjustments to our strategy, business model or both. As this process shapes our evaluation of material impacts, risks and opportunities related to sustainability matters, it may influence future DMA outcomes. Additionally, the adoption of future sector-specific standards could impact the DMA's future results. Consequently, the sustainability statement may not encompass every IRO or Nedap-specific disclosure that an individual stakeholder might deem important for their own assessment.

5.4.5 Risk management and internal controls over sustainability reporting

Our approach to risk management is described in subsection Nedap risk management framework of section 3.2 Risk management & internal controls, which is incorporated by reference. The Group Controlling department also has a leading role in the sustainability reporting process, which includes verifying the data used in sustainability reporting and ensuring that data processing and administration are performed correctly. The department also ensures the correct, complete and timely delivery of these reports and oversees other departments that deliver data, with a focus on accuracy and reliability.

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