When you need to be sure SGS 2023 Integrated Report Who we are SGS brings together global teams of highly qualified experts providing specialized testing, inspection and certification solutions across nearly every industry. See how we’re Enabling progress Watch our highlights film What we do We operate in the Testing, Inspection & Certification (TIC) sector and provide quality and safety control services: Testing products ensures they meet health, safety, and regulatory standards. Inspection controls quantity and quality to help our customers meet regulatory requirements. Certification provides assurance that products, processes, systems, or services meet standards and regulations. Our societal impact Our activities build trust and make a positive contribution to the communities in which we operate. We support you, our stakeholders, when you need to be sure. IFC images Laboratory technician, Health & Nutrition, Germany Inspector, Natural Resources, Peru Security evaluator, Connectivity & Products, Netherlands Management report In this report Management report Introduction to SGS Group Letter to stakeholders Q&A with CEO, Frankie Ng Q&A with CEO designate, Géraldine Picaud Financial and non-financial results Testing, inspection and certification industry overview TIC in focus Achievement from our 2020-23 strategic cycle Our impact on sustainability Corporate sustainability Our contribution to the sustainable development goals Stakeholder engagement Our material topics Risk management Our principal risks How we create value Financial capital Financial capital by business line Manufactured capital Intellectual capital Human capital Social and relationship capital Natural capital Financial and Non-Financial outlook Corporate governance Remuneration report Financial statements Non-financial statements Appendix Our integrated reporting approach The Integrated Reporting frameworkaims to create transparency. For the fourth consecutive year we have integrated our financial, operational and sustainability information in a single report – measuring our financial and non-financial performance across the six capitals. www.sgs.com/en/annual-report 1 1 2 5 6 7 8 10 12 14 17 18 20 22 24 25 28 32 34 36 38 39 42 44 46 48 50 66 92 158 190 Financial statementsCorporate governanceRemuneration reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 2 Introduction to SGS Group We provide specialized testing, inspection and certification services in 116 countries and deliver them through five business lines. Connectivity & Products, Health & Nutrition, Industries & Environment and Natural Resources sit under testing and inspection while Business Assurance (prev. Knowledge) represents our certification business. Testing & Inspection Sales by business line (%) Industries & Environment We enable organizations to be safer, greener and smarter by ensuring the integrity, safety and reliability of their equipment and operations as they transition to a more sustainable future. Enhancing wind farm inspections through digital innovation Read more at www.sgs.com/en/integrated-report/ business-performance SDG impact Natural Resources We are a global network of trusted, independent and committed experts who deliver pivotal solutions to the agricultural, mining, oil, gas and chemical industries, supporting quality, efficiency and sustainability goals across the supply chain. Growing need for raw materials to power the energy transition Read more at www.sgs.com/en/integrated-report/ business-performance SDG impact Connectivity & Products We are the experts who support brands, manufacturers, retailers and governments across the supply chain with the performance, safety, security and quality of their products and services. We help make products better and safer for an increasingly connected world. Improving safety in the automotive industry Read more at www.sgs.com/en/integrated-report/ business-performance SDG impact Health & Nutrition We assure quality, safety and sustainability in the health, wellness and nutrition industries, helping our customers to meet stringent standards throughout their supply chain and, ultimately, improving the quality of life in society. Certification Supporting the growth opportunity in the nutraceuticals market Read more at www.sgs.com/en/integrated-report/ business-performance SDG impact Business Assurance (prev. Knowledge) We have the global expertise and knowledge, and the people, processes and tools to help organizations improve their results, manage risk, comply with regulatory changes, adopt best practice and meet increasingly stringent sustainability requirements. Harmonizing Iveco’s supply chain Read more at www.sgs.com/en/integrated-report/ business-performance SDG impact Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Business Assurance (prev. Knowledge) 33% 24% 19% 13% 11% Adjusted operating income by business line (%) Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Business Assurance (prev. Knowledge) 26% 23% 27% 8% 16% Management reportSGS | 2023 Integrated Report Sales by geography (%) North America 12% of total SGS sales Latin America 9% of total SGS sales 3 Europe 36% of total SGS sales Africa & Middle East 9% of total SGS sales Asia Pacific 34% of total SGS sales We follow six key business principles 1 Integrity Integrity is the foundation of SGS. As leaders in our industry we hold ourselves to the highest standards of professional behavior as embedded in our Code of Integrity. The trust of our customers and stakeholders is the key to our success. 2 Health & Safety Our long-term success and sustainability depend on our ability to remain a recognized leader and a reference for all Health & Safety matters. 4 Respect We are engaged to treat all people fairly and respect human rights and take responsibility for creating a working environment that is grounded in dignity, equal opportunity and mutual respect. We promote diversity in our workforce and do not tolerate discrimination of any kind. 5 Sustainability We use the scale and expertise of SGS to enable a more sustainable future and add long-term value to society. Ensuring our impact on the environment is minimized throughout the value chain, we are good corporate citizens, investing in our communities and enabling a better, safer and more interconnected world. 3 Quality & Professionalism We act and communicate responsibly. We embody the SGS brand and its independence in our everyday behavior and attitude. We are customer-centric and committed to excellence. Always clear, concise and accurate, we strive to continually improve quality and promote transparency. We respect client confidentiality and individual privacy. 6 Leadership We work together to leverage our expertise and think ahead. Our teams are passionate and innovative with a relentless desire for improvement. Working in an open culture, where smart work is recognized and rewarded, we foster teamwork and commitment. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 4 Technical Division Manager, Health & Nutrition, France. SGS | 2023 Integrated Report Management report Letter to stakeholders 5 A new chapter for SGS Earlier this year, SGS announced its Strategy 2027: Accelerating growth, building trust I am very excited about this new chapter, which will guarantee that SGS remains the point of reference when you need to be sure. The testing, inspection and certification industry has significant growth potential, and we are uniquely positioned to capture this opportunity. We belong to the gold standard solutions providers in the industry with over 145 years of established history and experience. We will keep our ambition to remain at the forefront of the megatrends driving our markets. These are focused on powerful sustainability transition, ongoing innovation in digital capabilities and new technologies, ever-growing supply chain complexity and increasing regulation and public awareness. To fulfill this ambition, the Board of Directors is delighted to welcome Géraldine Picaud to the helm of our Group. She is an inspiring leader bringing the right blend of strategic vision and operational execution skills to SGS. As our next CEO, she has the Board’s full confidence in driving our upcoming phase of growth and profitability. I take this opportunity to express my sincere gratitude to Frankie Ng for his leadership over the past nine years. It is thanks to his vision that SGS has become the world’s undisputed leader in testing, inspection and certification. I am proud of our roadmap (see page 48 for details) that we have set for the next four years. Our financial targets provide a foundation to clearly outperform the industry growth and our sustainability targets positively underline the contribution of SGS to a better society. Our customers and our people are at the core of these objectives. Every day, our employees strive to provide better services to our customers. They lead the way in bringing highly innovative testing, inspection and certification solutions to market. We will continue to embed agility and performance in our culture, our actions and our decisions to make sure that this momentum continues unabated. By maintaining highly trained, passionate and committed employees, we will continue to drive a thriving and sustainable business that provides real value to all stakeholders. In 2023, SGS delivered sales of CHF 6.6 billion, strong organic growth of 8.1% and a significant increase in free cash flow. I am proud of how our teams have navigated the ever-increasing complexity of the world we live in and managed to turn challenges into opportunities. Finally, I would like to give my sincere thanks and gratitude to all our employees, to my fellow members of the Board of Directors, the Executive Committee and to you, our Shareholders, for your trust and continuing support. This is a very exciting journey: together, guided by our promise, ‘when you need to be sure’, we will accelerate growth and build trust. Calvin Grieder Chair of the Board of Directors Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 6 Q&A with CEO, Frankie Ng How do you reflect on SGS’s performance in 2023? 2023 marked the end of our current strategic cycle. We have made considerable progress in all key strategic areas, strengthening our Health & Nutrition service offering with the acquisition of Nutrasource in North America, and growing our market shares in Connectivity & Products and Business Assurance (previously Knowledge) through focused resource and capital allocation. With the digital laboratories program and improved customer relations management for salespeople, we are also making significant advances in our goal of becoming the most digital company in the TIC industry. This progress has only been possible through agile thinking and the efforts of our colleagues across the network. What challenges did SGS face in 2023? Our challenges were the same as for everyone – rising costs, global instability, the climate crisis and shifting consumer demand. As a company, we responded in multiple ways. Firstly, by taking care of our people. We foster employee engagement by providing motivating career paths as well as training initiatives on key topics such as employee well-being, health & safety, integrity and information security. Secondly, we focused on productivity and process optimization with our world class services (WCS) program. In fact, we have become the first in our industry to obtain the bronze level for two of our laboratories located in Shanghai and Bangkok. This is an exceptional accomplishment, and I am very proud of the way this methodology is being adopted by the network, with seven laboratories joining the program in 2023. Digitalization is central to our culture of efficiency. I am pleased to report that over 30% of laboratories are now digital, our global server network is migrated to a single cloud-based solution and through applications such as Windgo, a wind farm quality control solution, we are digitalizing our fieldwork. The ability to harness the vast amounts of data in our systems means we are also now developing better value propositions for our customers. Thirdly, our strength lies in our geographic and service diversity. In a volatile and uncertain world, we can maintain growth trajectories by shifting our focus to different industries, services and/or geographies. For example, as growth in Asia and Europe slows, we have increased our North American footprint. Finally, SGS continues to invest and innovate in new areas of growth, such as the implementation of global solutions relating to sustainability, health and safety, PFAS1 and microplastics. How is SGS responding to climate crisis? Sustainability is the foundation of our business strategy, as demonstrated by our commitment to 1.5ºC and net-zero targets approved by the Science Based Targets initiative. Our targets are ambitious, but this is only right because, as market leader and a global company, we must push the envelope of what is achievable or we will fail to be a part of the companies supporting a healthy planet, society and business. We have strengthened our focus on four key areas to support our customers in their sustainability journeys: carbon, biodiversity, plastic and ESG assurance. By developing industry-leading solutions, we are helping our customers achieve their own sustainability goals, improving efficiency and accelerating growth. Internally, we are making great progress in our decarbonization strategy, with a special focus on employee awareness through campaigns such as Spot the Orange Dot. While turning off one computer might seem inconsequential, the benefits for the environment are significant in a business with 99 600 employees. We are also focused on reducing emissions from our owned and leased properties and our vehicle fleet to reduce scope 1 and 2 emissions, and our supply chain through procurement to address scope 3. Now you are handing over your CEO responsibility? It has been an extraordinary journey for me over the past 30 years during which I have seen the Group transform into the company it is today. Therefore, I am excited to hand over the reins to Géraldine Picaud, whose energy and passion will no doubt lead SGS to new heights. I will always hold fond memories of my time here at SGS. All the fantastic people I have met and worked with and all the great events I have attended with customers and investors across the world will remain engraved in my memories. I’d like to finish by directly addressing my colleagues throughout SGS. You are the beating heart of this company. I would like to take this opportunity to thank you for your hard work and dedication. It is your resilience and dynamism that has allowed us to achieve our goals. Frankie Ng Chief Executive Officer Read more about our results www.sgs.com/en/integrated-report 1. Perfluoroalkyl and Polyfluoroalkyl substances. Management reportSGS | 2023 Integrated Report Q&A with CEO designate, Géraldine Picaud 7 What are your first impressions as you embark on your new CEO role? SGS is an iconic global leader in the testing, inspection and certification industry, with exceptional people and enormous future potential. I am honored to assume the role of Chief Executive Officer and build on the strong foundation laid by Frankie. I look forward to leading such a great company and to driving positive change in this dynamic industry. What are the principal drivers of the TIC industry and how is SGS positioned to capture growth? We operate in a healthy and growing industry. Our market is experiencing between 4% and 5% growth per year which is driven by four megatrends: sustainability, digital technologies, supply chain near shoring and by an increasing number of regulations. What makes us unique in the industry is our unrivaled network covering almost all industries and geographies. We are really a true partner to our customers whom we support in complete independence across their operations. But most importantly, it is our people that make us unique. Their commitment, their passion, their expertise and their personal values. This is why SGS is well positioned to capture all the growth opportunities of the testing, inspection and certification industry. Can you give some more details about the strategy 2027? Our Strategy 2027: Accelerating growth, building trust is based on three powerful drivers: growth, performance and agility, and the improvement of our financial profile. We will invest in segments and regions where greater opportunities exist, such as sustainability, digital services and North America. We will simplify our organization to foster accountability, performance and adaptability. In addition, we will enhance our financial profile through disciplined capital allocation. This will create value for all our stakeholders. Which values are most important to you? To improve our performance, we need to make our business more agile and our people more accountable. This requires a solid mix of diversity, an open and meritocratic environment to deliver on our objectives and drive a high-performance culture. These are the values that I want to ingrain at SGS. Géraldine Picaud CEO designate Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 8 Financial and non-financial results Financial highlights1 Sales CHF 6 622M +8.1% organic growth A year of sustained growth competitiveness as demonstrated by strong organic sales growth. We continue to lead on corporate sustainability. Adjusted operating income Adjusted operating income margin on sales CHF 971M 14.7% Earnings per share CHF 3.00 Free cash flow CHF 604M Change vs 2022 +25.6% 1. Refer to Alternative Performance Measures – Appendix to the 2023 full year results. SGS | 2023 Integrated Report Surveyors, Natural Resources, Belgium. Management report 9 Sales CHF 6 622M +8.1% organic growth Adjusted operating income Adjusted operating income margin on sales CHF 971M 14.7% Earnings per share CHF 3.00 Free cash flow CHF 604M Change vs 2022 +25.6% Sustainability KPIs Women in leadership positions Reduction in absolute CO2 emissions 31.9% -14% in scopes 1 and 2 against 2019 Lost Time Incident Rate (LTIR) Number of lost time incidents per 200 000 hours worked Volunteering hours 0.17 -31% against 2018 32 590 +89.5% against 2019 Our corporate sustainability awards Fantastic recognition across the world Volunteers planting trees, Hong Kong, China. Member of DJSI World and Europe, a leader of the professional services industry in S&P Corporate Sustainability Assessment (CSA) and well over double the sector average Low risk rating driven by our strong management of material ESG issues Gold medal, awarded to the top 5% of the evaluated companies AAA rating, the highest ESG rating awarded by MSCI, for the fourth consecutive year Prime distinction rating as recognition for excellence in management of ESG aspects among over 200 companies in the same sector Leadership position through score of A- in CDP’s highly technical climate change management assessment Inclusion in the FTSE4Good index for the sixth consecutive year for our strong commitment to sustainable practices Included in the top 100 most diverse and inclusive companies in the prestigious Refinitiv Global Diversity & Inclusion Index Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 10 Testing, inspection and certification industry overview Four interconnected megatrends are driving regulation and outsourcing in the testing, inspection and certification industry, providing opportunities for growth. The four megatrends of the TIC industry Powerful sustainability transition Higher demand from environment, social and governance regulations and societal expectations. Innovation in digital capabilities & new technologies Strong growth driven by digital trust needs and technological changes. Near-shoring of supply chains New opportunities from growing domestic demand and supply chain proximity. Increasing regulation & public awareness Structural expansion from tighter legislation and expectations for safety, health and well-being. Management reportSGS | 2023 Integrated Report The testing, inspection and certification industry Industry characteristics Industry drivers Societal benefits 11 The increasing complexity of the regulatory landscape is driving companies to search for specialized services delivered by the TIC industry Companies need reliable indicators provided by the TIC industry in the field of sustainability to avoid charges of ‘greenwashing’ Spending on testing is expected to increase due to country-specific regulations and requirements Geopolitical events and logistical challenges are forcing companies to assess their supply chains. Anything that brings about change, such as a new supply arrangement or change of supplier, will drive further testing and supply chain verification The TIC market benefits consumers who know the products and services they use are safer, consistently reliable and true to their advertised claims. This makes it easier for them to compare products and services Businesses benefit from enhanced demand from the trust and confidence that the use of TIC services generate in the marketplace. This enables market entry and market access with the assurance of higher levels of regulatory compliance Governments and policy makers benefit from increases in the volume of trade and an industry that can ensure compliance with regulatory requirements at a lower cost to the taxpayer Scale matters and TIC companies need a broad geographical footprint to match those of their customers Scale creates a virtuous circle and supports margins, especially for lab- based testing where high utilization and volumes drive the ability to invest in specialization, automation and technology to improve turnaround times. This in turn helps improve customer retention and acquisition Companies with scale and a global footprint can leverage their capabilities and expertise to bid for large multi-year contracts. As the network expands, the customer offer also increases, creating a virtuous circle Achieving accreditations from national or industry bodies can take longer than a year and requires investment in equipment, technology and know-how. Established companies with a long history have amassed a vast number of operating licenses, accreditations, and government authorizations which are difficult to replicate Customer retention is strong. For example, in certification areas such as health and safety, and supply-chain management, the cost to companies of changing to a different supplier is high, as it can involve retiring an existing system and incurring significant costs to start again. Changing a supplier also carries a risk of reputational damage while the financial benefits can be small Industry size and structure We value the addressable part of the TIC market to be USD 160 billion in 2023, and expect it to grow at 4-5% per annum to reach USD 190 billion in 2027 Addressable market growth consistently exceeding GDP 2023 USD 160 BN 4% to 5% Annually 2027 USD 190 BN Source: TIC council, ISO association reports. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix The vast breadth of TIC encompasses food testing to monitor quality and conformity, digital innovation to combat extreme weather when inspecting sea cargos, and certification around the implementation of AI. Testing What we do Testing reduces risks, shortens time to market and tests the quality, safety and performance of products against relevant health, safety and regulatory standards. Inspection What we do Inspection controls quantity and quality, and helps customers meet all relevant regulatory requirements across different regions and markets. What we do Certification ensures services, systems, processes or products meet national and international standards and regulations. Certification 12 TIC in focus SGS | 2023 Integrated Report Management report 13 Food safety testing in North America Our North American food team provides a comprehensive range of testing services to our clients to ensure the safety of their products and is looking to further expand capabilities and capacities. Through our network of laboratories in North America, we perform microbiological tests, most often for Salmonella and Listeria pathogens, as well as a wide variety of microbiological quality indicators. Our experts also provide chemistry testing, including proximate chemistry, metals, minerals and vitamins, and we aim to further expand our capabilities and capacities in the region. Our clients use the microbiological and chemistry data we provide to monitor their products’ quality and conformance to product specifications and to ensure they meet consumer expectations. We have to perform these tests as quickly as possible, allowing them to ship perishable products to market once the tests are completed. Digital innovation for employee safety and operations accuracy Meet Haritz Solachi, Global Field Services & Systems Manager, Spain. He explains how his experience of inspecting cargo on vessels in difficult and challenging conditions spurred him to innovate and create. ‘One of the most common operations conducted by Natural Resources is a draft survey, which is the way we measure a vessel’s cargo. To do this, inspectors are often exposed to very extreme weather conditions and may have to use very high ladders. Over the years of doing this, I got thinking that there must be a better and safer way. I’ve always been passionate about electronics and so combining this with the problem, I created a prototype draft survey tool which was made a reality! Now, inspectors don’t have to tackle these difficult working conditions.’ Curious about the DST tools? Watch the video at www.youtube.com/watch?v=t68j3IE4hT8 Aymeric Riverieulx, Global Head of Innovation and Information Security, explains challenges of Artifical Intelligence In response to the rise of AI, the ISO and IEC have created the ISO/IEC 42001 standard. It provides a certifiable AI management system (AIMS) framework in which AI systems can be developed and deployed as part of an AI assurance ecosystem. The global standard specifies the requirements for establishing, implementing, maintaining and continually improving an AIMS. We offer a wide range of services to help organizations and society benefit the most from AI while reassuring stakeholders that systems are being developed and used responsibly. From training, implementation or certification, we support companies in the implementation of AI, considering security, safety, fairness, transparency and data and AI system quality. As a result, companies can benefit from increased confidence in the performance of their management systems internally and externally, and greater customer confidence and satisfaction, which, in turn, can translate into increased business. Jodi M. Jurgens and Matt Keagle confirm the presence of Listeria, USA. Haritz Solachi using an innovative draft survey tool to inspect vessel cargo, Spain. Aymeric Riverieulx helps present our first FDIS ISO/IEC 42001 certificate to AI Clearing, Switzerland. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 14 Achievements from our 2020-23 strategic cycle Our previous strategy cycle ran from 2020 to 2023 and included three pillars to further align SGS to our customers’ requirements. 1 Invest to consolidate leadership position in selected business lines Overview At the end of 2023, we concluded our 2020-2023 strategic cycle meeting several of our key objectives. Achievements Consolidated our industry leadership by achieving the number 1 position in Natural Resources, Connectivity & Products and Business Assurance (prev. Knowledge) Consolidated our leadership position in Cosmetics with the acquisition of proderm GmbH last year and continued to integrate and derive synergies from this acquisition in 2023 Achieved a clear global leadership position in Industries & Environment, in all areas except environmental testing Acquisitions 2021-2023 Acquisition Penumbra Security, Inc Brightsight Nutrasource Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Seafood Testing business of Asmecruz Business Assurance (prev. Knowledge) Industry Lab proderm GmbH C-Labs (Phase 2)1 Quay Pharmaceuticals Limited IDEA Tests Lab Facilities of International Service Laboratory (ISL) Analytical & Development Services (ADS) Sulphur Experts Inc. Metair Lab The Lab (Asia) Ltd (Phase 2)1 Autoscope/CTOK SSAL/ELI Ecotecnos AIEX Gas Analysis Services BZH GmbH Deutsches Beratungszentrum für Hygiene Maine Pointe, LLC (Phase 2)1 LeanSis Productividad (Phase 2)1 1. Acquisition of the remaining minority stake. Jan 2021 April 2021 Jul 2021 Oct 2021 Jan 2022 April 2022 Jul 2022 Oct 2022 Jan 2023 April 2023 Jul 2023 Oct 2023 Management reportSGS | 2023 Integrated Report 15 2 Become the most digital company in the TIC industry Overview We made several strides to become the most digital company in the TIC industry. Our journey will continue as we move into the next phase of our evolution. Achievements Exceeded our goal of moving 30% of our sales to our new Laboratory Information Management System Deployed seven new digital products to support internal and external customer facing solutions thanks to our Digital Builders Organization, which helps identify new opportunities in digital products Consolidated the Group’s authority in the growing field of digital technology. In cybersecurity, the range of industrial activities to support and protect client networks and data expanded. In Artificial Intelligence, the first Artificial Intelligence Management System certification in the industry was delivered and several highly respected SGS experts contributed to the prestigious World Summit AI 2023 Case study Transforming wind energy inspections with WindGo app In the pursuit of clean and efficient energy production, wind turbines play a pivotal role. However, their reliability depends on meticulous care and timely inspections. Meeting this challenge head-on, we have developed WindGo, a cutting-edge mobile app designed to digitalize and streamline the entire inspection process. WindGo revolutionizes the experience for both our inspectors and customers. It empowers inspectors to efficiently manage their schedules while providing customers the ability to request inspections and gain near real-time control. By digitizing this critical process, we are not only enhancing operational efficiency but also elevating the customer experience. With WindGo, inspectors receive assignments directly on their mobile devices, saving valuable travel time. This real-time connectivity enables customers to stay informed about the ongoing inspection, with immediate access to comprehensive reports on their dedicated portal. By providing transparency and flexibility in our inspection services, we offer customers full visibility into the status of their windfarms reducing downtimes, maximizing production and contributing to the transition to safe, clean and reliable energy. Discover other ways in which we are accelerating digital growth and creating value for our customers at www.sgs.com/en/integrated-report/ business-performance Erika Christ Aguilar, Value Realization Lead, Information Technology, Spain. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 16 Achievements from our 2020-23 strategic cycle continued 3 Supporting our customers to achieve their sustainability goals Overview We support and contribute to our customers’ sustainability goals by helping them in their transformational change and implementation phases. Achievements Cross-business teams created to better serve our customers by providing a holistic portfolio of sustainability services. These services enable value chain transparency and traceability across industries aiming to tackle climate change, biodiversity loss, pollution and enhance circular economy New sustainability solutions in all business lines 85% of customers agree SGS services help them to meet their sustainability goals We have setup a framework to help us provide more value to customers through a portfolio of sustainability services across four key topics: Climate Nature Circularity Business risk mitigation Helping clients reduce their greenhouse gas (GHG) emissions through the complete value chain. From sampling and testing to impact assessment, we support companies in responsible sourcing. Pragmatic implementation solutions that increase resource efficiency and waste reduction. Supporting companies as they ensure integrity along the entire value chain for a more sustainable impact on people, climate and nature. Leading services Leading services Leading services Leading services • SBTi assessment and verification: helping clients formalize a clearly defined pathway to reduce greenhouse gas emissions, helping prevent negative impacts of climate change while also supporting future- proof business growth • IECQ: independent assurance on carbon footprint reports in accordance with international standard ISO 14067, to avoid greenwashing • Supply Chain Biodiversity • ISCC+ certification scheme: Impact: for many companies, the main impacts on biodiversity lie in their supply chain. We work with our customers to establish practical methods to source data, paving the way for more transparency of the biodiversity impacts in supply chains • Ballast water testing: ballast water sampling and testing helps clients meet their regulatory requirements and protect marine environments by reducing the transfer of invasive alien species offers different chain of custody approaches to trace material back along the supply chain to its origins. It can be applied to bio-based, renewable and circular raw materials and interconnects the entire supply chain, from cultivation and plastic recycling to plastic manufacturers and final products • Life Cycle Assessments (LCA): provide cradle to gate, in commodity supply chains around the world in accordance with the ISO 14040 and ISO 14044 standards • EDGE Certification is a highly recognized global standard for diversity, equity and inclusion (DE&I), focused on an intersectional approach to gender and equity in the workplace. We are proud to be one of the approved EDGE partners and Certification Bodies to conduct third-party verification of clients’ performance against the EDGE Standards • Social audits: support clients in the identification and mitigation of risks related to labor, ethics and human rights practices in their operations and supply chain • Responsible Supply Chain Assessment: our tool and methodology are easily adaptable for industry or sector specific risks and impacts and can help organizations to mitigate human rights risks and adverse impacts across supply chains • Corporate Sustainability Reporting Directive (CSRD): supporting customers in their double materiality assessment, gap analysis, training and report preparation Management reportSGS | 2023 Integrated Report Our impact on sustainability Our accredited testing is enabling innovation by providing clients with data to monitor microplastics and design solutions to reduce pollution. 17 Our impact in action: case study Monitoring microplastics pollution While plastic is one of the world’s most versatile and useful materials, microplastics pose a growing threat to ecosystems, and are a significant source of pollution in water, air, food and cosmetics. Watch the video at www.sgs.com/en/integrated-report/ business-performance Enabling innovation 121 000 microplastic particles estimated to be taken in by an adult each year through air, food and beverages >5.25 trillion microplastic particles estimated to be in the ocean What we do To manage the risks associated with microplastics effectively, it is important to monitor the sources of pollution. That’s why at SGS in Singapore we’ve integrated the most reliable methodologies in our laboratories to perform routine sampling and analysis of microplastics in diverse environments. Thanks to our ISO/IEC 17025 accredited testing services, our clients have access to the trusted data they need to monitor microplastics and design better solutions to manage pollution. Our impact We support governments, scientists and industries in carrying out their marine litter and microplastic monitoring. The robust data our people produce supports them in developing new technologies and modeling capabilities that can help predict impacts and define science-based policies, as governments worldwide pursue an international treaty to combat plastic pollution. Working with academia, we further harmonize testing methodologies and explore new areas such as tire and road wear particles pollution. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 18 Corporate sustainability Our Sustainability Ambitions 2030 cover the whole value chain and set targets that take us to 2030. Each year, we track progress against these targets and define specific action plans to become a better company for a better society and planet. Strong sustainability governance From the Board of Directors to our affiliates, a strong governance structure ensures that sustainability considerations are embedded in all of our activities. Our senior management is actively involved in overseeing the delivery which is developed by the corporate sustainability team. The Sustainability Committee of the Board assists the Board in evaluating and supervising the Group policies and strategies regarding the impact of the Group’s activities on society and the planet as well as the sustainability services provided to our clients. The SGS Operations Council is then mandated to take the overall strategy forward, approving and implementing more detailed programs, policies and targets for operations across the group. Our regions and affiliates are responsible for implementing various initiatives that support the Group sustainability targets. A network of regional sustainability ambassadors translate them into regional or local initiatives, cascading our corporate programs and guidelines down to every single SGS site. Sustainability culture We are constantly looking for ways to promote our sustainability culture throughout the network. To encourage our employees to become an active part of our commitment, we have worked on several initiatives in 2023: • Joined the United Nations Global Compact initiative, a voluntary leadership platform for the development, implementation and disclosure of responsible business practices. By joining this initiative, we stand united with thousands of forward- thinking companies around the world committed to taking responsible business action to create a better world for present and future generations • Launched the Spot the Orange Dot (STOD) campaign, a bottom-up campaign designed to identify spots where energy, water and waste can be reduced in the daily life of SGS employees at the workplace. Whether it is switching the lights off or adjusting the temperature at the office, our aim is to promote sustainable behaviors that, multiplied by more than 100 000 employees, can have a great impact. The campaign has already been launched in more than 30 affiliates • Launched an energy savings campaign, to help our employees save energy both at home and at work, teaching them responsible behaviors and minimizing our environmental impact. The winners of an energy savings themed quiz won different sustainable prizes that will help them contribute to a better environment • Organized the SGS People Challenge for the fourth consecutive year, with more than 50 countries participating in activities that reinforce our sense of community. We organized other activities for our colleagues’ families, including recognition, initiatives, volunteering and a drawing contest for employees’ children • Launched a new sustainability newsletter for sustainability professionals across the network through which we share news, sustainability assets and good practices • Provided mandatory sustainability training to all new employees joining SGS. The course explains our sustainability commitment and strategy and provides tips about how everyone can contribute to the Group Sustainability Ambitions 2030. In addition, we updated the mandatory human rights training to align with best practices A strong network As demand for specific sustainability- related information continues to increase, sustainability is an integral part of our value proposition. We support colleagues across our network to convey our sustainability commitment to customers, as they in turn place greater importance on the environmental, social and governance practices of their suppliers and business partners. We encourage close collaboration between the sustainability professionals in our network to help us share knowledge, good practices and success stories, and ultimately to provide a better service to customers. Through the series of monthly talks, ESG Spotlight, we aim to: • Generate awareness in the network about SGS’s sustainability culture beyond our sustainability performance • Promote new sustainability-related services among the network • Provide a platform for experts to share insights and inspire other services to collaborate and adopt new strategies • Promote cross-selling opportunities SGS team in Mauritius participating in a clean-up initiative. The team collected over 630 kg of waste and got to learn more about the importance of marine and coastal environments. Management reportSGS | 2023 Integrated Report 19 Over the period 2020-2023, we significantly increased our sustainability leadership position. Executive remuneration has been linked to sustainability KPIs and a specific sustainability committee provides strong oversight at Board level. This, together with the achievements in the areas listed below, has allowed us to maintain a leadership position in the main sustainability ratings. 1 Environment Overview While fundamentally a non-polluting business, we have very solid targets and programs to make sure we lead the path towards a net-zero future. 2 Social Overview We are a people business, and our employees are essential to our success. Everyday we work to to attract and develop diverse talent, while prioritizing wellbeing and employee satisfaction. It extends into our communities where we aim to make a positive and long- lasting impact. 3 Governance Overview Our commitment to the highest standards of integrity and professional excellence is the foundation from which we work. This applies across our entire value chain, from supplier due diligence, to operations efficiency and fair customer practices. Achievements • First TIC company to receive approval for our 1.5ºC and net-zero targets from the Science Based Targets initiative • 14% reduction in scope 1 and 2 absolute GHG emissions compared to 2019 • 97% of renewable electricity • Initiated our journey towards our target of reducing our scope 3 emissions by 28% in 2030 Achievements • 31.9% women in leadership positions • 31% and 22% reduction in LTIR and TRIR respectively since 2018 • 7.6 in employee engagement index • Over 30 000 volunteering hours Achievements • 90.6% customer satisfaction score • 27 labs now using World Class Methodology and two labs reaching Bronze award • Significant progress towards extending our sustainability principles to our supply chain Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 20 Our contribution to the sustainable development goals Through our client services and our own operations, we make a measurable contribution to the Sustainable Development Goals (SDGs) which we are committed to increasing year-on-year. Here are some examples of our contribution. Read more about our focus on sustainability online www.sgs.com/en/sustainability/corporate- sustainability/our-approach#89A Maria Fernandes, one of our molecular biology expert technicians, sequencing E-DNA from environmental samples, Lisbon. Steven Du during the signing ceremony with UOB, Hong Kong, China. Unlocking biodiversity data with E-DNA Transforming biodiversity analysis with cutting-edge services We leverage Environmental DNA (E-DNA) to transform biodiversity assessments. E-DNA, released by organisms into the environment through various sources, is analyzed using advanced molecular techniques. Our tailored field sampling and cutting-edge analytical services enable swift and cost-effective biodiversity assessments. Whether detecting rare species, invasive threats, or pathogens, our E-DNA service delivers the most comprehensive insights. E-DNA samples, easily collected non-invasively, facilitate monitoring in diverse settings from green roofs to deep marine sediments. Businesses can utilize E-DNA for impact assessments and integrate findings into sustainability reporting, supported by SGS’s seamless integration with other environmental sampling programs. SGS continues driving sustainable finance verification Combining strength and expertise to drive sustainable financing We have signed a ‘Memorandum of Understanding’ with the United Overseas Bank in Hong Kong to jointly promote green and sustainable financing. The collaboration will leverage the strengths of both entities to offer services such as green finance certification, evaluation and accreditation, as well as sustainable finance solutions. The joint initiative aims to assist companies seeking to enhance their environmental practices and progress towards a net- zero future. Additionally, the partnership will contribute to the development of sustainable finance in the Greater Bay Area, reinforcing the city’s position as an international sustainable financial hub. This collaboration follows several other global banking partnerships and represents a meaningful step towards integrating sustainability into business and finance for a healthier, more resilient world. Contributing to: Contributing to: Management reportSGS | 2023 Integrated Report 21 Employees promoting the Spot The Orange Dot campaign with recycled materials, Malaysia. Employees supporting the theme #EmbraceEquity on International Women’s Day 2023, India. Spot the Orange Dot initiative Cultivating eco-friendly practices in the workplace We cultivate a sustainability culture where the goal is to enhance eco-friendly practices by using fewer resources and reducing our emissions. In pursuit of this objective, we introduced Spot the Orange Dot, an awareness initiative about identifying sustainability action spots, where a real difference can be made, with orange dots. These orange dots range from straightforward, such as stickers near light switches, to inventive and abstract, like an eco-driving course. The campaign was deployed in 32 affiliates around the globe, those with the highest energy consumption. More than 560 locations were impacted, and more than 52 000 employees were reached. Together, we are making a tangible impact in fostering a greener future. Demonstrating our commitment to diversity Providing diverse, inclusive and equal opportunity employment in India In India, we are working to enhance gender diversity, with a current female representation of 15% overall and 32% at leadership level. This includes actively implementing a Gender- Neutral Workspace in collaboration with key stakeholders. Our approach focuses on three key pillars: Talent Attraction, Talent Retention and Talent Networking. Additionally, we launched two ‘WE Lead’ Initiatives: • YouINSPIRE: a quarterly platform fostering connections among women staff at SGS India, featuring empowering workshops on various topics like ‘It starts with You,’ ‘Creating a lasting impression,’ ‘Actually, I said that first,’ to name just a few • Actionable Ally Workshop for Managers on Women Talent: a workshop designed to empower people managers to actively support the transformation journey of women talent at SGS in India We are committed to creating a more inclusive and diverse workplace. Contributing to: Contributing to: Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 22 Stakeholder engagement Maintaining continuous dialogue with stakeholders is critical to our long-term success. These valuable insights enable us to align our initiatives to stakeholder requirements and ensure we deliver value to society. Customers Consumers Employees Key topics discussed • Quality of services • SGS employees’ attitude, expertise and responsiveness • Quick turnaround times • Sustainability services Key topics discussed • Product safety and quality • Ethical behavior Why we engage Customers are at the heart of everything we do. It is important to understand whether we achieve our goals to make their businesses more efficient, profitable and sustainable. How we engage • One-to-one meetings • SGS hosted conferences, seminars and webinars • Customer surveys • Knowledge and educational resources • Customer portal • Online and social media engagement Why we engage Our services ensure that consumers trust the products they buy. Understanding our end-consumers tells us if our services support SGS’s reputation for delivering confidence and assurance. How we engage • Certification and product labeling • Direct marketing and communication with certain B2C products Why we engage Key topics discussed • Training, development and recognition • Diversity and inclusion • Well-being and work-life balance • Health and safety • Sustainability awareness, good practices in labs and offices Our people are essential to our business. Discussing performance and providing training and opportunities helps to develop the potential of our talent and keep them motivated and engaged. How we engage • Our global employee engagement program • SGS intranet portal and internal social network • SGS Life newsletter • Training programs • Line manager direct engagement • Leadership townhalls Management reportSGS | 2023 Integrated Report 23 Why we engage Key topics discussed Engaging with suppliers is key to ensuring a smooth supply chain, boosting innovation and strengthening sustainability in our business. How we engage • Supplier self-assessment program • Scope 3 emissions program • Supplier relationship management (SRM) • Sustainability criteria in sourcing events • Supplier Code of Conduct commitment • Sustainability requirements to our suppliers • Supplier tangible plans to reduce CO2 emissions and their impact on our business • Human rights and ethics Key topics discussed • Community donations and volunteering programs • Human rights and ethical labor practices • Sustainable business practices Why we engage The sustainability of our communities and the planet is critical to our success. We engage with our communities to continually evaluate whether our sustainability ambitions are fit for purpose and meeting their targeted impact. How we engage • Multiple community projects across the network Why we engage Governments and industries are often moving in the same direction as SGS. We need a clear picture of how we contribute to driving innovation, promoting sustainable development and shaping markets. How we engage • SGS hosted conferences, seminars and webinars • Membership meetings and events • Knowledge and educational resources Why we engage Investors are vital to our ongoing success and growth. We constantly review market analysis, and aim to be assessed as both a sound investment and a sustainable business. How we engage • Annual General Meeting • SGS Capital Markets day • Meetings with investors and analysts • Answers to analyst questions Key topics discussed • Ethical behavior • Risk management and business continuity • Data privacy and cybersecurity • Product safety/quality Key topics discussed • Company performance • Strategic vision • Capital allocation • Execution of action plans • ESG credentials Suppliers Communities and the planet Governments and industries Investors Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 24 Our material topics Materiality assessment Every two years we conduct a formal materiality assessment. In 2022, we integrated the results of our risk assessment and kept in close contact with our stakeholders through our regular channels, such as meetings with investors, our investor days, voice of the customer surveys, our employee engagement survey and meetings with local communities. This has further contributed to our deep understanding of the most material topics for the Group. In 2023, we have developed our first double materiality assessment according to the Corporate Sustainability Reporting Directive. The process has involved a full review of our value chain, stakeholders’ prioritization, and direct/indirect consultation to each of them. During these consultations, we have analyzed: • Impact materiality: scale, scope and remediability of the impact • Financial materiality: likelihood and magnitude of the financial effect The process has been fully aligned with our annual risk assessment in terms of risk identification and assessment. The outcome will be disclosed in our website by mid-2024. The SGS Business Materiality Matrix captures the issues deemed by stakeholders to be materially important to our organization. It is the outcome of a rigorous process, including stakeholder consultation, megatrend and risk analysis, and benchmarking against international principles, including the UN Sustainable Development Goals (SDGs). The nine topics that are most important to the organization 1 Cybersecurity 6 Talent attraction and retention 2 Data privacy and protection 7 Customer relationship management 3 Ethical behavior 4 Health and safety 5 Risk management 8 Corporate governance 9 Sustainable supply chain These are key topics which have helped to shape our group strategy. Although relatively less material for SGS, all other topics remain an essential part of our sustainability management systems. We systematically re-evaluate them to determine whether they have become more material to the organization. Other material topics 10 Adaption and mitigation of climate change 18 Local community support 11 Biodiversity 19 Preventing air pollution 12 Diversity in the executive team 20 Reducing and managing waste 13 Diversity and inclusion 14 Employee engagement 21 Responsible use of materials 22 Tax strategy 15 Executive compensation linked to sustainability 23 Training and development 16 Freedom of association 24 Water footprint 17 Innovation in services and operations 25 Well-being and work-life balance 5 2 1 3 4 6 8 9 7 10 12 15 24 18 20 23 13 14 25 17 21 22 16 19 11 Management reportSGS | 2023 Integrated Report Risk management During 2023 we have continued to focus on and address the main prevailing risks facing the organization, to ensure we can fulfill our purpose of making the world better, safer and more interconnected. 25 Risk governance Our Board of Directors reviews risks to ensure that the Company has a robust strategic approach to mitigating them (see page 61). However, the ultimate responsibility for identifying risks and integrating their management into key business planning processes rests with our Operations Council. The Group Risk Steering Committee oversees our risk management framework, and is chaired by the CEO. The Committee comprises executive members, including the Chief Financial Officer, Chief Compliance & Legal Officer, Chief Operating Officer representative and Chief Information Officer, together with representatives from departments including Risk Management, Human Resources and Sustainability. The Committee meets as necessary, at least three times a year, and reports directly to the Board. Accountability for managing risk rests with ‘Risk Champions’ who are charged with assessing risk in the jurisdictions for which they have responsibility. In addition, SGS integrates a broad array of risk categories (see the charts below) directly into the management process, under the oversight of ‘Global Risk Category Owners’. Risk management framework During the year, SGS has continued to identify and address the main prevailing risks facing our organization. A number of risks have been redefined, to emphasize where the focal points are and the resources needed to address these risks. This was further enhanced by providing additional guidelines to local affiliates on how to properly recognize, measure and mitigate their local risks. Our risk assessment process is designed to make allowances for the size and profile of each of our affiliates. This allows SGS to ensure that the framework is applicable worldwide, with key markets and businesses appropriately involved. The local risk management assessment inputs provide further validation from a global management perspective, contributing to a comprehensive and insightful overview of risk perception which is presented on the risk heat map, page 27. Risk oversight To support our risk management framework, the Group conducts risk assessments, using a bottom-up approach, with identification of potential risks, coupled with design and implementation of mitigation actions and action plans at a local level, where appropriate. Additionally, at group level, SGS applies a top- down approach to evaluate and conclude on the country level results as well as to identify and assess risks from the global perspective. In defining and assessing risks, our organization takes into account risk appetite and tolerance levels. Risk appetite refers to the level of risk that we are willing to accept or take on in pursuit of our objectives and goals. Risk tolerance, however, is a more specific and quantitative measure that represents the actual ability of our organization to withstand losses or variations in the value of its investments or decisions. For instance, for the two examples of emerging risks mentioned below, i.e. for the risk of technological innovation, risk appetite is considered to be low/medium, while for the risk of acts of intentional harm the risk appetite is stated as zero. Risk management process Enterprise Risk Management Framework Places responsibility and accountability for managing risk close to our operations Board of Directors and CEO Review risks and ensure that the Company has a solid strategic approach to mitigating them Audit Committee Supporting the Board in risk assessment and monitoring Operations Council Ultimately responsible for identifying company risks and integrating the management of these risks into key business planning processes Group Risk Steering Committee Chaired by the CEO, the Committee gathers executive members, including the CFO, CCO and CIO, together with operational function representatives Group level Top-down approach with the objective of identifying and assessing global risks Macro risk assessment Reporting platform Local market level – Affiliates – Local business lines – Operations Own risks in local jurisdictions applying a bottom-up approach Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 26 Risk management continued 2023 risk assessment results In 2023, we conducted risk assessments in 58 of our main markets, applying a full and limited scope approach. We assessed 133 specific risks (full scope) and 19 risks (limited scope) within 44 risk categories defined globally. The assessment has confirmed a number of prevailing as well as emerging risks, particularly in relation to technological innovations, cyberattacks, access and security breaches, political instability and military conflicts, continued global energy challenges driving inflationary pressures that adversely impact local and regional economies, including sourcing operations, coupled with continued environment and climate changes. More details are disclosed on pages 28-31. As part of our assessment process, we also identify emerging risks that are likely to impact on our business in the next three to five years. An example of such risks is risk associated with technological innovations, especially investing in technology with limited value and impact on customers, or losing opportunities due to lack of innovation agility in serving current and new markets. Such risk may also be related to an inability to be adequately prepared for market disruptions resulting from new and emerging technologies. We also recognize another emerging risk which is associated with acts of intentional harm, particularly in relation to business disruption, asset loss or harm to employees due to fraud, theft and abuse of integrity of services. For each of these risks, mitigation actions are defined and monitored as per the risk management process. The mitigation actions are described on pages 28-31. Business continuity This year the world saw many disruptive events across different regions, largely driven by climate-led extreme weather events, natural disasters and socio-political crisis. These provide fresh reminders for businesses of any size and industry to be prepared to deal with disruption. Our business continuity programs focus on protecting our operations and critical business processes, by identifying relevant external and internal risks; minimizing their occurrence where possible; and preparing to respond and recover from such events, to limit the adverse impacts and protect our people, our business and our stakeholders. We operate at the three levels – local, regional and global – with our business continuity officers, normally managers or senior managers, who can influence and drive continuous enhancement to our business continuity capabilities. Management reportSGS | 2023 Integrated Report 27 External risks Communication & investor relations Environment & climate change Pandemic Customer needs Cyberattack Economy & sovereign Hostile civil or political environment Technological innovation Industry Legal & regulatory Political risk, war, crime, terrorism Internal risks Operational risks Process Environment (operations) Health & safety Pricing Real estate Service delivery Sourcing Supply chain Non-operational risks Management information Human capital Compliance Technology Treasury Strategic Budget & forecast Compliance Act of intentional harm Access Credit Business model External reporting Reward Business ethics Availability Foreign exchange Business portfolio Internal reporting Talent acquisition Tax Talent management Contract commitment & claim Data privacy Information governance Data integrity Infrastructure Reliability Technological capacity Liquidity Mergers & acquisitions Social responsibility Heat map of risks with highest residual risk scores High 5.0 4.0 t c a p m I 3.0 2.0 Low 1.0 1 Technological innovation 2 Economy & sovereign 3 Talent management 4 Pricing 5 Cyberattack 6 Environment & climate change 7 Access to IT applications 8 Hostile civil or political environment risks 9 Business model 10 Sourcing 11 Legal & regulatory 12 Technological capacity 13 Acts of intentional harm 2 9 3 6 8 11 12 13 10 4 7 5 1 Low 1.0 2.0 3.0 Likelihood 4.0 High 5.0 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 28 Our principal risks The identification and management of risks is aligned to our materiality assessment to help us manage the principal risks. We endeavor to have measures in place to mitigate those risks to an acceptable level. Risk description Summary of impact Mitigation measures • Risk of investing in technological innovation with limited value and impact on customers • Execution of innovation initiatives, based on a thorough understanding of the customer needs, problems and context l Technological a n r e t x E innovation • Risk of losing opportunities due to lack of innovation agility in serving current and new markets • Risk of not being adequately prepared for market disruptions resulting from new and emerging technologies • Continuous assessment and validation of innovation initiatives and projects to ensure their organizational viability • Ongoing business digitalization through strategic partnerships on technology development to identify solutions to mitigate operational risks, and to improve efficiency and competitiveness • Experiment and explore new business areas unlocked through emerging tech disruptions (e.g. Generative AI, Trust in AI) • Ongoing performance monitoring of SGS operations by region and country in comparison to local economic environment • Proactive pricing increases to address cost increases and support SGS growth • Take measures to adapt SGS capacity (and cost base) based on market demand • Balanced resources allocation to ensure adequate business and geographical diversification Economy & sovereign • Loss of sales (decrease in service demand/ economy) • Risk of price pressure management l Talent a t i p a c n a m u H • Ineffective or inadequate training and development programs for employees • Lack of leadership alignment and effectiveness, lack of qualified and competent employees, lack of succession planning of key personnel • Our global employer value proposition drives our integrated talent management, talent development programs and total reward strategy, enhancing talent attraction, engagement and retention • Talent review and succession planning processes across the organization strengthen talent management and development • Risk of inefficient performance management • Using talent assessment and facilitated movement we aim to significantly improve talent development • Risk of workplace discrimination • Our structured leadership development program is designed to enhance leaders’ competencies • Advancing our well-being program to improve employee engagement and retention • Dedicated diversity, equity and inclusion initiatives to foster a more inclusive and diverse workforce s Pricing s e c o r P • Risk of incorrect pricing due to inadequate • Implementation and monitoring of detailed operational pricing pricing model actions to offset inflationary pressures • Risk of margin pressure and processing • Ongoing review and implementation of pricing golden rules inaccurate discounts and value-based pricing strategy • Risk of underutilized capacity due to too • Execution of focused workstreams leveraging on relevant data high pricing versus competition (internal dashboards, segmentation, best practices) Management reportSGS | 2023 Integrated Report 29 Risk description Summary of impact Mitigation measures l Cyberattack a n r e t x E Environment & climate change l y Access to IT g applications o o n h c e T • Financial losses resulting from • Security Operations Center (SOC) continuous monitoring and business disruption or interruption due to cyberattacks • Loss of certification accreditation leading to significant reduction of our certification business • Loss of cyber insurance cover as a result of cyberattacks, lack of internal knowledge and adequate technology and security controls and processes • Reputational impact response around-the-clock • Constant evolution of use cases for security event correlation and early warning • Digital surveillance service and intelligence feeds • Deployment of security solutions at different levels and security layers (perimeter, datacenter, network and workstations) • Evolution and improvement of the antimalware platform at a global level protecting workstations, servers and kubernetes environment • Reinforcement of user identity security measures • Strong training and awareness program for all users with social engineering tests • Vulnerability management and pen testing program for vulnerability detection and remediation • Third-party monitoring (e.g. BitSight) as an additional source of security posture improvement • Implementation of security updates and patches in systems and applications • Cost (monetary and non-monetary) of • Global CO2 reduction targets cascaded down to regions transition to lower emissions technology to achieve our CO2 reduction targets • Reputational impact of misalignment with global megatrends and affiliates • Execution of a vehicle analysis to optimize the fleet and development of a mobility strategy • Ongoing deployment of the Energy Efficiency in Buildings program, with additional buildings in scope • Periodic deployment of awareness campaigns to promote sustainable behaviors among our employees, like the energy savings or the Spot the Orange Dot campaigns • Risk of unauthorized access to sensitive information and resources, existence of orphan accounts and use of exfiltrated credentials • Reinforcement of user access procedures and control • Implementation of new identity governance initiatives (WorkDay, SailPoint) • Deployment of conditional access control to reinforce security posture • Enhancement of user identity security protocols to prevent unauthorized access • Early detection of threads by Digital Surveillance Service • Advancing and broadening the scope of our Security Information and Event Management (SIEM) system to enhance our capabilities in detecting anomalous behavior through refined event • Various meetings and seminars during the year with the IT community on governance, policies, best practices, etc. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 30 Our principal risks continued Risk description Summary of impact Mitigation measures l Hostile civil a n or political r e environment t x E • Business disruption, asset loss or harm to employees and physical property, due to civil or interstate war, civil strife (e.g. following a natural disaster), political violence and terrorism and external criminality • Proactive assessment of country risk and area risk before initiating business activities • Integration of hostile environment contingency planning into business and service delivery design, as well as location and design or selection of facilities • Development of appropriate level of understanding of risk management for managers pertaining to their area of responsibility • Continuous active monitoring of the security risk environment as business activities • Contingency plans to minimize exposure to risk by avoiding concentration of investments in a single territory to ensure adequate levels of diversification if needed • Crisis management system in place to oversee major risk events • Risk of not achieving the strategic • Ongoing dialogue with stakeholders (clients, governments, i model c Business g e t a r t S objectives and misalignment with the strategic direction of the Company towards mega trends resulting in potential loss of market share and/or failure to capture margin increase opportunities s Sourcing s e c o r P • Business slowdown and/or increased operational costs due to impact of inflation and supply chain disruptions • Business slowdown and/or increased operational costs due to supply chain issues, inflation, increased transportation costs and energy price spike l Legal & regulatory • Risk of penalties, loss of business and a n r e t x E reputational risks industrial associations, etc.) to ensure relevance of our chosen megatrends • Ongoing performance monitoring of SGS in comparison to other significant TIC players • Focused resources allocation on strategic business units and markets • Constant optimization of the organization to ensure fast and agile reactions to changing market conditions • Sourcing and supply chain related risks are regularly analyzed and monitored by the global and local procurement teams, especially for those categories with highest impact on the business • While monitoring market trends to address inflation, energy and geopolitical potential risks, we define risks roadmaps by country and implement mitigation plans to anticipate to such risks, reducing our exposure and increasing our secureness • Our mitigation plans include a diverse number of actions, focused on fighting inflation (tendering and renegotiations, contract clauses, rationalization and standardization of products, etc.), and ensuring supply (alternative products, vendors and markets, advanced ordering, safety stocks, etc.) • Strong culture of compliance embedded in our Code of Integrity • Management actions and systematic training of employees • Policies on prevention of risks, bribery and corruption, due diligence and Know your Clients for customers, suppliers and business partners • Continuous review of activities in at risk areas Management reportSGS | 2023 Integrated Report 31 Risk description Summary of impact Mitigation measures Technological capacity e Acts of intentional c n a i l harm p m o C • Risk of software or hardware obsolescence • Migration of applications and infrastructure to the cloud • Lack of resources to meet the technological needs of the business • Lack of procedures and/or tools for IT management • Business disruption, reputational damage, asset loss, or physical and psychological harm to employees due to fraud, theft, intimidation, manipulation of processes and abuse of integrity of services (Azure) mitigating obsolescence or capacity limits (space or computing capacity) • Contracting outsourced IT management services to reduce the risk of turnover or absence of skilled resources to operate corporate IT • Implementation of Information Technology Infrastructure Library (ITIL) methodology and tools such as ServiceNow for change, request, demand and incident management • Proactive process security controls to deter, detect and disrupt attempts to manipulate inspection, testing, auditing, and other service delivery methods for the purposes of crime or similarly undesirable behavior. Process security also includes due diligence services and advice on suitability for recruitment (vetting), as well as dealing with allegations of falsification, adulteration and misuse of certificates, reports and other documents • Protective physical security controls to protect physical space, equipment, consumables, people and processes from misuse and criminal attack • Travel security and remote working security to protect employees on the move or working on client sites or other locations away from SGS immediate control • Investigations into security incidents, criminal attack and alleged violations of the Code of Integrity or other standards and rules Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 32 How we create value As the leader in the TIC industry we create value by enabling a better, safer and more interconnected world. We measure total value creation using the six capitals. Our inputs Financial capital The funds available to us Total equity Profit (prior year) CHF 528 M CHF 630 M Manufactured capital Infrastructure, equipment and tools Intellectual capital Capex Buildings and laboratories CHF 298 M 2 600 Organizational, knowledge-based intangibles Goodwill and other intangible assets Training hours (millions of hours) CHF 1 911 M 6.0 M Human capital The skills and know-how of our employees Employees SGS Rules for Life 99 600 9 Social and relationship capital Our relationships with our stakeholders Suppliers Voice of the customer program 50 000 1 Natural capital The natural resources we need to operate Electricity consumed Fuel consumed 496 GWh 452 GWh Management reportSGS | 2023 Integrated Report 33 What we do Our value Financial capital Testing Our testing processes are delivered using a systematic approach under controlled conditions on our customers’ products, services or systems. The objective is to determine if they meet required safety standards, quality norms and performance criteria set by regulatory bodies. This may include stress tests, usability tests or functionality checks. Testing helps verify if the product or service can perform reliably under expected conditions, thereby building trust with consumers and businesses. Inspection Our inspection processes provide detailed examinations of products, systems or processes for our customers. This involves checking whether they conform to specified criteria, which could include safety regulations, quality standards or performance benchmarks. Inspections are conducted by trained professionals who assess the condition, functionality or compliance of the subject matter, helping to identify potential issues or non-conformities. Certification Our certification processes officially recognize that a service, system, process or product meets specified standards. These are carried out by an accredited certification body after successful testing and inspection. Certification provides assurance of safety, quality and reliability, enhancing trust among consumers and businesses. It also demonstrates compliance with relevant regulations, which can be crucial for market access. CHF 3 316 million paid in wages to our employees CHF 205 million taxes paid to governments CHF 3.20 dividend per share proposed by the Board of Directors, subject to the approval of a capital increase, where shareholders can elect to receive the dividend in the form of shares or in cash Manufactured capital Delivering safe medicine to patients Ensuring a safe, quality and sustainable supply chain Creating great places to work to support our business growth Intellectual capital Enhancing career opportunities through training and innovation Simplifying the customer journey through innovation Ensuring information protection for us and our stakeholders Human capital Ensuring a diverse and inclusive workforce Protecting the health and safety of employees Reducing social risks by reinforcing human rights compliance Social and relationship capital Supporting the communities in which we operate Improving how we work with our customers Promoting sustainability across our supply chain Natural capital Committed to Net Zero by 2050 Minimizing resource depletion and protecting the environment Supporting our customers in their sustainability journey Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 34 Financial capital Access to and management of financial capital to support our strategy and deliver returns to shareholders. 1 How we develop our financial capital Outlook 2024 • Mid to high single-digit organic1 growth • Relaunched M&A program • Improvement in adjusted operating income margin1 on sales • Strong free cash flow1 generation 2 Our inputs Profit CHF million Total equity CHF million Total assets CHF million 2023 597 528 2022 630 763 6 761 7 122 2021 655 1 202 7 007 3 Progress during the year Financial discipline and focused capital allocation • Sustainability services delivered excellent growth across all business lines • SGS holds a prime position in the growing cybersecurity market, illustrated by the strong double-digit growth at Brightsight • Business Assurance (prev. Knowledge) delivered a record performance with solid double-digit organic sales growth and profitability. This was driven by new sustainability services including business health checks and gap assessments as well as social audits and ESG assurance • High single-digit growth in Industries & Environment driven by safety, supply chains, renewable energy and sustainability services • Accelerating demand for critical minerals and battery metal testing, as well as services to support the energy transition, including biofuels, drove growth in Natural Resources to nearly 10% at constant currency¹ • Strong sales momentum in Food for Health & Nutrition offset softness in Health Science and Cosmetics & Hygiene 1. Refer to Alternative Performance Measures – Appendix to the 2023 full year results. Management reportSGS | 2023 Integrated Report 35 3 Progress during the year continued Financial discipline and focused capital allocation (continued) Financial review • Sales of CHF 6 622 million, up 8.1% organic1, were driven by double-digit growth in Business Assurance (prev. Knowledge) and high single-digit growth in Natural Resources and Industries & Environment. Significant FX headwinds led to a reported -0.3% variation compared to prior year • Adjusted operating income (AOI)1 reached CHF 971 million, an increase of 6.2% at constant currency1 compared to prior year. A significant strengthening of the Swiss Franc against the majority of currencies led to a decline of 5.1% compared to 2022. The adjusted operating income margin on sales was 14.7%, representing a decline of 0.7 percentage points compared to prior year, of which 0.5 percentage points was attributable to adverse currency impact • An effective tax rate (ETR) of 26% reflected a normalization of non-tax-deductible expenses • Profit attributable to equity holders achieved CHF 553 million compared to CHF 588 million in prior year, a reduction of 6.0% driven by the strengthening of the Swiss Franc • Basic earnings per share2 was CHF 3.00, a decrease of 4.8% compared to prior year • Free cash flow (FCF)1 of CHF 604 million compared to CHF 481 million in 2022, driven by lower net working capital requirements and capital expenditures • Return on invested capital (ROIC)1 remained stable at 22% compared to 2022, representing an industry-leading level of returns • Net debt1 at 31 December 2023 amounted to CHF 2 839 million including lease liabilities, an increase of CHF 16 million compared to December 2022. SGS successfully refinanced maturing debt, by issuing a 4-year bond of CHF 240 million and an 8-year bond of CHF 260 million in November 2023 4 Outcomes Sales CHF billion Free cash flow1 CHF million Adjusted operating income margin1 % 2023 6.6 604 14.7 2022 6.6 481 15.4 2021 6.4 610 16.5 1. Refer to Alternative Performance Measures – Appendix to the 2023 full year results. 2. On 28 March 2023, the Annual General Assembly approved a 25-1 stock split that went into effect on 12 April 2023. This split increased the number of shares issued, from 7 495 032 to 187 375 800, and reduced the nominal value per share, from CHF 1 to CHF 0.04. As a result, for comparability purpose, the Group recalculated the weighted average number of shares as well as the basic and diluted earnings per share (EPS) as of December 2022. Please refer to note 11 of the consolidated financial statements (page 110). Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 36 Financial capital by business line In 2023, all business lines contributed to strong growth, and we drove additional returns through portfolio management. Strong growth driven by energy, safety and reliability Business performance • Double-digit organic growth in field services and inspection, safety, supply chains and government mandates • High single-digit organic growth in environmental testing • Margin improvement driven by pricing and business mix Market-leading business performance Business performance • High single-digit growth in trade and inspection, and strong performance in lab testing, driven by critical minerals and sustainability • Strong double-digit growth in metallurgy and consulting • Margin improvement driven by improved efficiencies, adoption of automated solutions and pricing Testing & inspection Industries & Environment Natural Resources Wind turbine inspector, Industries & Environment, Belgium. Technical developer XRF analyzers, Natural Resources, The Netherlands. Management reportSGS | 2023 Integrated Report 37 Solid growth and market share gains Business performance • High single-digit growth in connectivity, partly driven by very strong performance from Brightsight • Mid single-digit growth in softlines • Margin decline mainly due to softer activity in wireless testing and a positive one-off in 2022 Organic sales growth in a challenging environment Business performance • High single-digit growth in food testing driven by regulations, network expansion and pricing • Positive underlying growth for health science (excluding Covid related testing) despite challenging market conditions • Margin decrease primarily due to the change in business mix and slowdown in project outsourcing Record performance in 2023 Business performance • Double-digit growth in management system certification, ESG assurance services and customized audits • Very strong double-digit growth in consulting • Margin improvement driven by the strong sales growth and business mix Connectivity & Products Health & Nutrition Certification Business Assurance (prev. Knowledge) Test engineer, Connectivity & Products, Finland. Laboratory manager, Health & Nutrition, Germany. Security auditor, Business Assurance (prev. Knowledge), Switzerland. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 38 Manufactured capital Our manufactured capital represents the effective and efficient use of assets, such as laboratories that SGS owns or has control of to deliver testing, inspection and certification to our customers. 1 How we develop our manufactured capital We invest in and maintain our testing laboratories • Our laboratory network is the largest in the TIC industry and the equipment and services required to operate them drives one of our largest procurement categories. Our job is to negotiate the right commercial terms for the business need as well as ensure they are fit for purpose, high quality and delivered on time anywhere in the world We create great places to work that support our business growth • We manage our large corporate real estate (CRE) portfolio proactively with the aim of 100% accuracy of our database, with no expired contracts. This enables us to operate in full compliance with group policy and deliver workspaces that are fully sustainable, energy efficient and correctly priced. With 85% of our portfolio leased, it is important that we start (re)negotiating early on, approximately 24 months ahead of a lease expiry or the initiation of a new project, to guarantee the best leverage for SGS 2 Our inputs Capital expenditure CHF million Operating expenditure CHF million 2023 298 2022 329 2021 336 1 511 1 493 1 364 3 Progress during the year We invest in and maintain our testing laboratories • Significant investments of CHF 298 million were made to expand and evolve our service offerings in areas including connectivity, automotive and battery testing in Asia; health and safety and environmental in North America; as well as global investments in IT transformation and energy efficiency to meet our digital and sustainability objectives • In May, we expanded our Health & Nutrition capabilities in North America with the acquisition of Nutrasource. The Company provides clinical trial management, full regulatory support, testing services, and product development We create great places to work that support our business growth • The negotiation process continues to be guided by our CRE golden rules, helping them to put best-in- class deals in place and to protect us against high inflation. Where possible, we also further consolidated our office space by implementing work from home policies, which have improved employee work-life balance, as well as delivering cost reductions through space reduction and lower energy consumption • More than CHF 3 million of capex has been dedicated to improving the energy efficiency of our buildings, including investments in high efficiency systems and onsite renewable energy installations 4 Outcomes • Exceeded our target, set in 2020, to reduce depreciated costs over the length of lease agreements of CHF 40 million • Greatly improved compliance with our CRE policy, achieving 100% compliance at the end of the year and maintaining this through the year • On data accuracy, we achieved 98% compliance • By the end of 2023, we had delivered CHF 12.8 million of savings on real estate projects Management reportSGS | 2023 Integrated Report Intellectual capital Our intellectual capital is the development of processes, protocols, knowledge, insights, systems and data, to support and enhance our business activities. 39 1 How we develop intellectual capital We build capabilities that will enable us to deliver on our strategy • World Class Services (WCS) is our distinctive continuous improvement and operational system. It is based on the World Class Manufacturing (WCM) methodology that we apply in our laboratories and operational network. We empower colleagues and increase their level of knowledge and engagement by deploying our business principles on the shop floor. This strengthens our culture, and ensures that every single person in the organization can contribute to our continuous improvement process as their ideas and suggestions make our laboratories more efficient and better, creating a safer place to work • Our Digital Builders Organization designs and develops technology-based solutions such as the WindGo application to support field workers and customers for SGS’s business units that they can bring to market quickly. Through agile development methodology and close collaboration with the business units, we aim to create solutions that bring real value and can easily scale from regional to global We innovate for our customers • A forward-thinking approach to emerging technologies translates into strategic initiatives and programs that drive productivity improvements, increase customer satisfaction and leverage growth opportunities in a responsible and ethical way • Within our operations we are applying emerging technologies such as Generative AI to empower our employees to harness this technology and realize productivity improvements • We are also exploring the need for new services to assess the trustworthiness of new technologies when our customers use or develop them. This will help SGS and our customers comply with new regulations such as the EU AI Act • The ability of our people to innovate is integral to our success. We build on existing initiatives to inspire and encourage them to innovate and deploy new ideas. Our business environment stimulates innovation, delivers top-tier training and development, encourages cross-functional collaboration, and establishes a culture of feedback and continuous improvement. Together, these provide a strong foundation for growth • We have clear policies and procedures for protecting intellectual property generated through innovation. This includes patents, trademarks, domain names, copyrights and trade secrets • Continuously analyzing market trends and identifying improvements to be implemented at SGS to reduce information security risks is part of the DNA of our information security team • Our Global Data Privacy Policy and the corresponding standards and procedures define our principles for processing personal data. This approach allows us to achieve a high level of data protection for our employees, contract partners, customers and suppliers • Group wide, our understanding of data privacy is based on European legislation, in particular the European Union General Data Protection Regulation (EU GDPR). We are also taking steps to meet local data privacy requirements, where they are more strict than our global standards We inspire and encourage our people to innovate and generate new intellectual capital We secure our information and know-how We are committed to maintaining customer trust by protecting all personal data provided to or generated by us 2 Our inputs Goodwill and other intangible assets CHF million Training hours million of hours 2023 1 911 6.0 2022 2 105 5.3 2021 2 160 4.3 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 40 Intellectual capital continued 3 Progress during the year We build capabilities that will enable us to deliver on our strategy • Seven new laboratories have been added to our World Class Services program – in countries throughout the world including India, Kazakhstan, China, Sweden, Russia, Australia and Portugal. With 13 laboratories added since 2021, we have exceeded our SA 2030 target of at least 10 new sites by 2023 • 28 World Class Manufacturing external audits were completed in 2023. Two of our laboratories, located in Shanghai, China and Bangkok, Thailand achieved a World Class Manufacturing bronze award scoring over 50 points • Seven new technology-based products, designed to improve business results through increased sales or efficiency, and one proof of concept were successfully deployed. In addition, we have six products in development, as well as four proof of concepts expected to go live in 2024 We innovate for our customers • Significant progress has been made in embracing emerging technologies, in particular AI, through numerous pilots. We have further demonstrated our dedication to this area by working to increase awareness and enhance skills in the AI domain throughout our organization • An internal SGS ChatGPT has been developed to unleash the potential of Generative AI in daily routine tasks, and to explore new services around trust in artificial intelligence. We also completed the first audit for AI management systems • Dedicated policies and guidelines for the ethical and responsible use of Generative AI have been developed and deployed • Investment in our workforce, and the development of awareness campaigns and training initiatives continues. This will equip employees with the skills and knowledge they need to excel in the AI landscape We inspire and encourage our people to innovate and generate new intellectual capital • A new partnership has been established with a leading learning provider, granting our employees access to more diverse learning resources from top-tier business schools that will foster continuous learning and innovation, and contribute to their personal and professional growth • A Global Business Partner organization has been created to facilitate collaboration between HR and our business units to improve the overall understanding of finances, business objectives, competition, market trends and company culture. This has helped us create effective solutions across the organization through analyzing, developing, implementing and monitoring specific HR programs and solutions We secure our information and know-how • All planned projects were successfully completed in 2023 including the implementation of more than 90 new security operation center monitoring use cases, as well as the migration and optimization of the EDR platform. Progress in the global deployment of Network Access Control (NAC) and the maturity of the Security Operations Center (SOC) processes have made it possible to avoid any security incidents during the year • Implementing a Zero Trust Strategy has been crucial to enhancing our cybersecurity posture and protecting sensitive data from evolving threats. We have improved in a wide range of areas, including: identity and access management (IAM), with the enforcement of strong authentication methods, such as multi-factor authentication (MFA), for all users; micro-segmentation, enabling us to isolate a single workstation to a whole country or region through the enhancement of our SD-WAN and NAC technologies; and continuous monitoring, detecting suspicious activities or deviations from normal behavior in real time by our SOC 24/7/365 Management reportSGS | 2023 Integrated Report 41 3 Progress during the year continued We are committed to maintaining customer trust by protecting all personal data provided to or generated by us • A SGS Privacy Management program that aligns with our Sustainability Ambitions 2023 has been developed. It allows us to take a structured approach to privacy management, provides transparency on data privacy compliance, and boosts trust in us as a responsible and ethical user of data. This program is built on four pillars: leadership and management, risk management, reporting and monitoring, and learning and communication • New Data Privacy Officers (DPOs) have been appointed in Vietnam, Japan and in the French African region • The SGS Data Privacy brand has been refreshed and strengthened to communicate our data privacy function’s message and purpose • New blended learning initiatives have been deployed: – The Data Breach Response Toolkit, eLearning combined with a 20-minute webinar, which together provide employees with the necessary knowledge and skills to effectively respond to data breaches – The Data Privacy Spotlight, an employee data privacy quarterly newsletter that provides SGS employees with relevant and easy to understand insights, practical tips and updates on data privacy delivered directly to their inboxes – The DPO Dispatch, a newsletter tailored to local DPO needs, helping them stay informed on the latest developments in data protection and privacy, new SGS processes and procedures, as well as relevant learning opportunities and timely communication that can be locally deployed • As AI and machine learning are growing rapidly and have introduced new risks for data subjects as well as new challenges for DPOs, we have created new SGS DPO AI FAQ Guidance to provide a starting point local DPOs can use to navigate the critical and complex world of AI 4 Outcomes Training ratio (% of total employment cost spent on training) (includes safety training hours) Number of WCS laboratories 2023 3.6 27 2022 3.2 26 2021 2.6 22 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 42 Human capital Our people are vital to our success and human capital represents their behaviors, engagement and well-being. 1 How we develop our human capital We work with integrity • Being trusted is a prerequisite of everything we do as a business. Our people do not engage in any form of bribery or corruption, and we adhere to the legal requirements of every country where we operate. The SGS Code of Integrity applies to all employees, as well as affiliated companies, contractors, subcontractors, joint venture partners and agents We respect human rights We attract, develop and retain the best talent We commit to diversity and equal opportunities • Our Code of Integrity is reinforced through mandatory annual integrity training, and we require all new permanent employees to complete the same training within three months of joining SGS • Our absolute commitment to human rights is grounded in our SGS Code of Integrity and our SGS business principles. It is also reflected in our human rights policy, supplier code of conduct and other relevant policies • As part of our ongoing efforts, we have integrated human rights considerations into our policies, principles, and due diligence processes. Through this we aim to ensure their effective implementation and to prevent any potential adverse impacts on human rights that may be caused or contributed to by our operations • Our global Employer Value Proposition (EVP) of #Bethechange and #BeSGS is our guiding principle in attracting, engaging and retaining talent in a challenging labor market. These are reinforced by our integrated talent management, robust talent development programs and total reward strategy. Our commitments to talent development and continuous learning strengthen our organization and enable strategic objectives by releasing people’s potential • Our culture of diversity and inclusion enhances our competitiveness and creates value for our customers, investors and employees. We are dedicated to diversity and equal opportunities, and this is embedded in our business principles, Code of Integrity, human rights policy, and anti-discrimination and dignity at work policy. We firmly believe that integrating these principles into our policies and practices is the most effective means of fostering a culture where diversity and inclusion are fundamental values that influence decision making across all levels of the organization • We have zero tolerance for any form of discrimination and take pride in being recognized as an inclusive employer. We are proud to have achieved the 45th rank among the top 100 publicly traded companies recognized for their diverse and inclusive workplaces in the 2023 Refinitiv Diversity and Inclusion Index • We are committed to ensuring equal pay for equal work and regularly conduct analyses to uphold this commitment We engage with and care for our people’s well-being • We are dedicated to cultivating a workplace culture that empowers our employees to thrive, both personally and professionally. Our commitment to promoting well-being is driven by our belief that a healthy, happy and engaged workforce will have a positive impact on individuals, teams and the organization as a whole. To achieve this, we foster a workplace that values and supports well-being as a fundamental aspect of our organizational culture. We also highly value feedback and actively encourage employees to voice their opinions via our voluntary annual employee engagement survey We provide a safe and healthy environment • Our employees’ safety is our top priority. As part of our operational integrity (OI) mission, we promote safety initiatives around eight areas: – Visible leadership – Risk management – Training and awareness – Digitalization – Communications – Resources and skills – Performance management – Health, safety and environmental (HSE) compliance • We run a bi-annual health and safety (H&S) survey to check that safe operations and practices are in place in workplaces and facilities. It is an opportunity to assess how employees and contractors perceive the value of H&S initiatives and for us to identify improvements opportunities • In addition to our Group Security Risk Management Policy, Corporate Security continue to promote an agile, consistent, yet adaptive approach to the protection of people, workspaces, assets and processes from intentional harm. The strategy is to encourage the implementation of appropriate preventive and deterrent controls throughout the value chain 2 Our inputs • 99 600 employees • Nine SGS Rules for Life Management reportSGS | 2023 Integrated Report 43 3 Progress during the year We work with integrity • A network of regional compliance managers has been established across our regions. Following the update to our Code of Integrity and various integrity policies, a number of micro-learnings were launched and webinars conducted to promote and drive awareness throughout the network We respect human rights We attract, develop and retain the best talent We commit to diversity and equal opportunities We engage and care for our people’s well-being • Our Human Rights Task Force further developed our Human Rights Due Diligence Program, making significant progress. One notable achievement was the creation of a Human Rights Due Diligence Checklist specifically designed for use during social compliance audits within our own operations. The development of this checklist was a collaborative effort, with valuable support from experienced compliance auditors from our own responsible business services. We believe that it will help us to reduce operational risk, reinforce our commitment to responsible business practices, and foster positive stakeholder engagement • The first phase of mySGS, our new global human capital management system, was successfully launched. MySGS helps our employees and managers, enhancing employee experience and operational efficiency and supports better decision making • A new talent review and succession planning process using mySGS technology rolled out. The new process will significantly improve our approach to identifying talent and leveraging global organization capability to support business growth • Now operational in 60 countries, the expansion of our talent acquisition tool continues. The use of AI predictive analytics has significantly enhanced our recruitment processes, leading to reduced time-to-hire, increased quality of hire and overall improved service levels • Within our global eLearning platform, SGS Campus, we have now registered 96 650 employees. This platform delivers tailored learning and training programs to both local employees and global teams • Our commitment to diversity and inclusion extends to our Board, with 33% of positions held by women. Additionally, our women in leadership percentage stands at 31.9%, reflecting a positive trend compared to 31.1% in 2022 • To accelerate progress in enhancing our diversity, equity and inclusion (DE&I) we conducted surveys, one-on-one interviews and held workshops with our leaders. This feedback will guide the development of our DE&I program. An additional benefit of our new human capital management system, mySGS, is that it has been instrumental in advancing our global job architecture initiative. Leveraging the system’s functionalities, we have successfully hosted job data, including job grading. This enables us to conduct comprehensive data analysis, such as gender pay gap analysis, and promptly identify any disparities, allowing us to take corrective actions. This integrated approach establishes a robust foundation for providing fair and competitive remuneration packages across all the markets in which we operate • As part of our new global employee well-being strategy, titled ‘Together We Thrive: Cultivating a Culture of Well- Being,’ we organized global mental health webinars for people managers, with more than 1 000 participants. We also conducted a global communication campaign in celebration of International Mental Health Day, raising awareness and encouraging employees to destigmatize this vital issue • To empower our employees on their well-being journey, we established a global well-being eLearning channel, providing a comprehensive range of resources • A new Employee Voice & Engagement platform launched. The first pilot survey reached more than 25 000 employees globally, generating an 81% response rate and providing valuable feedback. The survey revealed an overall employee engagement score of 7.6/10 and an overall manager support score of 8.3/10. These results underscore our strengths in goal setting, emphasizing that employees clearly understand their expectations and how their work contributes to team goals, whether they work onsite, in a hybrid setup, or remotely. Additionally, we have excelled in the areas of safety, ethics and integrity, indicating that our employees feel safe, are encouraged to maintain ethical conduct, and are fully aware of their right to report integrity concerns. To further enhance employee engagement, action plans tailored to each country have been developed and are actively being executed by our affiliate teams We provide a safe and healthy environment • The Safety LeaderSHIFT initiative for managers was deployed in six countries across three regions, with more than 580 managers trained in Chile, South Africa, Brazil, Cameroon, Spain and France, in addition to the 250 managers we trained in 2022 (in Peru, Belgium, Germany, Spain and France) • A new partnership with the Royal Society for the Prevention of Accidents allows all SGS employees to access checklists, articles and posters designed to help prevent different types of accidents (covering everyone from kids under five to elderly people) • An additional 20% of operational sites obtained independent certification to ISO 45001 and ISO 14001 bringing the cumulative total to 644 sites 4 Outcomes Lost Time Incident Rate (LTIR) SGS Code of Integrity: % employees trained to SGS Code of Integrity1 Human rights training: % employees trained on human rights Women in leadership: % of women at CEO-3 level 1. The calculation is based exclusively on permanent employees who completed the annual integrity training. 2023 0.17 99.9 86 31.9 2022 0.19 99.9 78 31.1 2021 0.22 99.0 39 29.0 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 44 Social and relationship capital Our social and relationship capital represents the strength of our working relationships with key stakeholders including customers, suppliers and communities, supporting and strengthening our brand and reputation. 1 How we develop our social and relationship capital our market position as the world’s leading TIC company We engage with our customers • We constantly seek to employ innovative marketing and communications solutions to ensure we solidify • We expand and enhance our Voice of the Customer program every year to support our long-term customer satisfaction targets We collaborate with suppliers • We collaborate with more than 50 000 global, regional and local suppliers worldwide, enabling us to prioritize our sustainability and innovation goals. While maintaining solid partnerships with our key strategic suppliers to generate long-term growth, we also work closely with local suppliers. This allows us to seek new opportunities for development and collaboration, which will support and benefit the communities where we operate We use procurement to drive sustainability • Procurement plays a key role in supporting our sustainability ambitions through effective collaboration with our suppliers, which drives growth, innovation and productivity. Our supply chain is an important part of our value chain and we are committed to engage with our suppliers to further our sustainability ambitions We support our communities • We are committed to investing in the communities where we operate, and do so across three pillars: empowerment, education and environmental sustainability. Through our community program, we help to tackle global challenges such as poverty, equal opportunities, health, education, climate change and environmental degradation – SGS Community Program 2 Our inputs 3 Progress during the year We engage with our customers – More than 50 000 suppliers – Voice of the Customer program • A project to move all local corporate websites to a new single platform was completed. This delivers on our goal to create a consistent yet flexible platform that enables compelling experiences that boost lead generation and support business growth. The sites are outperforming all key competitors, as measured by third-party data, as well as reducing cost and mitigating security risks. The new single platform achieved strong external recognition, being named as a finalist in both the Drum Awards for marketing, and the European Excellence Awards for communications and PR • To help build awareness in the sustainability sector, we ran the ‘Changing Conversations Sustainability Summit,’ an innovative, customer-centric virtual event. This has helped to solidify our reputation as a sustainability leader: 85% of customers agree that SGS services help them to meet their sustainability goals. This global summit brought together 41 speakers from 18 countries to deliver valuable sessions that were streamed live to more than 43 000 people • AI has been integrated into our marketing and communications content creation processes, increasing efficiency and broadening the range of people who can create content for SGS, while focusing on governance to ensure the tools are used responsibly and effectively • An advanced platform to measure customer satisfaction has been implemented. The platform has enabled us to automate processes, providing survey results in real-time, which allows us to respond quickly to unsatisfied customers thanks to a close-the-loop process. It also uses artificial intelligence to analyze free-form comments to quickly identify key pain points or areas of satisfaction • A simple and consistent survey approach across business lines was built for our Voice of the Customer program to analyze the drivers of customer satisfaction and better identify areas for improvement. We also maintained a large geographical coverage of the program with 27 affiliates Management reportSGS | 2023 Integrated Report 45 3 Progress during the year continued We collaborate with suppliers • Although the challenges faced last year due to bottlenecks in the supply chain and high inflation have decreased in 2023, we continued to collaborate with our suppliers to ensure business continuity and alleviate price increases. Monitoring market conditions and the potential risks closely has allowed us to establish mitigation plans that have decreased our exposure and increased our security of supply. We have been able to anticipate problems and draw up action plans for the products we depend on the most. Looking ahead, we are working on rationalization projects to avoid the impacts of future market disruptions • Managing CHF 2 billion third-party spend, our procurement team started a transformation journey in 2023 to support SGS business in a more impactful way, focusing on agility, a collaborative mindset and the impact they could have on SGS financial performance. This transformation journey reinforces our efficiency and introduces a new way of working and collaborating among our global, regional and local procurement teams, as well as with our suppliers. We have put the focus on more strategic activities by restructuring our operating model, developing category management and transferring transactional activities to our shared service centers • New procurement tools to increase efficiency include Workday and Sievo – dashboards that increase visibility to help us make better decisions • Our internal stakeholder satisfaction survey has been enriched to better understand a business’s need for added value, and to guarantee that we can provide it in collaboration with our suppliers • Contributing to the SGS IT transformation journey, procurement supported the development of strategic agreements with multinational market leaders in technology, nurturing links between cutting-edge innovation and SGS operational efficiency and business development. A new ecosystem partnership is also being developed to strengthen the agility and business value of new innovation- based ideas and business models built on emerging technologies, such as artificial intelligence or augmented reality • A Supplier Relationship Management program has been launched with some of our most strategic suppliers, to discuss and align our common interests. As part of this, we have created steering committees to develop initiatives that strengthen strategic relationships, and bring greater efficiency, innovation and sustainability to both organizations • Our focus has been on reinforcing our sustainability commitment with our suppliers in relation to our SA2030 • The SGS Self-Assessment Questionnaire (SAQ) Program for suppliers has been implemented. This enables us to guarantee that all our suppliers comply with the highest standards in environment, carbon footprint, human rights, cybersecurity and data privacy, to ensure a sustainable supply chain in all countries • Sustainability criteria (the mandatory signing of the Code of Conduct and criteria related to carbon footprint, human rights, environment, health and safety and diversity) are now included in our supplier selection processes and tools, to guarantee that we select suppliers that are aligned with our sustainability principles • By initiating a switch from a spend-based model to a hybrid model that will be complete next year, our commitment to reducing our CO2 emissions is reinforced. We are working to increase our data accuracy and analysis to better identify categories, countries and suppliers which have more impact on our scope 3 emissions to actively reduce our carbon footprint through tangible actions on higher impact suppliers We use procurement to drive sustainability We support our communities • The community policy which establishes the foundations of our community strategy has been updated. We now provide clearer definitions of inclusions, exclusions, and roles and responsibilities • Specific guidelines for each type of contribution: from a starter guide for affiliates willing to put a community program in place, to a disaster relief guideline, have been deployed • We have worked with our regional and local sustainability network to promote community programs with a special focus on volunteering and pro-bono initiatives • SGS Academy for the Community provided support and training for people in Pakistan, Türkiye, Ghana, India, Brazil and Morocco. The Academy provides high-quality technical training to people earning less than the average living wage in the communities where we operate. The aim of this pro-bono initiative is to support local economic development by enhancing access to and the quality of employment. Since the beginning of the program, over 1 100 people have received training in several disciplines such as quality management systems, food safety and sustainability 4 Outcomes Customer satisfaction score (CSAT)1 Donations to the community CHF million2 Percentage of suppliers locally sourced % Customers that agree SGS services help them to meet their sustainability goals3 % 2023 90.6 1.72 99 85 2022 84.5 1.85 98 2021 88.0 1.38 98 1. This is a satisfaction score on a 0-100% scale. The data sources used are the global VoC program in 2022-2023 and the Laboratory Excellence Program for 2021. 2. On a constant currency basis. 3. 2023 is the first year we have included this question in the Voice of the Customer survey. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 46 Natural capital Natural capital considers our access to and stewardship and use of scarce natural resources. It measures our impact on the environment. As a professional services company it is relatively low, and comes mainly from energy consumption in our offices and laboratories. 1 How we manage our natural capital Our decarbonization strategy • Our decarbonization strategy focuses on three pillars: 1. Reducing energy consumption at source: our main sources of CO2 emissions are our buildings portfolio and vehicle fleet – we have specific programs such as the Energy Efficiency in Buildings (EEB) program and the vehicle emissions policy to address these 2. Using renewable energy whenever possible 3. Off-setting all residual emissions Our employees are an essential part of the journey we are on, and the environmental awareness initiatives that we develop are an important part of this. We encourage employee participation to strengthen their and our commitment and we are keen to take their initiatives and suggestions into account. Aligned with the 1.5ºC objective from the Paris Agreement, we have committed to reach net-zero greenhouse gas (GHG) emissions across the value chain by 2050. To achieve this objective, we have approved near- and long-term science-based emissions reduction targets with the SBTi: Near-term targets: • We commit to reduce absolute scope 1 and scope 2 GHG emissions 46.2% by 2030 from a 2019 base year • We also commit to reduce absolute scope 3 GHG emissions 28% by 2030 from a 2019 base year Long-term target: • We commit to reduce absolute scope 1, 2 and 3 GHG emissions 90% by 2050 from a 2019 base year In addition to the above targets, all residual emissions will be neutralized in line with SBTi criteria before reaching net-zero emissions by 2050. We have been carbon neutral since 2014, meaning that so far, while reducing our absolute emissions year-on-year, we have compensated our residual emissions using avoidance offsets. In our sustainability journey, while prioritizing the reduction of absolute emissions, we aim to gradually transition from using avoidance offsets to exclusively removal offsets. We promote the circular economy • While we produce relatively little waste, we do need to carefully consider the way we handle chemicals, test samples, paper, plastic and organic waste at our offices and laboratories to preserve natural resources 2 Our inputs Electricity consumed GWh Fuel consumed GWh 2023 496 452 2022 487 460 2021 480 448 3 Progress during the year We lead the decarbonization path following SBTi Our focus has been to communicate our global GHG emissions reduction targets to each region and affiliate. In this context, the global targets have been cascaded down to regions and affiliates by using a multi-criteria methodology that considers their weight, intensity and trend. Each of the identified key affiliates is developing a local decarbonization plan with the objective of reaching its assigned target by focusing on its major contribution, whether this is buildings or vehicles. Evaluating and managing the risks associated with climate change remains a priority for us, and we are supporters of the Task Force on Climate-related Financial Disclosures (TCFD). We are well ahead of the mandatory implementation of the TCFD recommendations, and we have adopted their recommendations around governance, strategy, risk management, and metrics and targets. In 2023, we have assessed direct physical risks in our key owned buildings. The result of this analysis is available in our TCFD appendix to this report. Management reportSGS | 2023 Integrated Report 47 3 Progress during the year continued We reduce energy consumption • The Energy Efficiency in Buildings (EEB) program is our flagship program to target and act on our major source of energy consumption. In 2023, we continued providing the network with tools to help them manage and visualize data as well as to make informed decisions. We also engaged with the identified key affiliates to discuss potential energy efficiency actions in buildings and how to approach them. This has now become part of the local decarbonization plans, currently under development by the affiliates • By focusing energy reduction efforts on our highest consumption buildings, we have demonstrated that we can make a significant impact on our energy levels. The 722 buildings currently in our EEB program account for 84% of our electricity and non-transport fuel consumption. In 2023, we have continued to provide access to global capex that supports financing of energy efficiency measures in buildings and incentivizes local investment. This has contributed to a decrease in our electricity intensity per sales of 6% compared to last year. We continued to strengthen our commitment to onsite solar systems, reaching 3 981 MWh produced onsite this year • For new buildings and major renovations of existing ones, we apply the SGS green building guidelines, which enable us to rate facilities based on KPIs spanning energy, water, waste, building materials and employee well-being, among others. This allows us to incorporate sustainability criteria in the capex decision-making process. In 2023, the tool was updated so that the outcomes are presented in a simple traffic light format to top management • We continued to implement our vehicle emissions policy, promoting greater use of low-carbon technologies, including full electric, plug-in hybrid, hybrid and ethanol vehicles • After buildings and vehicles, energy use across our IT infrastructure and data centers is an important priority. Our sustainable IT activation plan has promoted optimization in cloud migration, hardware and e-waste management in support of our Sustainability Ambitions 2030 to reduce energy use. In 2023, we have developed a new IT Strategy 2026, which embeds the actions for sustainability into our strategic initiatives and organizational roadmaps, to make sustainability a part of everything we do. As a result, we will decommission the activation plan as we strive to make sustainability part of our normal IT operations • 10 000 end user devices (laptops/desktops) have been replaced with more efficient models and our purchase catalog optimized by the introduction of new units from manufacturers like HP and Lenovo that are more aligned with our sustainability standards • To fit in with our power reduction policy we have designed a new Power Profile to save energy when a user is not actively working. The profile means a device will go into sleep mode after 15 minutes of inactivity (previously this did not happen at all) and the screen will be turned off after seven minutes (previously 20 minutes). Critical devices, kiosks, digital signage and devices in meeting rooms are excluded from the new Power Profile • Investments have been made in both onsite self-generation facilities (solar panels) and renewable electricity certificates. So far, 97% of the electricity consumed by SGS comes from renewable sources, and we are working towards closing that gap as far as possible • Waste reduction and recuperation initiatives, ranging from strengthening the employee culture around waste management to engaging with key affiliates to identify areas for improvement has been further developed. We have also continued to work towards embedding the circular economy into our operations – keeping resources in use for as long as possible, extracting the maximum value from them, and recovering and regenerating products and materials at the end of their service life • Various initiatives help us monitor the amount of water we use and minimize consumption across all our operations. As a company, we are not a highly intense consumer of water, so this is not such a material topic. However, we remain committed to ensuring that efficient water management strategies are in place. Within our EEB program, which is primarily focused on our energy reduction efforts, we also assess water consumption and installations, so that site-specific water efficiency recommendations can be made We reduce waste and conserve water 4 Outcomes CO2e thousand metric tons* EEB program energy conservation measures identified (cumulative) 2023 2022 2021 112 029 116 505 115 309 904 786 708 * Scopes 1 and 2 market-based figures. Excludes district heating and refrigerant gases emissions due to unavailability of data. 2021 data is recalculated and no longer includes business travel category of scope 3 in line with our new SBTi targets. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 48 Financial and Non-Financial outlook On 26 January 2024, we officially launched our Strategy 2027: Accelerating growth, building trust, to drive profitable growth, streamline the organization and deliver attractive returns for stakeholders. To ensure the achievement of these targets a new simplified Executive Committee was announced in January 2024. Financial targets Learn more about Strategy 2027 in the SGS 2023 Full Year Results Earnings Release and the SGS 2023 Results and Strategic Updates Presentation. Read more in our 2023 full year results releases www.sgs.com/en/investor-relations/ reports-and-presentations 1. Refer to Alternative Performance Measures - Appendix to the 2023 full year results. 2. Free cash flow/(EBITDA – leases). Refer to Alternative Performance Measures. Sales 5-7% organic growth1 annually Adjusted Operating Income Margin on sales1 1.5pp Significant improvement at least 1.5 percentage points by 2027 Free cash flow After leases and interests >50% Cash conversion1,2 by 2027 SGS | 2023 Integrated Report Laboratory technicians, Health & Nutrition, Spain. Management report 49 Spot the Orange Dot project, Corporate Sustainability, Chile. Sustainability targets Read more online www.sgs.com/en/sustainability/ corporate-sustainability/sustainability- ambitions-2030 Environment Environmental leadership 28% Material improvement towards 28% reduction in scope 3 emissions Governance Responsible business 93% customer satisfaction score Social Diversity, equity and inclusion at least 1/3 of leadership positions held by women Education 7million hours of training per year to employees, clients and communities Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 50 This Corporate Governance report informs shareholders, prospective investors and society on SGS’s policies in matters of corporate governance, such as: the structure of the Group, shareholders’ rights, the composition, roles and duties of the Board of Directors and its committees and management, and internal controls and audits. This report has been prepared in compliance with the Swiss Exchange (SIX) Directive on Information relating to Corporate Governance of 29 June 2022 (in force since 1 January 2023) and with the Swiss Code of Best Practice for Corporate Governance. The SGS Corporate Governance framework aims to achieve an efficient allocation of resources and clear mechanisms for setting strategies and targets, in order to maximize and protect shareholder value. SGS strives to attain this goal by defining clear and efficient decision-making processes, fostering a climate of performance and accountability among managers and employees alike and aligning employees’ remuneration with the long-term interests of shareholders. Corporate governanceCorporate governanceSGS | 2023 Integrated Report 51 52 52 52 52 53 53 53 53 53 53 53 53 54 54 58 58 58 58 58 59 60 60 61 62 62 63 63 63 5. Compensation, shareholdings 64 5.1. 5.2. and loans Content and method of determining the compensation and the shareholding programs Rules on approbation by the annual shareholders’ meeting of executive pay 5.2.1. Rules on performance-related pay and allocation of equity-linked instruments 5.2.2. Rules on loans, credit facilities and post-employment benefits 5.2.3. Rules on vote on pay 6. Shareholders’ participation rights 6.1. Voting rights and representation restrictions 6.1.2. Rules on instructions to the independent proxy and electronic participation in the annual shareholders’ meeting 6.2. Statutory quorums 6.3. Convocation of General Meetings of Shareholders 6.4. Inclusion of items on the agenda 6.5. Registration in the share register 7. Change of control and defense measures 7.1. Duty to make an offer 7.2. Clauses on change of control 8. Auditors 8.1. Duration of the mandate and term of office of the lead auditor 8.2. Audit fees 8.3. Additional fees 8.4. Information instruments pertaining to the external audit 9. Information policy 10. Quiet periods 64 64 64 64 64 64 64 64 64 64 64 64 64 64 64 65 65 65 65 65 65 65 1. 1.1. 1.2. 1.3. Group structure and shareholders Group structure Significant shareholders Cross-shareholdings Capital structure Issued share capital Conditional share capital 2. 2.1. 2.2. 2.3. Changes in capital 2.4. 2.5. Dividend-right certificates 2.6. Shares and participation certificates Limitations on transferability and admissibility of nominee registrations Convertible bonds and warrants/options 2.7. 3. Board of Directors 3.1. 3.2. 3.3. 3.4. 3.5. Members of the Board of Directors Other activities and vested interests Limits on external mandates Elections and terms of office Internal organizational structure 3.5.1. Allocation of tasks within the Board of Directors 3.5.2. Members’ list, tasks and area of responsibility for each Committee of the Board of Directors 3.5.3. Working methods of the Board and its committees 3.6. 3.7. Definition of areas of responsibility Information and control instruments vis-à-vis the management 4. Operations Council 4.1. 4.2. 4.3. Limits on external mandates 4.4. Management contracts Members of the Operations Council Other activities and vested interests Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 52 1. Group structure and shareholders 1.1. Group structure At 31 December 2023, the business lines are organized as follows: 1.1.1. Operational group structure SGS SA, registered in Geneva (CH), also referred to as the ‘Company,’ controls directly or indirectly all entities worldwide belonging to the SGS Group, which provides independent testing, inspection and verification services. The shares of SGS SA are listed on the SIX Swiss Exchange and are traded on SIX Europe (Swiss Security Number: 249745; ISIN: CH0002497458). At 31 December 2023, the operations of the Group were divided into seven regions, each led by a Chief Operating Officer responsible for the SGS businesses in that region and for the local implementation of group policies and strategies. At 31 December 2023, geographic operations were organized as follows: • North America • Latin America • Africa & Western Europe • North & Central Europe • Eastern Europe & Middle East • North East Asia • South East Asia & Pacific The Group is structured into five business lines with each responsible for the global development of group activities within its own sphere of specialization and the execution of strategies with the support of the Chief Operating Officers. • Industries & Environment (I&E) • Natural Resources (NR) • Connectivity & Products (C&P) • Health & Nutrition (H&N) • Business Assurance (BA) (prev. Knowledge) Each business line was led by an Executive Vice President. Chief Operating Officers and Executive Vice Presidents are members of the Operations Council, the Group’s most senior management body. 1.1.2. Listed companies in the Group None of the companies under the direct or indirect control of SGS SA have listed shares on any stock exchange. 1.1.3. Non-listed companies in the Group The material legal entities consolidated within the Group are listed on pages 155 to 157 of the annual report, with details of the share capital, the percentage of shares controlled directly or indirectly by SGS SA and the registered office or principal place of business. The list of legal entities is limited to entities whose contribution to the group sales in 2023 represent at least 1% of the consolidated sales and includes the main operating entity in the jurisdictions where the Group is active, even when annual sales do not reach 1% of consolidated sales. This definition of materiality excludes dormant companies, pure sub-holding companies or entities used solely for the detention of assets. Details of acquisitions and disposals made by the SGS Group during 2023 are provided in note 3 of the consolidated financial statements included on page 105 of this annual report. 1.2. Significant shareholders To the knowledge of the Company the shareholders owning more than 3% of its share capital as at 31 December 2023, or at the date of their last notification as per Article 120, al. 1 of the Financial Market Infrastructure Act (FinMIA) were Groupe Bruxelles Lambert (acting through Serena SARL and URDAC) with 19.31% (December 2022: 19.11%) of the share capital and voting rights of the Company, BlackRock Inc. with 5.18% (December 2022: 5.18%) and UBS Fund Management (Switzerland) with 3.03% (December 2022: below 3%). As at 31 December 2023, the SGS Group held 1.64% of the share capital of the Company (December 2022: 1.68%). During 2023, the Company has published regularly on the electronic platform of the Disclosure Office of the SIX Swiss Exchange Ltd all disclosure notifications received from shareholders of transactions subject to the disclosure obligations of Article 120, al. 1 of FinMIA. During 2023, the Company published a total of two reports regarding the composition of its significant shareholders to the Disclosure Office of the SIX Swiss Exchange Ltd at www.sgs.com/en/investor-relations. 1.3. Cross-shareholdings Neither SGS SA nor its direct and indirect subsidiaries have any cross-shareholding in any other entity, whether publicly traded or privately held. Group structure Regions Functions Chief Executive Officer Africa & Western Europe North & Central Europe Eastern Europe & Middle East North East Asia Finance, Corporate Sustainability, Investor Relations, Corporate Communications, Procurement, Corporate Development, IT, Digital and Strategic Transformation Business lines Connectivity & Products Health & Nutrition Industries & Environment Natural Resources Latin America South East Asia & Pacific Human Resources Business Assurance (prev. Knowledge) North America Legal, Compliance & Corporate Security Corporate governanceSGS | 2023 Integrated Report 53 2.6. Limitations on transferability and admissibility of nominee registrations SGS SA does not limit the transferability of its shares. The registration of shares held by nominees is not permitted by the Company’s articles of association, except by special resolution of the Board of Directors. By decision of the Board, the Company’s shares can be registered in the name of a nominee acting in a fiduciary capacity for an undisclosed principal, provided however that shares registered in the names of nominees or fiduciaries may not exercise voting rights above a limit of 5% of the aggregate share capital of the Company. This rule was made public on 23 March 2005. The Company has a single class of shares and no preferential rights have been granted to any shareholder. 2.7. Convertible bonds and warrants/options No convertible bonds have been issued by the Company or by any entity under its direct or indirect control. In 2023, no options or similar instruments have been issued by the Company or by any of the Group’s subsidiaries. The Board of Directors is the highest governing body within the Group. It is the ultimate decision-making authority except for those decisions reserved by law to the Annual General Meeting. 2. Capital structure 2.1. Issued share capital The share capital of SGS SA is CHF 7 495 032 as of 31 December 2023 and comprises 187 375 800 fully paid-in, registered shares of a par value of CHF 0.04. On 31 December 2023, SGS SA held 3 064 685 treasury shares through an affiliate company (2022: 125 978). At the 2023 Annual Shareholders Meeting, the shareholders approved a division of the par value of the shares from CHF 1 to CHF 0.04. Consequently each share was divided and replaced by 25 shares of a CHF 0.04 par value. 2.2. Conditional share capital The shareholders have conditionally approved an increase of share capital by an amount of CHF 1 100 000 divided into 27 500 000 registered shares with a par value of CHF 0.04 each. This conditional share capital increase is intended to obtain the shares necessary to meet the Company’s obligations with respect to employee equity-based remuneration plans and option or conversion rights of convertible bonds or similar equity- linked instruments that the Board is authorized to issue. If increased by the maximum amount of the conditional share capital, the existing share capital of 187 375 800 shares would increase by approximately 14.7% to 214 875 800 shares. The conditional capital is not limited in time. The right to subscribe to such conditional capital is reserved to beneficiaries of employee share option plans and holders of convertible bonds or similar debt instruments and therefore excludes shareholders’ preferential rights of subscription. The Board is authorized to determine the timing and conditions of such issues, provided that they reflect prevailing market conditions. The term of exercise of the options or conversion rights may not exceed 10 years from the date of issuance of the equity- linked instruments. Until 23 March 2023, the Company had an authorized share capital of CHF 500 000 which was not renewed beyond this term. 2.3. Changes in capital In 2023, the nominal value of the registered shares of the Company was divided by a factor of 25, consequently the number of shares in issue was multiplied by 25, whilst the share capital remained unchanged. The share capital of the Company was reduced in 2021 to cancel shares purchased by application of share buyback programs initiated by the Company. In 2021, the shareholders approved a reduction of the share capital, by cancellation of 70 700 shares (corresponding to 0.9% of the share capital). No other changes in the share capital of the Company were made in the course of the last three years. 2.4. Shares and participation certificates All shares, other than treasury shares held by SGS SA, have equal rights to the dividends declared by the Company and have equal voting rights. Treasury shares owned directly or indirectly by the Company do not earn dividend. The Company has not issued any participation certificates (bons de participation/Partizipationsscheine). 2.5. Dividend-right certificates The Company has not issued any dividend-right certificates. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 54 3. Board of Directors 3.1. Members of the Board of Directors This section presents the members of the Board of Directors of the Company with their functions in the Group, their professional backgrounds and all their material positions held outside the Group in governing and supervisory boards, management positions and consultancy functions, official tenures and political commitments, both in Switzerland and abroad. The Board has set out criteria for the selection of new Directors and has conducted a search which results in periodic changes to the composition of the Board of Directors. The aim of this exercise is to ensure that the Board is continuously in a position to provide leadership, strategic oversight and guidance and contribute to setting ambitious targets for the Group and meeting long-term value creation objectives. The competencies sought by the Group for its Board of Directors include experience of senior executive leadership in international businesses, strategic planning, finance, technology and innovation. When selecting candidates to the Board of Directors, the Company has due regards to the experience, professional qualifications, areas of expertise, age, gender and national background as well as leadership style, so that at all times, the Board and its committees have the required skills. At the Annual Shareholders Meeting of March 2023, Jens Riedl was appointed to the Board of Directors. Paul Desmarais, Jr. did not stand for re-election. Biographical information on former members of the Board of Directors is available in the corporate governance reports of prior years. The members of the Board of Directors at 31 December 2023 were as follows: Board members, key industry experience based on the Global Industry Classification Standard (GICS): Industrials Consumer discretionary Consumer staples Healthcare Financials Information technology Communication services Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Jens Riedl Kory Sorenson Janet Vergis Corporate governanceSGS | 2023 Integrated Report 55 Sami Atiya Nationality: German Year of birth: 1964 Appointment: March 2020 Function in SGS • Board of Directors • Nomination Committee • Chair: Remuneration Committee Key experience • Robotics • Automation • Medical technology • Software and logistics • Transportation • Risk management Phyllis Ka Yan Cheung Nationality: Chinese Year of birth: 1970 Appointment: March 2022 Function in SGS • Board of Directors • Sustainability Committee Key experience • Retail and consumption • Digital and data driven organization • Growth in Asian markets • Enterprise level risk management • Change management • Talent and workforce management Professional history 2016 to present: ABB Ltd (CH, SE) 1997 to 2014: Siemens Group 1995 to 1997: Harald Balzer & Partner 1994 to 1995: Robert Bosch – Blaupunkt 1988 to 1993: Fraunhofer Institute Karlsruhe Institute of Technology Education • Master of Business Administration (MBA), Massachusetts Institute of Technology (MIT), USA • Master’s degree in Electrical Engineering and Automation, Karlsruhe Institute of Technology, Germany • PhD in Electrical Engineering (Robotics, Artificial Intelligence and Sensors), University of Wuppertal/Karlsruhe Institute for Technology, Germany Professional history 2015 to present: McDonald’s China; CEO 2012 to 2014: McDonald’s Singapore and Malaysia 2000 to 2011: McDonald’s China 1998 to 2000: Leo Burnett, Hong Kong 1997 to 1998: Momentum Strategy Consultant, India 1992 to 1997: Saatchi & Saatchi, J Walter Thompsons, Hong Kong Education • Bachelor of Arts, The University of Hong Kong, China • Executive MBA, The Chinese University of Hong Kong, China Other activities and functions Fellow, Aspen China Fellowship (CN) Member, Aspen Global Leadership Network (CN) Calvin Grieder Nationality: Swiss Year of birth: 1955 Appointment: March 2019 Function in SGS • Chair: Board of Directors • Chair: Nomination Committee • Sustainability Committee Key experience • Automation and control technology (USA) • Telecom and digital services • System engineering and services • Food processing • Risk management Professional history 2001 to 2016: Bühler (CH); CEO 1999 to 2000: Swisscom (CH & DE) 1994 to 1998: SIG (CH) 1991 to 1994: Mikron (CH) 1984 to 1990: Bürkert (DE & USA) 1980 to 1983: Georg Fischer (CH & USA) Education • Master of Science in Process Engineering, ETH Zurich • Advanced Management Program (AMP), Harvard University Other activities and functions Givaudan SA*, Vernier (CH), Chairman of the Board Bühler Group AG, Uzwil (CH), Chairman of the Board Carivel7 AG, Zurich (CH), Owner Eraneos Group AG, Zurich (CH), Chairman of the Board Avenir Suisse, Zurich-Oerlikon (CH), Member of the Board of Trustees Advisory Board ETH – Department of Mechanical & Process Engineering (CH) * Listed company. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report Tobias Hartmann Nationality: German, American Year of birth: 1972 Appointment: March 2020 Shelby R. du Pasquier Nationality: Swiss Year of birth: 1960 Appointment: March 2006 Function in SGS • Board of Directors • Audit Committee Key experience • Retail • Technology • Logistics and operations • eCommerce and marketplaces • IT • Cybersecurity • Risk management Professional history 2018 to present: Scout24 SE; CEO 2017 to 2018: Hellofresh SE 2011 to 2015: eBay Enterprise (part of eBay Inc.) Education • MBA, Clark University, USA • Bachelor of Arts (BA), Clark University, USA Function in SGS • Board of Directors Key experience • Corporate law • Banking, stock exchange and financial regulation • Private equity • M&A • Risk management • Sustainability Professional history 1994 to present: Lenz and Staehelin; Partner Education • Geneva University Business School and School of Law • Columbia University School of Law (LLM) Other activities and functions Swiss National Bank* (CH), Member of the Board since 2012, Chair of the Risk Committee Pictet and Cie Group SCA (CH), Chairman of the Supervisory Board since 2013 56 Ian Gallienne Nationality: French, Belgian Year of birth: 1971 Appointment: March 2013 Function in SGS • Board of Directors • Remuneration Committee • Nomination Committee Key experience • Strategy • M&A • Finance • Risk management • Consumer/retail management Professional history 2012 to present: Group Bruxelles Lambert; CEO 2005 to 2012: Ergon Capital Partners 1998 to 2005: Rhône Capital LLC Education • MBA from INSEAD, France Other activities and functions adidas* (DE), Vice Chairman of the Supervisory Board, Member of the General Committee Imerys*, Paris (FR), Member of the Board, Chairman of the Strategic Committee, Member of the Compensation Committee, Member of the Appointments Committee Pernod Ricard SA*, Paris (FR), Member of the Board, Member of the Strategic Committee and Member of the Remuneration Committee Carpar SA (BE), Member of the Board Compagnie Nationale à Portefeuille SA (BE), Member of the Board Financière De La Sambre SA (BE), Member of the Board Société Civile du Château Cheval Blanc (FR), Member of the Board * Listed company. Corporate governanceSGS | 2023 Integrated Report 57 Jens Riedl Nationality: German Year of birth: 1973 Appointment: March 2023 Function in SGS • Board of Directors Key experience • TIC • Strategy • M&A • Finance and financial risk management • Industrials and business services • Transportation and logistics Professional history 2022 to present: Groupe Bruxelles Lambert; Investment Partner and Head of DACH 2019 to 2021: Permira 1999 to 2018: Boston Consulting Group Education • MBA from University of St. Gallen, Switzerland • PhD in Finance from European Business School (EBS), Germany Other activities and functions GEA Group*, Düsseldorf (DE), Member of the Supervisory Board, Member of the Presiding and Sustainable Committee, Member of the Nomination Committee Sanoptis, Zug (CH)/Berlin (DE), Member of the Supervisory Board Canyon, Koblenz (DE), Observer to the Supervisory Board EMarketing Munich (DE), Member of the Supervisory Board SecureSystem Munich (DE), Member of the Advisory Board Janet Vergis Nationality: American Year of birth: 1964 Appointment: March 2021 Function in SGS • Board of Directors • Audit Committee Key experience • Healthcare (pharmaceuticals, biotechnology and device) • US leadership across large, complex and heavily regulated businesses • R&D background • Board governance and CPG knowledge • M&A • Strategy Professional history 2013 to 2019: various private equity firms 2010 to 2012: OraPharma, Inc.; CEO 1988 to 2009: Johnson & Johnson Education • Bachelor of Science in Biology, Pennsylvania State University, USA • Master of Science in Physiology, Pennsylvania State University, USA Other activities and functions Teva Pharmaceutical Industries* (USA), Member of the Board, Chair of Compliance Committee Member of the Human Resources/ Compensation Committee, and Member of the Nominating and Governance Committee Dentsply Sirona* (USA), Member of the Board, Chair of the Science & Technology Committee Church and Dwight Company* (USA), Member of the Board, Chair of Governance Committee, and Member of the Compensation and Human Capital Committee The Pennsylvania State University (USA), Biotechnology Advisory Board Chair The Pennsylvania State University (USA), Corporate Engagement Advisory Board Vice- Chair Kory Sorenson Nationality: British Year of birth: 1968 Appointment: March 2019 Function in SGS • Board of Directors • Remuneration Committee • Chair: Audit Committee • Chair: Sustainability Committee Key experience • Financial risk management • Audit and control • Capital markets • M&A • Remuneration (executive and wider workforce) • Governance • Sustainability Professional history 2005 to 2010: Barclays Capital; Managing Director 2001 to 2005: Credit Suisse 1998 to 2001: Lehman Brothers 1997 to 1998: Morgan Stanley 1995 to 1997: Commerz Financial Products 1992 to 1995: Total SA Education • Post-graduate (DESS) degree in corporate finance, l’Institut d’études politiques de Paris, France • Master’s in applied economics, University of Paris-Dauphine, France • Bachelor’s in econometrics and political science, American University, USA • Governance programs from Harvard Executive Education, INSEAD and the Stanford Graduate School of Business • Professional certificate IBM Cybersecurity Fundamentals Other activities and functions Pernod Ricard SA*, Paris (FR), Member of the Board and Chair of the Remuneration Committee, Member of the Audit Committee Bank Gutmann, Vienna (AU), privately owned, Member of the Supervisory Board Comgest, Paris (FR), Chair and an independent member of the Board of Partners AA Limited, Jersey (UK), Member of the Board and Chair of Audit and Risk Committee Premium Credit Limited (UK), Member of the Board and Chair of Audit and Risk Committee * Listed company. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 58 The Board of Directors considers the following criteria to assess the independence of its members: 1. The Director must not have been employed by the Company in an executive capacity within the last five years 2. No family member of the Director is employed or was employed during the past three years by the Group in any management capacity 3. Neither the Director nor a family member has received any payments from the Group other than board remuneration approved by the Annual General Meeting 4. The director is not acting (and must not be affiliated with a company that is acting in material manner) as an advisor or consultant to the Company or a member of the Company’s Operations Council 5. The Director must not be affiliated with a significant customer or supplier of the Company 6. The Director must have no personal services contract(s) with the Company or a member of the Company’s Operations Council 7. The Director must not be affiliated with a not-for-profit entity that receives significant contributions from the Company 8. The Director must not have been a partner or employee of the Company’s external auditor during the past three years 9. The Director must not have any other conflict of interest that the Board determines to mean they cannot be considered independent 10. Any Director who has served for more than 12 consecutive terms is no longer considered as independent 3.4. Elections and terms of office The articles of association of SGS SA provide that each member of the Board of Directors, and among them the Chair of the Board of Directors and the members of the Remuneration Committee, is elected annually by the shareholders for a period ending at the next Annual General Meeting. Each member of the Board is individually elected. There is no limit to the number of terms a Director may serve. The initial date of appointment of each board member is indicated in Section 3.1. 3.5. Internal organizational structure The duties of the Board of Directors and its committees are defined in the Company’s articles of association and in its internal regulations, which are reviewed periodically. They set out all matters for which a decision by the Board of Directors is required. In addition to the decisions required by Swiss company law, the Board of Directors approves the Group’s strategies and key business policies, investments, acquisitions, disposals and commitments in excess of delegated limits. 3.5.1. Allocation of tasks within the Board of Directors The Chair of the Board is elected by the Annual General Meeting. He or she plans and chairs the board meetings, defines the agenda of the meetings and conducts the deliberations of the Board of Directors. All members of the Board of Directors participate in deliberations of the Board and participate equally in its decisions. Within the limits permitted by law or by the articles of association, the Board of Directors can decide to delegate certain of its tasks to standing or ad-hoc committees. With the exception of the members of the Remuneration Committee, who are elected by the shareholders, the members of other committees are appointed by the Board. The Board has concluded that its members are independent on the basis of these criteria, with the exception of Shelby du Pasquier (whose tenure exceeds 12 yearly terms), Ian Gallienne and Jens Riedl (both being representatives of a significant shareholder owning more than 10% of the shares of the Company). None of the members of the Board of Directors exercise nor have they exercised an executive role or operational management tasks for the Company or any entity of the Group. None of them have any significant business connection with the Company or the Group. The remuneration of the members of the Board of Directors is detailed in the Remuneration report. The Chair of the Board, jointly with members of the Board of Directors, assesses periodically the performance of the Board as a whole, of its committees and of each of its individual members. On the basis of this periodic assessment, changes to the composition of the board membership are regularly proposed to the Company’s Annual General Meeting. This periodic performance evaluation is designed to ensure that the Board is always in a position to provide an effective oversight and leadership role to the Group. 3.2. Other activities and vested interests Other activities and vested interests of the members of the Board of Directors are indicated in Section 3.1. 3.3. Limits on external mandates The Company’s articles of association limit the number of mandates permissible to board members. These rules limit the number of mandates that board members can accept to no more than 10 board memberships in entities outside the Group, of which a maximum of five memberships may be in boards of companies whose shares are traded on a stock exchange. Mandates assumed at the request of a controlling entity do not count towards the maxima defined in the articles of association. In addition, the articles of association limit to 10, the permissible participations in boards of association and other non-profit organizations. All board members have confirmed that they comply with these rules. Corporate governanceSGS | 2023 Integrated Report 3.5.2. Members’ list, tasks and area of responsibility for each committee of the Board of Directors The following chart describes the committees and their membership as at 31 December 2023: Remuneration Audit Sustainability Nomination 59 Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Jens Riedl Kory Sorenson Janet Vergis Chair Member The Chair of the Board of Directors attends the meetings of the Remuneration and Audit Committees, with a consultative vote. He chairs the Nomination Committee and is a member of the Sustainability Committee. Each committee acts within terms of reference established by the Board of Directors and set out in the internal regulations of the Company. The minutes of their meetings are available to all Directors. Remuneration Committee Members of the Remuneration Committee are elected individually during the Annual General Meeting, with the Chair of the Committee designated among them by the Board of Directors. The Remuneration Committee is focused on matters of executive remuneration. The Remuneration Committee acts in part in an advisory capacity to the Board, and in part as a decision-making body on matters that the Board has delegated to the Committee. The Committee advises the Board of Directors on matters regarding the remuneration of the members of the Board of Directors and management, and on general policies relating to remuneration applicable to the Group. The Committee defines the conditions of share-based remuneration plans or other variable compensation plans, issued from time to time by the Company. The Committee reviews and approves the contractual terms of the employment of the Chief Executive Officer and the other members of the Management. The Committee reviews regularly, at least once a year, the compensation of each member of the Operations Council. The Committee drafts the SGS Remuneration report. Audit Committee Sustainability Committee The Audit Committee supports the Board of Directors in discharging its duties in relation to financial reporting and internal controls. Such duties include consideration of the appropriateness of accounting policies, the adequacy of internal controls, risk management and regulatory compliance. It exercises oversight over the major risks identified by the Board of Directors. This includes specifically the risks of cybersecurity. It receives regular reports on cybersecurity incidents and measures taken by management to address this risk. The Audit Committee is assisted in this task by the Board digital advisory committee which provides advice on matters of digital technology. The Audit Committee is also responsible for the supervision of the internal and external auditors of the Group, each of which provides regular reports to the Committee on findings arising from their work. The Committee reports regularly to the Board of Directors on its findings. A dedicated Sustainability Committee was established in 2022 in response to the growing importance of sustainability to the Company and its stakeholders. The Committee plays an important role in supporting the Company to develop its sustainability plans and act accordingly. The Committee oversees sustainability- related issues that may affect the Group and its customers, including reputational and non-financial risks. Nomination Committee The Nomination Committee assists the Board in the succession planning, selection and nomination of candidates to positions to the Board of Directors and to the Operations Council of the Group. The Board of Directors and its committees hold physical meetings as well as meetings by videoconference. The table below does not make any distinction between physical and remote meetings of the Board and its committees. Meetings of Board of Directors Remuneration Committee Audit Committee Sustainability Committee Nomination Committee Frequency Average duration 6 times 5 times 5 times 4 times 3 times 4 hours 2.5 hours 3 hours 2 hours 2 hours Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 60 Attendance at board and committee meetings The Board of Directors expects its members to attend and participate actively in its meetings and meetings of its committees and has set a minimum target of attendance at 75% of meetings. The chart below summarizes the attendance by each board member in 2023 at the meetings of the Board and the respective standing committees. Member Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Jens Riedl1 Kory Sorenson Janet Vergis Paul Desmarais, Jr.2 Board meetings Remuneration Audit Sustainability Nomination 6/6 6/6 6/6 5/6 6/6 6/6 4/4 6/6 5/6 N/A 5/5 4/5 5/5 5/5 5/5 4/5 3/3 3/3 2/3 4/4 4/4 4/4 1. Elected to the Board in March 2023. 2. Did not stand for re-election in 2023. 3.5.3. Working methods of the Board and its committees The Board of Directors and each committee convene regularly scheduled meetings with additional meetings held as and when required, in person or by phone conference. The Board and the committees may pass resolutions by written consent. Each board member has the right to request that a meeting be held or that an item for discussion and decision be included in the agenda of a meeting. Board and committee members receive supporting documentation in advance of the meetings and are entitled to request further information from the Management in order to assist them to prepare for the meetings. The Board and each of the committees can request the attendance of members of the management of the Group. The Board and each of the committees are authorized to hire external professional advisors to assist them in matters within their sphere of responsibility. To be adopted, resolutions need a majority vote of the members of the Board or committee, with the Chair having a casting vote. The Board and its committees convene as often as required. In principle the Board meets at least four times a year, i.e. once every quarter. The Audit Committee meets at least three times a year, i.e. once before the publication of the annual and half-year results, and once outside these periods, to review and approve the scope of internal and external audit. The Sustainability Committee and the Remuneration Committee meet at least once a year. 3.6. Definition of areas of responsibility The Board of Directors is responsible for the ultimate direction of the Group. The Board discharges all duties and responsibilities that are attributed to it by law. In particular, the Board: • Leads and oversees the conduct, management and supervision of the Group • Determines the organization of the Group • Assesses risks facing the business and reviews risk management and mitigation policies • Appoints and removes the Group’s Chief Executive Officer and other members of management • Defines the Group’s accounting and control principles • Decides on major acquisitions, investments and disposals • Discusses and approves the Group’s strategy, financial statements and annual budgets • Prepares the General Meetings of Shareholders and implements shareholders’ resolutions • Notifies the judicial authorities in the event of insolvency of the Company, as required by Swiss law In accordance with the Company’s internal regulations, operational management of the Group, a function which the Board of Directors has delegated, is the responsibility of the Operations Council. The Operations Council has the authority and responsibility to decide on all issues that are not attributed to the Board of Directors. In the event of uncertainty on a particular issue regarding the separation of responsibility between the Board of Directors and the management, the final decision is taken by the Chair of the Board. The Chair of the Board is regularly informed of the activities of the Operations Council by the Chief Executive Officer, the Chief Financial Officer and the General Counsel. The Operations Council is chaired by the Chief Executive Officer and consists of those individuals entrusted with the operational management of the Group’s activities, as follows: • The Chief Operating Officers (COOs) are responsible for operations in the Group’s seven regions (see Section 1.1.) • The Executive Vice Presidents (EVPs) are entrusted with the management and development of the Group’s five business lines (see Section 1.1.) • The Senior Vice Presidents (SVPs) represent the principal group support functions (Finance, Human Resources, Corporate Communication, Sustainability & Investor Relations and Legal and Compliance) The composition, role and organization of the Operations Council are detailed in Section 4. Corporate governanceSGS | 2023 Integrated Report 61 E. Risk assessment The Board conducts on a yearly basis an assessment of the risks facing the Group. This process is conducted with the active participation and input of the management. Once identified, risks are assessed according to their likelihood, severity and mitigation. The Board deliberates on the adequacy of measures in place to mitigate and manage risks and assigns responsibility to designated managers for implementation of such measures. As part of this process, the ownership of and accountability for identified risks are approved by the Board. The risks identified and monitored by the Board fall broadly into three categories: first, environment risk, which includes circumstances outside the Group’s direct sphere of influence, such as competition and economic or political landscape; second, process risks that include risks linked to the operations of the business, the management of the Group and the integrity of its reputation in the marketplace; and third, risks associated with information and decision making. For each of the risk categories and within these categories, for each significant risk identified, the Board deliberates on proposed mitigation, risk avoidance or risk transfer measures and approves action plans designed to control such risks. 3.7. Information and control instruments vis-à-vis the management A. Responsibility of the Board The Board of Directors has ultimate responsibility for the system of internal controls established and maintained by the Group and for periodically reviewing its effectiveness. Internal controls are intended to provide reasonable assurance against financial misstatement and/or loss, and include the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information and compliance with relevant legislation, regulation and industry practice. B. Governance framework The Group has an established governance framework, which is designed to oversee its operations and assist the Company in achieving its objectives. The main principles of this framework include the definition of the role of the Board and its committees, an organizational structure with documented delegated authority from the Board to management, and procedures for the approval of major investments, acquisitions and other capital allocations. The Chief Executive Officer and the Chief Financial Officer attend the meetings of the Board of Directors and the Audit Committee. The group controller and the head of the internal audit function attend the meetings of the Audit Committee. The Senior Vice President of Human Resources attends the meetings of the Remuneration Committee and Nomination Committee, and the General Counsel and Chief Compliance Officer attend all meetings of the Board of Directors and its committees. The other members of the Operations Council and other members of management only participate in the Board and committee meetings by invitation. The Board and each of its committees meet from time to time in private sessions, outside of the presence of management. C. Information to the Board The Board of Directors is constantly informed about the operational and financial results of the Group by way of detailed monthly management reports, which describe the performance of the Group and its business lines. During each board meeting, the Chief Executive Officer and the Chief Financial Officer present a report to the Board of Directors on the operations and financial results, with an analysis of deviations from prior year and from current financial targets. During board meetings, the Board is updated on important issues facing the Group. The Chief Executive Officer, the Chief Financial Officer and the General Counsel and Chief Compliance Officer (hereafter ‘Operations Council’) attend all of the Board of Directors meetings, while other Operations Council members attend from time to time to discuss matters under their direct responsibility. The Board of Directors meets regularly with the members of the Operations Council. During board meetings or committee meetings, board members can request any information concerning the Group. The Board reviews and monitors regularly and formally previous acquisitions and large investments as well as the implementation of related group strategies. The Group has a dedicated Internal audit function, reporting to the Chair of the Audit Committee, which assesses the effectiveness and appropriateness of the Group’s internal controls. The Audit Committee approves the audit plan of the internal audit, receives its reports and deliberates on audit findings and is updated on implementation of corrective actions identified by the internal audit. The Audit Committee approves the audit plan of the internal audit, receives its reports and deliberates on audit findings and is updated on implementation of corrective actions identified by the internal audit. D. General Counsel and Chief Compliance Officer Furthermore, the Group has a compliance function, headed by the General Counsel and Chief Compliance Officer, who reports to the Audit Committee and the Board of Directors and has direct access to the Chair of the Board. The compliance function supports the implementation of a compliance program based on the SGS Code of Integrity, available in 30 languages. The goal of the program is to ensure that the highest standards of integrity are applied to all of the Group’s activities worldwide in accordance with international best practices. The General Counsel and Chief Compliance Officer reports violations of compliance rules every semester to the Sustainability Committee. The Committee is informed about violations of compliance standards and the implementation of corrective actions, including disciplinary actions taken. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 62 4. Operations Council Until 31 December 2023, the management of the group was placed under the responsibility of an Operations Council (as defined in Section 1.1.). The Company has announced in January 2024 the evolution of the group management structure, with the ultimate management responsibility to be entrusted to a simplified Executive Committee. The following section describes the Operations Council in its composition and role at the end of December 2023. 4.1. Members of the Operations Council The members of the Operations Council at 31 December 2023 were as follows: Frankie Ng Nationality: Swiss/Chinese Year of birth: 1966 Function in SGS • Chief Executive Officer Joined SGS in 1994 Education • BA in Economics and Electronics Engineering Previous responsibilities 2011-2015: EVP, Industrial Services 2005-2011: EVP, Consumer Testing Services 2002-2004: Managing Director, US Testing Géraldine Picaud Nationality: French Year of birth: 1970 Function in SGS • Chief Financial Officer Joined SGS in 2023 • Appointed CEO Designate as of 26 January 2024 Education • MBA from the Superior School of Commerce de Reims Previous responsibilities 2018-2023: Holcim, Switzerland, Chief Financial Officer 2011-2018: Essilor, France, Group Chief Financial Officer 2008-2011: Volcafe Ltd., Switzerland, Chief Financial Officer Olivier Merkt Nationality: Swiss Year of birth: 1962 Function in SGS • Chief Compliance Officer Joined SGS in 2001 Fabrice Egloff Nationality: French Year of birth: 1969 Function in SGS • COO, Africa & Western Europe Joined SGS in 1995 Education • Doctorate in Law, admitted to the bar in Switzerland Education • Master of Business Administration in International Business Affairs Previous responsibilities 2006-2008: VP, Corporate Development 2001-2006: Senior Counsel Teymur Abasov Nationality: Azerbaijani Year of birth: 1972 Function in SGS • COO, Eastern Europe & Middle East Joined SGS in 1994 Education • Degree in Electrical Engineering Previous responsibilities 2007-2023: COO Eastern Europe & Middle East, Managing Director Russia 2006-2007: Managing Director, Kazakhstan and Caspian Sub-Region 2004-2006: Managing Director, Azerbaijan and Georgia 2003-2004: Managing Director, Georgia Olivier Coppey Nationality: Swiss Year of birth: 1972 Function in SGS • EVP, Health & Nutrition Joined SGS in 1994 Education • MSc Economics Previous responsibilities 2015-2020: EVP, Agriculture Food and Life 2013-2015: EVP, Agriculture 2009-2013: Vice President Seed and Crop, Agricultural Services Steven Du Nationality: Chinese Year of birth: 1972 Function in SGS • COO North East Asia Joined SGS in 1999 Education • MSc Logistics & Supply Chain Management Previous responsibilities 2019-2021: Managing Director Mainland China and Hong Kong SAR 2016-2019: Managing Director Mainland China 2014-2016: Managing Director Vietnam Previous responsibilities 2017-2019: COO Africa 2009-2017: Managing Director, France 2004-2008: Managing Director, Hong Kong Luis Felipe Elias Nationality: Peruvian Year of birth: 1959 Function in SGS • COO, Latin America Joined SGS in 2004 Education • Industrial Engineering Degree and MBA Previous responsibilities 2012-2018: Managing Director, Ecuador and Peru 2004-2012: Deputy Managing Director, Peru Derick Govender Nationality: South African Year of birth: 1970 Function in SGS • EVP, Natural Resources Joined SGS in 2002 Education • Diploma in Analytical Chemistry • Postgraduate in Business Management Previous responsibilities 2015-2020: EVP Minerals Services 2014-2015: Minerals Manager, Chile 2010-2014: VP Minerals, Africa Jessica Sun Nationality: American Function in SGS • SVP, Human Resources Joined SGS in January 2022 Education • Bachelor’s degree in Law from the China University of Politics & Law Science • EMBA from the Chinese Europe International Business School (CEIBS) Previous responsibilities 2016-2021: Haier, USA, CHRO Global Appliances 2013-2016: Mallinckrodt Pharmaceuticals, VP of Human Resources, International Mallinckrodt 2012-2013: Eaton Corporation, USA, HR Director, Global CET Business Corporate governanceSGS | 2023 Integrated Report 63 4.2. Other activities and vested interests The following list presents all material activities in governing and supervisory boards, management positions and consultancy functions, official tenures and political positions held by each member of the Operations Council outside the Group, both in Switzerland and abroad. Frankie Ng Member of the Board of Directors, Chair of the Compensation Committee of Logitech SA, Switzerland. Géraldine Picaud Member of the Board of Directors and Chairperson of the Audit Committee of Danone SA, France Member of the CFO Coalition for the Sustainable Development Goals (SDGs), United Nations Global Compact Derick Govender Member of IPMI (International Precious Metal Institute) 4.3. Limits on external mandates The articles of association of the Company limit the number of mandates permissible to members of the Operations Council, to no more than four board memberships in entities outside the Group, of which a maximum of one membership may be in the board of companies whose shares are traded on a stock exchange. Mandates assumed at the request of a controlling entity do not count towards the maxima defined in the articles of association. In addition, the articles of association set limits to participations in boards of association and other not-for-profit organizations to no more than 10 such memberships. 4.4. Management contracts The Company is not party to any management contract delegating management tasks to companies or individuals outside the Group. Charles Ly Wa Hoi Nationality: French Year of birth: 1966 Malcolm Reid Nationality: British Year of birth: 1963 Function in SGS • EVP, Connectivity & Products Function in SGS • COO, South East Asia & Pacific Initially joined SGS in 1992, rejoined in 2008 Joined SGS in 1987 Education • Degree in Electronics Engineering from ENSEIRB-MATMECA Education • BSc Chemistry Previous responsibilities 2018-2020: EVP Consumer and Retail Services 2016-2018: Vice President of Retail Solutions and European Business Development, Consumer and Retail 2013-2016: Global Head of Materials and Manufacturing, Industrial Services 2009-2013: Vice President of Strategic Global Accounts, Consumer Testing Services Jeffrey McDonald Nationality: Australian/American Year of birth: 1964 Function in SGS • EVP, Business Assurance (prev. Knowledge) Joined SGS in 1995 Education • Postgraduate Diploma in Education Previous responsibilities 2015-2020: EVP Certification and Business Enhancement 2007-2015: COO, North America 2004-2007: EVP, Systems and Services Certification 2003: Global Project Manager, Systems and Services Certification Stephen Nolan Nationality: American/Irish Year of birth: 1960 Function in SGS • COO North America, since January 2021 Joined SGS in 2019 Education • B.Comm in Finance Previous responsibilities 2013-2018: Chief Executive Officer/Chief Financial Officer, Hudson Global 2004-2012: Chief Financial Officer, Adecco North America Previous responsibilities 2012-2015: EVP, Consumer Testing Services 2007-2011: EVP, Systems and Services Certification 2005-2007: Managing Director, Australia Alim Saidov Nationality: Azerbaijani/Canadian Year of birth: 1964 Function in SGS • EVP, Industries & Environment Joined SGS in 1993 Education • PhD in Science Previous responsibilities 2013-2020: EVP, Oil, Gas and Chemicals 2007-2013: EVP, Oil, Gas and Chemicals Services and Environmental Services 2005-2007: COO, Eastern Europe and Middle East 2004: COO, North America and Managing Director, Canada Wim van Loon Nationality: Belgian Year of birth: 1966 Function in SGS • COO Northern & Central Europe Joined SGS in 1989 Education • Engineering degree in Industrial Electro Mechanics and Master’s degree in Business Management Previous responsibilities 2018-2020: EVP, Industrial Services 2015-2018: Managing Director, Benelux 2011-2015: Executive Director, Industrial Services, Benelux 2003-2015: Business Manager for Industrial, Minerals and Consumer Testing Services, Benelux During 2023, Dominik de Daniel, CFO and Toby Reeks, SVP Corporate Communications, Sustainability, and Investor relations left the Operations Council. Biographical information on former members of the Operations Council may be found in prior years’ Corporate Governance reports. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 64 5. Compensation, shareholdings and loans 5.1. Content and method of determining the compensation and the shareholding programs The Group’s overriding compensation policies are defined by the Board of Directors. The objectives of these policies are twofold: 1) to attract and retain the best talent available in the industry, and 2) to motivate employees and managers to create and protect value for shareholders by generating long-term sustainable financial achievements. In line with these principles, board members are entitled to a fixed fee, which takes into account their level of responsibility. Members of the Operations Council receive a fixed remuneration and are entitled to a performance-related annual bonus and a Long-Term Incentive plan. The Annual General Meeting approves the compensation payable to the Board and the Operations Council. The rules on the vote on pay applicable in the Group are explained below. The ultimate responsibility for defining remuneration policies and deciding on all matters relating to remuneration rests with the Board of Directors, subject to decisions that require binding resolutions of the Annual General Meeting. The Board of Directors is assisted in its work by a Remuneration Committee, which is elected by the Annual General Meeting. 5.2. Rules on approbation by the annual shareholders’ meeting of executive pay 5.2.1. Rules on performance-related pay and allocation of equity-linked instruments The Company’s articles of association define the principles of the variable remuneration and the allocation of shares or equity- linked instruments to the members of the Operations Council. Please refer to the Remuneration report pages 69 to 70 for a description of the Company’s rules in the matter. In the event of changes in composition of the Operations Council occurring after the approval by the Annual General Meeting of the remuneration of the executive team, the Board is authorized to increase up to a maximum of 40% the amount authorized by the shareholders for that purpose. 5.2.2. Rules on loans, credit facilities and post-employment benefits Loans granted to members of the governing bodies of the Company may not exceed one year of remuneration and must be granted at market conditions. As at 31 December 2023 (same as at 31 December 2022), no loan or advance is granted by the Group to members of the Operations Council. 5.2.3. Rules on vote on pay The Annual General Meeting approves the following matters related to the compensation of the Board and Operations Council: • It approves the fixed fees payable to the Board of Directors until the next Annual General Meeting • It approves in advance a prospective maximum fixed remuneration to the Operations Council during the next financial year • It approves the total aggregate amount payable to the Operations Council for the performance-related annual bonus related to the prior year • It approves the maximum amount payable under Long-Term Incentive plans to be introduced by the Company • Resolutions of such matters are binding to the Board of Directors. In addition, the Annual General Meeting is invited to cast a non-binding vote on the Remuneration report that describes the Company’s remunerations policies. This allows shareholders to express a view on the overall policies of the Group in relation to remuneration 6. Shareholders’ participation rights All registered shareholders receive a copy of the half-year and full-year results upon the publication of such results by the Company. They can request a copy of the Company’s annual report and are personally invited to attend the Annual General Meeting. The Company’s annual report and press releases are publicly available on its website. 6.1. Voting rights and representation restrictions All registered shareholders can attend the General Meetings of Shareholders and exercise their right to vote. A shareholder may also elect to grant power of attorney to an independent proxy appointed by the Company and elected in advance by the General Meeting of Shareholder or to any other representative holding a written power of attorney. There are no voting restrictions, subject to the exclusion of nominee shareholders representing undisclosed principals, as detailed in Section 2.6. 6.1.2. Rules on instructions to the independent proxy and electronic participation in the annual shareholders’ meeting Shareholders have the opportunity to give general or specific voting instructions to the independent proxy, who is elected by the General Meeting of Shareholders. Shareholders can give specific or generic voting instructions to the independent proxy on all matters on the agenda of the General Meeting of Shareholders. These instructions can be issued in written form, or by electronic transmission. The voting of resolutions by electronic votes is authorized by the articles of association, within the modalities defined by the Board of Directors. 6.2. Statutory quorums The General Meeting of Shareholders can validly deliberate regardless of the number of shares represented at the meeting. Resolutions are adopted by the absolute majority of votes cast unless Swiss company law mandates a special majority. 6.3. Convocation of General Meetings of Shareholders The rules regarding the convocation of General Meetings of Shareholders are in accordance with Swiss company law. 6.4. Inclusion of items on the agenda The agenda of the Annual General Meeting is issued by the Board of Directors. Shareholders representing shares of at least 0.5% of the company’s shares may request the inclusion of an item on the agenda of the Annual General Meeting, provided that such a request reaches the Company at least 40 days prior to the meeting. 6.5. Registration in the share register The Company does not impose any deadline for registering shares prior to an Annual General Meeting. However, a technical notice of two business days is required for processing the registration in the share registry. 7. Change of control and defense measures No restriction on changes of control is included in the Company’s articles of association. 7.1. Duty to make an offer In the absence of any specific rules in the Company’s articles of association, any investor or group of investors acquiring more than 33.3% of the shares and voting rights of the Company has the duty to make a public offer in compliance with the applicable Swiss takeover rules. 7.2. Clauses on change of control There are no general plans or standard agreements offering specific protection to board members, Operations Council or employees of the Group in the event of a change of control, subject to the standard rules regarding termination of employment. However, long-term incentive plans issued by the Company may include rules allowing acceleration of vesting of benefits in the event of a change of control. Corporate governanceSGS | 2023 Integrated Report 65 The group website has a section fully dedicated to investor relations, where all financial information and presentations are available. This includes an updated version of the articles of association, current information on share buyback programs and minutes of shareholders’ meetings. SGS meets regularly with institutional investors, holds results presentations, roadshows and presentations at broker- sponsored country or industry conferences, and attends one-on-one meetings. The Group publishes consolidated half-year unaudited and yearly audited results in print and online formats. The annual report is published in English and is available upon order from the Group’s website. The current list of publication dates is available on the Group’s website. The Group acknowledges the directives on the independence of financial research issued by the Swiss Bankers Association. In addition, the Group complies with rules regarding information and reporting of the Federal Act on stock exchange and securities trading, and the ordinance on stock exchanges and securities trading. The address of SGS’s main registered office and contact details by phone and email can be found on page 204 of this report. 10. Quiet periods Members of the Board of Directors, Operations Council and other employees having access to material non-public information are banned from trading in SGS shares during quiet periods, preceding publication of yearly and half yearly results. These periods are set between 31 December until and including the date of publication of the full year results and between 30 June until and including the date of the publication of the half year results. In addition to these fixed quiet periods, the Company institutes additional trading bans from time to time, prior to the release of material non-public information, such as major acquisitions or disposals, or trading updates. 8. Auditors 8.1. Duration of the mandate and term of office of the lead auditor PwC was elected as auditor of the Company and the SGS Group. The auditors of the Company are subject to re-election at the Annual General Meeting every year. PwC with Guillaume Nayet as the lead initially took up office in 2021 in relation to the 2021 financial statements and have audited the Company and Group 2023 financial statement. The Company requires the lead auditor to be changed at the latest after completion of seven annual audit cycles, in line with Swiss law. The Audit Committee reviews annually the desirability to renew the annual mandate of its external auditors before proposing to the Board and the Annual General Meeting the re-election of the auditors. 8.2. Audit fees Total audit fees paid to the auditors for the audit of the Company and the Group financial statements in 2023 amounted to CHF 6.3 million (2022: CHF 6.1 million). 8.3. Additional fees An aggregate amount of CHF 1 million was paid to PWC (2022: CHF 1 million) for other professional services, unrelated to the statutory audit activity, mainly composed of tax compliance services, non-statutory and other assurance services. 8.4. Information instruments pertaining to the external audit The Audit Committee is responsible for evaluating the external auditor on behalf of the Board of Directors and conducts assessments of the audit services provided to the Group during its regular meetings. The audit committee meets with the auditor at least four times per year, including in private sessions without the presence of management. In 2023, the Audit Committee met five times with the external auditors. The Committee considers and approves the proposed audit plan, conducts assessment of the performance of the auditor and approves audit fees on the basis of the amount of work required in order to perform the audit. The Audit Committee reviews with the group auditors the significant financial statement risk areas arising from the audit, including the key audit matters referred to in the statutory auditor’s report. When evaluating the performance of the auditors, the Audit Committee assesses the effectiveness of the audit based on Swiss Law, their understanding of the business of the Group and how matters of significant importance for the group internal control and financial reporting are identified, reported and resolved. The Audit Committee reviews also how the group auditors interact with the component audit firms in charge of auditing the main subsidiaries of the Group, and the relevance and timeliness of issuance of statutory audits and management letters. The Audit Committee places great emphasis on the independence of the external auditors, and on the absence of conflict of interests, both at the group level and at the level of individual subsidiaries. It reviews carefully the type of other services which are provided by the auditors, in addition to the audit, to ensure that such ancillary services could not endanger the independence of the audits. The audit Committee has issued a policy on non- audit services which define restrictively the type of admissible services excluding from the admissible scope most tax advisory services and services related to prospective acquisitions and disposal. The policy also sets an approval process requiring prior approval of the Audit Committee for any assignment for non- audit services above defined thresholds. The audit fees are approved on the basis of a negotiated budget agreed with the group auditors taking into account the complexity of the audit, the structure of the Group and its internal control systems and the responsibility of the auditors. The duties of the Committee include consideration of the audit plan, regular assessment of the performance of the auditor and approval of audit fees on the basis of the amount of work required in order to perform the audit. The Audit Committee reviews with the group auditors the significant financial statement risk areas arising from the audit, including the key audit matters referred to in the statutory auditor’s report. The auditor regularly presents its findings, both during the deliberations of the Audit Committee and in written reports, to the attention of the Board of Directors that summarize key findings. 9. Information policy The policy of the Group is to provide individual and institutional investors, directly or through financial analysts, business journalists, investment consultants (financial community) and employees with financial and business information in a consistent, broad, timely and transparent manner. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 66 The SGS Remuneration report provides an overview of the SGS remuneration model, its principles and programs and the related governance framework. The report also includes details on the remuneration of the Board of Directors and of the Operations Council related to the 2023 business year. The SGS Remuneration report has been prepared in compliance with the new Code of Obligations, in effect as of 1 January 2023, the Swiss Exchange (SIX) Directive on Information relating to Corporate Governance, revised on 29 June 2022 and in effect as of 1 January 2023, the Swiss Code of Best Practice for Corporate Governance of economiesuisse, revised on 14 November 2022, and according to the articles of association of SGS SA, as revised and approved by the shareholders at the Annual General Meeting in 2023. Remuneration reportRemuneration reportSGS | 2023 Integrated Report 67 82 82 82 83 85 85 86 Introduction by the Remuneration Committee 68 5. Remuneration awarded to the Operations Council members 5.1. AGM vote on remuneration 5.2. Fixed remuneration (audited) 5.3. Short-term variable remuneration (audited) 5.4. Long-term variable remuneration 5.4.1. 5.4.2. 2023-2025 PSUs long-term incentive grant (audited) Vesting of the 2021-2023 PSUs and cash long-term incentive plans 5.5. Total remuneration (audited) 5.6. Remuneration mix (audited) 5.7. Other compensation, loans and credit facilities (audited) 5.8. Shares and options held (audited) 5.9. Gender representation (audited) 5.10. Other activities (audited) 87 88 89 89 89 89 Report of the statutory auditor 90 1. 2. Remuneration policy and principles 2.1. Remuneration general principles 2.2. Remuneration policy for the executive management 2.3. Remuneration governance 2.3.1. Remuneration Committee 2.3.2. Shareholders’ engagement 2.3.3. Changes in remuneration governance 3. Remuneration model 3.1. Structure of remuneration of the Board of Directors 3.2. Structure of remuneration of the Operations Council 3.2.1. Fixed remuneration: annual base salary 3.2.2. Fixed remuneration: benefits 3.2.3. Short-term variable remuneration 3.2.4. Long-term variable remuneration 3.2.5. Changes to the long-term incentive plan 3.2.6. Remuneration mix 3.2.7. Shareholding ownership guidelines 3.2.8. Employment contracts 3.2.9. Timeline of remuneration 69 69 69 69 70 70 70 71 71 71 72 72 72 75 76 77 77 77 78 79 4. Remuneration awarded to the Board of Directors 4.1. AGM vote on remuneration 4.2. Details of remuneration (audited) 4.3. Other compensation, loans and credit facilities (audited) 4.4. Shares and options held (audited) 4.5. Gender representation (audited) 4.6. Other activities (audited) 79 79 81 81 81 81 Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 68 1. Introduction by the Remuneration Committee On behalf of the Remuneration Committee, I am pleased to present the SGS Remuneration report for the year ended in December 2023. During the AGM 2022 to AGM 2023 mandate, the Remuneration Committee sustained its commitment to enhancing clarity and transparency for shareholders and stakeholders concerning the management of governing bodies’ remuneration at SGS. Furthermore, the Committee supported the Board of Directors in its initiatives to simplify and streamline the Company’s governance. A primary aspect related to transparency is associated with the implementation of the new Code of Obligation in 2023, replacing the ordinance against excessive compensation (OaEC) at listed joint-stock companies, effective as of 1 January 2014. This update incorporates and specifies provisions related to the management and disclosure of governing bodies’ remuneration. In this remuneration report, the Remuneration Committee adhered to the new formulation of these provisions, aiming to interpret both their letter and spirit in the light of completeness and transparency, in the best interest of shareholders and stakeholders. The Long-Term Incentive 2021-2023, a transition plan from a scheme based on a grant every three years to one based on annual grants, concluded its performance period in 2023 and reached vesting. Details regarding the vesting of the plan are explained in Section 5.4.2. of this report. The Remuneration Committee continues to evaluate the Long-Term Incentive to ensure that the structure of the plan aligns with our business strategy and shareholders’ interests. The modifications of the plan are outlined in Section 3.2.5. of this report. The Committee also scrutinized the structure of the AGM votes on remuneration matters. In order to simplify governance and align with prevalent market practices, the Committee proposed to the AGM to change the timing of the vote on the value of the grants awarded under the long-term incentive plan to the Operations Council members from the current fiscal year to the next fiscal year. Details on this are disclosed in Section 2.3.3. of this report, and the necessary modifications of the Articles of Association are submitted to the AGM for its approval. As disclosed in Section 4 of the Governance of this report, a new leadership structure was announced in January 2024. As this Remuneration Report refers to the 2023 business year, we have kept reference to the past leadership structure (Operations Council and Senior Management). We make reference to the new leadership structure (Executive Committee) only in regards to future events. Since 2015, the Board of Directors has implemented the consultative vote on the remuneration report and the binding vote on compensation amounts at the Annual General Meeting. The Committee received significant support in its activities and direction through positive votes at the Annual General Meeting 2023, and will continue with the same ‘say-on-pay’ vote structure at the forthcoming Annual General Meeting 2024: • Consultative vote on the remuneration report • Binding vote on the prospective maximum remuneration amount of the Board of Directors until the next Annual General Meeting • Binding vote on the retrospective short-term variable remuneration amount of the Executive Committee members for the business year 2023 • Binding vote on the prospective maximum fixed remuneration amount of the Operations Council members for 2025 • Binding vote on the prospective maximum value of the grants awarded under the long-term incentive plan to the Executive Committee members in 2024 and 2025, following the change in the timing of the vote on this matter described above On the following pages, you will find detailed information about our remuneration model, its principles and programs, and the remuneration awarded to the Board of Directors and the Operations Council related to the business year 2023. I hope that you find this report informative. The Committee has sought to promote a remuneration environment that is fully aligned with the purpose and the strategy of the Group, its short-term and long-term performance, the interests of our shareholders, and relevant market practices and trends. I look forward to your support on the 2023 annual remuneration report at the AGM. Sami Atiya Chair of the Remuneration Committee The table below summarizes the votes of the Annual General Meeting on remuneration matters in the last five years. (% of votes for) Consultative vote on the remuneration report Binding vote on the prospective maximum remuneration amount of the Board of Directors Binding vote on the prospective maximum fixed remuneration amount of the Operations Council members Binding vote on the retrospective short-term variable remuneration amount of the Operations Council members Binding vote on the value of the grants awarded under the long-term incentive plan to the Operations Council members1 1. Until 2020, the SGS Long-Term Incentive plan provided a grant every three years. 2023 95.41 2022 83.94 2021 92.70 2020 93.05 2019 94.50 98.10 97.81 95.51 98.13 98.09 95.34 96.11 94.37 95.58 80.28 98.16 97.02 96.95 97.39 97.17 96.08 96.88 96.40 – – Remuneration reportSGS | 2023 Integrated Report 69 2. Remuneration policy and principles 2.1. Remuneration general principles The general principles of remuneration of the members of the Board of Directors and the members of the Operations Council are defined in the articles of association (Art. 28, Art. 29, Art. 30, Art. 31 and Art. 32). The remuneration of the members of the Board of Directors is defined with two main objectives: (i) to compensate their activities and responsibilities as the highest governing body of the Group and their participation in the committees established within the Board of Directors, and (ii) to guarantee their independence in exercising their supervisory duties towards the executive management. The remuneration of the members of the Operations Council is defined with two main objectives: (i) to attract and retain the best talents available in the industry, and (ii) to motivate them to create and protect long-term sustainable value for our shareholders and society. The members of the Board of Directors receive a fixed remuneration only. The members of the Operations Council receive a fixed remuneration and a variable remuneration linked to short-term and long-term results. Remuneration component Board of Directors (non-executive) Operations Council (executive) Fixed remuneration Short-term variable remuneration Long-term variable remuneration 2.2. Remuneration policy for the executive management The Company’s remuneration policy applicable to the executive management (Operations Council members) is defined by the Board of Directors in support of the Company’s business strategy to deliver profitable growth, and in line with its business principles: integrity, health and safety, quality and professionalism, respect, sustainability, leadership and innovation. The remuneration system for the Operations Council members operates according to four main principles: • Market competitiveness – Remuneration levels are in line with competitive market practices • Internal equity – Remuneration programs link remuneration to the level of responsibility and the skillset required to perform the job • Pay for performance – A substantial portion of remuneration is directly linked to business and individual performance • Long-term value creation and alignment to shareholders’ interests – Part of remuneration is delivered in equity subject to a multi-year vesting period In line with its anti-discrimination and dignity at work policy, SGS is committed to promoting equal opportunity for all employees and an environment in which all members of the workplace treat all individuals both in the workplace and in other work-related settings at all times with dignity, consideration and respect. All employment-related decisions, including compensation, benefits and promotions, will be solely made on the basis of an individual’s qualifications, performance and behavior or other legitimate business considerations. SGS does not tolerate any discriminatory practices, in particular based on age, civil partnership, disability, ethnicity, family status, gender, gender identity, ideological views, marital status, nationality, political affiliation, pregnancy, religion, sexual orientation, social origin or any other status that is protected as a matter of local law. Method of determination of remuneration levels – benchmarking SGS is a global company, operating in a broad range of sectors; the determination of the remuneration levels of the Operations Council members must consider both global and local practices. We periodically compare our compensation practices with those of similar global organizations: • Competitors in the testing, inspection and certification industry: ALS, Applus+, Bureau Veritas, Eurofins, Intertek, Mistras, Team (the peer group of companies considered for the performance conditions of the long-term incentive plan, see Section 3.2.4.) • The SMI and SMIM-listed companies belonging to the SLI index, not belonging to the capital markets, insurance and pharmaceuticals sectors of comparable size (-50% / +100% in terms of sales) The elements of executive remuneration benchmarked include annual base salary and benefits, short-term and long-term incentives. To ensure proper benchmarking, we use a proprietary job evaluation methodology. Since half of our Operations Council members are based outside Switzerland, we use information published by reputable data providers, including Mercer and Willis Towers Watson, related to both the Swiss market and the other markets where the Operations Council members are based. As a reference point, SGS targets the median compensation level of the peer group. The Company has not used external paid advisors to perform salary benchmarks since 2015, relying instead on available market data. No third-party services provider was engaged to perform such benchmark in 2023. 2.3. Remuneration governance The Annual General Meeting approves every year the maximum aggregate amount of remuneration of the Board of Directors. Within that limit, the Board of Directors is responsible for determining the remuneration of the Chair and the Directors. It also decides on the remuneration and terms of employment of the CEO. In addition, the Board of Directors defines general executive remuneration policies, including the implementation and terms and conditions of long-term incentive plans, as well as the financial targets relevant to any incentive plan. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 70 2.3.1. Remuneration Committee The Board of Directors is assisted in its work by a Remuneration Committee (the Committee), which consists of non-executive Directors. The Committee acts in part in an advisory capacity to the Board of Directors, and in part as a decision-making body on matters that the Board of Directors has delegated to the Committee. The Committee reviews regularly, at least once a year, the compensation of each member of the Operations Council (including the CEO) and decides on all matters relating to the remuneration of these executives. The following chart summarizes the authorization levels for the main decisions relating to the compensation of the Board of Directors and the Operations Council members. When reviewing and deciding on executive remuneration policies, the Committee and the Board of Directors have access to group human resources staff and may use third-party consultants that specialize in compensation matters. In 2023, neither the Committee nor the Board of Directors had recourse to such external advisors. Subject matter Aggregate remuneration amount of the Board of Directors Individual remuneration of the members of the Board of Directors including the Chair of the Board Aggregate fixed remuneration amount of the Operations Council Aggregate short-term variable remuneration amount of the Operations Council Setting of annual financial targets for short-term variable remuneration of Operations Council members Establishment of long-term incentive plans Aggregate value of the grants awarded under the long-term incentive plan to Operations Council members Individual remuneration of the Operations Council members Remuneration report Recommendation Approval Binding vote Consultative vote The following Directors served on the Committee during their mandate from Annual General Meeting 2023 to 2024: • Sami Atiya (Chair) • Ian Gallienne • Kory Sorenson In 2023, the Committee met five times and handled several matters pertaining to remuneration outside scheduled meetings. The Chair of the Remuneration Committee reports to the Board of Directors after each meeting on the activities of the Committee. The minutes of the Committee meetings are available to the members of the Board of Directors. Generally, the Chair of the Board attends the meetings of the Committee, except when matters pertaining to his own compensation are being discussed. Selected members of the Operations Council, the CEO, the senior vice president of human resources and the global head of total reward may be asked to attend the meetings in an advisory capacity. They do not attend the meeting when their own compensation or performance are being discussed. CEO Remuneration Committee Board of Directors Annual General Meeting 2.3.2. Shareholders’ engagement As has been the case since the 2015 Annual General Meeting, and as of 2023 in accordance with the requirements defined by the new Code of Obligations (art. 735), the Company will continue to submit the remuneration report to a consultative shareholders’ vote at the Annual General Meeting, so that shareholders have an opportunity to express their opinion about our remuneration model. In addition, as required by the new Code of Obligations (art. 735), the aggregate amounts of remuneration to be paid to members of the Board of Directors and the Operations Council are subject to the approval of the shareholders in the form of a binding vote on remuneration. The procedure on the vote is defined in the articles of association and foresees separate votes on (i) the maximum remuneration of the Board of Directors for the period until the next Annual General Meeting, (ii) the maximum fixed remuneration of the Operations Council for the next calendar year, (iii) the short-term variable remuneration awarded to the Operations Council in respect of the previous calendar year, and (iv) the maximum amount to be granted to the Operations Council under any long-term incentive plan during the current calendar year. 2.3.3. Changes in remuneration governance The Board of Directors believes that three separate votes on the three elements of remuneration of the Operations Council give great transparency and say-on-pay power to the AGM, and intend to align the timing of the prospective votes on fixed remuneration and on long-term incentive grants, proposing to the AGM to vote on both maximum amounts for 2024 as well as 2025 with regards to the long-term incentive grants. Remuneration reportSGS | 2023 Integrated Report 71 3. Remuneration model 3.1. Structure of remuneration of the Board of Directors Members of the Board of Directors receive a fixed remuneration only. They are entitled to a fixed annual board membership fee (annual board retainer) and additional annual fees for the participation in board committees (committee fees). The annual board retainer of the Chair of the Board includes his or her attendance to any committee of the Board, whether as a voting member or in an advisory capacity. By agreement with the relevant tax authorities, part of the remuneration of the Chair of the Board may be settled as representation fees. Directors do not receive additional compensation for attending meetings and do not receive any variable remuneration. The table below summarizes the remuneration elements of the members of the Board of Directors. Annual Board retainer Committee fees (per Committee) Representation fees (subject to agreement with relevant tax authorities) Chair Board members awarded after the Annual General Meeting during which the board member is elected to their position. The number of restricted shares awarded will be determined by dividing the cash value of 25% of the annual board retainer by the average closing share price during the 20-day period following the payment of the dividends after the Annual General Meeting. Fractions will be rounded down to the nearest whole number; the balance, if any, will be settled in cash, payable with the next installment of the fees. Such restricted shares may not be sold, donated, pledged, or otherwise disposed of to third parties during the three-year restriction period. In case of change of control or liquidation, or in case a member of the Board ceases to exercise their mandate following death or permanent disability, the restriction period of the shares lapses. The shares remain restricted in all other instances. The portion of remuneration settled in cash is paid in two installments, in June and December of the calendar year. Members of the Board of Directors do not hold service contracts and are not entitled to any termination or severance payments. They do not participate in the Company’s benefit schemes and the Company does not make any contributions to any pension scheme on their behalf. Board members are required to accumulate during their tenure a number of shares equivalent in value to two years of remuneration. The remuneration to the members of the Board of Directors is subject to employer social charges according to Swiss legislation. The amounts of the remuneration elements for the Chair and the other board members are defined by the Board of Directors every year. The maximum total amount is subject to the binding vote of the Annual General Meeting. In determining the amounts of the compensation elements, the Board of Directors considers the prevailing practices of the Swiss publicly traded companies belonging to the SMI or SMIM indexes, with market capitalization of similar size, and not belonging to the capital markets, insurance and pharmaceuticals sectors. Each board member receives 25% of the annual board retainer in the form of shares restricted for a period of three years ending on the third anniversary of their award. The restricted shares will be 3.2. Structure of remuneration of the Operations Council The members of the Operations Council receive a fixed remuneration and a variable remuneration linked to short-term and long-term results. The fixed remuneration includes an annual base salary and benefits, in the form of employer’s contributions into pension funds, health insurances, life and disability insurances, other contributions and allowances according to local practices in their country of employment, and in the form of benefits in kind. The variable remuneration consists of a short-term incentive, settled 50% in cash and 50% in equity, and a long-term incentive, settled in equity. The table below summarizes the various components of the remuneration of the Operations Council members. Remuneration vehicle Drivers Performance measures Purpose Plan period Remuneration element Fixed remuneration Annual base salary Benefits Variable remuneration Short-term incentive Cash Contributions to pension plans and insurances, other contributions, allowances, benefits in kind 50% cash 50% restricted shares Position and experience, market practice (benchmarking) Market practice n/a n/a Annual financial performance, individual performance against leadership competency model and ESG1 metrics Group sales, group NPAT2, group ROIC3, group free cash flow, regional and business line profit, regional and business line NWC4, leadership multiplier Relative TSR5, ESG1 metrics Long-term incentive Performance share units (PSUs) Long-term financial and non-financial performance Attract and retain key executives Continuous Protect executives against risks, attract and retain Continuous Pay for performance 1-year performance period 3-year deferral period 3-year performance period Reward for long-term performance, align compensation with the interests of the shareholders 1. ESG: environmental, social and governance. 2. NPAT: net profit after tax. 3. ROIC: return on invested capital. 4. NWC: net working capital. 5. TSR: total shareholder return. The remuneration of the members of the Operations Council is subject to employer social charges, according to the legislation in force in their country of employment. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 72 3.2.1. Fixed remuneration: annual base salary The base salaries of the CEO and each Operations Council member are reviewed annually based on market data for similar positions in those companies and geographies against which the Group benchmarks itself. In addition to individual performance and contribution and business performance and results, the deciding body considers the scope and complexity of the areas of responsibility of the position, skillsets, experience required to perform the job, and relevant market practice in the industry. 3.2.2. Fixed remuneration: benefits Benefits include the employer’s contributions to pension plans, the employer’s contributions to insurances for health, life, disability and other risks, other cash contributions and allowances, and benefits in kind. They are awarded in accordance with prevailing practices in the country of employment of the members of the Operations Council. Swiss-based Operations Council members participate, on the same basis as other Swiss employees of the Group, in the company’s pension scheme. Each participant can choose between three levels of employee contributions (‘standard’, ‘plus 2’ and ‘maxi’), defined based on the participant’s age; the Company contributes an amount equal to one and a half times the participant’s contribution at the ‘standard’ level. Flexibility is granted to employees who wish to fund a potential retirement before the normal age, and to those who wish to continue working after the age of 65. 3.2.3. Short-term variable remuneration The CEO and the other members of the Operations Council are eligible to a performance-related annual incentive (the ‘short-term incentive’). The short-term incentive is designed to reward the CEO and the other members of the Operations Council for the annual financial performance of the Group and its businesses, and for the demonstration of leadership behaviors in line with the SGS competency model and the Group’s sustainability ambitions. The short-term incentive plan is reviewed annually to ensure its alignment with the Group’s business strategy and value to society ambitions. For the performance year 2023, a change in the pay-out curve of the financial KPIs was implemented, with the objective to provide a better reward to the CEO and the OC members in case of overachievements. The maximum financial performance pay-out factor, set at 200% of the incentive opportunity (unchanged from previous year) is reached at 120% performance versus target (it was reached at 133.3% performance versus target the in previous year). The target incentive is expressed as a percentage of the annual base salary and varies depending on the role. For the CEO, the target incentive amounts to 100% of annual base salary, while the target incentive for the other members of the Operations Council varies between 50% and 90% of annual base salary. The table below summarizes the annual incentive opportunity for the CEO and the other members of the Operations Council. Incentive frequency Minimum incentive opportunity CEO Annual Other Operations Council members Annual as % of base salary as % of target incentive opportunity 0% 0% 0% 0% Target incentive opportunity as % of base salary 100% 50%–90% Maximum incentive opportunity1 as % of target incentive opportunity as % of base salary 250% 250% 250% 125%–225% 1. The maximum incentive opportunity is the result of the maximum financial performance payout 200% times the maximum leadership multiplier 125%. Annual financial performance Each year, an annual business plan is derived from the long-term strategic plan and sets the business objectives to be achieved during the year. The key performance indicators used in the short-term incentive to measure the annual financial performance of the Group and its businesses include measurements of growth (top-line contribution), profitability (bottom-line contribution), cash generation and efficient use of capital, and thus reflect the financial performance of the Company in a balanced manner. Those financial metrics are cascaded consistently throughout the organization to ensure collective alignment. The CEO and the heads of corporate functions (SVPs) are measured on the financial performance of the Group, while the other members of the Operations Council are measured on the financial performance of the Group and on the financial performance of their own business line (EVPs) or region (COOs). At the beginning of each year, based on a recommendation by the CEO, the Board of Directors sets the target values of the key performance indicators used in the short-term incentive, in line with the annual business objectives. The table below summarizes the key performance indicators applicable to the CEO and the other members of the Operations Council. Group results Profitability (bottom-line) Growth (top-line) Efficient use of capital Cash generation Business line results Profitability (bottom-line) Regions results Cash generation Profitability (bottom-line) Cash generation CEO Group NPAT 25% Group sales 25% Heads of Corporate Functions (SVPs) Heads of business lines (EVPs) Heads of Regions (COOs) Group NPAT 25% Group sales 25% Group NPAT 25% Group sales 25% Group NPAT 25% Group sales 25% Group ROIC (organic) 25% Group ROIC (organic) 25% Group free cash flow (organic) 25% Group free cash flow (organic) 25% Business line profit 40% Business line NWC 10% Regional profit 40% Regional NWC 10% Remuneration reportSGS | 2023 Integrated Report 73 For each key performance indicator, a pay-out curve is defined according to the following principles: • A threshold (minimum level of performance to trigger a pay-out, and below which the pay-out is zero), a target (expected level of performance that triggers a pay-out equivalent to the target incentive), and a maximum (level of performance that triggers the highest pay-out, and above which the pay-out is capped) are defined • The lowest pay-out (triggered by the threshold performance) and the highest pay-out (triggered by the maximum performance) are defined • The pay-out for performances between threshold and target and between target and maximum are calculated by linear interpolation The chart below shows the pay-out curves for the group net profit after taxes (NPAT), group sales, group return on invested capital (ROIC), group free cash flow (FCF), business line profit, regional profit. Bottom-line, top-line, ROIC and FCF performance (pay -out curve) 250% 200% % t u o - y a P 150% 100% 50% 0% 80% 100% 120% 200% Performance % The pay-out curve for regional and business line net working capital (NWC) is defined by the CEO at the beginning of the performance year together with the objectives for each performance metric. At the end of the performance period, the results for each key performance indicator are assessed against the pre-defined target and the pay-out curve to determine a pay-out factor. The weighted average of the pay-out factors of each key performance indicator corresponds to the overall financial performance pay-out factor. An example of the calculation of the financial performance pay-out factor for an executive vice president is described in the chart below. Financial performance pay-out factor for an executive vice president Group NPAT weight 25% Group sales weight 25% Business net working capital 10% Business profit weight 40% Financial performance pay-out Performance 96% Performance 110% Performance 100% Performance 102% Pay-out 80% 80% x 0.25 Pay-out 150% 150% x 0.25 Pay-out 100% 100% x 0.10 Pay-out 110% 110% x 0.40 111.5% Leadership multiplier The members of the Operations Council are also rewarded for the demonstration of leadership behaviors in line with the SGS competency model and with the SGS sustainability ambitions. The leadership multiplier is determined for each executive based on an assessment of their behaviors against: i) the leadership competency model of SGS in the areas of innovation, people management and change management, and ii) environmental, social and governance (ESG) metrics aligned with the Group’s sustainability ambitions. These criteria encompass a broader range of values than the three metrics used for the determination of vesting of the long-term incentives (LTI). The assessment of the CEO is conducted at year end by the Board of Directors, while the assessment of the other members of the Operations Council is conducted by the CEO and approved by the Remuneration Committee. The assessment leads to a leadership multiplier that can range between 70% and 125%. Their final incentive payout factor is calculated by multiplying the financial performance pay-out factor by the leadership multiplier. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 74 An example of the calculation of the final incentive amount for an OC member is described in the chart below. Final incentive amount for an OC member Target incentive Financial performance pay-out factor Leadership multiplier Final incentive amount CHF 100 000 111.5% 120% CHF 133 800 Settlement of the short-term incentive Once the final incentive amount is determined, it is settled 50% in cash and 50% in restricted shares, to strengthen the link between the compensation of executives and the interests of the shareholders. The cash component is paid and the restricted shares are allocated after the shareholders’ approval at the Annual General Meeting of the following year. The number of restricted shares to be allocated is determined by dividing 50% of the final incentive amount by the average closing share price during the 20-day period following the payment of the dividends after the Annual General Meeting, and the result is rounded up to the nearest integer. They are restricted for a period of three years during which they may not be sold, transferred or pledged. In case of change of control or liquidation or termination of employment following retirement, death or disability, the restriction period of the shares lapses. The shares remain restricted in all other instances. The Group does not issue new shares to be allocated to employees for equity-based compensation plans, but uses treasury shares instead, acquired through share buyback programs. Detailed information on the overhang and burn rate are disclosed in note 29 of the consolidated financial statements. Termination of employment In case of termination of employment for any reason except for cause, if the last day of employment is on or after 31 December of the respective business year, the executive is eligible for the full annual incentive payment. The annual incentive is paid fully in cash after the approval of the Annual General Meeting. In case of termination for cause before the date of payment, irrespective of whether the last day of employment is before or after 31 December of the respective business year, the executive has no entitlement to receive any annual incentive payment. In case of resignation, and if the last day of employment is before 31 December of the respective business year, the participant has no entitlement to receive any annual incentive payment. If employment ceases due to death or disability before 31 December of the respective business year, the annual incentive payment is calculated pro-rata (calendar days) based on the Board of Directors’ best estimate of the performance on the last day of employment. The annual incentive is paid fully in cash shortly after the last day of employment, as soon as administratively possible. In case of retirement or termination not for cause before 31 December of the respective business year, the annual incentive payment is calculated pro-rata (calendar days) based on actual performance at the end of the performance year, and it is paid fully in cash after the approval of the Annual General Meeting. The table below summarizes the rules in case of termination of employment. Clawback provisions A clawback policy applies to any variable remuneration awarded to the members of the Operations Council. Under this policy, the Company may reclaim the value of any variable incentives paid, in cash or shares, in the following cases: i) any fraud, negligence or intentional misconduct was a significant contributing factor to the Company having to restate all or a portion of its financial statements; ii) a serious violation of the SGS internal regulations and/or Code of Integrity; iii) any violation of law within the scope of employment at the Company. Last day of employment before 31 December Last day of employment between 31 December and AGM Incentive opportunity (target incentive) Incentive pay-out Payment date Payment vehicle Incentive opportunity (target incentive) Incentive pay-out Payment date Payment vehicle Termination reason Termination for cause Zero Zero Resignation Zero Zero – – – – Death or disability Retirement, termination not for cause Pro-rated on calendar days Pro-rated on calendar days Based on estimated performance Shortly after the termination date 100% cash Based on actual performance After AGM approval 100% cash Zero Zero – – Full Full Full Based on actual performance After AGM approval 100% cash Based on actual performance Shortly after the termination date 100% cash Based on actual performance After AGM approval 100% cash Remuneration reportSGS | 2023 Integrated Report 3.2.4. Long-term variable remuneration The CEO and the other members of the Operations Council are eligible for a performance-related long-term incentive (the ‘long- term incentive’). The long-term incentive is designed to motivate the leadership team to achieve the long-term objectives of the Group and to align their remuneration with the interests of the shareholders. The long-term incentive consists of a grant of performance share units (PSUs). The value of the grants, defined as the number of PSUs granted multiplied by the average share price of the 20 trading days preceding the grant date, is expressed as a percentage of the annual base salary and varies depending on the job. The value of the grant is 167% of the annual base salary for the CEO, and between 100% and 133% of the annual base salary for the other members of the Operations Council. The table below summarizes the value of the incentive opportunity for the CEO and other OC members. Incentive frequency Minimum incentive opportunity value as % of base salary as % of target incentive opportunity Target incentive opportunity value as % of base salary Maximum incentive opportunity value as % of target incentive opportunity as % of base salary CEO Annual Other Operations Council members Annual 0% 0% 0% 0% 167% 100%–133% 150% 250% 150% 150%–200% The PSUs granted under the long-term incentive vest after a performance period of three years, conditionally upon the achievement of pre-defined performance objectives and subject to continuity of employment of the beneficiaries during the vesting period. The long-term incentive plan is reviewed annually to ensure its alignment with the Group’s business strategy and value to society ambitions. No change in the structure of the long-term incentive plan was implemented in 2023. Relative TSR vesting formula 75 Performance conditions The performance conditions of the long-term incentive consist of the following key performance indicators: • Relative Total shareholder return (rTSR1) (relative SGS performance compared with the peer group), accounting for 80% of the incentive opportunity • Environmental, social and governance (ESG) metrics, accounting for 20% of the incentive opportunity The TSR of the Group will be compared to the TSR of a group of seven peer companies, selected by the Board of Directors as the main listed competitors in the testing, inspection and certification industry. The intention of indexing performance against a peer group of companies is to reward the relative performance of the Company, where market factors that are outside the control of the executives are neutralized. The list of the peer group companies is illustrated in the table below. ALS Intertek Applus+ Mistras Bureau Veritas Eurofins Team The vesting level for the TSR is defined as follows: 150% vesting if SGS is ranked first among the eight companies (including SGS) composing the peer group, 125% vesting if SGS is ranked second, 100% vesting if SGS is ranked third, 50% vesting if SGS is ranked fourth, and zero vesting if SGS is ranked fifth or worse. The ESG metrics have been selected by the Board of Directors in line with the Company’s sustainability ambitions, in the areas of diversity and inclusion (women in leadership positions), health and safety (lost time incident rate) and environment protection (greenhouse gas (GHG) emissions). The vesting level for the ESG metrics is defined based on the Company’s achievements against pre-defined performance levels and can range between zero (in case the performance of two of the metrics is below target) and 150% (in case the performance of all three metrics is at maximum or above). The graphics below summarize the key performance indicators of the long-term incentive and their vesting levels: % g n i t s e V 150% 125% 100% 75% 50% 25% 0% 8th 7th 6th 5th 4th 3rd 2nd 1st ESG metrics vesting formula Relative TSR Ranking % g n i t s e V 150% 125% 100% 75% 50% 25% 0% 2 or all 3 metrics below target 2 metrics at target all 3 metrics at target (or 2 metrics above target) all 3 metrics at max 1. Total shareholder return: (Ending stock price – Beginning stock price) + Sum of all dividends received during the measurement period. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 76 The overall vesting level of the PSUs granted will be calculated as a weighted average of each of the respective vesting levels for relative TSR (80%) and ESG metrics (20%), and ranges between 0% and 150%. Settlement of the long-term incentive At the end of the vesting period, the PSUs vest, subject to the performance conditions and the continuity of employment condition, and shares are allocated to the participants based on the overall vesting level. The number of shares to be allocated at vesting is calculated by multiplying the number of PSUs granted by the overall vesting level, the result being rounded up to the nearest integer. Number of PSUs granted Overall vesting level (0-150%) Number of shares allocated at vesting The Group does not issue new shares to be allocated to employees for equity-based compensation plans, but uses treasury shares instead, acquired through share buyback programs. Detailed information on the overhang and burn rate is disclosed in note 29 of the consolidated financial statements. Termination of employment In case of termination of employment, all unvested PSUs are as a rule immediately forfeited without value and without any compensation, except in the following cases: • In case of termination of employment as a result of disability or retirement, unvested PSUs vest on a pro-rata basis, based on the number of full months of the vesting period that have expired until the termination date. The shares are allocated after the regular vesting date and the vesting level is determined based on the performance during the entire regular performance period. There is no early allocation of the shares • Upon termination of employment as a result of death, unvested PSUs will vest immediately on a pro rata basis, based on the number of full months of the vesting period that have expired until the termination date. The vesting level is based on an estimation of performance by the Board of Directors • In case of company-initiated termination not for cause, if the termination date occurs during the last 12 months of the vesting period, and subject to the Board of Directors approval, PSUs unvested at the termination date may vest on a pro-rata basis, based on the number of full months that have expired during the vesting period • In the event of a corporate transaction or liquidation, unvested PSUs vest immediately. The vesting level is based on an estimation of performance by the Board of Directors The table below summarizes the vesting rules in case of termination of employment. Termination reason Vesting rule Vesting time and shares allocation Vesting level Retirement or disability Vesting on a pro-rata basis At regular vesting date Based on actual performance Death Vesting on a pro-rata basis Immediate Corporate transaction or liquidation Full vesting Immediate Based on an estimation of performance by the Board of Directors Based on an estimation of performance by the Board of Directors Other reasons1 Forfeiture – – 1. In case of company-initiated termination not for cause, if the termination date occurs during the last 12 months of the vesting period, and subject to the Board of Directors approval, PSUs unvested at the termination date may vest on a pro-rata basis, based on the number of full months that have expuired during the vesting period. Malus and clawback provisions A malus and clawback policy applies to any long-term incentive grant awarded to the members of the Operations Council. Under this policy, the Company may forfeit any unvested equity compensation and/or reclaim the value of any vested equity compensation granted under a long-term incentive plan, in the following cases: i) any fraud, negligence or intentional misconduct was a significant contributing factor to the company having to restate all or a portion of its financial statements; ii) a serious violation of the SGS internal regulations and/or Code of Integrity; iii) any violation of law within the scope of employment at the Company. 3.2.5. Changes to the long-term incentive plan The Remuneration Committee, also considering market practices and aiming to enhance alignment with shareholders’ interests, has decided to change the performance indicators for the next plans. While the focus on ESG objectives is maintained, the relative weight of the relative TSR is reduced, and a new performance indicator, EPS growth, is added to the plan. The reason for this change is on the one hand to reduce the risk of significant differences in the vesting level caused by small differences in TSR performance, given the small number of competitors in the peer group and the large relative weight of the performance indicator, and on the other hand, to include in the plan a performance indicator aligned with the long-term interests of the shareholders but closer to management’s line of sight. More details on the 2024 long-term incentive plan will be disclosed in the 2024 remuneration report. Remuneration reportSGS | 2023 Integrated Report 77 3.2.6. Remuneration mix The part of remuneration at risk (short-term incentive and long-term incentive) for the CEO represents, at target, 73% of their total remuneration. The part of remuneration settled in equity instruments (restricted shares and PSUs) represents, at target, 59% of their total remuneration. For the other members of the Operations Council, the part of remuneration at risk represents, on average, 64% of their total remuneration. The part of remuneration settled in equity instruments represents, on average, 50% of their total remuneration. The part of the fixed remuneration linked to benefits is not considered in this analysis. The charts below show the remuneration mix for the CEO and the other members of the Operations Council in three cases: at minimum (both short-term and long-term incentives at zero pay-out), at target (both short-term and long-term incentives at 100% pay-out) and at maximum (both short-term and long-term incentives at maximum pay-out). Remuneration mix for the CEO and other Operations Council members in three cases (%) CEO Other Operations Council members (on average) 100 90 80 70 60 50 40 30 20 10 0 Minimum Target Maximum 100 90 80 70 60 50 40 30 20 10 0 Minimum Target Maximum Base salary (cash) Short-term incentive (cash) Short-term incentive (restricted shares) Long-term incentive (PSUs) 3.2.7. Shareholding ownership guidelines A shareholding ownership guideline (SOG) in force since 2015, requires the members of the Operations Council to own at least a certain multiple of their annual base salary in SGS shares, as follows: • CEO: three times the annual base salary • Other members of the Operations Council: two times the annual base salary In the event of a substantial drop in the share price, the Board of Directors has the discretion to modify the SOG. The determination of equity amounts against the SOG is defined to include vested shares allocated under the short-term and long-term incentive plans and other shares that are owned by the Operations Council member directly or indirectly (by ‘closely related persons’). The Remuneration Committee reviews compliance with the SOG on an annual basis. Until the minimum requirement is met, 25% of the shares allocated under the short-term incentive plan and all shares allocated upon vesting of the PSUs under the long-term incentive plan are blocked. 3.2.8. Employment contracts Employment contracts of the Operations Council members have no fixed term and can be terminated at any time by either party, provided a notice period of six months is respected. For the CEO, the notice period is 12 months. The executive contracts do not provide for any severance payments (beyond the minimum legally required in the country of employment) and are subject to applicable legislation in the country of employment. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 78 3.2.9. Timeline of remuneration The following chart outlines the timeline of payment of each remuneration element that was earned in 2023: • The annual base salary is paid during 2023 • The cash portion of the short-term incentive is paid shortly after the 2024 Annual General Meeting • The share portion of the short-term incentive is allocated in Q2 2024 and will be unblocked in Q2 2027 • The PSUs granted under the long-term incentive in 2021 were earned over the performance period from 2021 to 2023, and vested, subject to performance conditions and continuity of employment, on 1 February 2024; shares will be allocated to the participants in Q1 2024 • The PSUs granted under the long-term incentive in 2023 will be earned over the performance period from 2023 to 2025 and will vest, subject to performance conditions and continuity of employment, in Q1 2026 Timeline of remuneration Timeline (performance period, time of payment) 2021 Long-term incentive grant 2022 Long-term incentive grant Vesting 50% in restricted shares 50% in cash 2023 Long-term incentive grant Short-term incentive Annual base salary and benefits Vesting Vesting Performance KPIs Relative TSR (80%) ESG metrics (20%) Unblocking Group sales (25%) Group NPAT (25%) Role specific profit, cash generation, efficient use of capital (50%) Multiplied by leadership multiplier Fixed remuneration 2021 2022 2023 2024 2025 2026 2027 Shareholding Ownership Guideline Remuneration reportSGS | 2023 Integrated Report 79 4. Remuneration awarded to the Board of Directors 4.1. AGM vote on remuneration The table below summarizes the vote of the AGM on the remuneration of the members of the Board of Directors. AGM Remuneration element Vote type Period Approved amount CHF thousand Actual amount CHF thousand 2023 Aggregate total remuneration Prospective AGM 2023 to AGM 2024 2 700 2 655 The table below summarizes the proposed amount for the vote at the 2024 AGM. AGM Remuneration element Vote type Period 2024 Aggregate total remuneration Prospective AGM 2024 to AGM 2025 Proposed amount CHF thousand 2 700 4.2. Details of remuneration (audited) For the mandate from Annual General Meeting 2023 to 2024, the annual board retainer is CHF 665 000 for the Chair of the Board and CHF 200 000 for the other Board of Directors members (unchanged from prior mandate). The Chair of the Audit Committee is entitled to an additional fee of CHF 70 000; Directors serving as Audit Committee members are entitled to an additional fee of CHF 50 000 (unchanged from prior mandate). The Chair of the Remuneration Committee is entitled to an additional fee of CHF 40 000; Directors serving as Remuneration Committee members are entitled to an additional fee of CHF 30 000 (unchanged from prior mandate). The Chair of the Sustainability Committee is entitled to an additional fee of CHF 30 000; Directors serving as Sustainability Committee members and Directors serving on the Nomination Committee are entitled to an additional fee of CHF 30 000 (unchanged from prior mandate). (CHF thousand, gross) Chairmanship Membership Board Retainer Audit Committee fee Remuneration Committee fee Nomination Committee fee Sustainability Committee fee 665 200 70 50 40 30 – 30 30 30 Each board member receives 25% of the annual board retainer in the form of shares restricted for a period of three years ending on the third anniversary of their award; the remaining portion is settled in cash. The cash part is paid partly in the current fiscal year and partly in the next fiscal year, on a pro-rata temporis basis. The restricted shares are awarded in the current fiscal year, after the Annual General Meeting during which the board member is elected to their position. The total remuneration of the Board of Directors for the mandate from Annual General Meeting 2022 to 2023 was equal to CHF 2 655 000, within the amount approved by the Annual General Meeting 2022 (CHF 2 700 000). The table below details the remuneration elements and the settlement vehicle of the Directors for the mandate Annual General Meeting 2023 to 2024. (CHF thousand, gross) Chairmanship Board membership Audit Committee membership Remuneration Committee membership Nomination Committee membership Sustainability Committee membership Total remuneration To be settled in cash To be settled in restricted shares1 Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Jens Riedl Korey Sorenson Janet Vergis Total 665 – 200 200 200 200 200 200 200 200 – – – – 50 – – 70 50 665 1 600 170 1. Restricted shares were granted during fiscal year 2023. – 40 – 30 – – – 30 – 100 – 30 – 30 – – – – – 60 – – 30 – – – – 30 – 60 665 270 230 260 250 200 200 330 250 500 220 180 210 200 150 150 280 200 165 50 50 50 50 50 50 50 50 2 655 2 090 565 Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 80 The table below details the remuneration elements and the settlement vehicle of the Directors for the mandate Annual General Meeting 2022 to 2023. (CHF thousand, gross) Chairmanship Board membership Audit Committee membership Remuneration Committee membership Nomination Committee membership Sustainability Committee membership Total remuneration To be settled in cash To be settled in restricted shares1 Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Paul Desmarais, Jr. Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Korey Sorenson Janet Vergis Total 665 – – – – – – – – – 200 200 200 200 200 200 200 200 – – – – – 50 – 70 50 – 40 – – 30 – – 30 – 665 1 600 170 100 1. Restricted shares were granted during fiscal year 2022. – 30 – – 30 – – – – 60 – – 30 – – – – 30 – 60 665 270 230 200 260 250 200 330 250 500 220 180 150 210 200 150 280 200 165 50 50 50 50 50 50 50 50 2 655 2 090 565 The remuneration of the Board of Directors is subject to employer social charges according to Swiss legislation. The following table details the remuneration elements granted to each of the Directors for their tenure in fiscal year 2023. It includes both pro-rata temporis elements of remuneration for the mandate Annual General Meeting 2022 to 2023 and pro-rata temporis elements of remuneration for the mandate Annual General Meeting 2023 to 2024. (CHF thousand, gross) Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Paul Desmarais, Jr.1 Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Jens Riedl2 Korey Sorenson Janet Vergis Total Board retainer Representation fees Committee fees Total remuneration Cash Restricted shares value3 Restricted shares NB Employer social charges 667 201 201 37 201 201 201 164 201 201 2 275 – – – – – – – – – – – 70 30 – 60 50 – – 130 50 390 667 271 231 37 261 251 201 164 331 251 502 221 181 37 211 201 151 114 281 201 165 2 003 50 50 – 50 50 50 50 50 50 607 607 – 607 607 607 607 607 607 10 23 19 2 22 – 17 14 27 21 2 665 2 100 565 6 859 155 1. Until the AGM 2023. 2. As of the AGM 2023. 3. Based on the average closing share price of the 20 trading days preceding the grant date. The following table details the remuneration elements granted to each of the Directors for their tenure in fiscal year 2022. It includes both pro-rata temporis elements of remuneration for the mandate Annual General Meeting 2021 to 2022 and pro-rata temporis elements of remuneration for the mandate Annual General Meeting 2022 to 2023. Board retainer Representation fees Committee fees Total remuneration (CHF thousand, gross) Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung1 Paul Desmarais, Jr. Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Korey Sorenson Janet Vergis Total 656 197 163 197 197 197 212 288 197 2 304 – – – – – – – – – – – 60 23 – 59 49 – 98 49 656 257 186 197 256 246 212 386 246 338 2 642 1 921 Cash 493 209 138 149 208 198 115 213 198 Restricted shares value2 Restricted shares NB3 Employer social charges 163 48 48 48 48 48 97 173 48 721 65 19 19 19 19 19 38 68 19 10 22 16 14 22 – 18 32 21 285 155 1. As of the AGM 2022. 2. Based on the average closing share price of the 20 trading days preceding the grant date. 3. Prior to the share split implemented on 12 April 2023. The overall remuneration paid to the Board of Directors in 2023 is in line with the overall remuneration paid in 2022. Remuneration reportSGS | 2023 Integrated Report 4.3. Other compensation, loans and credit facilities (audited) In 2023, no other payment was made to any member or former member of the Board of Directors (unchanged from prior year). As at 31 December 2023, no loan, credit or outstanding advance was due to the Group from members or former members of the Board of Directors or related parties (unchanged from prior year). 4.4. Shares and options held (audited) The following table shows the shares held by members of the Board of Directors as at 31 December 2023: 81 Name Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Jens Riedl Korey Sorenson Janet Vergis No options were held by members of the Board of Directors as at 31 December 2023. The following table shows the shares held by members of the Board of Directors as at 31 December 2022: Name Calvin Grieder Sami Atiya Phyllis Ka Yan Cheung Paul Desmarais, Jr. Ian Gallienne Tobias Hartmann Shelby R. du Pasquier Korey Sorenson Janet Vergis Shares 14 128 3 382 1 082 1 082 1 082 2 257 607 3 207 1 082 Shares1 485 111 19 56 20 19 66 104 19 1. Prior to share split implemented on 12 April 2023. No options were held by members of the Board of Directors as at 31 December 2022. 4.5. Gender representation (audited) For the mandate from AGM 2023 to AGM 2024, the gender representation at the Board of Directors is as per the below table. Period AGM 2023 to AGM 2024 Female Male Number % Number % 3 33.3% 6 66.7% 4.6. Other activities (audited) The functions of the members of the Board of Directors in other undertakings are disclosed in Section 3.1 of the Corporate Governance section of this report. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 82 5. Remuneration awarded to the Operations Council members This section sets out the remuneration that was paid to the Operations Council as a whole, to the Operations Council members who make up senior management and to the CEO in 2023. All amounts disclosed in this section include the short-term incentive cash amount and restricted shares that will be granted in Q2 2024 with respect to performance in 2023 (disclosure according to the accrual principle). 5.1. AGM vote on remuneration The table below summarizes the votes of the AGM on the remuneration of the members of the Operations Council relevant to 2023. AGM Remuneration element Vote type Period 2022 2023 2023 2023 Aggregate fixed remuneration Prospective Calendar year 2023 Aggregate short-term variable remuneration Retrospective Performance year 2022 (paid after the 2023 AGM) Aggregate long-term variable remuneration Prospective Calendar year 2023 Aggregate fixed remuneration Prospective Calendar year 2024 Approved amount CHF thousand Actual amount CHF thousand 12 500 4 432 13 500 9 728 4 432 13 0911 12 500 Will be reported in the 2024 Remuneration report 1. Value of the Performance Share Units at the time of their grant (CHF thousand 8 727), assessed at the maximum possible vesting level under the plan rules (150%). The table below summarizes the proposed amounts for the vote at the 2024 AGM. AGM Remuneration element Vote type Period 2024 Aggregate short-term variable remuneration Retrospective Performance year 2023 (paid after the 2024 AGM) 2024 2024 2024 Aggregate long-term variable remuneration Prospective Calendar year 2024 (transition)1 Aggregate long-term variable remuneration Prospective Calendar year 2025 Aggregate fixed remuneration Prospective Calendar year 2025 Proposed amount CHF thousand 4 956 12 000 12 000 10 500 1. As explained in Section 2.3.3. of this report, the prospective vote on the aggregate long-term variable remuneration will be aligned to the next fiscal year. 5.2. Fixed remuneration (audited) The table below summarizes the fixed remuneration paid to the Operations Council, senior management and the Chief Executive Officer in 2023. (CHF thousand, gross) Operations Council (including senior management) Base salary Other cash allowances Contributions to pension plans Other contributions and benefits in kind Total fixed remuneration Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total 7 753 – – 7 753 2 444 – – 2 444 1 200 – – 1 200 973 – – 973 190 – – 190 63 – – 63 – 755 – 755 – 284 – 284 – 116 – 116 – 292 – 292 – 24 – 24 – 9 – 9 8 726 1 047 – 9 773 2 634 308 – 2 942 1 263 125 – 1 388 Remuneration reportSGS | 2023 Integrated Report 83 The table below summarizes the fixed remuneration paid to the Operations Council, senior management and the CEO in 2022. (CHF thousand, gross) Operations Council (including senior management) Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total Base salary Other cash allowances Contributions to pension plans Other contributions and benefits in kind Total fixed remuneration 7 499 – – 7 499 2 325 – – 2 325 1 200 – – 1 200 867 – – 867 142 – – 142 64 – – 64 – 748 – 748 – 271 – 271 – 112 – 112 – 343 – 343 – 21 – 21 – 8 – 8 8 366 1 091 – 9 457 2 467 292 – 2 759 1 264 120 – 1 384 The increase in fixed remuneration compared with 2022 reflects the change in the pay-mix decided by the Remuneration Committee for some of the Operations Council members. 5.3. Short-term variable remuneration (audited) The short-term variable remuneration of the members of the Operations Council is determined by the achievement of financial targets and by their leadership behaviors. In 2023, the achievement of financial targets at group level, in the businesses and in the regions ranged from 63.8% to 126.7% (2022: 74.8% to 123.6%). The chart below summarizes the 2023 performance achievements against targets for the financial objectives (sales, profitability, cash generation and capital efficiency) used in the short-term incentive. 2023 performance achievements against targets Performance KPI Pay-out % Threshold Target Maximum Group sales Group NPAT Group ROIC Group free cash flow 111.4% 55.8% 37.3% 93.8% Regional and business profit 79.9% 0.0% 200.0% Regional and business cash generation 87.0% 36.3% 154.6% Avg Min Max Achievement Average achievement Performance range The overall short-term incentive pay-out amounts to 82.0% of the target incentive opportunity for the CEO (2022: 63.5%) and ranged from 48.3% to 142.7% of the target incentive opportunity for the other members of the Operations Council (2022: 49.4% to 113.1%). For the purpose of the short-term incentive, targets and performance achievement are measured at constant currency exchange rates. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 84 The table below details the 2023 short-term incentive for the CEO. CEO 2023 STI pay-out KPI description Sales (CHF million) NPAT (CHF million) ROIC (organic) (%) FCF (CHF million) Group financial KPIs Pay-out Target Actual Actual vs Target % Pay-out % Weight Financial KPIs pay-out % Leadership multiplier Total pay-out % Pay-out (CHF thousand, gross) 6 475 6 622 102.3% 111.4% 25% 606 553 91.2% 55.8% 25% 26 22 87.5% 37.3% 25% 612 604 98.8% 93.8% 25% 74.6% 110% 82.0% 984 The table below details the 2022 short-term incentive for the CEO. CEO 2022 STI pay-out KPI description Target Actual Actual vs Target % Pay-out % Weight Financial KPIs pay-out % Leadership multiplier Total pay-out % Pay-out (CHF thousand, gross) Sales (CHF million) NPAT (CHF million) ROIC (organic) (%) FCF (CHF million) Group financial KPIs Pay-out 6 623 6 642 100.3% 100.8% 25% 630 588 93.3% 66.6% 25% 20.5 19.0 92.7% 63.4% 25% 677 507 74.8% 0.0% 25% 57.7% 110% 63.5% 762 In settlement of the equity portion of the short-term incentive 2023, SGS restricted shares will be allocated to the members of the Operations Council in Q2 2024, after the approval of the total short-term incentive amount by the Annual General Meeting (in Q2 2023, 26 921 restricted shares were granted in settlement of the equity portion of the short-term incentive 2022). The number of restricted shares to be allocated is calculated by dividing the equity portion of the short-term incentive by the average closing price of the share during a 20-trading day period following the payment of the dividends after the Annual General Meeting, rounded up to the nearest integer, and are restricted for a period of three years. The table below summarizes the short-term variable remuneration awarded to the Operations Council, senior management and the CEO for the 2023 performance year, and its comparison with the incentive opportunity. (CHF thousand, gross) Operations Council (including senior management) Minimum Target Maximum Actual short-term variable remuneration Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total – – – – – – – – – – – – 3 195 – 2 500 5 695 1 433 – 738 2 171 600 – 600 1 200 7 988 – 6 250 14 238 3 583 – 1 845 5 428 1 500 – 1 500 3 000 2 737 – 2 219 4 956 1 135 – 617 1 752 492 – 492 984 The total short-term remuneration amount will be submitted for approval to the Annual General Meeting of 2024, and the settlement for both the cash and the equity part will be implemented shortly after. The table opposite summarizes the short-term variable remuneration awarded to the Operations Council, senior management and the CEO for the 2022 performance year, and its comparison with the incentive opportunity. Remuneration reportSGS | 2023 Integrated Report (CHF thousand, gross) Minimum Target Maximum Operations Council (including senior management) Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total – – – – – – – – – – – – 3 106 – 3 106 6 212 1 080 – 1 080 2 160 600 – 600 1 200 7 765 – 7 765 15 530 2 700 – 2 700 5 400 1 500 – 1 500 3 000 85 Actual short-term variable remuneration 2 216 – 2 216 4 432 662 – 662 1 324 381 – 381 762 The total 2022 short-term remuneration amount was approved by the Annual General Meeting of 2023, and the settlement for both the cash and the equity part were implemented shortly after. The increase in short-term variable remuneration compared to 2022 reflects the higher pay-out achieved against the financial targets in 2023 compared to 2022. 5.4. Long-term variable remuneration 5.4.1. 2023-2025 PSUs long-term incentive grant (audited) In 2023, the Group implemented a long-term incentive plan for the performance period 2023-2025. Under the long-term incentive plan 2023- 2025, a total of 105 045 performance share units (PSUs) were granted to the members of the Operations Council; this includes 41 153 PSUs granted to senior management, of which 24 074 PSUs granted to the CEO. The PSUs awarded under the long-term incentive 2023-2025 vest after the three-year performance period 2023-2025, in early 2026, subject to the performance conditions (relative total shareholder return and environmental, social and governance metrics; see Section 3.2.4. of this report for detailed explanations on the performance conditions) and to continuity of employment of the beneficiaries during the vesting period. The number of PSUs granted is calculated dividing the value of the grant, as disclosed in Section 3.2.4. of this report, by the average closing price of the share during a 20-trading day period preceding the grant date, rounded up to the nearest integer. In 2022, the Group implemented a long-term incentive plan for the performance period 2022-2024. Under the long-term incentive plan 2022-2024, a total of 3 296 PSUs1 were granted to the members of the Operations Council; this includes 1 301 PSUs granted to senior management, of which 769 granted to the CEO. A cash long-term incentive plan was implemented in 2022 for one Operations Council member who was newly appointed, as part of his total compensation. This incentive mirrors the long-term incentive PSUs plan 2021-2023, with the exact same vesting and performance conditions, from the date of the appointment to 31 December 2023. The table below summarizes the value of the long-term variable remuneration awarded to the Operations Council, senior management and the CEO in 2023. Number of PSUs granted2 Total value of the grant3 (CHF thousand) Operations Council (including senior management) Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total – – 105 045 105 045 – – 41 143 41 143 – – 24 074 24 074 – – 8 727 8 727 – – 3 418 3 418 – – 2 000 2 000 1. Prior to the share split implemented on 12 April 2023. 2. After the share split implemented on 12 April 2023. 3. The value of the grant for the equity part is defined as the number of PSUs granted multiplied by the average closing price of the share during a 20-trading day period preceding the grant date. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 86 The table below summarizes the value of the long-term variable remuneration awarded to the Operations Council, senior management and the CEO in 2022. Number of PSUs granted1 Total value of the grant2 (CHF thousand) Operations Council (including senior management) Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total – – 3 296 3 296 – – 1 301 1 301 – – 769 769 618 – 8 577 9 195 – – 3 386 3 386 – – 2 001 2 001 1. 2. Prior to the share split implemented on 12 April 2023. The value of the grant for the equity part is defined as the number of PSUs granted multiplied by the average closing price of the share during a 20-trading day period preceding the grant date. 5.4.2. Vesting of the 2021-2023 PSUs and cash long-term incentive plans On 1 February 2024, the 2021-2023 PSUs and cash long-term incentive plans vested, according to the vesting and performance conditions. The assessment of the performance conditions has been performed by the Board of Directors, based on the recommendation of the Remuneration Committee. The charts below show the achievements on relative TSR and ESG metrics. Relative TSR % g n i t s e V 150% 125% 100% 75% 50% 25% 0% 8th 7th 6th 5th 4th 3rd 2nd 1st Relative TSR Ranking ESG metrics % g n i t s e V 150% 125% 100% 75% 50% 25% 0% 2 or all 3 metrics below target 2 metrics at target all 3 metrics at target (or 2 metrics above target) all 3 metrics at max Remuneration reportSGS | 2023 Integrated Report 87 The table below presents the details of the vesting. Relative TSR ESG metrics Total GHG Emissions Lost Time Incident Rate Women in leadership Weight 80% 20% 100% Vesting level 0% 150% 30% The table below details the vesting of the 2021-2023 PSUs and cash long-term incentive plan for the Operations Council, the senior management and the CEO. Number of PSUs granted in 20211 Value at grant2 (CHF thousand) Number of PSUs outstanding at vesting date1 Number of shares allocated Value at vesting3 (CHF thousand) Operations Council (including senior management) Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO) Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total – – 150 075 150 075 – – 61 550 61 550 – – 37 025 37 025 1 000 – 16 216 17 216 – – 6 651 6 651 – – 4 001 4 001 – – 137 325 137 325 – – 61 550 61 550 – – 37 025 37 025 – – 41 202 41 202 – – 18 466 18 466 – – 11 108 11 108 289 – 3 304 3 593 – – 1 481 1 481 – – 891 891 1. Restated after the share split of implemented on 12 April 2023. 2. For the equity part: based on the average closing share price of the 20 trading days preceding the grant date. 3. For the equity part: based on the closing share price at vesting date. 5.5. Total remuneration (audited) The tables below present all components of the remuneration earned in 2023 and 2022 by the Operations Council, senior management and the CEO. The employer social charges are reported separately in the last column of the table. Total remuneration 2023 (CHF thousand, gross) Total fixed remuneration Total short-term variable remuneration Total remuneration before LTI Total long-term variable remuneration Total remuneration Employer social charges Operations Council (including senior management)1 Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO)2 Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total 1. 17 FTE (Full-Time Equivalent). 2. 3 FTE. 8 726 1 047 – 9 773 2 634 308 – 2 942 1 263 125 – 1 388 2 737 – 2 219 4 956 1 135 – 617 1 752 492 – 492 948 11 463 1 047 2 219 14 729 3 769 308 617 4 694 1 755 125 492 2 372 – – 8 727 8 727 – – 3 418 3 418 – – 2 000 2 000 11 463 1 047 10 946 23 456 – 1 222 – 1 222 3 769 308 4 035 8 112 1 755 125 2 492 4 372 – 312 – 312 – 156 – 156 Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 88 Total remuneration 2022 (CHF thousand, gross) Total fixed remuneration Total short-term variable remuneration Total remuneration before LTI Total long-term variable remuneration Total remuneration Employer social charges Operations Council (including senior management)1 Cash (including allowances) Contributions and benefits in kind Equity Total Senior management (including CEO)2 Cash (including allowances) Contributions and benefits in kind Equity Total Chief Executive Officer Cash (including allowances) Contributions and benefits in kind Equity Total 1. 18 FTE (Full-Time Equivalent). 2. 3 FTE. 8 366 1 091 – 9 457 2 467 292 – 2 759 1 264 120 – 1 384 2 216 – 2 216 4 432 662 – 662 1 324 381 – 381 762 10 582 1 091 2 216 13 889 3 129 292 662 4 083 1 645 120 381 2 146 618 – 8 577 9 195 – – 3 386 3 386 – – 2 001 2 001 11 200 1 091 10 793 23 084 – 1 390 – 1 390 3 129 292 4 048 7 469 1 645 120 2 382 4 147 – 418 – 418 – 220 – 220 5.6. Remuneration mix (audited) In 2023, the part of remuneration at risk (short-term incentive and long-term incentive) for the CEO represents 71% of the total remuneration (2022: 70%); the part of remuneration settled in equity instruments (restricted shares and PSUs) represents 60% of the total remuneration (2022: 60%). For the other members of the Operations Council, the part of remuneration at risk represents, on average, 62% of the total remuneration (2022: 62%); the part of remuneration settled in equity instruments represents, on average, 49% of the total remuneration (2022: 51%). The part of the fixed remuneration linked to benefits is not considered in this analysis. The charts below show the remuneration mix for the CEO and for the other members of the Operations Council in 2023 and 2022. Remuneration mix of the CEO and other Operations Council members (%) CEO 100 90 80 70 60 50 40 30 20 10 0 Other Operations Council members (on average) 100 90 80 70 60 50 40 30 20 10 0 2022 2023 2022 2023 Base salary (cash) Short-term incentive (cash) Short-term incentive (restricted shares) Long-term incentive (PSUs) Remuneration reportSGS | 2023 Integrated Report 89 5.7. Other compensation, loans and credit facilities (audited) Severance payment for a total amount of CHF 194 334 was made in 2023 to one member of the Operations Council who left the Group in 2023, according to the legislation in force in his country of employment (2022: no severance payments). As at 31 December 2023, no loan, credit or outstanding advance was due to the Group from members or former members of the Operations Council or related parties (unchanged from prior year). 5.8. Shares and options held (audited) The following table shows the shares and restricted shares held by senior management as at 31 December 2023: Name F. Ng G. Picaud O. Merkt Corporate responsibility Chief Executive Officer Chief Financial Officer (from 1 December 2023) General Counsel and Chief Operating Officer No options were held by senior management as at 31 December 2023. Restricted shares 14 726 – 3 001 The following table shows the shares and restricted shares held by senior management as at 31 December 2022: Name F. Ng D. de Daniel O. Merkt Corporate responsibility Chief Executive Officer Chief Financial Officer General Counsel and Chief Operating Officer 1. Prior to share split implemented on 12 April 2023. No options were held by senior management as at 31 December 2022. Restricted shares1 648 406 144 Shares 95 000 500 8 750 Shares1 3 556 1 165 287 5.9. Gender representation (audited) As at 31 December 2023, the gender representation at the Operations Council is as per the below table. Period 31 December 2023 Female Male Number % Number 2 12.5% 14 % 87.5% The Board and Leadership team are very committed to drive gender diversity, and we have continued to make progress on increasing the number of female representatives at the Operations Council over the last two years. 5.10. Other activities (audited) The functions of the members of the Operations Council in other undertakings are disclosed in Section 4.2 of the Corporate Governance of this report. Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 90 Report of the statutory auditor to the General Meeting of SGS SA Geneva Report on the audit of the remuneration report Opinion We have audited the remuneration report of SGS SA (the Company) for the year ended 31 December 2023. The audit was limited to the information pursuant to article 734a-734f CO in the tables marked 'audited' in sections 4 and 5 (pages 79 to 89) of the remuneration report. In our opinion, the information pursuant to article 734a-734f CO in the remuneration report for the tables marked ‘au- dited’ in sections 4 and 5 complies with Swiss law and the Company’s articles of incorporation. Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the remunera- tion report' section of our report. We are independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the tables marked 'audited' in the remuneration report, the consolidated finan- cial statements, the financial statements and our auditor’s reports thereon. Our opinion on the remuneration report does not cover the other information and we do not express any form of assur- ance conclusion thereon. In connection with our audit of the remuneration report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the audited financial information in the remuner- ation report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' responsibilities for the remuneration report The Board of Directors is responsible for the preparation of a remuneration report in accordance with the provisions of Swiss law and the Company's articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of a remuneration report that is free from material misstatement, whether due to fraud or error. It is also responsible for designing the remuneration system and defining individual remuneration pack- ages. PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Genève 2, Switzerland Téléphone: +41 58 792 91 00, www.pwc.ch PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. Remuneration reportSGS | 2023 Integrated Report 91 Auditor’s responsibilities for the audit of the remuneration report Our objectives are to obtain reasonable assurance about whether the information pursuant to article 734a-734f CO is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. 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 this remuneration report. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgement and maintain profes- sional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement in the remuneration report, whether due to fraud or error, de- sign and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropri- ate to provide a basis for our opinion. 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. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri- ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's in- ternal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re- lated disclosures made. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safe- guards applied. PricewaterhouseCoopers SA Guillaume Nayet Licensed audit expert Auditor in charge Geneva, 21 February 2024 Louise Rolland Licensed audit expert 2 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsCorporate governanceRemuneration reportManagement reportNon-financial statementsAppendixSGS | 2023 Integrated Report 92 Financial statementsFinancial statementsSGS | 2023 Integrated Report 93 134 140 140 141 142 142 142 142 143 143 144 144 144 144 145 146 147 151 151 152 153 153 154 155 Report on the audit of the consolidated financial statements Income Statement 2. SGS SA 2.1. 2.2. Statement of Financial Position 2.3. Notes 1. Significant accounting policies 2. Subsidiaries 3. Corporate bonds 4. Total equity 5. Share capital 6. Financial income and financial expenses 7. Extraordinary losses 8. Guarantees and comfort letters 9. Remuneration 10. Shares and options held by members of governing bodies 11. Significant shareholders Report on the audit of the financial statements 3. Historical data 3.1. 3.2. SGS Group – Five-Year Statistical Data Consolidated Income Statements SGS Group – Five-Year Statistical Data of Financial Position SGS Group – Five-Year Statistical Share Data 3.3. 3.4. SGS Group share information 3.5. Closing prices for SGS and the SMI 2022-2023 4. Material operating companies and ultimate parent 94 94 94 95 96 97 98 98 98 105 106 108 108 108 108 109 109 110 111 112 113 115 116 116 116 116 117 118 118 122 123 124 130 130 130 131 132 133 133 Consolidated Income Statement Consolidated Statement of Comprehensive Income Consolidated Statement of Financial Position Consolidated Statement of Cash Flows Consolidated Statement of Changes in Equity Notes to Consolidated Financial Statements Significant accounting policies and exchange rates Information by business and geographical segment Sales from contracts with customers 1. SGS Group 1.1. 1.2. 1.3. 1.4. 1.5. 1.6. 1. Activities of the Group 2. 3. Business combinations 4. 5. 6. Government grants 7. Other operating expenses 8. Financial income 9. Financial expenses 10. Taxes 11. Earnings per share and dividend per share 12. Property, plant and equipment 13. Right-of-use assets and lease liabilities 14. Goodwill 15. Other intangible assets 16. Other non-current assets 17. Trade receivables 18. Other receivables and prepayments 19. Cash and cash equivalents 20. Cash flow statement 21. Acquisitions 22. Financial risk management 23. Share capital and treasury shares 24. Loans and other financial liabilities 25. Defined benefit obligations 26. Provisions 27. Trade and other payables 28. Contingent liabilities 29. Equity compensation plans 30. Related-party transactions 31. Significant shareholders 32. Approval of financial statements and subsequent events Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 94 1. SGS Group 1.1. Consolidated Income Statement For the years ended 31 December (CHF million) Sales Salaries and wages Subcontractors’ expenses Depreciation, amortization and impairment Gain on business disposals Other operating expenses Operating income (EBIT)1 Financial income Financial expenses Share of profit of associates and joint ventures Profit before taxes Taxes Profit for the period Profit attributable to: Equity holders of SGS SA Non-controlling interests Basic earnings per share (in CHF)2 Diluted earnings per share (in CHF)2 Notes 4 12 to 15 3 7 4 8 9 10 11 11 2023 6 622 –3 316 –400 –545 7 –1 511 857 29 –86 2 802 –205 597 553 44 3.00 2.99 1. 2. Refer to note 4 for analysis of non-recurring items. 2022 restated for comparability following share split on 12 April 2023 – refer to note 11 and to the Alternative Performance Measures – Appendix to the 2023 full year results. 1.2. Consolidated Statement of Comprehensive Income For the years ended 31 December (CHF million) Actuarial gains/(losses) on defined benefit plans Income tax on actuarial gains/(losses) Items that will not be subsequently reclassified to income statement Exchange differences Items that may be subsequently reclassified to income statement Notes 25 10 Other comprehensive (loss) for the period Profit for the period Total comprehensive income for the period Attributable to: Equity holders of SGS SA Non-controlling interests 2023 50 –8 42 –238 –238 –196 597 401 364 37 2022 6 642 –3 331 –399 –521 – –1 493 898 20 –71 2 849 –219 630 588 42 3.15 3.15 2022 –20 5 –15 –148 –148 –163 630 467 430 37 Financial statementsSGS | 2023 Integrated Report 1.3. Consolidated Statement of Financial Position At 31 December (CHF million) Assets Non-current assets Property, plant and equipment Right-of-use assets Goodwill Other intangible assets Investments in joint ventures, associates and other companies Deferred tax assets Other non-current assets Total non-current assets Current assets Inventories Unbilled sales and work in progress Trade receivables Other receivables and prepayments Current tax assets Cash and cash equivalents Total current assets Total assets Equity and liabilities Capital and reserves Share capital Reserves Treasury shares Equity attributable to equity holders of SGS SA Non-controlling interests Total equity Non-current liabilities Loans and other financial liabilities Lease liabilities Deferred tax liabilities Defined benefit obligations Provisions Total non-current liabilities Current liabilities Trade and other payables Contract liabilities Current tax liabilities Loans and other financial liabilities Lease liabilities Provisions Other creditors and accruals Total current liabilities Total liabilities Total equity and liabilities 95 Notes 2023 2022 12 13 14 15 10 16 5 17 18 19 23 24 13 10 25 26 27 5 24 13 26 823 506 1 636 275 16 185 191 907 577 1 755 350 20 153 125 3 632 3 887 57 223 940 213 127 1 569 3 129 6 761 7 723 –271 459 69 528 3 040 384 73 66 91 3 654 634 221 176 841 143 41 523 2 579 6 233 6 761 59 210 988 223 132 1 623 3 235 7 122 7 954 –279 682 81 763 2 833 442 79 47 96 3 497 671 228 165 1 009 162 58 569 2 862 6 359 7 122 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 96 1.4. Consolidated Statement of Cash Flows For the years ended 31 December (CHF million) Profit for the period Non-cash and non-operating items (Increase) in working capital Taxes paid Cash flow from operating activities Purchase of property, plant and equipment and other intangible assets Disposal of property, plant and equipment and other intangible assets Acquisition of businesses Proceeds from disposal of businesses Cash paid on other non-current assets Proceeds received from investments in joint ventures, associates and other companies Interest received Cash flow used by investing activities Dividends paid to equity holders of SGS SA Dividends paid to non-controlling interests Transaction with non-controlling interests Cash paid on treasury shares Proceeds from corporate bonds Payment of corporate bonds Interest paid Payment of lease liabilities Proceeds from borrowings Payment of borrowings Cash flow used by financing activities Currency translation (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at beginning of year (Decrease)/increase in cash and cash equivalents Cash and cash equivalents at end of year Notes 20.1 20.2 21 20.3 20.3 20.3 20.3 20.3 20.3 19 2023 597 824 –55 –243 1 123 –298 15 –12 22 –1 8 24 –242 –590 –44 –34 –10 500 –501 –82 –178 105 –5 –839 –96 –54 1 623 –54 1 569 2022 630 812 –162 –250 1 030 –329 8 –67 2 –3 1 19 –369 –599 –43 –9 –268 500 –251 –64 –183 469 – –448 –70 143 1 480 143 1 623 Financial statementsSGS | 2023 Integrated Report 97 Total equity 1 202 630 1.5. Consolidated Statement of Changes in Equity For the years ended 31 December (CHF million) Share capital Treasury shares Capital reserve Attributable to: Cumulative (losses)/gains on defined benefit plans net of tax Retained earnings and group reserves Cumulative translation adjustments Equity holders of SGS SA Non- controlling interests Balance at 1 January 2022 7 –8 130 –1 342 –190 2 520 1 117 Profit for the period Other comprehensive income for the period Total comprehensive income for the period Dividends paid Share-based payments Movement in non-controlling interests Movement on treasury shares – – – – – – – Balance at 31 December 2022 7 – – – – – – –271 –279 – – – – 18 – –4 – –143 –143 – – – – Balance at 1 January 2023 7 –279 144 –1 485 –205 2 500 144 –1 485 –205 2 500 Profit for the period Other comprehensive income for the period Total comprehensive income for the period Dividends paid Share-based payments Movement in non-controlling interests Movement on treasury shares – – – – – – – – – – – – – 8 Balance at 31 December 2023 7 –271 – – – – 24 – –4 164 – –231 –231 – – – – –1 716 –163 2 438 – 588 588 85 42 –15 –15 – – – – – –158 –5 –163 588 430 37 467 –599 –599 –43 –642 – –8 –1 18 –8 –276 682 682 553 – 2 – 81 81 44 18 –6 –276 763 763 597 – 553 42 – –189 –7 –196 42 553 364 37 401 – – – – –590 –590 –44 –634 – –25 – 24 –25 4 459 – –5 – 24 –30 4 69 528 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 98 1.6. Notes to Consolidated Financial Statements 1. Activities of the Group SGS SA and its subsidiaries (‘the Group’) operate around the world under the name SGS. The head office of the Group is located in Geneva, Switzerland. SGS is the global leader in inspection, verification, testing and certification services supporting international trade in agriculture, minerals, petroleum and consumer products. It also provides these services to governments, international institutions and customers engaged in the industrial, environmental and life science sectors. 2. Significant accounting policies and exchange rates Basis of preparation of the financial statements The consolidated financial statements of the Group are stated in millions of Swiss Francs (CHF million). They are prepared from the financial statements of the individual companies within the Group with all significant companies having a year end of 31 December 2023. The consolidated financial statements comply with the accounting and reporting requirements of the IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB) and Swiss law. The accounting conventions and accounting policies are the same as those applied in the 2022 consolidated financial statements, except for the Group’s adoption of new IFRSs effective 1 January 2023. The financial statements are prepared on an accruals basis and under the historical cost convention, modified as required for the revaluation of certain financial instruments. Geopolitical instability Recent geopolitical events have impacted the economy and financial markets. Many industries are facing challenges, including supply-chain disruption, inflation, deteriorating credit and liquidity concerns. Consequently, these 2023 consolidated financial statements were prepared with particular attention to the below specific areas: • Impairment of non-current assets: the Group has recognized a CHF 40 million impairment loss on tangible and intangible assets (2022: 18 million) • Impairment of Goodwill: CHF 18 million impairment was recognized (2022: nil) • Appropriateness of expected credit loss allowance for trade receivables, unbilled sales and work in progress: applying the simplified approach for IFRS 9 expected credit loss model, the Group reviewed its impairment matrix to ensure it continues to reflect current and future credit risks and assessed it as adequate • Accounting for government grants: at 31 December 2023, the Group recognized CHF 9 million as deduction of salaries and wage expenses (2022: CHF 12 million) Developments in international taxation The Group is subject to income taxes in numerous jurisdictions and monitors developments which could affect the Group’s tax liability. In particular, the Organisation for Economic Co-operation and Development (OECD) published the Global Anti-Base Erosion Model Rules (Pillar Two). The Pillar Two model framework introduced a global minimum tax rate concept of 15%, which is achieved through a system of top-up taxes in jurisdictions where tax rate would be lower. As at 31 December 2023, Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions where the Group operates. The legislation will be effective for the Group’s financial year beginning 1 January 2024. The Group has performed an assessment of its potential exposure to Pillar Two income taxes, based on the most recent tax filings, country- by-country reporting and financial statements of its constituent entities. Based on this assessment, the Pillar Two effective tax rates in most of the jurisdictions in which the Group operates are above 15%. There are a limited number of jurisdictions where the transitional safe harbor relief does not apply. In those jurisdictions, the Pillar Two effective tax rate is close to 15% and the Group does not expect a material impact. In addition, in accordance with IAS 12 amendments published on 23 May 2023 and 27 June 2023, the Group applied the mandatory exception from accounting for deferred tax arising from Pillar Two as at 31 December 2023. Stock-split On 28 March 2023, the Annual General Assembly approved a 25-1 stock split that went into effect on 12 April 2023. This split increased the number of shares issued, from 7 495 032 to 187 375 800, and reduced the nominal value per share, from CHF 1 to CHF 0.04. As a result, for comparability purposes, the Group recalculated the basic and diluted earnings per share (EPS) as of December 2022 and discloses it in note 11. Adoption of new and revised International Financial Reporting Standards and Interpretations Several new amendments and interpretations were adopted effective 1 January 2023 but have no material impact on the Group’s consolidated financial statements. There are no IFRS standards or interpretations which are not yet effective and which would be expected to have a material impact on the Group. Basis of consolidation Subsidiaries The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Group. Control is achieved when the Group: • Has power over the investee • Is exposed, or has the right, to variable return from its involvement with the investee; and • Has the ability to use its power to affect its return The Company reassesses whether or not the Group controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above. Financial statementsSGS | 2023 Integrated Report 99 Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses control of the subsidiary. The principal operating companies of the Group are listed on pages 155 to 157. Non-controlling interests Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Initially they are measured at the non- controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. Subsequently to the acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity. Associates Associates are entities over which the Group has significant influence but no control or joint control over the financial and operating policies. The consolidated financial statements include the Group’s share of the earnings of associates on an equity accounting basis from the date that significant influence commences until the date that significant influence ceases. Joint ventures A joint venture is a contractual arrangement over which the Group exercises joint control with partners and where the parties have rights to the net assets of the arrangement. The consolidated financial statements include the Group’s share of the earnings and net assets on an equity accounting basis of joint ventures that it does not control, effective from the date that joint control commences until the date that joint control ceases. Joint operations A joint operation is an arrangement whereby the parties that have joint control have separable specific rights to the assets and the liabilities within the arrangement. When a group entity undertakes its activities under joint operations, the Group as a joint operator recognizes in relation to its interest in a joint operation: • Its assets, including its share of any assets held jointly • Its liabilities, including its share of any liabilities incurred jointly • Its revenue from the sale of its share of the output arising from the joint operation • Its share of the revenue from the sale of the output by the joint operation; and • Its expenses, including its share of any expenses incurred jointly Investments in companies not accounted for as subsidiaries, associates or jointly controlled entities Investments in companies not accounted for as subsidiaries, associates or jointly controlled entities (normally below 20% shareholding levels) are stated at fair value through profit and loss. Dividends received from these investments are included in financial income. Transactions eliminated on consolidation All intra-group balances and transactions, and any unrealized gains and losses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealized gains and losses arising from transactions with associates and jointly controlled entities are eliminated to the extent of the Group’s interest in those entities. Foreign currency transactions Transactions in foreign currencies are recorded at the foreign exchange rate prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the foreign exchange rate prevailing at that date. Exchange differences arising on the settlement of monetary items or on reporting monetary items at rates different from those at which they were initially recorded during the period or in previous financial statements, are recognized in the income statement. Consolidation of foreign companies All assets and liabilities of foreign companies that are consolidated are translated using the exchange rates in effect at the balance sheet date. Income and expenses are translated at the exchange rate at the average exchange rate for the year, or at the rate on the date of the transaction for significant items. Translation differences resulting from the application of this method are recognized in other comprehensive income and reclassified to profit or loss on disposal. Average exchange rates are used to translate the cash flows of foreign subsidiaries in preparing the consolidated statement of cash flows. Sales recognition IFRS 15 Revenue from Contracts with Customers establishes a five-step model to account for sales arising from contracts with customers. Under IFRS 15, sales are recognized at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring services to a customer. The standard requires entities to exercise judgment, taking into consideration all of the relevant facts and circumstances when applying each step of the model to contracts with their customers. The Group recognizes sales based on two main models: services transferred at a point in time and services transferred over time. • The majority of SGS’ sales are transferred at a point in time and recognized upon completion of performance obligations and measured according to the transaction price agreed in the contract. Once services are rendered, e.g. a report issued, the customer is invoiced and payment is due • Services transferred over time mainly concern long-term contracts, where sales are recognized based on the measure of progress. When the Group has a right to consideration from a customer at the amount corresponding directly to the customer’s value of the performance completed to date, the Group recognizes sales in the amount to which it has a right to invoice. In all other situations, the measure of progress is either based on observable output methods (usually the number of tests or inspection performed) or based on input methods such as the time incurred to date relative to the total expected hours to the satisfaction of the performance obligation. These invoices are usually issued per contractually agreed installments and prices. Payments are due upon invoicing Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 100 Segment information The Group reports its operations by business segment, according to the nature of the services provided. The Group operates in five business segments: • Connectivity & Products (C&P): end-markets covered include Electrical and Electronic goods, Softlines, Hardlines and Trade Facilitation • Health & Nutrition (H&N): end-markets covered include Food, Crop Science, Health Science and Cosmetics & Hygiene • Industries & Environment (I&E): end-markets covered include Field Services and Inspection, Technical Assessment and Advisory, Industrial and Public Health & Safety, Environmental Testing and Public Mandates • Natural Resources (NR): end-markets covered include Trade and Inspection of minerals, oil and gas and agricultural commodities, Laboratory Testing, Metallurgy and Consulting and Market Intelligence • Business Assurance (prev. Knowledge): end-markets covered include Management System Certification, Customized Audits, Consulting and Academy The chief operating decision maker evaluates segment performance and allocates resources based on several factors, of which sales, adjusted operating income and capital expenditures are the main criteria. For the Group, the chief operating decision maker is the senior management, which is composed of the Chief Executive Officer, the Chief Financial Officer and the General Counsel. All segment sales reported are from external customers. Segment sales and operating income are attributed to countries based on the location in which the services are rendered. Capital additions represent the total cost incurred to acquire land, buildings and equipment as well as other intangible assets. Property, plant and equipment Land is stated at historical cost and is not depreciated. Buildings and equipment are stated at historical cost less accumulated depreciation. Subsequent expenditures are capitalized only if they increase the future economic benefits embodied in the related item of property and equipment. All other expenditures are expensed as incurred. Depreciation is calculated on a straight-line basis over the estimated useful life of the assets as follows: • Buildings 12–40 years • Machinery and equipment 5–10 years • Other tangible assets 5–10 years Right-of-use assets The Group recognizes right-of-use assets at the commencement date of the lease. Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses. They are adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognized, initial direct costs incurred and lease payments made at or before the commencement date, less any lease incentives received. Unless the Group is reasonably certain to obtain ownership of the leased asset at the end of the lease term, recognized right-of-use assets are depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Right-of-use assets are subject to impairment. Lease liabilities At the commencement date of the lease, the Group recognizes lease liabilities measured at the present value of lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The Group elected to use the practical expedient to account for each lease component and any non-lease components as a single lease component. The lease payments also include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a lease, if the lease term reflects the Group exercising the option to terminate. In the case that the implicit rate cannot be readily determined, the Group uses an incremental borrowing rate considering the country and the lease duration. The rate is estimated by the combination of the reference rate, the financing spread and any asset-specific adjustment when required. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interests and reduced for the lease payments made. Subsequently, the carrying amount of lease liabilities is remeasured if there is a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the underlying asset. The Group applies the short-term lease and low-value recognition exemptions. Lease payments on short-term leases and leases of low-value assets are recognized as expenses on a straight-line basis over the lease term. Goodwill In the case of acquisitions of businesses, the acquired identifiable assets, liabilities and contingent liabilities are recorded at fair value. The difference between the purchase price and the fair value is classified as goodwill and recorded in the statement of financial position as an intangible asset. Goodwill arising from business combinations is measured at cost less any accumulated impairment losses. If the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the Group reports provisional amounts for the items for which the accounting is incomplete. Those provisional amounts are adjusted during the measurement period, or additional assets or liabilities are recognized, to reflect new information obtained about facts and circumstances that existed at the acquisition date that, if known, would have affected amounts recognized at that date. Goodwill arising on the acquisition of a foreign entity is recorded in the relevant foreign currency and is translated using the end of period exchange rate. On disposal of part or all of a business that was previously acquired and which gave rise to the recording of acquisition goodwill, the relevant amount of goodwill is included in the determination of the gain or loss on disposal. Goodwill acquired as part of business combinations is tested for possible impairment annually and whenever events or changes in circumstances indicate their value may not be fully recoverable. Financial statementsSGS | 2023 Integrated Report 101 For the purpose of impairment testing, the Group has adopted a uniform method for assessing goodwill recognized under the acquisition method of accounting. These assets are allocated to a cash generating unit or a group of cash generating units (CGU) which are expected to benefit from the business combination. The recoverable amount of a CGU or the group of CGUs is determined through a value-in- use calculation. If the value-in-use of the CGU or the group of CGUs is less than the carrying amount of its net operating assets, then a fair value less costs to sell valuation is also performed with the recoverable amount of the CGU or the group of CGUs being the higher of its value-in-use and the fair value less costs to sell. The key assumptions for the value-in-use calculations are those regarding the discount rates, growth rates, operating margins and expected changes to selling prices or direct costs during the period. Pre-tax discount rates used are based on the Group’s weighted average cost of capital, adjusted for specific risks associated with the CGUs or the group of CGUs’ cash flow projections. The growth rates are based on industry growth forecasts. Expected changes in selling prices and direct costs are based on past practices and expectations of future changes in the market. For all CGUs or groups of CGUs, a value-in-use calculation is performed using cash flow projections covering the next five years and including a terminal growth assumption. These cash flow projections take into account the most recent financial results and outlook approved by management. If the recoverable amount of the CGU or of the group of CGUs is less than the carrying amount of the unit’s net operating assets, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets of the unit. An impairment loss recognized for goodwill is not reversed in a subsequent period. Even if the initial accounting for an intangible asset acquired in the reporting period is only provisional, this asset is tested for impairment in the year of acquisition. Other intangible assets Intangible assets, including software, licenses, trademarks and customer relationships are capitalized and amortized on a straight-line basis over their estimated useful lives, normally not exceeding 20 years. The following useful lives are used in the calculation of amortization: • Trademarks 5–20 years • Customer relationships 2–20 years • Computer software 3–5 years Other intangible assets acquired as part of an acquisition of a business are capitalized separately from goodwill if their fair value can be measured reliably. Internally generated intangible assets are recognized if the asset created can be identified, it is probable that future economic benefits will be generated from it, the related development costs can be measured reliably and sufficient financial resources are available to complete the development. These assets are amortized on a straight-line basis over their useful lives, which usually do not exceed five years. All other development costs are expensed as incurred. Impairment of assets excluding goodwill At each balance sheet date, or whenever there is an indication that an asset may be impaired, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether they have suffered an impairment loss. If indications of impairment are present, the assets are tested for impairment. If impaired, the carrying value of the asset is reduced to its recoverable value. Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the CGU to which the asset belongs. The recoverable amount of an asset is the greater of the fair value less cost of sale and its value-in-use. In assessing its value-in-use, the pre-tax estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time-value of money and the risks specific to the asset. Reversal of impairment losses Where an impairment loss on assets other than goodwill subsequently reverses, the carrying amount of the asset or CGU is increased to the revised estimate of its recoverable amount, but not in excess of the carrying amount that would have been recorded had no impairment loss been recognized. A reversal of an impairment loss is recognized as income immediately. Government grants IAS 20 sets out the principle for the recognition, measurement, presentation and disclosure of government grants. Government grants that are not related to assets are credited to the income statement as a deduction of the related expenses. Government grants are recognized when there is a reasonable assurance that the grant will be received and all attached conditions will be met. Trade receivables Trade receivables are recognized and carried at original invoice amount less an allowance for any non-collectible amounts. An expected credit loss allowance is made in compliance with the simplified approach using a provision matrix (expected credit loss model). This provision matrix has been developed to reflect the country risk, the credit risk profile, as well as available forward looking and historical data. The Group considers a trade receivable to be credit impaired when one or more detrimental events have occurred such as: • Significant financial difficulty of the customer; or • It is becoming probable that the customer will enter bankruptcy or other financial reorganization Unbilled sales and work in progress Unbilled sales are recognized for services completed but not yet invoiced and are valued at net selling price. Work in progress is recognized for the partially finished performance obligations under a contract. The measure of progress is either based on observable output methods or based on input methods. A margin is recognized based on actual costs incurred, provided that the project is expected to be profitable once completed. Similarly to receivables, an allowance for unbilled sales and work in progress is made in compliance with the simplified approach using a provision matrix (expected credit loss model). Cash and cash equivalents Cash and cash equivalents include cash and deposits held with banks with an original maturity of three months or less and are subject to an insignificant risk of changes in value. Bank overdrafts are included within current loans. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 102 Derivative financial instruments and hedging The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivatives are accounted for on a mark-to-market basis. Derivative financial instruments are initially recognized at fair value and subsequently remeasured at fair value at each balance sheet date. The gains and losses resulting from the fair value remeasurement are recognized in the income statement. The fair value of forward exchange contracts is determined with reference to market prices at the balance sheet date. Corporate bonds The corporate bonds issued by the Group are measured at amortized cost using the effective interest method, with interest expense recognized on an effective yield basis. The effective interest method is a method of calculating the amortized cost of a financial liability and allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments through the expected life of the financial liability to the net carrying amount on initial recognition. The Group uses financial instruments to economically hedge interest rate risks relating to its corporate bonds. The changes in fair value of finance instruments are recognized in the income statement. Liabilities related to put options granted to holders of non-controlling interests Written put options in favor of holders of non-controlling interests give rise to the recognition of a financial liability at the present value of the expected cash outflow. The present value is determined by management’s best estimate of the cash outflow required to settle the obligation on exercise of the option, discounted by the Group’s cost of debt. The financial liability is initially recorded with the corresponding entry within equity and in the absence of specific guidance in IFRS, subsequent changes in the valuation of the liability shall be recognized directly in equity attributable to owners, including the unwinding of the discount. Fair value measurement Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. • Level 1 fair value measurements are those derived from the quoted price in active markets • Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset and liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices) • Level 3 fair value measurements are those derived from valuation techniques as it cannot be derived from publicly available information. The assumptions and inputs used in the model take into account externally verifiable inputs. However, such information is by nature subject to uncertainty, particularly where comparable market-based transactions often do not exist. External valuers are involved for valuation for significant assets and liabilities Employee benefits Pension plans The Group maintains several defined benefit and defined contribution pension plans in accordance with local conditions and practices in the countries in which it operates. Defined benefit pension plans are based on an employee’s years of service and remuneration earned during a predetermined period. Contributions to these plans are normally paid into funds, which are managed independently of the Group, except in rare cases where there is no legal obligation to fund. In such cases, the liability is recorded in the Group’s consolidated statement of financial position. The Group’s obligations towards defined benefit pension plans and the annual cost recognized in the income statement are determined by independent actuaries using the projected unit credit method. Remeasurement gains and losses are immediately recognized in the consolidated statement of financial position with the corresponding movement being recorded in the consolidated statement of comprehensive income. Past service costs are immediately recognized as an expense. Net interest expense is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. The retirement benefit obligation recognized in the statement of financial position represents the present value of the defined benefit obligation reduced by the fair value of plan assets. Any asset resulting from this calculation is limited to the present value of available refunds and reductions in future contributions to the plan. Payments to defined contribution plans are recognized as an expense in the income statement as incurred. Post-employment plans other than pensions The Group operates some non-pension post-employment defined benefit schemes, mainly healthcare plans. The method of accounting and the frequency of valuations are similar to those used for defined benefit pension plans. Equity compensation plans The Group provides additional benefits to certain senior executives and employees through equity compensation plans. An expense is recognized in the income statement for shares and equity-linked instruments granted to senior executives and employees under these plans. Trade payables Trade payables are recognized at amortized cost that approximates the fair value. Provisions The Group records provisions when: it has an obligation, legal or constructive, to satisfy a claim; it is probable that an outflow of group resources will be required to satisfy the obligation; and a reliable estimate of the amount can be made. In the case of litigation and claims relating to services rendered, the amount that is ultimately recorded is the result of a complex process of assessment of a number of variables, and relies on management’s informed judgment about the circumstances surrounding the past provision of services. It also relies on expert legal advice and actuarial assessments. Changes in provisions are reflected in the income statement in the period in which the change occurs. Financial statementsSGS | 2023 Integrated Report 103 Contract liabilities Contract liabilities arise upon advance payments from clients and issuance of upfront invoices. Restructuring costs The Group recognizes costs of restructuring against operating income in the period in which management has committed to a formal plan, the costs of which can be reliably estimated, and has raised a valid expectation in those affected that the plan will be implemented and the related costs incurred. Where appropriate, restructuring costs include impairment charges arising from the implementation of the formal plan. Capital management Capital comprises equity attributable to equity holders, loans and other financial liabilities, lease liabilities and cash and cash equivalents. The Board of Directors’ policy is to maintain a strong capital base in order to maintain investor, creditor and market confidence, and to sustain the future development of the business. The Board also recommends the level of dividends to be distributed to ordinary shareholders on an annual basis. The Group maintains sufficient liquidity at the Group and subsidiary level to meet its working capital requirements, fund capital purchases and small and medium-sized acquisitions. Treasury shares are intended to be used to cover the Group’s employee equity participation plan, convertible bonds and/or cancellation of shares. Decisions to buy or sell are made on an individual transaction basis by management. There were no changes in the Group’s approach to capital management during the year. The Group is not subject to any externally imposed capital requirements. Taxes Income taxes include all taxes based upon the taxable profits of the Group, including withholding taxes payable on the transfer of income from group companies and tax adjustments from prior years. Taxes on income are recognized in the income statement except to the extent that they relate to items directly charged or credited to equity or other comprehensive income, in which case the related income tax effect is recognized in equity or other comprehensive income. Provisions of income and withholding taxes that could arise on the remittance of subsidiary retained earnings are only made where there is a current intention to remit such earnings. Other taxes not based on income, such as property taxes and capital taxes, are included within operating expenses. Deferred taxes are provided using the full liability method. They are calculated on all temporary differences that arise between the tax base of an asset or liability and the carrying values in the consolidated financial statements except for non-tax-deductible goodwill and for those differences related to investments in subsidiaries where their reversal will not take place in the foreseeable future. Deferred income tax assets relating to the carry-forward of unused tax losses and tax credits are recognized to the extent that it is probable that future taxable profits will be available against which they can be used. Current income tax assets and liabilities are off-set where there is a legally enforceable right to off-set. Deferred tax assets and liabilities are determined based on enacted or substantively enacted tax rates in the respective jurisdictions in which the Group operates that are expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Earnings per share Basic earnings per share are calculated by dividing the Group’s profit by the weighted average number of shares outstanding during the year, excluding treasury shares. For diluted earnings per share, the weighted average number of shares outstanding is adjusted assuming conversion of all potential dilutive shares. Group profit is also adjusted to reflect the after-tax impact of conversion. Dividends Dividends are reported as a movement in equity in the period in which they are approved by the shareholders. Treasury shares Treasury shares are reported as a deduction to equity. The original cost of treasury shares and the proceeds of any subsequent sale are recorded as movements in equity. Significant accounting estimates and judgments Use of estimates The key assumptions concerning the future, and other key sources of estimation at the balance sheet date that may have a risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. Business combinations In a business combination, the determination of the fair value of the identifiable assets acquired, particularly intangibles, requires estimations which are based on all available information and in some cases on assumptions with respect to the timing and amount of future sales and expenses associated with an asset. The purchase price is allocated to the underlying acquired assets and liabilities based on their estimated fair value at the time of acquisition. The excess is reported as goodwill. As a result, the purchase price allocation impacts reported assets and liabilities, future net earnings due to the impact on future depreciation and amortization expense and impairment charges. The purchase price allocation is subject to a maximum period of 12 months adjustment. Valuation of trade receivables, unbilled sales and work in progress The balances are presented net of expected credit loss allowance. These allowances for potential uncollected amounts are estimated in compliance with the simplified approach using a provision matrix (expected credit loss model), which has been developed to reflect the country risk, the credit risk profile, as well as available historical data. In addition, an allowance is estimated based on individual client analysis when the collection is no longer probable. Impairment of goodwill The Group determines whether goodwill is impaired at a minimum on an annual basis. This requires identification of CGUs and an estimation of the value-in-use of the CGUs to which the goodwill is allocated. Estimating the value-in-use requires the Group to make an estimate of expected future cash flows from the CGU or group of CGUs that holds the goodwill at a determined discount rate in order to calculate the present value of those cash flows. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 104 Estimations of employee post-employment benefits obligations The Group maintains several defined benefit pension plans in accordance with local conditions and practices in the countries in which it operates. The related obligations recognized in the statement of financial position represent the present value of the defined benefit obligations calculated annually by independent actuaries. These actuarial valuations include assumptions such as discount rates, salary progression rates and mortality rates. These actuarial assumptions vary according to the local prevailing economic and social conditions. Income taxes The Group is subject to income taxes in numerous jurisdictions. There are many transactions and calculations for which the ultimate tax determination is uncertain. In assessing how an uncertain tax treatment may affect the determination of the taxable profit (tax loss), the Group assumes that a taxation authority will examine amounts and have full knowledge of all related information. If the Group concludes it is not probable that a taxation authority will accept a particular tax treatment, the Group reflects the effect of each uncertainty in determining the taxable profit (tax loss) by using one of the following methods: • The single most likely amount • The sum of probability-weighted amount in a range of possible outcomes The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due, including estimated interest and penalties where appropriate. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. Legal and warranty claims on services rendered The Group is subject to litigation and other claims. Management bases its judgment on the circumstances relating to each specific event, internal and external legal advice, knowledge of the industries and markets, prevailing commercial terms and legal precedent, and evaluation of applicable insurance cover where appropriate. The process of estimation is complex, dealing with uncertainty, requiring the use of informed estimates, actuarial assessment, evaluation of the insurance cover where appropriate and the judgment of management. The timing of cash outflows from pending litigation and claims is uncertain since it depends, in the majority of cases, on the outcome of administrative and legal proceedings. The Group’s legal and warranty claims are reviewed, at a minimum, on a quarterly basis by a cross- functional representation of management. Any changes in these estimates are reflected in the income statement in the period in which the estimates change. Judgments In the process of applying the entity’s accounting policies described above, management has made the following judgment that has a significant effect on the amounts recognized in the financial statements. Lease termination of contracts with renewal and exit options The Group determines the lease term as the non-cancellable term of the lease together with any periods covered by an option to extend the lease if it is reasonably certain to be exercised, or any periods covered by an option to terminate the lease, if it is reasonably certain not to be exercised. The Group has the option, for some of its leases to lease the assets for additional terms. The Group applies judgment in evaluating whether it is reasonably certain to exercise the option to renew. That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. After the commencement date, the Group reassesses the lease term if there is a significant event or change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to renew. Exchange rates The most significant currencies for the Group were translated at the following exchange rates into Swiss Francs: Australia Canada Chile China Eurozone Korea AUD CAD CLP CNY EUR KRW United Kingdom GBP Russia Taiwan USA RUB TWD USD 100 100 100 100 100 100 100 100 100 100 Statement of financial position period-end rates Income statement period average rates 2023 57.38 63.53 0.10 11.83 93.02 0.06 107.16 0.94 2.74 84.11 2022 62.70 68.20 0.11 13.29 98.47 0.07 111.47 1.31 3.01 92.43 2023 59.73 66.59 0.11 12.70 97.17 0.07 111.69 1.07 2.89 89.87 2022 66.33 73.40 0.11 14.20 100.52 0.07 118.01 1.43 3.21 95.44 Financial statementsSGS | 2023 Integrated Report 105 3. Business combinations The following business combinations occurred during 2023 and 2022: Business combinations 2023 In 2023, the Group completed two business combinations for a total purchase price of CHF 9 million (note 21). • 100% of Seafood Testing Business, from Asmecruz, a cooperative of mussels producers in Spain (effective 17 March 2023) • 60% of Nutrasource, a company providing clinical trial management, full regulatory support, testing services as well as product development R&D in Canada and USA (effective 1 May 2023) These companies were acquired for an amount of CHF 9 million and the total goodwill generated on these transactions amounted to CHF 9 million. All the above transactions contributed a total of CHF 7 million in sales and CHF nil million in operating income in 2023. Had all acquisitions been effective 1 January 2023, the sales for the period from these acquisitions would have been CHF 11 million and the operating income would have been CHF 1 million. None of the goodwill arising on these acquisitions is expected to be tax deductible. Divestments 2023 In 2023, the Group completed three divestments, for a total consideration of CHF 22 million, resulting in a gain on disposal of CHF 7 million: • Subsurface Consultancy business, in the Netherlands (effective 1 March 2023) • Automotive Asset Assessment and Retail Network Services operations, in multiple countries (effective 1 July 2023) • Powertrain Testing Operations, in North America (effective 1 October 2023) On 18 December 2023, the Group announced the signing of an agreement to divest its crop science operations in several countries. The transaction will be effective in the course of 2024 upon realization of completion conditions and does not impact the 2023 consolidated financial results. Assets held for disposal are deemed immaterial. Business combinations 2022 In 2022, the Group completed seven business combinations for a total purchase price of CHF 75 million (note 21). • 100% of Gas Analysis Services (GAS), a company specialized in instrumentation and gas analysis testing in Ireland (effective 28 February 2022) • 100% of Ecotecnos, a company providing sea monitoring and oceanography services in Chile (effective 6 May 2022) • 100% of AIEX, a company providing technical and welding inspection services in the nuclear and marine industries in France (effective 9 May 2022) • 100% of Silver State Analytical Laboratories and Excelchem Laboratories, companies providing quality analytical and microbiological testing and support services for clients in the environmental, water, utility, engineering, construction, food processing, chemical, mining, healthcare, resort and hospitality industries (effective 1 July 2022) • 100% of proderm GmbH, a company conducting clinical studies from initial consultation to final reports in Germany (effective 7 July 2022) • 100% of Penumbra Security, a recognized leader providing various types of information security conformance testing to government standards and regulatory compliance for multinational companies in the USA (effective 31 August 2022) • 100% of Industry Lab, a company offering a comprehensive range of microbiological analysis services, from enumeration of indicator organisms to detection of foodborne pathogens, located in Romania (effective 3 November 2022) These companies were acquired for an amount of CHF 75 million and the total goodwill generated on these transactions amounted to CHF 52 million. All the above transactions contributed a total of CHF 20 million in sales and CHF 3 million in operating income in 2022. Had all acquisitions been effective 1 January 2022, the sales for the period from these acquisitions would have been CHF 32 million and the operating income would have been CHF 5 million. On 7 July 2022, the Group has acquired proderm GmbH, a clinical research organization, specialized in advanced solutions for cosmetics and personal care as well as medical clinical studies. This acquisition further supports the group strategic expansion in cosmetics and hygiene. proderm GmbH has contributed CHF 6 million to the Group’s sales and CHF 1 million to operating income in 2022. Had the company been acquired on 1 January 2022 the sales for the year would have been CHF 12 million and the operating income would have been CHF 2 million. None of the goodwill arising on these acquisitions is expected to be tax deductible. Divestment 2022 In 2022, the Group disposed of its US Drilling operations in the USA for a total consideration of CHF 2 million. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 106 4. Information by business and geographical segment The information presented is disclosed by business line and focuses on sales, operating income, capital expenditures and employee numbers because these are the performance measures used by the Chief Operating Decision Maker to assess segment performance. Analysis of operating income (CHF million) Adjusted operating income1 Amortization and impairment of acquired intangibles Restructuring costs Goodwill impairment Gain on business disposals Transaction and integration costs Other non-recurring items Operating income 1. Alternative Performance Measures – Appendix to the 2023 full year results. Analysis of sales and operating income 2023 2023 971 –55 –21 –18 7 –5 –22 857 2022 1 023 –37 –46 – – –13 –29 898 (CHF million) Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Business Assurance (prev. Knowledge) Total Sales 2 190 1 583 1 246 857 746 6 622 Adjusted operating income1 Amortization and impairment of acquired intangibles Restructuring costs Goodwill impairment Gain on business disposals Transaction and integration costs Other non- recurring items Operating income by business 248 228 262 80 153 971 –15 –1 –5 –31 –3 –55 –11 –18 –6 –1 –2 –1 – – – – –21 –18 3 – 4 – – 7 –2 – –1 –2 – –5 –16 –2 –2 – –2 –22 189 219 257 45 147 857 1. Alternative Performance Measures – Appendix to the 2023 full year results. 2022 (CHF million) Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Business Assurance (prev. Knowledge) Total Adjusted operating income1 Amortization and impairment of acquired intangibles Restructuring costs Transaction and integration costs Other non- recurring items Operating income by business Sales 2 157 1 583 1 311 892 699 224 225 313 119 142 6 642 1 023 –19 –1 –5 –9 –3 –37 –15 –10 –12 –6 –3 –46 –6 –1 –1 –4 –1 –29 – – – – –13 –29 155 213 295 100 135 898 1. Alternative Performance Measures – Appendix to the 2023 full year results. Restructuring costs The Group incurred a pre-tax restructuring charge of CHF 21 million (2022: CHF 46 million). Total restructuring costs comprised personnel reorganization of CHF 15 million (2022: CHF 26 million) as well as fixed asset impairment of CHF 2 million (2022: CHF 2 million) and other charges of CHF 4 million (2022: CHF 18 million). Other non-recurring items The Group reported as non-recurring items a charge of CHF 22 million in 2023 (2022: CHF 29 million), including intangible impairment of CHF 16 million and other charges of CHF 6 million (2022: CHF 16 million of fixed assets impairment in addition to incurred personnel costs for CHF 3 million and other charges for CHF 10 million). Financial statementsSGS | 2023 Integrated Report Sales from external customers by geographical area (CHF million) Europe/Africa/Middle East Americas Asia Pacific Total 2023 2 937 1 406 2 279 6 622 % 44.4 21.2 34.4 100.0 2022 2 944 1 364 2 334 6 642 107 % 44.3 20.5 35.2 100.0 Sales in Switzerland from external customers for 2023 amounted to CHF 155 million (2022: CHF 164 million). No country represented more than 20% of sales from external customers in 2023 nor 2022. Major customer information In 2023 and 2022, no external customer represented 5% or more of the Group’s total sales. Specific non-current assets by geographical area Specific non-current assets directly attributable to geographical segment mainly include property, land and equipment, right-of-use assets, goodwill and other intangible assets: (CHF million) Europe/Africa/Middle East Americas Asia Pacific Total specific non-current assets 2023 1 973 744 593 3 310 % 59.6 22.5 17.9 100.0 2022 2 224 824 623 3 671 % 60.6 22.4 17.0 100.0 Specific non-current assets in Switzerland for 2023 amounted to CHF 155 million (2022: CHF 169 million). No country represented more than 20% of non-current assets in 2023 nor 2022. Reconciliation with total non-current assets (CHF million) Specific non-current assets as above Deferred tax assets Retirement benefit assets Non-current loans to third parties Total Capital additions¹ by business segment (CHF million) Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Business Assurance (prev. Knowledge) Total 2023 96 70 81 44 7 298 % 32.2 23.5 27.2 14.8 2.3 100.0 1. Capital additions represent the total cost incurred to acquire land, buildings and equipment as well as other intangible assets. Average number of employees by geographical area (Average number of employees) Europe/Africa/Middle East Americas Asia Pacific Total Number of employees at year end 2023 3 310 185 133 4 3 632 2022 88 75 107 52 7 329 2023 39 986 20 702 37 857 98 545 99 589 2022 3 671 153 59 4 3 887 % 26.8 22.8 32.5 15.8 2.1 100.0 2022 39 906 19 370 37 483 96 759 98 152 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 108 5. Sales from contracts with customers Group’s sales from contracts with customers by timing of recognition (CHF million) Industries & Environment Natural Resources Connectivity & Products Health & Nutrition Business Assurance (prev. Knowledge) Total Assets and liabilities related to contracts with customers (CHF million) Unbilled sales and work in progress Trade receivables Contract liabilities 2023 2022 Services transferred at a point in time Services transferred over time Services transferred at a point in time Services transferred over time 71% 84% 86% 84% 89% 81% 29% 16% 14% 16% 11% 19% 71% 84% 86% 84% 90% 81% 2023 223 940 221 29% 16% 14% 16% 10% 19% 2022 210 988 228 Sales evolution, timing and project maturity are the main factors impacting assets and liabilities related to contracts with customers. In 2023, SGS has recognized sales of CHF 170 million related to contract liabilities at 31 December 2022. In 2022, the sales recognized from contract liabilities at 31 December 2021 amounted to CHF 159 million. Sales recognized from performance obligations satisfied in previous periods were immaterial in 2023 and 2022. The remaining performance obligations (unsatisfied or partially satisfied) expected to be recognized for long-term contracts amount to CHF 978 million at 31 December 2023, out of which CHF 518 million are expected to be recognized in sales within one year, CHF 258 million between one year and two years and CHF 202 million after the next two years. SGS is applying the practical expedient IFRS 15.121 and does not disclose unsatisfied or partially unsatisfied performance obligations from contracts with an original duration of one year or less or where SGS may recognize sales from the satisfaction of the performance obligation in accordance with IFRS 15.B16. This paragraph permits as a practical expedient to exclude contracts where SGS has a right to payment for performance completed to date. Assets recognized from costs to fulfill a contract in 2023 and 2022 were not significant, while amortization and impairment losses were nil. 6. Government grants Government grants for the period amount to CHF 9 million (2022: CHF 12 million), presented as a deduction of salaries and wages expenses. The outstanding balance recognized in the statement of financial position amounted to CHF 1 million (2022: CHF 5 million). 7. Other operating expenses (CHF million) Consumables, repairs and maintenance Travel costs Rental expense, insurance, utilities and sundry supplies External consultancy fees IT expenses Communication costs Allowance for expected credit losses Gain on disposal of property, plant and equipment Miscellaneous operating expenses Total 8. Financial income (CHF million) Interest income Foreign exchange gains/(losses) Other financial income Net financial income on defined benefit plans Total 2023 546 333 166 116 135 48 11 –3 159 1 511 2023 20 2 6 1 29 2022 546 314 168 115 116 53 22 –4 163 1 493 2022 11 5 3 1 20 Financial statementsSGS | 2023 Integrated Report 9. Financial expenses (CHF million) Interest expense Loss on derivatives at fair value Other financial expenses Total 10. Taxes Major components of tax expense (CHF million) Current taxes Deferred tax (credit) relating to the origination and reversal of temporary differences Total 109 2022 43 19 9 71 2022 227 –8 219 2023 70 13 3 86 2023 262 –57 205 The Group has operations in various countries that have different tax laws and rates. Consequently, the effective tax rate on consolidated income varies from year to year. A reconciliation between the reported income tax expense and the amount that would arise using the weighted average statutory tax rate of the Group is as follows: Reconciliation of tax expense (CHF million) Profit before taxes Tax at statutory rates applicable to the profits earned in the country concerned Tax effect of non-deductible or non-taxable items Tax effect on losses not currently treated as being recoverable in future years Tax effect on losses previously considered irrecoverable, now expected to be recoverable Non-creditable foreign withholding taxes Minimum taxes Prior period adjustments Rate changes Other¹ Tax charge 1. Other includes the tax impact of an internal legal reorganization and some write-offs. Deferred tax after netting (CHF million) Deferred tax assets Deferred tax liabilities Total Components of deferred income tax balances (CHF million) Right-of-use assets Fixed assets Trade receivable, unbilled sales and work in progress Defined benefit obligation Provisions and other² Lease liabilities Intangible assets Tax losses carried forward Deferred income taxes 2. Other includes the tax impact of an internal legal reorganization. 2023 802 147 13 18 – 41 5 24 1 –44 205 2023 185 –73 112 2022 849 162 10 17 –3 37 5 –10 – 1 219 2022 153 –79 74 2023 2022 Assets Liabilities Assets Liabilities – 41 21 6 105 111 3 54 341 109 8 8 22 16 – 66 – 229 – 44 25 7 56 126 3 54 315 122 11 8 14 11 – 75 – 241 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 110 Net change in deferred tax assets/(liabilities) (CHF million) Net deferred income tax asset (liability) at 1 January 2022 Acquisition of subsidiaries (Charged)/credited to the income statement (Charged)/credited to other comprehensive income Exchange differences and other Net deferred income tax asset (liability) at 31 December 2022 Acquisition of subsidiaries (Charged)/credited to the income statement (Charged)/credited to other comprehensive income Exchange differences and other Net deferred income tax asset (liability) at 31 December 2023 The Group has unrecognized tax losses carried forward amounting to CHF 247 million (2022: CHF 194 million). Unrecognized tax losses carryforwards at 31 December 2023 (CHF million) Expiring in the next 3 years Expiring in 4-10 years Available without limitation Total unrecognized tax losses Total 72 –4 8 5 –7 74 –1 57 –8 –10 112 14 40 193 247 At 31 December 2023, the unrecognized deferred tax assets amount to CHF 66 million (2022: CHF 57 million). At 31 December 2023, the retained earnings of subsidiaries and foreign incorporated joint ventures consolidated by the Group include approximately CHF 2 212 million (2022: CHF 2 415 million) of undistributed earnings that may be subject to tax if remitted to the parent company. As set out in note 22, the nature of the Group’s business requires keeping a significant part of the cash reserves in the operating units. The Group takes the view that a deferred tax liability is required when it is probable that unremitted earnings will be distributed in the foreseeable future. 11. Earnings per share and dividend per share On 28 March 2023, the Annual General Assembly approved a 25-1 stock split that went into effect on 12 April 2023. This split increased the number of shares issued, from 7 495 032 to 187 375 800, and reduced the nominal value per share, from CHF 1 to CHF 0.04. As a result, for comparability purposes, the Group recalculated the basic and diluted earnings per share (EPS) as of December 2022 as follows: Profit attributable to equity holders of SGS SA (CHF million) Weighted average number of shares (million) Basic earnings per share (CHF) 2023 2022 Restated 2022 Published 553 184 3.00 588 186 3.15 588 7 78.86 Diluted earnings per share are calculated as basic earnings per share except that the weighted average number of shares only includes the dilutive effect of the Group’s equity compensation plans detailed in note 29. For the year ended 31 December 2023, the Group calculated 742 208 dilutive potential shares (2022 restated: 438 500 and 2022 published: 17 540): Profit attributable to equity holders of SGS SA (CHF million) Diluted weighted average number of shares (million) Diluted earnings per share (CHF) 2023 2022 Restated 2022 Published 553 185 2.99 588 187 3.15 588 7 78.67 The SGS Board of Directors will recommend to the Annual General Meeting (to be held on 26 March 2024) the approval of an optional scrip dividend of CHF 3.20 per share, subject to the approval of a capital increase, where shareholders can elect to receive the dividend in the form of shares or in cash. Shares will be sourced from the issuance of new shares in the proposed capital increase. The shares will be delivered at a discount, and the share dividend will be a tax- and cost-effective option for shareholders. In 2022, the Board of Directors recommended the approval of a dividend of CHF 80 per share, equivalent to CHF 3.20 per share after the stock-split. Financial statementsSGS | 2023 Integrated Report 12. Property, plant and equipment (CHF million) 2023 Cost At 1 January Additions Disposals Disposals from subsidiaries Exchange differences and other At 31 December Accumulated depreciation and impairment At 1 January Depreciation Impairment Disposals Disposals from subsidiaries Exchange differences and other At 31 December Net book value at 31 December 2023 (CHF million) 2022 Cost At 1 January Additions Acquisition of subsidiaries Disposals Exchange differences and other At 31 December Accumulated depreciation and impairment At 1 January Depreciation Impairment Acquisition of subsidiaries Disposals Exchange differences and other At 31 December Net book value at 31 December 2022 111 Land & buildings Machinery & equipment Other tangible assets Total 460 14 –18 –7 –22 427 269 16 – –11 –6 –17 251 176 2 340 138 –79 –31 –180 2 188 1 837 173 3 –78 –25 –172 1 738 450 702 108 –36 –4 –111 659 489 50 – –33 –3 –41 462 197 Land & buildings Machinery & equipment Other tangible assets 463 11 4 –4 –14 460 267 17 – – –3 –12 269 191 2 327 154 2 –98 –45 2 340 1 826 184 17 1 –97 –94 1 837 503 719 126 4 –35 –112 702 491 52 1 2 –33 –24 489 213 3 502 260 –133 –42 –313 3 274 2 595 239 3 –122 –34 –230 2 451 823 Total 3 509 291 10 –137 –171 3 502 2 584 253 18 3 –133 –130 2 595 907 Included in the other tangible assets are leasehold improvements, office furniture and IT hardware, as well as construction-in-progress assets amounting to CHF 47 million (2022: CHF 52 million). At 31 December 2023, the Group had commitments of CHF 3 million (2022: CHF 6 million) for the acquisition of land, buildings and equipment. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 112 13. Right-of-use assets and lease liabilities (CHF million) At 1 January Additions Acquisition Depreciation expense Interest expense Payment of lease liabilities and interests Exchange difference and other At 31 December 2023 Analyzed as: Current liabilities Non-current liabilities Total (CHF million) At 1 January Additions Acquisition Depreciation expense Interest expense Payment of lease liabilities and interests Exchange difference and other At 31 December 2022 Analyzed as: Current liabilities Non-current liabilities Total Right-of-use assets Land & buildings Machinery & equipment Other tangible assets Total Lease liabilities 502 103 2 –135 – – –41 431 69 48 – –42 – – –6 69 6 3 – –3 – – – 6 Right-of-use assets Land & buildings Machinery & equipment Other tangible assets 528 136 3 –139 – – –26 502 71 44 – –42 – – –4 69 6 3 – –3 – – – 6 577 154 2 –180 – – –47 506 Total 605 183 3 –184 – – –30 577 604 147 2 – 17 –193 –50 527 2023 143 384 527 Lease liabilities 636 174 3 – 21 –199 –31 604 2022 162 442 604 Included in machinery & equipment are mainly vehicles for CHF 63 million (2022: CHF 68 million). Financial statementsSGS | 2023 Integrated Report The following table summarizes the main foreign currencies of the lease liabilities. (CHF million) Euro (EUR) US Dollar (USD) Renminbi Yuan (CNY) Taiwan Dollar (TWD) Australian Dollar (AUD) Canadian Dollar (CAD) Indian Rupee (INR) Korean Won (KRW) British Pound Sterling (GBP) Chilean Peso (CLP) Swedish Krona (SEK) Singapore Dollar (SGD) New Zealand Dollar (NZD) Mexican Peso (MXN) Other Total (CHF million) IFRS 16 Other quantitative information Expense relating to short-term leases Expense relating to leases of low value assets Total expense recognized in income statement 113 2022 241 93 63 24 17 18 13 12 8 7 4 6 5 5 88 604 2022 4 5 9 2023 219 71 52 21 19 16 11 9 7 6 6 5 5 4 76 527 2023 3 2 5 The Group leases mainly offices, laboratory spaces and vehicles. During the year ended 31 December 2023, an additional CHF 5 million (2022: CHF 9 million) was recognized as an expense in the income statement. 14. Goodwill (CHF million) Cost At 1 January Additions Consideration/fair value adjustments on prior years’ acquisitions Impairment Exchange differences At end of the period 2023 2022 1 755 1 778 9 – –18 –110 1 636 52 1 – –76 1 755 The cash generating units (CGU) and groups of CGUs allocation has been done in accordance with IAS 36, which defines a CGU as the lowest level of a group of assets generating cash inflows that are largely independent from other assets and groups of assets. In the case of the following two business lines, the CGU covers the entire worldwide operations since customer activities executed by the local entities, the clients and customers that they serve and the drivers of cash inflows are largely interdependent on a worldwide basis across each business line: • Connectivity & Products (C&P) • Natural Resources (NR) The Health & Nutrition (H&N) business line is split into two worldwide CGUs to reflect the global nature of customer activities and drivers of cash inflows in each sub-business unit: Nutrition, Health Science and Cosmetics & Hygiene. The Industry & Environment (I&E) business line includes Vehicle Compliance and Upstream activities. To best reflect the interdependency of the cash inflows, Vehicle Compliance has been split into two distinct CGUs regrouping regulated services activities in Spain and in France since customers in this sector are country specific. Upstream services is assessed as one separate CGU regrouping the worldwide Upstream activities for which cash inflows are independent from the rest of the I&E activities. For the remaining I&E activities (excluding Vehicle Compliance and Upstream services), business is driven primarily by regional or local customer activities, therefore cash inflows are largely independent from each other. Consequently, a CGU organization by region has been maintained, split regionally into four CGUs in line with the Group’s regional reporting structure. The Business Assurance (BA) (prev. Knowledge) business line is split into two CGUs, one regrouping the Technical Consultancy business in the USA for which cash inflows remain largely independent from the rest of the business line’s activities and the other regrouping the remaining worldwide BA activities for which there are synergies across the Group’s network, generating interdependent cash inflows. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 114 Allocation of goodwill to CGUs or group of CGUs Goodwill allocated to the main CGUs or groups of CGUs, as of 31 December is broken down as follows: (CHF million) Industries & Environment1 Natural Resources Connectivity & Products Health & Nutrition2 Business Assurance (prev. Knowledge)3 Total 2023 833 105 155 452 91 2022 904 115 166 471 99 1 636 1 755 1. Within I&E, goodwill allocated to I&E Europe/Africa/Middle East CGU was CHF 437 million (2022: CHF 462 million). 2. Within H&N, goodwill allocated to Nutrition CGU was CHF 182 million (2022: CHF 184 million) and goodwill allocated to Health Science and Cosmetics & Hygiene CGU was CHF 270 million (2022: CHF 287 million). 3. Within BA, goodwill allocated to Technical consultancy USA CGU was CHF 74 million (2022: CHF 82 million). Goodwill impairment reviews have been conducted for all goodwill balances allocated to the CGUs as described above. For Vehicle Compliance Spain CGU, the recoverable amount, determined based upon a value-in-use calculation, was CHF 122 million and fell below the carrying amount by CHF 18 million, resulting in a goodwill impairment in 2023 for the same amount. This was mainly driven by discount rate increase (+1.9 percentage points, to 10.9%) and unfavorable market conditions. For each of the remaining CGUs, the recoverable amount, determined based upon a value-in-use calculation, is higher than its carrying amount thus resulting in no additional goodwill impairment in 2023. Cash flow projections were used in this calculation, discounted at a pre-tax rate depending on the business activities and geographic profile of each of the respective CGUs. Pre-tax discount rate used in 2023 for the main CGUs or group of CGUs impairment testing Industries & Environment1 Natural Resources Connectivity & Products Health & Nutrition2 Business Assurance (prev. Knowledge)3 2023 2022 8.4%-10.9% 7.6%-9.9% 8.6% 8.9% 8.5% 7.4%-8.8% 8.4% 8.4% 7.9%-8.0% 6.7%-8.2% 1. Within I&E, I&E Europe/Africa/Middle East pre-tax discount rate was 8.5% (2022: 7.8%). 2. Nutrition pre-tax discount rate was 8.5% (2022: 8.0%), while Health Science and Cosmetics & Hygiene pre-tax discount rate was 8.5% (2022: 7.9%). 3. Within BA, Technical consultancy USA pre-tax discount rate was 7.4% (2022: 6.7%). The cash flow projections for the first five years were based upon financial plans, approved by the Group, for each CGU or group of CGUs. The overall assumptions used in the cash flow projections are consistent with the expected average growth rates of the segments served by the Group. For the subsequent years, the Group assumes a long-term growth rate in the range of 1%-1.7% (1% for CGUs where goodwill allocated is significant), in line with market long-term inflation rates projections (2022: range of 1%-2%, 1% for CGUs where goodwill allocated is significant), and stable operating margins depending on each CGU or group of CGUs. Sensitivity to changes in assumption Sensitivity analyses were conducted using the following key assumptions: • Reducing the expected annual sales growth rates for the first five years by 2 percentage points • Reducing the operating margin by 0.25 percentage points • Increasing the discount rate assumption by 1 percentage point For all impairment tests, changing the key assumptions retained in the scenario using the sensitivity analyses described above would not result in any impairment. Vehicle Compliance Spain goodwill impairment test assumptions The following key assumptions have been used in the impairment test for this CGU, for which goodwill amounted to CHF 92 million (2022: CHF 115 million): • Pre-tax discount rate of 10.9% (2022: 9%) • Expected average annual sales growth rate of 2.1% for the projected period 2024-2028 (2022: 3% for the projected period 2023-2027) • Long-term growth rate of 1.7% after 2028 (2022: 2.0%) Financial statementsSGS | 2023 Integrated Report 115 15. Other intangible assets (CHF million) 2023 Cost At 1 January Additions Acquisition of subsidiaries Disposals Disposals of subsidiaries Exchange differences and other At 31 December Accumulated amortization and impairment At 1 January Amortization Impairment Disposals Disposals of subsidiaries Exchange differences and other At 31 December Net book value at 31 December 2023 (CHF million) 2022 Cost At 1 January Additions Acquisition of subsidiaries Disposals Exchange differences and other At 31 December Accumulated amortization and impairment At 1 January Amortization Acquisition of subsidiaries Disposals Exchange differences and other At 31 December Net book value at 31 December 2022 Trademarks and other Customer relationships Internally generated Purchased Total Computer software and other assets 89 – – – – –5 84 68 7 – – – –6 69 15 446 – 4 –3 –17 –24 406 199 27 21 –3 –14 –13 217 189 220 17 – –10 – 8 235 176 21 14 –10 – –4 197 38 205 21 – –21 – –14 191 167 13 2 –21 – –3 158 33 960 38 4 –34 –17 –35 916 610 68 37 –34 –14 –26 641 275 Trademarks and other Customer relationships Internally generated Purchased Total Computer software and other assets 92 – – – –3 89 66 5 – – –3 68 21 454 – 17 –2 –23 446 176 32 – –2 –7 199 247 202 17 – – 1 220 159 18 – – –1 176 44 200 21 1 –6 –11 205 165 11 1 –6 –4 167 38 948 38 18 –8 –36 960 566 66 1 –8 –15 610 350 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 116 16. Other non-current assets (CHF million) Non-current loans or amounts receivable from third parties Retirement benefit asset Other non-current assets Total 2023 4 133 54 191 2022 4 59 62 125 Other non-current assets are measured at fair value through profit and loss except non-current loans or amounts receivable from third parties that are measured at amortized cost. Depending on the nature of the balances, currency and date of maturity, interest rates on long-term balances or loans to third parties range between 0.0% and 14.0%. In 2023, other non-current assets included deposits for guarantees and restricted cash of CHF 34 million (2022: CHF 38 million). Typical examples of restricted cash are cash deposits for performance bonds, rentals and other operating obligations. At 31 December 2023 and 2022, the fair value of the Group’s other non-current assets approximates their carrying value. 17. Trade receivables (CHF million) Trade receivables Allowance for expected credit losses Total The movement of allowance for expected credit losses is analyzed as follows: (CHF million) At 1 January Acquisition of subsidiaries (Increase) in allowance recognized in the income statement Utilizations Exchange differences Total at 31 December 18. Other receivables and prepayments (CHF million) Accrued income, prepayments Derivative assets Other receivables Total 2023 1 078 –138 940 2023 –161 –1 –9 16 17 –138 2023 83 17 113 213 2022 1 149 –161 988 2022 –162 –1 –16 10 8 –161 2022 86 12 125 223 The Group has no significant concentration of credit risk, with exposure spread over a large number of counterparties. Other receivables consist mainly of sales taxes and other taxes recoverable as well as advances to suppliers. 19. Cash and cash equivalents (CHF million) Cash and short-term deposits Total 2023 1 569 1 569 2022 1 623 1 623 Financial statementsSGS | 2023 Integrated Report 20. Cash flow statement 20.1. Non-cash and non-operating items (CHF million) Depreciation of property, plant and equipment Impairment of property, plant and equipment and other intangible assets Depreciation/impairment right-of-use asset Amortization of intangible assets Impairment of goodwill ECL1 on trade receivables, unbilled sales and work in progress Net financial expenses (Decrease) in provisions and employee benefits Share-based payment expenses Gain on disposals Gain on disposals of property, land and equipment Share of results from associates and other entities Taxes Non-cash and non-operating items 1. Expected Credit Losses. 20.2. (Increase)/decrease in working capital (CHF million) (Increase) in unbilled sales and inventories (Increase) in trade receivables Decrease/(increase) in other receivables and prepayments Increase in trade and other payables Increase in other creditors and accruals (Decrease)/increase in other provisions (Increase) in working capital Notes 12 12 and 15 13 15 14 8 and 9 3 10 117 2022 253 18 184 66 – 22 51 –13 18 – –4 –2 219 812 2022 –53 –125 –25 7 25 9 –162 2023 239 40 180 68 18 11 57 –6 24 –7 –3 –2 205 824 2023 –43 –66 7 33 25 –11 –55 20.3. Changes in liabilities arising from financing and investing activities Cash impact Non cash impact (CHF million) 2023 Corporate bonds Bank loans Put option on acquisition Lease liabilities Other financial liabilities Total 1 January Financing cash flows Investing cash flows Equity movement Acquisition and disposals New leases Other movements1 31 December 3 310 469 29 604 26 4 438 –1 100 –12 –178 – –91 – – – – –3 –3 – – 7 – – 7 – 5 – 2 – 7 – – – 147 – 147 –40 –16 – –48 –1 –105 3 269 558 24 527 22 4 400 1. Other movements mainly include currency effects. (CHF million) 2022 Corporate bonds Bank loans Put option on acquisition Lease liabilities Other financial liabilities Total 1. Other movements mainly include currency effects. Cash impact Non cash impact 1 January Financing cash flows Equity movement Acquisition and disposals New leases Other movements1 31 December 3 100 5 33 636 26 3 800 249 469 –4 –183 –5 526 – – 1 – – 1 – 3 – 3 5 11 – – – 174 – 174 –39 –8 –1 –26 – –74 3 310 469 29 604 26 4 438 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 118 21. Acquisitions Assets and liabilities arising from acquisitions (CHF million) Property, plant and equipment Right-of-use assets Intangible assets Trade receivable Other current assets Cash and cash equivalents Current liabilities Non-current liabilities Net assets acquired Goodwill Total purchase price Acquired cash and cash equivalents Consideration payable Payment on prior year acquisitions Net cash outflow on acquisitions Total fair value on acquisitions December 2023 Total fair value on acquisitions December 2022 – 2 4 2 2 – –3 –7 – 9 9 – – 3 12 7 3 17 5 2 6 –9 –8 23 52 75 –6 –5 3 67 In compliance with IFRS 3, fair value on acquisition remains provisional for a 12-month period following the date of acquisition, during which the Group can finalize the purchase price allocation. The goodwill arising on these acquisitions relates mainly to the value of expected synergies and the value of the qualified workforce that do not meet the criteria for recognition as separable intangible assets. Consideration payable relates mainly to environmental and commercial warranty clauses and the fair value of contingent future earn-out payments. The Group incurred transaction-related costs of CHF 2 million (2022: CHF 5 million) related to external legal fees and due diligence expenses. These expenses are reported within other operating expenses in the consolidated income statement. 22. Financial risk management Risk management policies and objectives The Group’s activities expose it primarily to market, credit and liquidity risk. Market risk includes foreign exchange, interest rate and equity price risks. The risk management policies and objectives are governed by the Group’s policies approved by the Board of Directors. The Group’s risk management policies are designed to identify and analyze these risks, to set appropriate risk limits and controls and to monitor the risk and limits continually by means of reliable and up-to-date administrative and information systems. The Audit Committee oversees how management monitors compliance with the Group’s risk management policies. The Audit Committee is assisted in its oversight role by Internal Audit. Risk management activities The Group uses foreign exchange contracts to manage the Group’s exposure to fluctuations in foreign currency exchange rates. These activities are carried out in accordance with the Group’s risk management policies and objectives in areas such as counterparty exposure and economic hedging practices. Counterparties to these agreements are major international financial institutions with high credit ratings and positions are monitored using market value and sensitivity analyses. The associated credit risk is therefore limited. These agreements generally include the exchange of one currency for a second currency at a future date. The following table summarizes foreign exchange contracts outstanding at year end. The notional amount of derivatives summarized below represents the gross amount of the contracts and includes transactions, which have not yet matured. Therefore the figures do not reflect the Group’s net exposure at year end. The market value approximates the costs to settle the outstanding contracts. These market values should not be viewed in isolation but in relation to the market values of the underlying hedged transactions and the overall reduction in the Group’s exposure to adverse fluctuations in foreign exchange rates. Financial statementsSGS | 2023 Integrated Report Currently, the Group has certain exposure to interest and credit risks and no exposure to equity price risk. (CHF million) Foreign exchange forward contracts Notional amount Market value 2023 2022 2023 2022 119 Currency: Australian Dollar (AUD) Brazilian Real (BRL) Canadian Dollar (CAD) Chilean Peso (CLP) Chinese Renminbi (CNY) Colombian Peso (COP) Euro (EUR) British Pound Sterling (GBP) Hong Kong Dollar (HKD) Indian Rupee (INR) Japanese Yen (JPY) Kenyan Shilling (KES) Korean Won (KRW) New Zealand Dollar (NZD) Philippines Peso (PHP) Polish Zloty (PLN) Turkish New Lira (TRY) US Dollar (USD) South African Rand (ZAR) Other Total –9 –5 –13 –33 –22 –10 392 –114 17 1 –4 –2 1 –6 –11 –6 3 –307 –4 –36 –168 –15 –5 –5 –34 –22 –4 441 –119 18 1 –3 – 3 –6 –13 1 1 –268 –10 –38 –77 – – – –1 1 – 1 – – – – – – – – – – 9 – –1 9 – –1 – –3 – – – 2 – – – – – – –1 – – 7 – –1 3 Credit risk management Credit risk arises from the possibility that customers may not be able to settle their obligations as agreed. It arises principally from the Group’s commercial activities. Trade receivable, unbilled sales and work in progress are subject to a policy of active risk management which focuses on the assessment of country risk, credit limits and approval procedures. Due to its large geographic base and number of customers, the Group is not exposed to material concentrations of credit risk on its trade receivable, unbilled sales and work in progress. As at 31 December 2023, the Group has unbilled sales and work in progress of CHF 223 million (2022: CHF 210 million) which is net of an allowance for expected credit losses of CHF 20 million (2022: CHF 20 million). Receivables are recognized and carried at original invoice amount less an allowance for any non-collectible amounts. A credit loss allowance is made in compliance with the simplified approach using a provision matrix (expected credit loss model). This provision matrix has been developed to reflect the country risk, the credit risk profile and available historical data. Similarly to receivables, an allowance for unbilled sales and work in progress is made using a provision matrix. Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix based on aging of trade receivables as of invoice date at 31 December 2023: (CHF million) 0 – 90 days 91 – 120 days 121 – 180 days 181 – 240 days 241 – 300 days 301 – 360 days > 360 days Total Expected credit loss range Gross carrying amount Expected credit loss 0%-5% 10%-25% 20%-50% 35%-75% 50%-75% 75%-100% 100% 866 46 39 20 14 9 84 1 078 3 9 14 11 9 8 84 138 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 120 Set out below is the information about the credit risk exposure on the Group’s trade receivables using a provision matrix based on aging of trade receivables as of invoice date at 31 December 2022: (CHF million) 0 – 90 days 91 – 120 days 121 – 180 days 181 – 240 days 241 – 300 days 301 – 360 days > 360 days Total Expected credit loss range Gross carrying amount Expected credit loss 0%-5% 10%-25% 20%-50% 35%-75% 50%-75% 75%-100% 100% 910 47 47 25 14 10 96 1 149 2 10 19 15 10 9 96 161 As part of financial management activities, the Group enters into various types of transaction with international banks, usually with a credit rating of at least A. Exposure to these risks is closely monitored and kept within predetermined parameters. The Group does not expect any non-performance by these counterparties. The maximum credit risk to which the Group is theoretically exposed at 31 December 2023 is the carrying amount of financial assets including derivatives. In addition, the Group has issued CHF 166 million (2022: CHF 181 million) financial guarantees to certain financial institutions that have provided credit facilities and foreign exchange lines to its subsidiaries. Management believes the likelihood that a material payment will be required under these guarantees is remote. Analysis of financial assets by class and category at 31 December 2023: Amortized cost At fair value through Equity At fair value through P&L Total Fair value (CHF million) Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Cash and cash-equivalents 1 569 1 569 Trade receivables Other receivables¹ Unbilled sales and work in progress Loans to third parties – non-current Derivatives 940 123 223 4 – 940 123 223 4 – Total financial assets 2 859 2 859 – – – – – – – 1. Excluding VAT and other tax related items. Analysis of financial assets by class and category at 31 December 2022: – – – – – – – – – – – – – – – – – 17 17 17 17 1 569 1 569 940 123 223 4 17 940 123 223 4 17 2 876 2 876 Amortized cost At fair value through Equity At fair value through P&L Total Fair value (CHF million) Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Carrying amount Fair value Cash and cash-equivalents 1 623 1 623 Trade receivables Other receivables¹ Unbilled sales and work in progress Loans to third parties – non-current Derivatives 988 132 210 4 – 988 132 210 4 – Total financial assets 2 957 2 957 1. Excluding VAT and other tax related items. – – – – – – – – – – – – – – – – – – – – – – – – 12 12 12 12 1 623 1 623 988 132 210 4 12 988 132 210 4 12 2 969 2 969 In the fair value hierarchy, Level 1 measurements are those derived from the quoted price in active markets. Level 2 fair value measurements are those derived from inputs other than quoted prices that are observable for the asset and liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). Derivative assets (2023: CHF 17 million; 2022: CHF 12 million) qualify as Level 2 fair value measurement category in accordance with the fair value hierarchy. Derivative assets consist of foreign currency forward contracts that are measured using quoted forward exchange rates and yield curves derived from quoted interest rates matching maturities of the contract. Financial statementsSGS | 2023 Integrated Report 121 Liquidity risk management The objective of the Group’s liquidity and funding management is to ensure that all its foreseeable financial commitments can be met when due. Liquidity and funding are primarily managed by Group Treasury in accordance with practices and limits set in the risk management policies and objectives approved by the Board of Directors. The nature of the Group’s business requires keeping a significant part of the cash reserves in the operating units. Due to the significant cash position, liquidity risk is limited. The Group has various committed and uncommitted bilateral credit facilities with its banks. Analysis of financial liabilities by class and category at 31 December 2023: Amortized cost At fair value through Equity At fair value through P&L Total Fair value (CHF million) Trade payables Other payables1 Loans and other financial liabilities Lease liabilities Total financial liabilities 1. Excluding VAT and other tax related items. Carrying amount 335 123 Fair value 335 123 3 842 3 778 527 4 827 527 4 763 Carrying amount Fair value Carrying amount Fair value Carrying amount – – 24 – 24 – – 24 – 24 – – 15 – 15 – – 15 – 15 Fair value 335 123 335 123 3 881 3 817 527 4 866 527 4 802 The corporate bonds qualify as fair value Level 1, which amounts to CHF 3 205 million (2022: CHF 3 124 million). Other financial liabilities include CHF 24 million qualifying as fair value Level 3 (2022: CHF 29 million), which represents the estimated present value of the redemption amount to acquire the remaining non-controlling interests of acquisitions if the put/call option is exercised. Subsequent changes in the valuation of the redemption amount to acquire the remaining non-controlling interests of acquisitions if the put/call option is exercised shall be recognized directly in equity attributable to owners, including the unwinding of the discount. The remaining financial liabilities qualify as Level 2 determined in accordance with generally accepted pricing models. Analysis of financial liabilities by class and category at 31 December 2022: Amortized cost At fair value through Equity At fair value through P&L Total Fair value (CHF million) Trade payables Other payables¹ Loans and other financial liabilities Lease liabilities Total financial liabilities Carrying amount 360 130 Fair value 360 130 3 792 3 606 604 4 886 604 4 700 1. Excluding VAT and other tax related items. Carrying amount Fair value Carrying amount Fair value Carrying amount – – 29 – 29 – – 29 – 29 – – 21 – 21 – – 21 – 21 Fair value 360 130 360 130 3 842 3 656 604 4 936 604 4 750 Undiscounted contractual maturities of financial liabilities including interest payments at 31 December 2023: (CHF million) Trade payables Other payables¹ Gross settled derivative financial instruments outflows Gross settled derivative financial instruments inflows Loans and Other financial liabilities Lease liabilities On demand or within one year 335 123 1 141 –1 134 Within the second year Within the third year Within the fourth year Within the fifth year After five years 1. Excluding VAT and other tax related items. – – – – – – – – – – – – – – – – – – – – 856 417 736 957 191 863 155 114 84 56 39 103 Total 1 476 531 820 1 013 230 966 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 122 Undiscounted contractual maturities of financial liabilities including interest payments at 31 December 2022: Gross settled derivative financial instruments outflows Gross settled derivative financial instruments inflows Other payables¹ Loans and Other financial liabilities Lease liabilities 130 1 301 –1 299 1 014 – – – – – – – – – – – – – – – 283 409 716 747 771 173 125 89 64 45 135 Total 1 679 408 498 780 792 906 Trade payables 360 – – – – – (CHF million) On demand or within one year Within the second year Within the third year Within the fourth year Within the fifth year After five years 1. Excluding VAT and other tax-related items. The Group economically hedges its foreign exchange exposure on a net basis. The net position of the gross settled derivative financial instruments of CHF 7 million (2022: CHF 2 million) represents the net nominal value expressed in CHF of the Group’s foreign currency contracts outstanding at 31 December 2023. Sensitivity analyses The estimated changes in the value of net foreign currency positions are based on an instantaneous 5% weakening of the Swiss Franc against all other currencies from the level applicable at 31 December 2023 and 2022 with all other variables remaining constant. Sensitivity analysis based on net hedged positions at 31 December 2023 and 2022: (CHF million) US Dollar (USD) Euro (EUR) CFA Franc BEAC (CFA) Russian Ruble (RUB) Canadian Dollar (CAD) U.A.E. Dirham (AED) 2023 2022 Income statement impact income/(expense) Equity impact increase/(decrease) Income statement impact income/(expense) Equity impact increase/(decrease) 3 –1 2 –1 – –1 –1 – – – 1 – 4 –2 2 – – –1 –2 – – – 2 – Interest rate risk management The Group is exposed to fair value interest rate risk because the Group borrows funds at fixed interest rates. Where appropriate, the risk is managed by the Group using Interest Rate Swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite, ensuring the most cost-effective hedging strategies are applied. If interest rates were 100 basis points higher/lower, the profit for the year ended 31 December 2023 would increase/decrease by CHF 5 million (2022: CHF 5 million). 23. Share capital and treasury shares Balance at 1 January 2022 Treasury shares released into circulation Treasury shares purchased for equity compensation plans Treasury shares purchased for cancellation Balance at 31 December 2022 Treasury shares released into circulation Balance at 12 April 2023 before share split Shares in circulation 7 491 672 3 381 –12 500 –113 499 7 369 054 1 964 7 371 018 Treasury shares 3 360 –3 381 12 500 113 499 125 978 –1 964 124 014 7 495 032 – – – 7 495 032 – 7 495 032 Share split 25-1 176 904 432 2 976 336 179 880 768 Balance at 12 April 2023 after share split 184 275 450 3 100 350 187 375 800 Treasury shares released into circulation Balance at 31 December 2023 35 665 –35 665 – 184 311 115 3 064 685 187 375 800 Total shares issued Total share capital (CHF million) 7 – – – 7 – 7 – 7 – 7 Financial statementsSGS | 2023 Integrated Report 123 Issued share capital On 28 March 2023, the Annual General Assembly approved a 25-1 stock split that went into effect on 12 April 2023. This split increased the number of shares issued, from 7 495 032 to 187 375 800, and reduced the nominal value per share, from CHF 1 to CHF 0.04. As at 31 December 2023, SGS SA has a share capital of CHF 7 495 032 (2022: CHF 7 495 032) fully paid. All shares, other than own shares, participate equally in the dividends declared by the Company and have equal voting rights. Treasury shares On 31 December 2023, SGS SA held 3 064 685 treasury shares (2022 restated: 3 149 450 and 2022 published: 125 978 shares). The shares purchased for cancellation are directly held by SGS SA, while the shares to cover the equity compensation plans are held by a subsidiary company. In 2023, 84 765 treasury shares were sold or given in relation with the equity compensation plans. Authorized and Conditional issue of share capital The shareholders have conditionally approved an increase of share capital in the amount of CHF 1 100 000, divided into 27 500 000 registered shares of a par value of CHF 0.04 each. This conditional share capital increase is intended to procure the necessary shares to satisfy employee equity participation plans and option or conversion rights to be incorporated in convertible bonds or similar equity-linked instruments that the Board is authorized to issue. The right to subscribe to such conditional capital is reserved for beneficiaries of employee equity participation plans and holders of convertible bonds or similar debt instruments and therefore excludes shareholders’ preferential rights of subscription. The Board is authorized to determine the timing and conditions of such issues, provided that they reflect prevailing market conditions. The term of exercise of the options or conversion rights may not exceed ten years from the date of issuance of the equity-linked instruments. 24. Loans and other financial liabilities (CHF million) Bank loans and commercial paper Corporate bonds Put option on acquisition Other financial liabilities Derivatives Total Current Non-current 2023 558 3 269 24 22 8 3 881 841 3 040 2022 469 3 310 29 26 8 3 842 1 009 2 833 In 2023, the Group continued to issue commercial paper out of its EUR 1 billion Euro Commercial Paper (ECP) program, for an amount of EUR 124 million (CHF 105 million) as at 31 December 2023. Depending on the nature of the loan, currency and date of maturity, interest rates on long-term loans from third parties range between 0.125% and 8.00% and on short-term loans from third parties range between 0.00% and 14.00%. The loans from third parties exposed to fair value interest rate risk amounted to CHF 3 825 million (2022: CHF 3 778 million) and the loans from third parties exposed to cash flow interest rate risk amounted to CHF less than 0.7 million (2022: CHF less than 0.7 million). SGS SA issued the following corporate bonds listed on the SIX Swiss Exchange: Date of issue 27.02.2014 08.05.2015 03.03.2017 29.10.2018 29.10.2018 06.05.2020 05.09.2022 05.09.2022 17.11.2023 17.11.2023 Face value in CHF million 250 225 375 225 175 325 150 350 240 260 Coupon in % 1.750 0.875 0.550 0.750 1.250 0.950 1.250 1.700 2.000 2.300 Year of maturity Issue price in % Redemption price in % 2024 2030 2026 2025 2028 2026 2025 2029 2027 2031 101.019 100.245 100.153 100.068 101.157 100.182 100.000 100.197 100.038 100.127 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 SGS Nederland Holding BV has issued the following corporate bond, which is guaranteed by SGS SA and which is listed on the Luxembourg Stock Exchange: Date of issue 21.04.2021 Face value in EUR million 750 Coupon in % 0.125 Year of maturity 2027 Issue price in % 99.761 Redemption price in % 100.000 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 124 The currency composition of bank loans, corporate bonds and other financial liabilities is as follows: (CHF million) Swiss Franc (CHF) Euro (EUR) Singapore Dollar (SGD) US Dollar (USD) British Pound Sterling (GBP) Canadian Dollar (CAD) New Zealand Dollar (NZD) Other Total Bank loans and corporate bond Put option and other financial liabilities 2023 2 573 1 251 2 – – – – 2022 2 574 1 201 3 – – – – 1 3 827 1 3 779 2023 12 7 11 1 – 12 3 – 46 2022 12 20 13 1 1 4 3 1 55 25. Defined benefit obligations The Group mainly operates defined benefit pension plans in Switzerland, the USA, the UK, the Netherlands, Germany, Italy, France, Belgium, South Korea and Taiwan. Contributions to most plans are paid to pension funds that are legally separate entities. The Group also operates post-employment benefit plans, principally healthcare plans, in the USA and Switzerland. They represent a defined benefit obligation at 31 December 2023 of CHF 6 million (2022: CHF 5 million). The method of accounting and the frequency of valuation are similar to those used for defined benefit pension plans. Healthcare cost trend assumptions do not have a significant effect on the amounts recognized in the income statement. There is a risk to the Group that adverse experience could lead to a requirement for the Group to make additional contributions to recover any deficit that arises. The Group’s material defined benefit plans are in Switzerland, the USA and the UK. Switzerland The Group jointly operates with the employees a retirement foundation in Switzerland. The assets and liabilities of the retirement foundation are held separately from the Group. The foundation board is equally composed of representatives of the employees and representatives of the employer. This foundation covers all the employees in Switzerland and provides benefits on a defined contribution basis. Each employee has a retirement account to which the employee and the Group contribute at a rate set out in the foundation rules based on a percentage of salary. Every year, the foundation decides the level of interest, if any, to apply to retirement accounts based on the agreed policy. At retirement, employees can elect either to withdraw all or part of the balance of their retirement account or to convert it into annuities at pre-defined conversion rates. As the foundation board is expected to eventually pay out all of the foundation’s assets as benefits to employees and former employees, no surplus is deemed to be recoverable by the Group. Similarly, unless the assets are insufficient to cover minimum benefits, the Group does not expect to make any deficit contribution to the foundation. According to IFRS, the foundation has to be classified as a defined benefit plan due to underlying benefit guarantees and has to be accounted for on this basis. The weighted average duration of the expected benefit payment is approximately 12 years (2022: 12 years). The Group expects to contribute CHF 5 million to this plan in 2024. The Group also operates an employer fund. The assets are held separately from the Group. This foundation has unilateral power to provide benefits and consequently has no obligations. Therefore, this foundation has no pension liabilities. United States of America The Group operates a non-contributory defined benefit plan, which is subject to the provisions of the Employee Retirement Income Security Act (ERISA). The assets of the plan are held separately from the Group by the trustee-custodian and the plan’s third-party pension administrator who disburses payments directly to retirees or beneficiaries under the plan. Both the trustee-custodian and the administrator ensure adherence to ERISA rules. Funding valuations are calculated on an actuarial basis and contributions are made as necessary. The funding target is to provide the plan with sufficient assets to meet future plan obligations. Effective 16 March 2004, non-exempt participants ceased accruing any additional benefits; only exempt employees of certain SGS business units in the USA are eligible for annual benefit accrual. In addition, the pension benefit was changed and is defined as a percentage of the current year’s pensionable compensation; the cost of additional benefit accrual is evaluated annually. The Group reserves the right to make future changes to the benefit accrual structure of the plan. Eligible employees become participants in the plan after the completion of one year of service and after reaching the age of 21. Participants become fully vested in the plan after five years of service. The weighted average duration of the expected benefit payment is approximately 10 years (2022: 10 years). The Group expects to contribute CHF nil million to this plan in 2024. Financial statementsSGS | 2023 Integrated Report 125 United Kingdom The Group operates a defined benefit plan through a trust, with the assets of the plans held separately from the Group and trustees who ensure the plan’s rules are strictly adhered to. This plan has been closed to new entrants since 2002 and, effective 31 October 2020, all remaining participants ceased accruing any additional benefits in the defined benefit plan. Employees are now offered membership in defined contribution plans operated by the Group. Funding valuations of the defined benefit plans are carried out and agreed between the Group and the plan trustees at least once every three years. The funding target is for the plans to hold assets equal in value to the accrued benefits based on projected salaries. As part of the valuation process, if there is a shortfall against this target, then the Group and trustees will agree on deficit contributions to meet this deficit over a specified period. The weighted average duration of the expected benefit payments from the combined plans is approximately 13 years (2022: 14 years). The Group expects to contribute CHF nil million to this plan in 2024. Other countries The Group sponsors defined retirement benefits plans in other countries where the Group operates. No individual countries other than those described above are considered material and need to be separately disclosed. The Group expects to contribute CHF 6 million to those plans in 2024. The assets and liabilities recognized in the statement of financial position at 31 December for defined benefit obligations and for post-employment benefit plans are as follows: (CHF million) 2023 Fair value of plan assets Present value of funded defined benefit obligation Funded/(unfunded) status Present value of unfunded defined benefit obligation Unrecognized asset due to asset ceiling Net asset/(liability) at 31 December (CHF million) 2022 Fair value of plan assets Present value of funded defined benefit obligation Funded/(unfunded) status Present value of unfunded defined benefit obligation Unrecognized asset due to asset ceiling Net asset/(liability) at 31 December CH UK USA Other Total 496 –395 101 –5 – 96 128 –111 17 – – 17 145 –137 8 –2 – 6 75 –84 –9 –41 –2 –52 844 –727 117 –48 –2 67 CH UK USA Other Total 494 –357 137 –5 –98 34 134 –115 19 – – 19 156 –150 6 –3 – 3 77 –79 –2 –41 –1 –44 861 –701 160 –49 –99 12 The net asset of CHF 67 million (2022: net asset of CHF 12 million) includes CHF 133 million (2022: CHF 59 million) of pension fund assets recognized in the item other non-current assets in note 16 and CHF 66 million (2022: CHF 47 million) of pension fund liability recognized in the item Defined Benefit Obligation in statement of financial position. Amounts recognized in the income statement: (CHF million) 2023 Service cost expense Net interest income on defined benefit plan Administrative expenses Total expense due to defined benefit obligation at 31 December Expense charged in: Salaries and wages Financial expenses Total expense due to defined benefit obligation at 31 December CH UK USA Other Total 5 –1 – 4 5 –1 4 – –1 1 – 1 –1 – – –1 1 – 1 –1 – 7 2 – 9 7 2 9 12 –1 2 13 14 –1 13 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 126 (CHF million) 2022 Service cost expense Net interest income on defined benefit plan Administrative expenses Total expense due to defined benefit obligation at 31 December Expense charged in: Salaries and wages Financial expenses Total expense due to defined benefit obligation at 31 December Amounts recognized in the statement of other comprehensive income: (CHF million) 2023 Remeasurement on net defined benefit liability Change in demographic assumptions Change in financial assumptions Experience adjustments on benefit obligations Actual return on plan assets excluding net interest expense Asset ceiling Total recognized in the statement of other comprehensive income at 31 December (CHF million) 2022 Remeasurement on net defined benefit liability Change in demographic assumptions Change in financial assumptions Experience adjustments on benefit obligations Actual return on plan assets excluding net interest expense Asset ceiling Total recognized in the statement of other comprehensive income at 31 December Change in unrecognized asset due to the asset ceiling: (CHF million) 2023 Unrecognized asset at 1 January Interest on unrecognized asset recognized in P&L Other changes in unrecognized asset due to the asset ceiling Unrecognized asset at 31 December (CHF million) 2022 Unrecognized asset at 1 January Other changes in unrecognized asset due to the asset ceiling Unrecognized asset at 31 December CH UK USA Other Total 8 – – 8 8 – 8 – –1 1 – 1 –1 – 1 – 1 2 2 – 2 6 – – 6 6 – 6 15 –1 2 16 17 –1 16 CH UK USA Other Total – 31 10 –1 –100 –60 –2 3 1 – – 2 – 2 1 –6 – –3 – 6 3 2 – 11 –2 42 15 –5 –100 –50 CH UK USA Other Total – –87 3 –21 98 –7 – –68 7 99 – 38 – –43 –1 50 – 6 –1 –34 3 14 1 –17 –1 –232 12 142 99 20 CH UK USA Other Total 98 2 –100 – CH – 98 98 – – – – – – – – 1 1 – 2 99 3 –100 2 UK USA Other Total – – – – – – 1 – 1 1 98 99 In 2023, the Group recognized a CHF 2 million asset ceiling (2022: CHF 99 million). The movement in 2023 was mainly made of a CHF 100 million decrease (2022: CHF 98 million increase) for the SGS Swiss Pension Plan. The maximum economic benefit available in the SGS Swiss Pension Plan was determined applying the common approach prescribed by IFRIC 14, and reflects the present value of reductions in future contributions to the plan. In making this estimate, assumptions used for future service costs are consistent with those used to determine the defined benefit obligation as at 31 December 2023. Financial statementsSGS | 2023 Integrated Report Movements in the net asset/(liability) during the period: (CHF million) 2023 Net asset/(liability) at 1 January Expense recognized in the income statement Remeasurements recognized in other comprehensive income Contributions paid by the Group Employer benefit payments Exchange differences Net asset/(liability) at 31 December (CHF million) 2022 Net asset/(liability) at 1 January Expense recognized in the income statement Remeasurements recognized in other comprehensive income Contributions paid by the Group Employer benefit payments Exchange differences Net asset/(liability) at 31 December Change in the defined benefit obligation is as follows: (CHF million) 2023 127 CH UK USA Other Total 34 –4 60 6 – – 96 19 – –2 – – – 17 3 – 3 – – – 6 –44 –9 –11 8 2 2 –52 12 –13 50 14 2 2 67 CH UK USA Other Total 29 –8 7 6 – – 34 61 – –38 – – –4 19 4 –2 –6 7 – – 3 –74 –6 17 13 3 3 –44 20 –16 –20 26 3 –1 12 CH UK USA Other Total Opening present value of the defined benefit obligation 362 115 153 120 750 Current service cost Interest cost Plan participants’ contributions Past service cost Actual net benefit payments (Gains)/losses due to changes in demographic assumptions (Gains)/losses due to changes in financial assumptions Experience differences Exchange rate (gains)/losses Defined benefit obligation at 31 December (CHF million) 2022 5 7 5 – –20 – 31 10 – 400 – 5 – – –6 –2 3 1 –5 111 – 7 – – –10 – 2 1 –14 139 6 4 1 1 –7 – 6 3 –9 125 11 23 6 1 –43 –2 42 15 –28 775 CH UK USA Other Total Opening present value of the defined benefit obligation 456 194 197 159 1 006 Current service cost Interest cost Plan participants’ contributions Actual net benefit payments (Gains)/losses due to changes in demographic assumptions (Gains)/losses due to changes in financial assumptions Experience differences Exchange rate (gains)/losses Defined benefit obligation at 31 December 8 1 5 –24 – –87 3 – 362 – 4 – –7 – –68 7 –15 115 1 6 – –10 – –43 –1 3 153 6 2 1 –9 –1 –34 3 –7 120 15 13 6 –50 –1 –232 12 –19 750 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 128 Change in fair value of plan assets is as follows: (CHF million) 2023 Opening fair value of plan assets Interest income on plan assets Return on plan assets excluding amounts included in net interest income Actual employer contributions Actual plan participants’ contributions Actual net benefit payments Actual admin expenses paid Exchange differences CH UK USA Other Total 494 10 1 6 5 –20 – – 134 6 – – – –6 –1 –5 156 8 6 – – –10 –1 –14 145 77 3 –2 10 1 –7 – –7 75 861 27 5 16 6 –43 –2 –26 844 Fair value of plan assets at 31 December 496 128 (CHF million) 2022 Opening fair value of plan assets Interest income on plan assets Return on plan assets excluding amounts included in net interest income Actual employer contributions Actual plan participants’ contributions Actual net benefit payments Actual admin expenses paid Exchange differences Fair value of plan assets at 31 December CH UK USA Other Total 485 1 21 6 5 –24 – – 494 255 5 –99 – – –7 –1 –19 134 201 6 –50 7 – –10 –1 3 156 85 2 1 026 14 –14 –142 16 1 –9 – –4 77 29 6 –50 –2 –20 861 There are no reimbursement rights included in plan assets. The actual return on plan assets was a gain of CHF 32 million (2022: loss of CHF 128 million). The major categories of plan assets at the balance sheet date are as follows: (CHF million) 2023 Cash and cash equivalents Equity securities Debt securities Assets held by insurance company Properties Investment funds Other Total plan assets at 31 December (CHF million) 2022 Cash and cash equivalents Equity securities Debt securities Assets held by insurance company Properties Investment funds Other Total plan assets at 31 December CH UK USA Other Total 16 138 78 3 226 32 3 496 14 24 88 – – – 2 128 – – 145 – – – – 145 12 – 2 22 – – 39 75 42 162 313 25 226 32 44 844 CH UK USA Other Total 26 136 68 3 217 44 – 494 12 15 106 – – – 1 134 – 17 138 – – – 1 156 18 – 1 21 – – 37 77 56 168 313 24 217 44 39 861 Financial statementsSGS | 2023 Integrated Report 129 In 2023 and 2022, the Group did not occupy any property that was included in the plan assets. Properties are rented at fair market rental rates. There are no SGS SA shares or any other financial securities used by the Group included in the plan assets. The plan assets are primarily held within instruments with quoted market prices in an active market, with the exception of the property and insurance policy holdings. The investment strategy in Switzerland is to invest, within the statutory and legal requirements, in a diversified portfolio with the aim of generating long-term returns, which will enable the Board of the foundation to grow the accounts of the members of the pension fund, whilst taking on the lowest possible risk in order to do so. In the USA, the pension plan target policy is determined by both quantitatively and qualitatively assessing the risk tolerance level and return requirements of the plan as determined by the Investment Committee. In 2023 the investment portfolio asset was shifted to 100% Liability Driven Investment as the company decided to freeze the plan effective 31 December 2022. In the UK, the Trustees review the investment strategy of the scheme and the plan on a regular basis in order to ensure that they remain appropriate. The last review for both the scheme and plan was recently undertaken and is in the process of being implemented. Actuarial assumptions vary according to local prevailing economic and social conditions. The principal weighted average actuarial assumptions used in determining the cost of benefits for both 2023 and 2022 are as follows: USA Other (Weighted average %) 2023 Discount rate Mortality assumption Salary progression rate Future increase for pension in payments Healthcare cost trend assumed for the next year Ultimate trend rate Year that the rate reaches the ultimate trend rate (Weighted average %) 2022 Discount rate Mortality assumption Salary progression rate Future increase for pension in payments Healthcare cost trend assumed for the next year Ultimate trend rate Year that the rate reaches the ultimate trend rate CH 1.4 UK 4.5 LPP 2020, CMI 2019 1.25% SPA03M103%/ F99% CMI_2022 1.25% 1.7 – – – CH 2.1 2.5 3.0 – – UK 4.7 5.1 PRI 2012 MP 2021 – – 6.4 4.5 2030 USA 5.2 LPP 2020, CMI 2019 1.25% SNA03M104%/ F94% CMI 2021 1.25% PRI 2012 MP 2021 1.7 – – – 2.5 3.0 – – 3.3 – 6.7 4.5 2030 4.2 – 3.1 0.4 – – Other 3.9 – 3.1 0.4 – – The weighted average rate for each assumption used to measure the benefits obligation is also shown. The assumptions used to determine the end-of-year benefits obligation are also used to calculate the following year’s cost. In Switzerland, a decrease in the discount rate of 0.5% per annum would, all other things being equal, increase the obligation by CHF 26 million; a 0.5% increase in assumed salary would increase the obligation by CHF 1 million; and a one-year increase in members’ life expectancy would increase the obligation by approximately CHF 10 million. In the USA, a decrease in the discount rate of 0.5% per annum would, all other things being equal, increase the obligation by CHF 6 million; a 0.5% increase in assumed salary would not impact the obligation; and a one-year increase in members’ life expectancy would increase the obligation by approximately CHF 2 million. In the UK, a decrease in the discount rate of 0.5% per annum would, all other things being equal, increase the obligation by CHF 7 million; a 0.5% increase in assumed salary would not impact the obligation; and a one-year increase in members’ life expectancy would increase the obligation by approximately CHF 3 million. These sensitivities have been calculated to show the movement in the defined benefit obligation in isolation and assume no other changes in market conditions at the accounting date. This is unlikely in practice; for example, a change in discount rate is unlikely to occur without any movement in the value of the assets held by the plans. The amount recognized as an expense in respect of defined contribution plans during 2023 was CHF 80 million (2022: CHF 81 million). Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 130 26. Provisions (CHF million) At 1 January 2023 Charge to income statement Release to income statement Payments Exchange differences At 31 December 2023 Analyzed as: Current liabilities Non-current liabilities Total Legal and warranty claims on services rendered Demobilization and reorganization Other provisions 39 15 –6 –10 –2 36 60 27 –5 –28 –7 47 55 11 –9 –6 –2 49 2023 41 91 132 Total 154 53 –20 –44 –11 132 2022 58 96 154 A number of group companies are subject to litigation and other claims arising out of the normal conduct of their business that can be best viewed as claims on services rendered. The claim provision represents the sum of estimates of amounts payable on identified claims and of losses incurred but not yet reported. They therefore reflect estimates of the future payments required to settle both reported and unreported claims. In the opinion of management, based on all currently available information, the provisions adequately reflect the Group’s exposure to legal and warranty claims on services rendered. The ultimate outcome of these matters is not expected to materially affect the Group’s financial position, results of operations or cash flows. Demobilization and reorganization provisions relate to present legal or constructive obligations of the Group towards third parties, such as termination payments to employees upon leaving the Group, which in some jurisdictions are a legal obligation. For specific long-term contracts, typically with two to five years’ duration, the Group is required to dismantle infrastructure and terminate the services of personnel upon completion of the contract. These demobilization costs are provided for during the life of the contract. Experience has shown that these contracts may be either extended or terminated earlier than expected. Other provisions include present legal or constructive obligations towards tax authorities for indirect tax exposure as well as other provisions towards third parties. 27. Trade and other payables (CHF million) Trade payables Other payables Total 2023 335 299 634 2022 360 311 671 Trade accounts and other payables principally comprise amounts outstanding for trade purchases and ongoing operating costs. At 31 December 2023 and 2022, the fair value of the Group’s trade accounts and other payables approximates the carrying value. 28. Contingent liabilities In the normal course of business, the Group and its subsidiaries are parties to various lawsuits and claims. Management does not expect that the outcome of any of these legal proceedings will have a material adverse effect on the Group’s financial position, results of operations or cash flows. Guarantees and performance bonds (CHF million) Guarantees Performance bonds Total 2023 186 191 377 2022 461 189 650 The Group has issued unconditional guarantees of CHF 186 million (2022: CHF 461 million), as well as performance bonds and bid bonds of CHF 191 million (2022: CHF 189 million) to commercial customers on behalf of its subsidiaries. Management believes the likelihood that a material payment will be required under these guarantees is remote. Financial statementsSGS | 2023 Integrated Report 131 29. Equity compensation plans Selected employees of the SGS Group are eligible to participate in equity compensation plans. i) Grants to members of the Board of Directors In 2023, a total of 6 859 restricted shares were granted to members of the Board of Directors, in settlement of part of their remuneration for the Annual General Meeting 2023 to 2024 mandate. The restricted shares are blocked for a period of three years from the grant date, until May 2026. The value at grant date of the restricted shares granted was CHF 564 839 (defined as the average closing price of the share during a 20-day period following the payment of the dividends after the Annual General Meeting 2023). ii) Grants to members of the Operations Council In 2023, a total of 105 045 Performance Share Units (PSUs) under the long-term incentive plan 2023-2025 were granted to members of the Operations Council. The PSUs vest after a three-year performance period 2023-2025, in March 2026, subject to performance conditions and to continuity of employment of the beneficiaries during the vesting period. The value at grant date of the PSUs granted, being defined as the average closing price of the share during a 20-day period preceding the grant date, was CHF 8 727 139. More information on the long-term incentive plan for the members of the Operations Council is disclosed in the SGS Remuneration report. In 2023, a total of 26 921 Restricted Shares were granted to members of the Operations Council, in settlement of 50% of the annual incentive related to the 2022 performance. The Restricted Shares are blocked for a period of three years from the grant date, until May 2026. The value at grant date of the Restricted Shares granted, being defined as the average closing price of the share during a 20-day period following the payment of the dividends after the 2023 Annual general Meeting, was CHF 2 216 944. 50% of the Annual Incentive related to the 2023 performance will be settled in Restricted Shares. The grant of the Restricted Shares will be done after the 2024 Annual General Meeting; the total number of Restricted Shares to be granted will be calculated dividing 50% of the annual Incentive amount by the average closing price of the share during a 20-day period following the payment of the dividends after the 2024 Annual General Meeting, rounded up to the nearest integer. The Restricted Shares will be blocked for a period of three years from the grant date, until May 2027. More information on the short-term incentive for the members of the Operations Council in disclosed in the SGS Remuneration report. iii) Grants to other employees In 2023, a total of 184 464 performance share units (PSUs) under the long-term incentive plan 2023-2025 were granted to selected senior managers. The PSUs vest after a three-year performance period 2023-2025, in March 2026, subject to performance conditions and to continuity of employment of the beneficiaries during the vesting period. The value at grant date of the PSUs granted, being defined as the average closing price of the share during a 20-day period preceding the grant date, was CHF 15 325 269. In 2023, a total of 89 475 restricted share units (RSUs) were granted to selected key employees under the restricted share units plan 2023. The RSUs vest three years after the grant date. The value at grant date of the RSUs granted, being defined as the average closing price of the share during a 20-day period preceding the grant date, was CHF 7 433 583. Performance share unit (PSU) and restricted share unit (RSU) plans Granted Forfeited Description SGS-PSU-21 SGS-PSU-22 SGS-PSU-23 SGS-RSU-20 SGS-RSU-21 SGS-RSU-22 SGS-RSU-23 Total Vesting period from February 24 February 25 March 26 April 23 April 24 April 25 April 26 Units outstanding at 31 December 2022 376 800 219 900 – – – 289 509 48 700 42 225 70 750 – 758 375 – – – 89 475 378 984 Units outstanding at 31 December 2023 355 125 206 750 286 561 – 39 325 66 350 86 950 Vested –795 –345 – –48 475 –300 –900 –170 –20 880 –12 805 –2 948 –225 –2 600 –3 500 –2 355 –45 313 –50 985 1 041 061 The Group does not issue new shares to grant employees in relation to the equity-based compensation plans but uses treasury shares, acquired through share buyback programs. In total, as of 31 December 2023, the equity overhang, defined as the total number of unvested share units (1 041 061 units) divided by the total number of outstanding shares (187 375 800 shares) amounted to 0.56%. The Company’s burn rate, defined as the number of equities (shares, restricted shares and share units) granted in 2023 (412 764 units) divided by the total number of outstanding shares, was 0.22%. The Group recognized during the year a total expense of CHF 27 million (2022: CHF 20 million) in relation to equity compensation plans. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 132 Shares available (required) for future plans: At 1 January 2022 Repurchased shares Granted SGS-RSU-22 plan Granted SGS-PSU-22 plan Shares for PSU forfeited Shares for RSU forfeited Shares used for Restricted Shares plan as settlement of Short-Term Incentive At 31 December 2022 At 31 December 2022 restated after stock-split Granted SGS-RSU-23 plan Granted SGS-PSU-23 plan Shares for PSU forfeited Shares for RSU forfeited Shares used for Restricted Shares plan as settlement of Short-Term Incentive At 31 December 2023 At 31 December the Group had the following shares available to satisfy various programs: Total –18 323 12 500 –2 915 –8 907 991 461 –1 663 –17 856 –446 400 –89 475 –289 509 36 633 8 680 –33 780 –813 851 Number of shares held Shares allocated for 2020 RSU plan Shares allocated for 2021 RSU plan Shares allocated for 2021 PSU plan Shares allocated for 2022 RSU plan Shares allocated for 2022 PSU plan Shares allocated for 2023 RSU plan Shares allocated for 2023 PSU plan Shares required for future equity compensation plans at 31 December 2023 Total 2022 Total Restated 2022 Total Published 227 210 – –39 325 –355 125 –66 350 –206 750 –86 950 –286 561 311 975 –48 700 –42 225 –376 800 –70 750 –219 900 – – 12 479 –1 948 –1 689 –15 072 –2 830 –8 796 – – –813 851 –446 400 –17 856 30. Related-party transactions Transactions between the Company and its subsidiaries, which are related parties of the Group, have been eliminated on consolidation and are not disclosed. Compensation to Directors and members of the Operations Council The remuneration of Directors and members of the Operations Council during the year was as follows: (CHF million) Short-term benefits Post-employment benefits Share-based payments1 Total 2023 2022 15 1 12 28 15 1 12 28 1. 2023 represents the value at grant of restricted share units and performance share units granted in 2023 while 2022 represents the value at grant of restricted share units and performance share units granted in 2022. The remuneration of Directors and members of the Operations Council is determined by the Nomination and Remuneration Committee. Additional information is disclosed in the SGS Remuneration report. During 2023 and 2022, no member of the Board of Directors or of the Operations Council had a personal interest in any business transactions of the Group. The Operations Council (including senior management) participates in the equity compensation plans as disclosed in note 29. The total compensation, including social charges, received by the Board of Directors amounted to CHF 2 820 000 (2022: CHF 2 797 000). The total compensation (cash and shares/options), including social charges, received by the Operations Council (including senior management) amounted to CHF 24 678 000 (2022: CHF 24 474 000). Financial statementsSGS | 2023 Integrated Report 133 Loans to members of governing bodies As at 31 December 2023, no loan, credit or outstanding advance was due to the Group from members or former members of its governing bodies (unchanged from previous year). Transactions with other related parties In 2023 and in 2022, the Group did not perform any activity generating sales for the other related parties. During 2023 and 2022, neither related trade receivable balances unpaid nor expense in respect of any bad or doubtful debts due from these related parties were recognized. 31. Significant shareholders As at 31 December 2023, Groupe Bruxelles Lambert (acting through Serena SARL and URDAC) held 19.31% (December 2022: 19.11%) and BlackRock Inc. held 5.18% (December 2022: 5.18%) and UBS Fund Management (Switzerland) AG held 3.03% (December 2022: below 3%) of the share capital and voting rights of the Company. At the same date, the Group held 1.64% of the share capital of the Company (December 2022: 1.68%). 32. Approval of financial statements and subsequent events The Board of Directors is responsible for the preparation and presentation of the financial statements. These financial statements were authorized for issue by the Board of Directors on 21 February 2024, and will be submitted for approval on 26 March 2024 during the Annual General Meeting. There are no subsequent events to be reported in these consolidated financial statements. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 134 Report of the statutory auditor to the General Meeting of SGS SA Geneva Report on the audit of the consolidated financial statements Opinion We have audited the consolidated financial statements of SGS SA and its subsidiaries (the Group), which comprise the consolidated income statement and consolidated statement of comprehensive income for the year ended 31 December 2023, the consolidated statement of financial position as at 31 December 2023, the consolidated statement of cash flows and consolidated statement of changes in equity for the year then ended, and notes to the consolidated financial state- ments, including a summary of significant accounting policies. In our opinion, the consolidated financial statements (pages 94 to 133 and pages 155 to 157) give a true and fair view of the consolidated financial position of the Group as at 31 December 2023 and its consolidated financial performance and its consolidated cash flows for the year then ended in accordance with IFRS Accounting Standards and comply with Swiss law. Basis for opinion We conducted our audit in accordance with Swiss law, International Standards on Auditing (ISAs) and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the consolidated financial statements' section of our report. We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, as well as the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code), and we have fulfilled our other ethical responsi- bilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit approach Overview Overall Group materiality: CHF 42 million We concluded full scope audit work at 21 reporting units and audits of specific balances were performed on a further 16 reporting units. Our audit scope ad- dressed over 68% of the Group's sales. As key audit matters the following areas of focus have been identified: • Testing the Vehicle Compliance Spain CGU for impairment • Unbilled sales and work in progress (WIP) • Taxation PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Genève 2, Switzerland Téléphone: +41 58 792 91 00, www.pwc.ch PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. Financial statementsSGS | 2023 Integrated Report 135 Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influ- ence the economic decisions of users taken on the basis of the consolidated financial statements. Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial statements as a whole. Overall Group materiality CHF 42 million Benchmark applied Three-years average profit before tax Rationale for the materiality bench- mark applied We chose profit before tax as the benchmark because, in our view, it is the benchmark against which the performance of the Group is most commonly measured. The three-years average reflects current market volatility. Moreover, profit before tax is a generally accepted benchmark for materiality considera- tions. We agreed with the Audit Committee that we would report to them misstatements above CHF 2 million identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons. Audit scope We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consoli- dated financial statements as a whole, taking into account the structure of the Group, the accounting processes and con- trols, and the industry in which the Group operates. Due to the nature of its business and its organisation, the Group has a decentralised structure and operates in 116 coun- tries in three main regions (Asia Pacific, Europe/Africa/Middle East and Americas). We instructed audit teams in 17 countries to perform a full scope audit and audit teams in another 14 countries to perform an audit of specific balances (principally sales, account receivable, work in progress and unbilled sales). These teams audit the respective account balances as well as classes of transactions and report to us on their audit results in response to the audit instructions we sent to them. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements of the current period. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Testing the Vehicle Compliance Spain CGU for impairment Key audit matter How our audit addressed the key audit matter The Group’s share of goodwill allocated to the Vehicle Compliance Spain CGU (cash generating unit) amounts to CHF 92 million as at 31 December 2023. We identified the valuation and recoverability of goodwill and other intangible assets allocated to the Vehicle Com- pliance Spain CGU as a key audit matter because tech- nical assumptions used in the determination of the CGUs recoverable amount are highly sensitive to the current We obtained the Group’s impairment test for the Vehicle Spain Compliance CGU and, in particular: • We assessed the appropriateness of the impairment testing methodology; • We reconciled the five-year projections to the financial forecasts that were approved by management; 2 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 136 economic situation. At the same time, the business is highly dependent on the renewal of concessions in the coming years. The discounted cash flow model is based on the value- in-use methodology and on a five-year plan. The valuation and assessment in connection with the im- pairment testing of the goodwill of Vehicle Compliance Spain CGU were of particular importance. As a result of this analysis, the goodwill of the CGU was written down by CHF 18 million. Management’s judgement is required to determine the as- sumptions relating to the future business results, the long- term growth rate after the forecast period and the dis- count rate applied to the forecasted cash flows. Refer to the corresponding accounting policy in note 2 – Significant accounting policies and exchange rates and note 14 – Goodwill in the notes to the consolidated finan- cial statements. • We challenged management to substantiate the key as- sumptions used in the cash flow projections of the Vehi- cle Compliance Spain CGU's business during the fore- casted period; • We obtained comfort over the appropriateness of cash flow assumptions by corroborating them with external market data; • We tested, with the support of PwC's valuation experts, the reasonableness of the long-term growth rate after the forecast period and the discount rate; • We tested the mathematical accuracy of the model; • We assessed the quality of the cash flow projections by comparing the actual results of the CGU to the prior year's budget to identify in retrospect whether any of the assumptions might have been too optimistic; • We evaluated the Group’s sensitivity analysis of key as- sumptions to ascertain the effect of changes in those assumptions on the value-in-use; • We assessed the adequacy of the disclosures included in note 14 related to goodwill. On the basis of the procedures performed, we consider that the conclusions drawn by management regarding the impairment test of the Vehicle Compliance Spain CGU was reasonable. Unbilled sales and work in progress (WIP) Key audit matter How our audit addressed the key audit matter The amounts on the balance sheet related to unbilled sales and work in progress total CHF 223 million. Unbilled sales are recognised for services completed but not yet invoiced and is measured at the net selling price. WIP is recognised for partially completed performance obligations under a contract. The measure of progress is based on observable output or input methods. A propor- tion of the expected margin on completion is recognised based on the actual costs incurred in proportion to total expected costs, provided that the project is expected to be profitable once completed. The assessment of the degree of progress and the esti- mated margin requires judgement by management. Given the significance and relevance of their impact on the consolidated financial statements and because the progress and the expected margin on completion must be estimated at the end of each reporting period, we deemed the measurement of unbilled sales and work in progress to be a key audit matter. Refer to the corresponding accounting policy in note 2 – Significant accounting policies and exchange rates and to note 5 – Sales from contracts with customers in the notes to the consolidated financial statements. We reviewed SGS's sales recognition policy and obtained an understanding of how unbilled sales and WIP are ac- counted for. Our audit approach consisted of the following procedures, in particular: • We assessed the design and implementation of the key controls relating to the monitoring of unbilled sales and WIP balances. • We selected samples of unbilled sales and WIP bal- ances and traced them to underlying contracts and in- voices with customers. • We obtained comfort over the degree of progress from discussions with project managers and performed rec- onciliations to actual numbers recognised in the finan- cial statements in selected cases. • We selected samples of unbilled sales and WIP bal- ances recorded at the previous period-end and com- pared them to subsequent invoices and cash received from clients in order to evaluate the reliability of man- agement's estimation process. • We analysed the aging of the open balances and as- sessed the appropriateness of provisions recognised in accordance with the Group’s provision grid. 3 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsSGS | 2023 Integrated Report 137 • For entities with significant unbilled or WIP balances not subject to our Group audit, we performed central audit procedures. On the basis of the procedures performed, we consider management’s estimates and disclosures regarding un- billed sales and work in progress balances to be reason- able. How our audit addressed the key audit matter Our audit approach consisted of the following procedures, in particular: • We assessed the existence of tax exposures by means of inquiry with local and Group management. • We discussed management’s process to assess the risk of tax liabilities in the different jurisdictions as a result of potential challenges to the tax positions, and tested the measurement and timing of recognition of the provision when applicable. • With the support of PwC's internal tax experts, we ex- amined the documentation outlining the matters in dis- pute or at risk and the benchmarks relied upon for trans- fer pricing, and used our knowledge of the tax laws and other similar taxation matters to assess the available ev- idence, management’s judgmental processes and the provisions. On the basis of the procedures performed, we conclude that management’s tax estimates were reasonable. Taxation Key audit matter The Group is subject to taxation in many jurisdictions and management makes judgements about the incidence and magnitude of tax liabilities that are subject to the future outcome of assessments by the relevant tax authorities. Accordingly, the calculation of tax expense and the re- lated liability are subject to inherent uncertainty. To make these judgements, the Group has a structured process whereby management systematically monitors and assesses the existence, development and settlement of tax risks in each of its jurisdictions. The Group’s main tax risks are i) that the tax authorities might not accept the transfer prices applied and ii) poten- tial adverse results of ongoing tax audits. In accordance with its methodology, provisions for uncer- tain tax positions are calculated and included within cur- rent tax liabilities (CHF 176 million as at 31 Decem- ber2023). Refer to the corresponding accounting policy in note 2 – Significant accounting policies and exchange rates and to note 10 – Taxes in the notes to the consolidated financial statements. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the remunera- tion report and our auditor’s reports thereon. Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial state- ments, or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' responsibilities for the consolidated financial statements The Board of Directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with IFRS Accounting Standards and the provisions of Swiss law, and for such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. 4 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 138 In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the consolidated financial statements Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law, ISAs and SA-CH will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influ- ence the economic decisions of users taken on the basis of these consolidated financial statements. As part of an audit in accordance with Swiss law, ISAs and SA-CH, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. 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, misrep- resentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri- ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group's internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re- lated disclosures made. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's ability to continue as a going concern. If we conclude that a material uncertainty ex- ists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evi- dence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclo- sures, and whether the consolidated financial statements represent the underlying transactions and events in a man- ner that achieves fair presentation. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them regarding all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. 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, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. 5 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsSGS | 2023 Integrated Report 139 Report on other legal and regulatory requirements In accordance with article 728a para. 1 item 3 CO and PS-CH 890, we confirm the existence of an internal control sys- tem that has been designed, pursuant to the instructions of the Board of Directors, for the preparation of the consoli- dated financial statements. We recommend that the consolidated financial statements submitted to you be approved. PricewaterhouseCoopers SA Guillaume Nayet Licensed audit expert Auditor in charge Geneva, 21 February 2024 Louise Rolland Licensed audit expert 6 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 140 2. SGS SA 2.1. Income Statement For the years ended 31 December (CHF million) Operating income Dividends from subsidiaries Total operating income Operating expenses Other operating expenses Total operating expenses Operating result Financial income Exchange gain, net Financial expenses Liquidation of subsidiaries, net Financial result Extraordinary losses Profit before taxes Taxes Withholding taxes Profit for the year Notes 2023 2022 646 646 –6 –6 640 98 1 –79 – 20 –26 634 – –8 626 696 696 –4 –4 692 48 30 –51 – 27 –67 652 3 –6 649 6 6 7 Financial statementsSGS | 2023 Integrated Report 2.2. Statement of Financial Position at 31 December (Before appropriation of available retained earnings) (CHF million) Assets Current assets Cash and cash equivalents Derivative assets Amounts due from subsidiaries Other receivables and prepayments Total current assets Non-current assets Loans to subsidiaries Other financial assets Other assets Investments in subsidiaries Total non-current assets Total assets Shareholder's equity and liabilities Current liabilities Bank overdraft Derivative liabilities Trade and other payables Amounts due to subsidiaries Corporate bonds Deferred income and accrued expenses Total current liabilities Non-current liabilities Amounts due to subsidiaries Corporate bonds Total non-current liabilities Shareholder's equity Share capital Legal reserve Retained earnings Treasury shares for share buyback Reserve for treasury shares held by a subsidiary Total shareholder's equity Total shareholder's equity and liabilities 141 Notes 2023 2022 419 18 449 6 892 424 12 434 4 874 1 667 1 666 4 2 2 003 3 676 4 568 8 14 1 625 250 12 910 570 2 325 2 895 7 34 951 –250 21 763 4 568 5 2 2 008 3 681 4 555 9 9 10 590 500 12 1 130 623 2 075 2 698 7 34 907 –250 29 727 4 555 3 3 4 to 5 4 to 5 4 to 5 4 to 5 4 to 5 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 142 2.3. Notes SGS SA (‘the Company’) is the ultimate parent company of the SGS Group which owns and finances, either directly or indirectly, its subsidiaries and joint ventures throughout the world. The head office is located in Geneva, Switzerland. The average number of employees is less than 10 people for this company (2022: less than 10). 1. Significant accounting policies The financial statements are prepared in accordance with the accounting principles required by the provisions of commercial accounting as set out in the Swiss Code of Obligations. Investments in subsidiaries Investments in subsidiaries are valued individually at acquisition cost less an adjustment for impairment where appropriate. Foreign currencies Balance sheet items denominated in foreign currencies are converted into Swiss Francs at year-end exchange rates with the exception of investments in subsidiaries which are valued at the historical exchange rate. Foreign currency transactions are translated using the actual exchange rates prevailing during the year. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of assets and liabilities denominated in foreign currencies are recognized in profit or loss. Derivatives SGS SA uses derivative financial instruments to hedge its exposure to foreign exchange and interest rate risks arising from operational, financing and investment activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. Derivatives are accounted for on a mark-to-market basis. Derivative financial instruments are initially recognized at fair value and subsequently remeasured at fair value at each balance sheet date. The gains and losses resulting from the fair value remeasurement are recognized in the income statement. The fair value of forward exchange contracts is determined with reference to market prices at the balance sheet date. Dividends from subsidiaries Dividends are treated as an appropriation of profit in the year in which they are ratified at the Annual General Meeting and subsequently paid, rather than as an appropriation of profit in the year to which they relate or for which they are proposed by the Board of Directors. As a result, dividends are recognized in income in the year in which they are received, on a cash basis. Dividends are recorded in the currency defined for each affiliate and converted at spot rate in the income statement. Bonds Bonds are recorded at nominal value. 2. Subsidiaries The list of principal Group subsidiaries appears in the annual report on pages 155 to 157. In 2020, SGS SA acquired 80% of the capital of Ryobi Geotechnique Pte Ltd in Singapore. The share purchase agreement includes an option to acquire the remaining 20% of Ryobi Geotechnique Pte Ltd in 2025. 3. Corporate bonds SGS SA made the following bond issuances: Date of issue 27.02.2014 Short-term bonds 08.05.2015 03.03.2017 29.10.2018 29.10.2018 06.05.2020 05.09.2022 05.09.2022 17.11.2023 17.11.2023 Face value in CHF Million 250 250 225 375 225 175 325 150 350 240 260 Coupon in % 1.750 0.875 0.550 0.750 1.250 0.950 1.250 1.700 2.000 2.300 Year of Maturity 2024 2030 2026 2025 2028 2026 2025 2029 2027 2031 Issue price in % 101.019 100.245 100.153 100.068 101.157 100.182 100.000 100.197 100.038 100.127 Redemption price in % 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 100.000 Long-term bonds 2 325 As at 31 December 2023, one bond in the above table is classified as short-term liabilities as the due date is less than a year. On 17 November 2023, SGS SA issued two bonds, one CHF 240 million bond with a 2.000% coupon and one CHF 260 million bond with a 2.300% coupon. The Company has listed all bonds on the SIX Swiss Exchange. Financial statementsSGS | 2023 Integrated Report 4. Total equity (CHF million) Balance at 1 January 2022 Dividends paid Increase in the reserve for own shares Share buyback program Profit for the year Balance at 31 December 2022 Dividends paid Decrease in the reserve for own shares Profit for the year Balance at 31 December 2023 5. Share capital Share capital 7 Legal reserve 34 – – – – 7 – – – 7 – – – – 34 – – – 34 Reserve for treasury shares held by a subsidiary Treasury shares for share buyback Retained earnings 8 – 21 – – 29 – –8 – 21 – – – –250 – –250 – – – –250 878 –599 –21 – 649 907 –590 8 626 951 143 Total 927 –599 – –250 649 727 –590 – 626 763 Total shares issued Total share capital CHF (million) Balance at 1 January 2022 Treasury shares released into circulation Treasury shares purchased for equity compensation plans Treasury shares purchased for cancellation Balance at 31 December 2022 Treasury shares released into circulation Balance at 12 April 2023 before share split Shares in circulation 7 491 672 3 381 –12 500 –113 499 7 369 054 1 964 7 371 018 Treasury shares 3 360 –3 381 12 500 113 499 125 978 –1 964 124 014 7 495 032 – – – 7 495 032 – 7 495 032 Share split 25-1 176 904 432 2 976 336 179 880 768 Balance at 12 April 2023 after share split 184 275 450 3 100 350 187 375 800 Treasury shares released into circulation Balance at 31 December 2023 35 665 –35 665 – 184 311 115 3 064 685 187 375 800 7 – – – 7 – 7 – 7 – 7 Issued share capital On 28 March 2023, the Annual General Assembly approved a 25-1 stock split that went into effect on 12 April 2023. This split increased the number of shares issued, from 7 495 032 to 187 375 800, and reduced the nominal value per share, from CHF 1 to CHF 0.04. As at 31 December 2023, SGS SA has a share capital of CHF 7 495 032 (2022: CHF 7 495 032) fully paid-in and divided into 187 375 800 (2022: 7 495 032) registered shares of a par value of CHF 0.04 (2022: CHF 1). All shares, other than treasury shares, participate equally in the dividends declared by the Company and have equal voting rights. Treasury shares On 31 December 2023, SGS SA held 3 064 685 treasury shares, thereof 2 837 475 directly and 227 210 through an affiliate company. In 2023, 84 765 shares were released into circulation. On 31 December 2022, SGS SA held 125 978 treasury shares, thereof 113 499 directly and 12 479 through an affiliate company. On 21 June 2022, SGS SA announced a CHF 250 million share buyback program for the purpose of capital reduction. The program ended on 21 December 2022 and 113 499 shares were repurchased for a total amount of CHF 250 million at an average purchase price of CHF 2 203 per share. In 2022, 12 500 shares have been repurchased through an affiliate company for covering future equity compensation plans, whilst 3 381 shares were released into circulation. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 144 6. Financial income and financial expenses (CHF million) Financial income Interest income 3rd party Interest income Group Financial income Financial expenses Interest expenses 3rd party Interest expenses Group Other financial expenses Financial expenses 2023 2022 5 93 98 –31 –41 –7 –79 1 47 48 –21 –14 –16 –51 7. Extraordinary losses The extraordinary loss is composed of impairment respectively on investments in subsidiaries of CHF –27 million (2022: CHF –52 million) and on loan to subsidiaries of CHF 1 million (2022: CHF –15 million). 8. Guarantees and comfort letters (CHF million) Guarantees Performance bonds Total 2023 issued 2023 utilized 2022 issued 2022 utilized 3 105 68 3 173 1 467 38 1 505 2 511 55 2 566 1 563 55 1 618 The Company has unconditionally guaranteed or provided comfort to financial institutions providing credit facilities (loans and guarantee bonds) to its subsidiaries. In addition, it has issued performance bonds to commercial customers on behalf of its subsidiaries. The Company is part of a VAT Group comprising itself and other group companies in Switzerland. 9. Remuneration 9.1. Remuneration policy and principles This section appears in the SGS Remuneration report paragraph 2 in the annual report on pages 69 to 70. 9.2. Remuneration model This section appears in the SGS Remuneration report paragraph 3 in the annual report on pages 71 to 78. 9.3. Remuneration awarded to the Board of Directors This section appears in the SGS Remuneration report paragraph 4 in the annual report on pages 79 to 81. 9.4. Remuneration awarded to the Operations Council members This section appears in the SGS Remuneration report paragraph 5 in the annual report on pages 82 to 89. Financial statementsSGS | 2023 Integrated Report 10. Shares and options held by members of governing bodies 10.1. Shares and options held by members of the Board of Directors The following table shows the shares held by members of the Board of Directors as at 31 December 2023: Name C. Grieder S.R. du Pasquier J. Riedl P. Cheung K. Sorenson I. Gallienne S. Atiya T. Hartmann J. Vergis The following table shows the shares held by members of the Board of Directors as at 31 December 2022: Name C. Grieder S.R. du Pasquier P. Desmarais P. Cheung K. Sorenson I. Gallienne S. Atiya T. Hartmann J. Vergis 10.2. Shares and options held by senior management The following table shows the shares and restricted shares held by senior management as at 31 December 2023: Name F. Ng G. Picaud O. Merkt Corporate responsibility Chief Executive Officer Chief Financial Officer (from 1 December 2023) General Counsel and Chief Compliance Officer Restricted shares 14 726 – 3 001 The following table shows the shares and restricted shares held by senior management as at 31 December 2022: Name F. Ng Corporate responsibility Chief Executive Officer D. de Daniel Chief Financial Officer O. Merkt General Counsel and Chief Compliance Officer 1. Prior to share split implemented on 12 April 2023. Details of the various plans are explained in the SGS Remuneration report. Restricted shares1 648 406 144 145 Shares 14 128 2 257 607 1 082 3 207 1 082 3 382 1 082 1 082 Shares1 485 66 56 19 104 20 111 19 19 Shares 95 000 500 8 750 Shares1 3 556 1 165 287 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 146 11. Significant shareholders As at 31 December 2023, Groupe Bruxelles Lambert (acting through Serena SARL and URDAC) held 19.31% (December 2022: 19.11%), BlackRock Inc. held 5.18% (December 2022: 5.18%) and UBS Fund Management (Switzerland) AG held 3.03% (December 2022: below 3%) of the share capital and voting rights of the Company. At the same date, the SGS Group held 1.64% of the share capital of the Company (December 2022: 1.68%). Proposal of the Board of Directors for the appropriation of available retained earnings (CHF) Profit for the year Balance brought forward from previous year Dividend paid2 Share buyback program (Transfer to) / Reversal from the reserve for treasury shares Total retained earnings available for appropriation 2. No dividend is paid on own shares held directly or indirectly by SGS SA. Distribution to shareholders 2023 2022 625 502 400 649 821 069 657 434 309 877 874 780 –589 608 000 –599 419 601 – –250 000 741 7 846 448 –20 841 198 701 175 157 657 434 309 The SGS Board of Directors will recommend to the Annual General Meeting (to be held on 26 March 2024) the approval of an optional scrip dividend of CHF 3.20 per share (CHF 590 million), subject to the approval of a capital increase, where shareholders can elect to receive the dividend in the form of shares or in cash. Shares will be sourced from the issuance of new shares in the proposed capital increase. The shares will be delivered at a discount, and the share dividend will be a tax and cost-effective option for shareholders. Depending on the choices of the shareholders the above total amount of retained earnings will be reduced: • By CHF 3.20 for each share for which a cash dividend is paid (no dividends are paid on treasury shares) • By CHF 0.04 for each dividend share The remaining amount will constitute the balance being carried forward. Approval of financial statements and subsequent events The Board of Directors is responsible for the preparation and presentation of the financial statements. These financial statements were authorized for issue by the Board of Directors on 21 February 2024 and will be submitted for approval by the Annual General Meeting to be held on 26 March 2024. Financial statementsSGS | 2023 Integrated Report 147 Report of the statutory auditor to the General Meeting of SGS SA Geneva Report on the audit of the financial statements Opinion We have audited the financial statements of SGS SA (the Company), which comprise statement of financial position as at 31 December 2023, and the income statement for the year then ended, and notes to the financial statements, includ- ing a summary of significant accounting policies. In our opinion, the financial statements presented on pages 140 to 146, comply with Swiss law and the Company’s arti- cles of incorporation. Basis for opinion We conducted our audit in accordance with Swiss law and Swiss Standards on Auditing (SA-CH). Our responsibilities under those provisions and standards are further described in the 'Auditor’s responsibilities for the audit of the financial statements' section of our report. We are independent of the Company in accordance with the provisions of Swiss law and the requirements of the Swiss audit profession, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit approach Overview Overall materiality: CHF 42 million We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the financial statements as a whole, taking into ac- count the structure of the Company, the accounting processes and controls, and the industry in which the Company operates. As key audit matter the following area of focus has been identified: • Valuation of investments in subsidiaries Materiality The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Genève 2, Switzerland Téléphone: +41 58 792 91 00, www.pwc.ch PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 148 Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative consider- ations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole. Overall materiality CHF 42 million Benchmark applied Total assets Rationale for the materiality bench- mark applied We chose total assets as the benchmark, because, in our view, it is the benchmark against which the performance of the Company, which has limited operating activities and which mainly holds investments in subsidiaries and intra-group loans, is most commonly measured, and it is a generally accepted benchmark for holding companies. We agreed with the Audit Committee that we would report to them misstatements above CHF 2 million identified during our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons. Audit scope We designed our audit by determining materiality and assessing the risks of material misstatement in the financial state- ments. In particular, we considered where subjective judgements were made; for example, in respect of significant ac- counting estimates that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of internal controls, including among other matters consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the fi- nancial statements of the current period. These matters were addressed in the context of our audit of the financial state- ments as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Valuation of investments in subsidiaries Key audit matter How our audit addressed the key audit matter As at 31 December 2023, SGS SA's investments in subsidi- aries amount to CHF 2,003 million. We obtained the Company’s work on the valuation of investments in subsidiaries, and we performed the following procedures: Given the significance of this amount in the financial state- ments and because of the judgement used by management in determining its value, we consider the valuation of invest- ments in subsidiaries a key audit matter. The Company measures individually the investment in each subsidiary. The Company conducts an annual risk as- sessment based on several impairment indicators to identify investments with an impairment risk. For those investments in subsidiaries with a higher identified risk of impairment, the recoverable amount is determined based on a five-year discounted cashflow forecast. The main judgements applied by management relate to revenue and margin growth throughout the period of the five-year plan, the long-term growth rate beyond the detailed forecast pe- riod and the discount rate. An impairment is recognised if the recoverable amount of an individual investment is lower than the associated carry- ing value. • We obtained an understanding of management's pro- cess and controls relating to the valuation of investments in subsidiaries. • We tested the mathematical accuracy of the calculations and reconciled the balances to the financial statements. • We challenged the appropriateness of management’s process to identify impairment indicators by comparing the triggers used to common indicators such as historical profitability and capacity to pay dividends. • We also performed testing by calculating revenue and operating profit multipliers based on the market capitali- sation of the Group and comparing those to the respec- tive multiples of the individual investments in subsidiar- ies. For those investments in subsidiaries with a higher identified risk of impairment, we critically assessed the reasonable- ness of the underlying key assumptions and judgements applied by performing the following procedures in particular: • We assessed the quality of the five-year cashflow forecast projections by comparing forecasted revenue and margin growth to historical and market trends as well as by holding discussions with group management 2 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsSGS | 2023 Integrated Report 149 Key audit matter How our audit addressed the key audit matter The results of management’s impairment testing indicated that some investments in subsidiaries were im- paired. As a result, management recognised an impairment in the amount of CHF 27 million. Refer to note 1 – Significant accounting policies to assess their intention and ability to execute the strate- gic initiatives. • We evaluated, with the support of PwC's valuation spe- cialists, the reasonableness of the discount rate and long-term growth rate applied to those future cash flows. We consider management's approach as an acceptable and reasonable basis for the valuation of the investments in subsidiaries. Other information The Board of Directors is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements, the consolidated financial statements, the remunera- tion report and our auditor’s reports thereon. Our opinion on the financial statements does not cover the other information and we do not express any form of assur- ance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge ob- tained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Board of Directors' responsibilities for the financial statements The Board of Directors is responsible for the preparation of financial statements in accordance with the provisions of Swiss law and the Company’s articles of incorporation, and for such internal control as the Board of Directors determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Board of Directors is responsible for assessing the Company's ability to con- tinue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from ma- terial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and SA-CH will always detect a material misstatement when it exists. 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 de- cisions of users taken on the basis of these financial statements. As part of an audit in accordance with Swiss law and SA-CH, we exercise professional judgement and maintain profes- sional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, de- sign and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropri- ate to provide a basis for our opinion. 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. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropri- ate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's in- ternal control. 3 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 150 • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and re- lated disclosures made. • Conclude on the appropriateness of the Board of Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to 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. Our conclusions are based on the audit evidence ob- tained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern. We communicate with the Board of Directors or its relevant committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide the Board of Directors or its relevant committee with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them regarding all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with the Board of Directors or its relevant committee, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. 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, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication. Report on other legal and regulatory requirements In accordance with article 728a para. 1 item 3 CO and PS-CH 890, we confirm the existence of an internal control sys- tem that has been designed, pursuant to the instructions of the Board of Directors, for the preparation of the financial statements. We further confirm that the proposed appropriation of available earnings complies with Swiss law and the Company’s articles of incorporation. We recommend that the financial statements submitted to you be approved. PricewaterhouseCoopers SA Geneva, 21 February 2024 Guillaume Nayet Licensed audit expert Auditor in charge Louise Rolland Licensed audit expert 4 SGS SA | Report of the statutory auditor to the General Meeting Financial statementsSGS | 2023 Integrated Report 3. Historical data 3.1. SGS Group – Five-Year Statistical Data Consolidated Income Statements For the years ended 31 December (CHF million) Sales Salaries and wages Subcontractors’ expenses Depreciation, amortization and impairment Gain on business disposal Other operating expenses Operating income (EBIT) Financial income Financial expenses Share of profit of associates and joint ventures Profit before taxes Taxes Profit for the year Profit attributable to: Equity holders of SGS SA Non-controlling interests Operating income margins in % Average number of employees 2023 6 622 –3 316 –400 –545 7 –1 511 857 29 –86 2 802 –205 597 553 44 13 2022 6 642 –3 331 –399 –521 – 2021 6 405 –3 180 –385 –499 – 2020 5 604 –2 797 –352 –517 63 –1 493 –1 364 –1 206 898 20 –71 2 849 –219 630 588 42 14 977 16 –69 – 924 –269 655 613 42 15 795 12 –66 1 742 –237 505 480 25 14 98 545 96 759 93 297 89 098 94 494 151 2019 6 600 –3 357 –386 –548 268 –1 495 1 082 18 –79 –4 1 017 –315 702 660 42 16 Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 152 3.2. SGS Group – Five-Year Statistical Data Consolidated Statements of Financial Position At 31 December (CHF million) Property, plant and equipment Right-of-use assets Goodwill Other intangible assets Investments in joint-ventures, associates and other Deferred tax assets Other non current-assets Total non-current assets Inventories Unbilled sales and work in progress Trade receivables Other receivables and prepayments Current tax assets Marketable securities Cash and cash equivalents Total current assets Total assets Share capital Reserves Treasury shares Equity attributable to equity holders of SGS SA Non-controlling interests Total equity Loans and other financial liabilities Lease liabilities Deferred tax liabilities Defined benefit obligations Provisions Total non-current liabilities Trade and other payables Contract liabilities Current tax liabilities Loans and other financial liabilities Lease liabilities Provisions Other creditors and accruals Total current liabilities Total liabilities Total equity and liabilities 2023 823 506 2022 907 577 2021 925 605 2020 872 590 2019 926 611 1 636 1 755 1 778 1 651 1 281 275 16 185 191 350 20 153 125 382 26 164 173 333 34 161 154 187 35 174 149 3 632 3 887 4 053 3 795 3 363 57 223 940 213 127 – 1 569 3 129 6 761 7 723 –271 459 69 528 3 040 384 73 66 91 59 210 988 223 132 – 1 623 3 235 7 122 7 954 –279 682 81 763 2 833 442 79 47 96 59 175 928 204 108 – 1 480 2 954 7 007 7 1 118 –8 1 117 85 1 202 2 889 481 92 84 90 57 160 856 188 77 9 1 766 3 113 6 908 8 1 282 –230 1 060 74 1 134 2 390 470 53 136 88 45 195 953 219 77 9 1 466 2 964 6 327 8 1 536 –30 1 514 81 1 595 2 199 490 23 151 91 3 654 3 497 3 636 3 137 2 954 634 221 176 841 143 41 523 2 579 6 233 6 761 671 228 165 1 009 162 58 569 2 862 6 359 7 122 687 221 169 282 155 60 595 2 169 5 805 7 007 658 189 140 863 151 85 551 2 637 5 774 6 908 638 155 145 38 154 74 574 1 778 4 732 6 327 Financial statementsSGS | 2023 Integrated Report 153 3.3. SGS Group – Five-Year Statistical Share Data (CHF unless indicated otherwise) 2023 2022 2021 2020 2019 Share information Registered shares Number of shares issued Number of shares with dividend rights Price High Low Year-end Par value Key figures by shares Equity attributable to equity holders of SGS SA per share in circulation at 31 December Basic earnings per share1 Dividend per share ordinary Total dividend per share Dividends (CHF million) Ordinary2 Total 187 375 800 184 311 115 7 495 032 7 369 054 7 495 032 7 491 672 7 565 732 7 469 238 7 565 732 7 552 390 94 72 73 0.04 2.49 3.00 3.20 3.20 590 590 3 076 2 002 2 150 1 92.56 78.86 80.00 80.00 3 059 2 595 3 047 1 2 843 1 974 2 670 1 2 689 2 213 2 651 1 149.20 141.91 200.37 81.91 80.00 80.00 64.05 80.00 80.00 87.45 80.00 80.00 590 590 599 599 598 598 604 604 1. 2. Calculation of the basic earnings per share (weighted average for the year) is disclosed in note 11 of SGS Group Results. The SGS Board of Directors will recommend to the Annual General Meeting (to be held on 26 March 2024) the approval of an optional scrip dividend of CHF 3.20 per share, subject to the approval of a capital increase, where shareholders can elect to receive the dividend in the form of shares or in cash. Shares will be sourced from the issuance of new shares in the proposed capital increase. The shares will be delivered at a discount, and the share dividend will be a tax- and cost-effective option for shareholders. 3.4. SGS Group share information Share transfer SGS SA has no restrictions as to share ownership, except that registered shares acquired in a fiduciary capacity by third parties may not be registered in the shareholders’ register, unless a special authorization has been granted by the Board of Directors. Market capitalization At the end of 2023 market capitalization was approximately CHF 13 370 million (2022: CHF 16 114 million). Shares are quoted on the SIX Swiss Exchange. Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 154 3.5. Closing prices for SGS and the Swiss market index (SMI) 2022-2023 SGS SA 150 140 130 120 110 100 90 80 70 60 50 SMI 15 000 14 000 13 000 12 000 11 000 10 000 9 000 8 000 7 000 6 000 J F M A M J J A S O N D J 2022 F M A M J J 2023 A S O N D 5 000 High price Closing Low price Swiss market index (monthly close) Financial statementsSGS | 2023 Integrated Report 4. Material operating companies and ultimate parent The disclosure of legal entities is limited to entities whose contribution to the Group sales in 2023 represent at least 1% of the consolidated sales, but includes, in addition, the main operating legal entity in every country where the Group has permanent operations, even when such legal entities represent less than 1% of the Group consolidated sales. This definition of materiality excludes dormant companies, pure sub- holding companies or entities used solely for the detention of assets. 155 Country Albania Algeria Angola Argentina Australia Austria Azerbaijan Bangladesh Belarus Belgium Botswana Brazil Bulgaria Name and domicile SGS Albania, Tirana SGS Qualitest Algérie SpA, Alger SGS Serviços Angola SA, Luanda SGS Argentina SA, Buenos Aires SGS Australia Pty. Ltd., Bentley SGS Austria Controll-Co. Ges.m.b.H., Vienna SGS Azerbaijan LLC SGS Bangladesh Limited, Dhaka SGS Minsk Ltd., Minsk SGS Belgium N.V., Antwerpen SGS Botswana (Proprietary) Limited, Gaborone SGS do Brasil LTDA, São Paulo SGS Bulgaria Ltd., Sofia Burkina Faso SGS Burkina SA, Ouagadougou Cambodia Cameroon Canada Central African Republic Chile China China Colombia Congo Croatia SGS (Cambodia) Ltd., Phnom Penh SGS Cameroun SA, Douala SGS Canada Inc., Mississauga SGS Centrafrique SA, Bangui SGS Minerals S.A., Santiago de Chile SGS-CSTC Standards Technical Services Co. Ltd., Beijing SGS-CSTC Standards Technical Services (Shanghai) Co., Ltd., Shanghaï SGS Colombia SAS, Bogota SGS Congo SA, Pointe-Noire SGS Adriatica d.o.o., Zagreb Czech Republic SGS Czech Republic s.r.o., Praha Denmark SGS Analytics Denmark A/S, Nørresundby Democratic Republic of Congo SGS Minerals RDC SARL, Lubumbashi Ecuador Egypt Estonia Ethiopia Finland France Georgia Germany Germany Ghana Consorcio SGS – Revisiones Técnicas SGS Egypt Ltd., Cairo SGS Estonia Ltd., Tallinn SGS Ethiopia Private Limited SGS Fimko Oy, Helsingfors SGS France SAS, Arcueil SGS Georgia Ltd., Batumi SGS Germany GmbH, Hamburg SGS Institut Fresenius GmbH, Taunusstein SGS Laboratory Services Ghana LTD, Accra Great Britain SGS United Kingdom Limited, Ellesmere Port Greece Guam SGS Greece SA, Marousi SGS Guam Inc., Guam Guatemala SGS Central America SA, Guatemala-City Guinea-Conakry SGS Mineral Services (Guinée) Sàrl Unipersonnelle, Conakry Issued capital currency Issued capital amount % held by Group Direct/ indirect ALL DZD USD ARS AUD EUR USD BDT USD EUR BWP BRL BGN XOF KHR XAF CAD XAF CLP USD CNY COP XAF HRK CZK DKK CDF USD EGP EUR ETB EUR EUR USD EUR EUR GHS GBP EUR USD GTQ GNF 15 100 000 50 000 000 30 000 1 139 599 536 200 000 185 000 100 000 10 000 000 20 000 35 995 380 1 000 648 683 068 5 010 000 601 080 000 4 000 000 000 10 000 000 20 900 000 10 000 000 29 725 583 703 3 966 667 180 000 000 135 546 166 036 1 510 000 000 1 300 000 7 707 000 506 000 46 144 617 25 000 1 500 000 42 174 15 000 260 000 3 172 613 80 000 1 210 000 7 490 000 13 501 602 8 000 000 301 731 25 000 14 568 000 50 000 000 100 100 49 100 100 100 100 100 100 100 100 100 100 100 100 98.9 100 100 100 85 85 100 100 100 100 100 49 100 100 100 100 100 100 100 100 100 100 100 100 100 100 100 D D I D I D D D D D D D D D D D D D I I I D D I I I D I D I D I I D I I D I D D D D Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 156 Country Hong Kong Hungary India Indonesia Iran Ireland Italy Ivory Coast Japan Jordan Name and domicile SGS Hong Kong Limited, Hong Kong SGS Hungária Kft., Budapest SGS India Private Ltd., Mumbai P.T. SGS Indonesia, Jakarta SGS Iran (Private Joint Stock) Limited, Tehran SGS Ireland Limited, Dublin SGS Italia S.p.A., Milan Société Ivoirienne de Contrôles Techniques Automobiles et Industriels SA, Abidjan SGS Japan Inc., Yokohama SGS (Jordan) Private Shareholding Company, Amman Kazakhstan SGS Kazakhstan Limited, Almaty Kenya SGS Kenya Limited, Mombasa Korea (Republic of) SGS Korea Co. Ltd., Seoul Kuwait Kyrgyzstan Lao (People's Democratic Republic) SGS Kuwait W.L.L, Kuwait City SGS Bishkek LLC, Bishkek SGS (Lao) Sole Co., Ltd., Vientiane Latvia Lebanon Liberia Lithuania Luxembourg Madagascar Malaysia Mali Mauritius Mexico Moldova Mongolia Morocco SGS Latvija Limited, Riga SGS (Liban) S.A.L., Beirut SGS Liberia Inc, Monrovia SGS Klaipeda Ltd., Klaipeda SGS Luxembourg, Windhof Malagasy Community Network Services SA, Antananarivo Petrotechnical Inspection (Malaysia) Sdn. Bhd., Kuala Lumpur SGS Mali Sàrlu, Kayes SGS (Mauritius) LTD, Phoenix SGS de Mexico, SA de C.V., Mexico SGS (Moldova) SA, Chisinau SGS-IMME Mongolia LLC, Ulaanbaatar SGS Maroc SA, Casablanca Mozambique SGS MCNET Moçambique Limitada, Maputo Myanmar Netherlands New Zealand Nigeria Norway Oman Pakistan Panama SGS (Myanmar) Limited, Yangon SGS Nederland B.V., Spijkenisse SGS New Zealand Limited, Auckland-Onehunga SGS Inspection Services Nigeria Limited, Lagos SGS Analytics Norway AS, Hamar SGS Inspection and Testing Services SPC, Oman SGS Pakistan (Private) Limited, Karachi SGS Panama Control Services Inc., Panama Papua-New-Guinea SGS PNG Pty. Limited, Port Moresby Paraguay Peru Philippines Poland Portugal Qatar Romania Russia SGS Paraguay SA, Asunción SGS del Perú S.A.C., Lima SGS Philippines, Inc., Manila SGS Polska Sp.z o.o., Warsaw SGS Portugal – Sociedade Geral de Superintendência SA, Lisboa SGS Qatar WLL, Doha SGS Romania SA, Bucharest AO SGS Vostok Limited, Moscow Issued capital currency Issued capital amount % held by Group Direct/ indirect HKD HUF INR USD IRR EUR EUR XOF JPY JOD KZT KES KRW KWD KGS LAK EUR LBP LRD EUR EUR MGA MYR XOF MUR MXN MDL MNT MAD MZN MMK EUR NZD NGN NOK OMR PKR USD PGK PYG PEN PHP PLN EUR QAR RON RUB 200 000 518 000 000 960 000 872 936 100 100 100 100 50 000 000 99.99 5 000 2 500 000 200 000 000 100 000 000 100 000 228 146 527 3 000 000 15 617 540 000 50 000 3 463 000 2 444 700 000 100 100 95 100 50 100 100 100 49 100 100 118 382 30 000 000 100 99.97 100 711 576 38 000 10 000 000 750 000 300 000 000 100 000 281 370 828 488 050 8 066 764 376 17 982 000 343 716 458 300 000 250 000 12 022 190 200 000 1 250 000 800 000 2 300 000 7 899 339 2 1 962 000 000 43 813 182 24 620 000 27 167 800 500 000 200 000 100 002 18 000 000 100 100 100 70 100 100 100 100 100 55 100 100 100 100 100 49 100 100 100 100 100 100 100 100 100 100 49 100 100 D I D D D I D D D D D D D D D D I D D I I D D D D D D I D I D I D D I D D D I D D D D I D I D Financial statementsSGS | 2023 Integrated Report Country Name and domicile Saudi Arabia SGS Inspection Services Saudi Arabia Ltd., Jeddah Senegal Serbia Sierra Leone Singapore Slovakia Slovenia SGS Sénégal SA, Dakar SGS Beograd d.o.o., Beograd SGS (SL) Ltd., Freetown SGS Testing and Control Services Singapore Pte Ltd., Singapore SGS Slovakia spol.s.r.o., Kosice SGS Slovenija d.o.o. – Podjetje za kontrol blaga, Koper South Africa SGS South Africa (Proprietary) Limited, Johannesburg Spain Sri Lanka Sweden Switzerland Switzerland Taiwan Tanzania Thailand Togo SGS Tecnos, SA, Sociedad Unipersonal, Madrid SGS Lanka (Private) Limited, Colombo SGS Analytics Sweden AB, Linköping SGS Société de Surveillance SA, Geneva SGS SA, Geneva SGS Taiwan Limited, Taipei African Assay Laboratories (Tanzania) Ltd, Dar Es Salaam SGS (Thailand) Limited, Bangkok SGS Togo SA, Lomé Trinidad and Tobago SGS Trinidad Ltd, San Fernando Tunisia Türkiye SGS Tunisie SA, Tunis SGS Supervise Gözetme Etud Kontrol Servisleri Anonim Sirketi, Istanbul Turkmenistan SGS Turkmen Ltd., Ashgabat Uganda Ukraine SGS Uganda Limited, Kampala SGS Ukraine, Foreign Enterprise, Odessa United Arab Emirates SGS Gulf Limited Dubai Airport Free Zone Branch United States SGS North America Inc., Wilmington Uruguay Uzbekistan Vietnam Zambia SGS Uruguay Limitada, Montevideo SGS Tashkent Ltd., Tashkent SGS Vietnam Ltd., Ho Chi Minh City SGS Inspections Services Ltd., Lusaka 157 Issued capital currency Issued capital amount % held by Group Direct/ indirect SAR XAF EUR SLL SGD EUR EUR ZAR EUR LKR SEK CHF CHF TWD TZS THB XOF USD TND TRY USD UGX USD – USD UYU USD USD ZMK 1 000 000 35 000 000 66 161 200 000 20 100 000 19 917 10 432 452 000 500 92 072 034 9 000 000 1 018 250 100 000 7 495 032 62 000 000 2 000 20 000 000 10 000 000 1 000 50 000 6 550 000 50 000 5 000 000 400 000 – 73 701 996 1 500 50 000 288 000 16 944 000 75 100 100 100 100 100 100 100 100 100 100 100 100 100 99.99 100 100 50 100 100 100 100 – 100 100 100 100 100 D D I D D I I I I D I D Ultimate parent company I I D D D D I D D D – I D D D I Financial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportNon-financial statementsAppendix 158 Our approach to sustainability reporting Our progress towards our sustainability ambitions 2030 Quantifying our value through six capitals Databank Compliance and integrity Customer relationship management Public policy Sustainable procurement and supply chain Human rights Information security and data privacy Workforce breakdown Learning and development Employee engagement Talent attraction and retention Remuneration Operational integrity Community donations Climate change – energy consumption Climate change – energy efficiency in buildings program Climate change – greenhouse gas (GHG) emissions Water and waste management 2023 Global Reporting Initiative (GRI) content index Sustainable Accounting Standards Board (SASB) framework alignment Non-financial matters required by article 964b of the Swiss Code of Obligations Independent practitioner’s limited assurance report 159 160 162 164 164 165 165 166 167 167 167 169 170 170 171 172 173 174 174 175 176 177 185 186 187 Non-financial statementsNon-financial statementsSGS | 2023 Integrated Report 159 Our approach to sustainability reporting At SGS, we are committed to providing stakeholders with accurate and timely updates on our sustainability activities and performance, and we strive to produce a report that is fair, transparent and balanced, and meets the needs of stakeholders. Assurance and basis of preparation Each year, around 10% of our affiliates are selected to be audited on all data reported and procedures in place to collect and consolidate data. Each audit is carried out by a qualified Sustainability Report Assurance (SRA) auditor. External assurance of the sustainability performance indicators and the non-financial performance indicators is an important part of our approach, and our sustainability reporting has been independently assured since 2011. Since 2021, PricewaterhouseCoopers SA (PwC) provides independent limited assurance over certain sustainability metrics, indicated with in this report on pages 177 to 184. PwC’s Assurance Report describes the work undertaken and their conclusion for the reporting period to 31 December 2023. Documents relating to independent external assurance in the years prior to 2022 are available in our website. Please see Independent practitioner’s limited assurance report Pages 187 to 189 Data collection process Robust data gathering is important to set targets and monitor performance. The majority of our data is collected locally through centralized software then reviewed and consolidated in a centralized manner. The remaining data is gathered directly from global functions. All sustainability data is gathered on a half-year basis. Remaining data is collected annually at the full year. External standards We have published sustainability information at SGS for more than 10 years, and since 2015, we have integrated sustainability content into our integrated annual report. We support the principles of integrated reporting, and continue to move towards a fully integrated reporting structure in line with the Integrated Reporting Framework. Since 2013, our non-financial information has been developed using the guidelines for the AA1000 Accountability Principles Standard and the Global Reporting Initiative’s Standards (GRI). We also align our reporting with the Sustainability Accounting Standard for the Professional & Commercial Services Industry (SASB). Our reporting approach is explained further in our Sustainability Basis of Reporting. For more information on our Sustainability Basis of Reporting www.sgs.com/en/sustainability/ corporate-sustainability/reporting-hub Where GRI or SASB standards do not provide a methodology for a sustainability performance indicator, or their methodology is not appropriate, we apply the methodology provided in our Basis of reporting. Scope and boundaries The scope of the sustainability information contained in this integrated annual report covers all regions and business lines of the SGS Group for the 2023 calendar year. A list of SGS affiliates can be found on pages 155 to 157 of this report. Unless stated otherwise, our reported data scope covers the Group business and targets for the period 1 January to 31 December 2023. We have identified and prioritized the most material impacts on our business and on stakeholders across our value chain. This integrated annual report includes performance data for our direct operations, as well as information on how we manage the most material issues. For more information on material issues Page 24 We report key performance indicators (KPIs) from all of our facilities, subsidiaries, and other business units, as determined by our reporting boundaries. Under the financial control approach, we account for 100% of the KPIs from operations over which we have control. We do not account for KPIs from operations in which we own an interest but not a control. Control is defined in financial terms. We do not include a KPI in our accounting or reporting if we do not have reliable information about it. This omission is noted in the report. As an example, we currently do not account for district heating and refrigerants in our total carbon dioxide (CO2) emissions. In this report, we present our historical and current performance over a three-year period. Sometimes historical data may differ from that included in previous reports due to the availability of more accurate data or improved data gathering and/or reporting. Variations in the data that are less than 5% are usually considered not material in these situations. Significant modifications to data from previous years, however, are noted in the report when they initially appear. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 160 Our progress towards our sustainability ambitions 2030 1 Environment 2023 targets Climate change mitigation 2023 marks the end of a strategic cycle and we have taken the opportunity to reflect on our achievements as we set new focus areas for 2027. 2023 performance Continue working towards our SBTi ambition by: Achieved • Increase annually the number of energy efficiency measures in our 100 most energy intensive owned buildings 14% reduction since 2019 in scope 1 and 2 absolute GHG emissions. 5% reduction compared to 2022 in scope 3 absolute GHG emissions. Achieved The coverage of our energy efficiency measures in these buildings has now reached 85% of our consumption, representing a 10% increase compared to 2022. The number of energy efficiency measures has increased by 12%. • Reduce total car fleet CO2 average emissions by 10% Achieved compared to 2019 10% reduction in car fleet GHG emissions since 2019. • Ensure 10% of our cars have low-carbon technologies Achieved • Further adopt Task Force on Climate-related Financial Disclosures (TCFD) recommendations 15% of cars have low-carbon technologies. Achieved See TCFD report on page 190. 2 Social Human rights protection • Achieve 30% women in senior leadership positions (CEO-3) • Reduce our Total Recordable Incident Rate (TRIR) by 20% and Lost Time Incident Rate (LTIR) by 10% compared to 2018 Achieved 31.9% women at CEO-3 level. Achieved LTIR of 0.17 and TRIR of 0.32, a 31% and 22% reduction respectively compared to 2018. • HSE Certify main operational sites to ISO 45001 and ISO 14001 On track An additional 20% of operational sites obtained independent certification to ISO 45001 and ISO 14001, bringing the cumulative total to 644 sites. • Continue performing annual risk assessments on human right across the Group, keep developing our human rights due diligence program to avoid violations across our operations and train 100% of our employees on our human rights principles annually On track See Human Rights report on page 197. Knowledge and engagement • Increase by 10% the completion rate of job-related training compared to 2020 • Improve year on year our employee engagement and manager effectiveness scores Community • Increase our positive impact on our communities through employee volunteering by 10% compared to 2019 Achieved 4.7 million hours and 48.1 hours per FTE of job-related training (27% and 15% variation compared to 2020). Achieved 7.6/10 employee engagement average score and 8.3/10 of management support average score, an improvement compared to last year. Achieved CHF 1.7 million of community donations and 32 590 hours of volunteering (22% and 89.5% increase respectively compared to 2019). Non-financial statementsSGS | 2023 Integrated Report 161 3 Governance 2023 targets Excellence 2023 performance • Promote a culture of efficiency and excellence through our WCS program, with 20% of WCS labs reaching WCM Bronze On track 10% of labs reached Bronze level. • Expand the program to at least 10 new sites considering Achieved 2020 perimeter Brand 13 additional sites adopted World Class Methodology. • Achieve a customer satisfaction score of 85% Achieved 90.6% customer satisfaction score. Integrity • Ensure 100% of employees are trained on our Integrity Principles On track on an annual basis 99.9% employees trained on our Integrity Principles.1 Digitalization, information protection and privacy • Enhance the SGS Information Governance Framework, data privacy framework and standardized information security management systems Achieved Security governance maturity has been improved and security structure expanded. • Harmonize processes for third-party vendors/processors Achieved for risk evaluation purposes Supply chain • >50% of our goods and services spend from suppliers who have signed our Code of Conduct or commit to comparable standards • 100% of the selected SGS strategic suppliers will have completed our sustainability self-assessment questionnaire (SAQ) • 75% of requests for proposals to be online and include the relevant SGS sustainability criteria, enabling comparison and selection of suppliers • Actively contribute to the reduction of our SGS CO2 footprint by sourcing energy efficient solutions from our suppliers • Leverage SGS buying power to request strategic suppliers to report their own CO2 footprint and subsequently target carbon reduction in their own operations The process of ‘Third party security assessments’ (TPSA) has been formalized. Achieved 65% of our goods and services spend now come from suppliers having signed the Code of Conduct. Achieved We have extended the SAQ to all countries in scope (25 countries and suppliers with over CHF 1 million spend). Achieved Sustainability criteria now embedded in new RFP tool as mandatory fields for all online RFPs. Achieved New classification of spend and more accurate numbers embedded in a new dashboard. Based on new spend classification, suppliers with high CO2 intensity are being identified. The next steps would be to work proactively with those suppliers to reduce their footprint. CO2 questionnaire included in SAQ to collect real footprint data. 1. The calculation is based exclusively on permanent employees who completed the annual integrity training. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 162 Quantifying our value through six capitals Like all organizations we depend on various capitals to be successful. We are one of a small number of companies that measure value creation by capital using our Impact Valuation Framework. 2022 SGS value to society (CHF million) Financial capital Manufactured capital Human capital Natural capital Intellectual capital Social and relationship capital Total value to society +621 -195 6 168 Our financial capital results are impacted by profit, sales, employment costs and taxes paid to governments Our manufactured capital value measures the improvement of capital assets (directly controlled and those of our supply chain) Our human capital value is directly influenced, among others, by our risk of having human rights non-compliances in our value chain and by our suboptimal data on gender equality -380 +341 +82 6 637 The most negative impact is related to the footprint in the value chain, especially in our supply chain Our intellectual capital value is mostly driven by our training and development programs This capital is positively impacted by the way we create trust to customers and communities The total value to society of SGS direct operations and supply chain activities Positive impacts Negative impacts Net impact Supply chain Direct operations Supply chain Direct operations Financial capital 1 988 4 180 Industrial capital 482 Human capital Natural capital Intellectual capital Social and relationship capital – – – – 157 62 7 365 218 – – –120 –372 – – – –18 –137 –15 –24 –136 6 168 621 –195 –380 341 82 The framework is based on six forms of capital, as defined by the International Integrated Reporting Council. We use it to help us to make better decisions, by considering non-financial as well as financial aspects of our business. We measure our progress using 32 indicators that support how we track our measurable positive impact. We created the majority of this value through profit generation, the paying of taxes and wages, and our investments in training programs and information security. The framework also shows that we generated CHF 822 million of negative societal impacts, arising from the environmental footprint of our supply chain. Applying our Impact Valuation Framework methodology, we have calculated that our total value to society calculated in 2023 for 2022 was +CHF 6 637 million, and that the value of our positive benefit to society was +CHF 7 459 million. Non-financial statementsSGS | 2023 Integrated Report 163 Our value in action Our SGS Impact Valuation Framework allows us to quantify the effects of events that occur within our operations and throughout our supply chain. Furthermore, we are dedicated to assessing the results of the services we provide. We worked across all five of our business lines to identify services and their impacts in order to develop a valuation approach based on independently verified data and research. We are then able to determine the impact and monetize it using a combination of research and input data. This exercise helps us better understand the impact of our services in terms of how much value they add to the different capitals. We have covered almost 50% of our sales and our initial impact calculation shows a significant positive impact in many different areas. Among the main impact indicators we have looked at so far are consumption of energy and CO2 emissions avoided; water consumption avoided; injuries avoided; and lost disability-adjusted life years avoided. Main impact indicators: Avoided energy consumption (billion kWh) +28 Avoided injuries (million) +14 Avoided water consumption (billion liters) +68 Avoided CO2 emissions (million metric tons) +144 Example of how our valuation methodology was applied to green buildings services 1 Service or group of services selected 2 Input indicators • Energy & Green Buildings • Number of buildings audited 6 Impact monetization • Social cost of avoided CO2 emissions • Increase in natural capital 3 Identification of impacts • Reduced energy consumption • Avoided CO2 emissions 5 Impact calculation 4 Valuation methodology • CO2 avoided • U.S. Energy Information Administration research regarding the energy consumption of commercial buildings • World Green Building Council research about average energy savings associated with green buildings • Social cost of carbon Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 164 Databank Compliance and integrity Integrity is one of our six business principles. Our Code of Integrity acts as a blueprint for our employees, affiliated companies, contractors, subcontractors, joint venture partners and agents. Any employee or third party can report violations through our Integrity Helpline. All the reports received are considered and evaluated. Based on the data received we assess whether an investigation is needed or whether more information is needed. Reported issues might be discarded only if the information provided was not sufficient or if the issue reported is not in the scope of the Code of Integrity. Total number of integrity issues reported through integrity helplines¹ Total number of substantiated breaches of the Code of Integrity received through integrity helplines¹ Broken down by type of breach: Integrity of services Integrity of financial records Conflict of interest Employee relations Fair competition Compliance with laws Gifts and entertainment Confidentiality Use of company assets and resources Environment, health and safety Bribery and corruption4 Intellectual property External communication Insider dealing Political donations and charitable contributions Consequences adopted during the reporting year, broken down by type2: Termination Disciplinary action Corrective actions (including improvement in processes) No action possible or needed Under decision process Percentage of employees signing the Code of Integrity Percentage of employees trained on the Code of Integrity5 Percentage of operations analyzed for risks related to corruption Number and nature of confirmed incidents of corruption identified through corporate helplines1, 3 Public legal cases regarding corruption brought against the organization/employees 2023 450 89 23 3 8 20 – 9 – 3 10 5 6 2 – – – 48 48 19 4 1 2022 374 73 23 3 12 10 – 7 – 2 2 7 7 – – – – 38 29 12 18 – 2021 262 35 6 4 – 9 – 2 – 1 6 – 7 – – – – 11 18 17 5 7 100.0% 100.0% 100.0% 99.9% 99.9% 99.0% 100.0% 100.0% 100.0% 6 – 7 – 7 – ‘Helplines’ means channels used by employees and external parties to report suspected violations of the Code of integrity and submitted online, by phone call, sent via fax, email or post. Consequences adopted during the reporting year. Some of these consequences may refer to breaches confirmed in previous years. Measures taken for these six cases were the following: service or employment contract termination (14) and disciplinary action (1). 1. 2. 3. 4. Breaches of integrity reported as bribery and corruption include also instances of SGS employees accepting improper advantages in the course of their duties (so-called passive corruption). 5. The calculation is based exclusively on permanent employees who completed the annual integrity training. Non-financial statementsSGS | 2023 Integrated Report 165 Customer relationship management How well we manage our customer relationships determines what we are able to achieve as a business, in the long term. That is why we aim to anticipate and respond to customer needs as they arise. We track customer sentiment annually through our global Voice of the Customer (VoC) program. Results are shared with all relevant stakeholders across the organization and corrective actions are developed to increase customer satisfaction. Customer satisfaction score (% score) Group's sales covered by Voice of the Customer surveys (% of total sales) Countries participating in Voice of the Customer survey (# of countries) Reponses in Voice of the Customer surveys (# of responses) 2023 2022 2021 90.6% 84.5% 88.0% 84% 76% 34% 27 27 12 26 140 19 000 12 560 Public policy We do not provide any financial or in-kind support, given directly or indirectly, to political parties, their elected representatives or persons seeking political office. We support some industry associations, but the sum is not material, representing approximately 0.01% of our sales. Lobbying, interest representation or similar (CHF) Contributions to local, regional or national political campaigns, organizations or candidates (CHF) Trade associations or tax-exempt groups (e.g. think tanks)1 (CHF) Other (e.g. spending related to ballot measures or referendums) (CHF) Total contributions and other spending (CHF) Contribution to industry associations as % of sales (% of sales) 2023 2022 2021 – – – – – – 909 129 1 121 161 716 652 – – – 909 129 1 121 161 716 652 0.01% 0.02% 0.01% 1. The main associations we contributed to in 2023 were: Association of Professional Social Compliance Auditors: CHF 269 154.46; TIC Council: CHF 74 119.43; Energy Institute: CHF 59 811.58; Swissholding: CHF 50 000. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 166 Databank continued Sustainable procurement and supply chain Our supply chain is diverse and covers over 100 countries from large industrial to small developing countries. These suppliers are key stakeholders to SGS and we are committed to engage in an ongoing dialog to reach the highest social, economic and environmental standards. Spend analyzed for sustainability risks1 (%) Tier 1 Suppliers analyzed for sustainability risks2 (% of total Tier 1 suppliers) Number of local suppliers (% of total suppliers) Number of global suppliers (% of total suppliers) Spend of local suppliers (% of total spend) Spend of global suppliers (% of total spend) 2023 2022 2021 100% 100% 100% 100% 100% 100% 99% 98% 98% 1% 2% 2% 89% 84% 82% 11% 16% 18% 1. Potential sustainability risks identified in the supply chain in 2022 assessment (as a % of spend): − Economic risk: low: 59%; medium: 40%; high: 1% − Social risk: low: 65%; medium: 35%; high: 0 − Environmental risk: low: 49%; medium: 49%; high: 2%. 2. Tier 1 suppliers within the scope of the SAQ. Spend by SGS supra-region Spend by SGS category Americas Europe, Africa and Middle East Asia Pacific 22% 43% 35% Capex External services Material and supplies General repairs and maintenance Travel and vehicles Other OPEX 13% 23% 21% 6% 17% 20% Non-financial statementsSGS | 2023 Integrated Report 167 Human rights Our human rights policy clearly sets out our commitment to treat everyone with whom we come into contact with fairness, dignity and respect. It is in line with leading international human rights legislation and principles, and it applies to all those working for SGS or in our supply chains. Number of operations identified as having a significant risk of incidences of child labor, forced or compulsory labor, or where the right to exercise freedom of association may be violated Total number of proven incidents of discrimination Number of grievances identified through helplines2 related to human rights1 Total number of employees trained on our Human Rights Principles Percentage of employees trained on our Human Rights Principles Percentage of employees covered by collective bargaining3 2023 2022 2021 – 2 3 – 4 4 – – – 88 885 79 893 39 137 86% 46% 78% 46% 39% 44% 1. 2. 3. Measures taken for these three cases were the following: termination of employee (1) and disciplinary action (3). ‘Helplines’ means channels used by employees and external parties to report suspected violations of the Code of Integrity and submitted online, by phone call. Employees covered by collective consultation/representation processes. The scope is limited to those affiliates where collective bargaining exists according to the International Labour Organization database for coverage rate. Information security and data privacy Protection of personal data is key to every part of our business. It is at the heart of our commitment to our clients, our values, our principles, our conduct and our success and is essential to maintaining trust. We are committed to conducting our business in accordance with all relevant data protection and privacy laws of the countries in which we operate and in line with the highest standards of ethical conduct. Number of complaints received from outside parties and substantiated by the organization (# of complaints) Substantiated complaints concerning breaches of data customer policy (# of complaints) Number of complaints from regulatory bodies (# of complaints) Workforce breakdown Our workforce is characterized by diversity in generation, nationality and gender identity. Type of contract Number of employees at year end (#) Permanent workers (% of total employees) Casual workers1 (% of total employees) Number of FTEs2 at year end (#) 2023 2022 2021 – – – – – – – 1 – 2023 2022 2021 103 193 101 860 99 374 92% 92% 91% 8% 8% 9% 99 589 98 152 96 216 1. Casual employees are those people who are engaged for short periods of time (man-day, job by job basis). 2. Full-time equivalent employment is the number of full-time equivalent jobs, defined as total hours worked divided by average annual hours worked in full-time jobs. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 168 Databank continued Workforce breakdown continued Gender, generation and other diversity indicators Employees by gender (female) (% of total employees) Employees by gender (male) (% of total employees) Employees by age – under 30 years old (female) (# of employees by ranges of age) Employees by age – under 30 years old (male) (# of employees by ranges of age) Employees by age – 30 to 50 years old (female) (# of employees by ranges of age) Employees by age – 30 to 50 years old (male) (# of employees by ranges of age) Employees by age – over 50 years old (female) (# of employees by ranges of age) Employees by age – over 50 years old (male) (# of employees by ranges of age) Manager employees (# of manager employees) Manager by gender (female) (% of managers) Manager by gender (male) (% of managers) CEO-3 employees # of CEO-3 employees CEO-3 by gender (female) – 'Women in Leadership’ (% of CEO-3 employees) CEO-3 by gender (male) (% of CEO-3 employees) Women in management positions in sales-generating functions (% of women) Women in STEM-related positions (% of women) Employees from vulnerable groups With disabilities Employees with disabilities – female Employees with disabilities – male With other vulnerabilities Employees with other vulnerabilities – female Employees with other vulnerabilities – male 2023 2022 2021 37.3% 37.0% 36.5% 62.7% 63.0% 63.5% 11 148 10 997 10 162 14 500 14 248 13 877 22 759 22 255 21 229 39 432 39 695 39 672 4 611 4 394 4 875 10 743 10 271 9 559 8 525 8 490 8 246 34.3% 33.9% 34.8% 65.7% 66.1% 65.2% 1 299 1 235 1 274 31.9% 31.1% 29.0% 68.1% 68.9% 71.0% 32.3% 31.8% 34.4% 34.3% 33.8% 31.1% 2 292 2 285 1 299 906 434 472 796 369 427 1 386 1 489 578 808 547 942 660 290 370 639 269 370 Non-financial statementsSGS | 2023 Integrated Report 169 2023 17.0% 5.6% 4.5% 3.7% 3.7% 14.9% 5.6% 4.8% 4.6% 4.1% Workforce breakdown continued Nationality Employees by top five nationalities1 (% of share in total workforce) Chinese Indian Spanish German Brazilian Management workforce by top five nationalities1 (% of share in total workforce) Chinese Indian French German Brazilian 1. This data covers 97% of our employees as USA employees are not included in this breakdown. Learning and development Each year we invest in the upskilling our employees’ capabilities in line with our business priorities and growth strategy. We promote self- directed learning, tailor our talent development programs to fit local markets, business needs and employee expectations, and invest in digital tools for training and development. Regarding performance reviews, we tailor the type of performance review to the job position and category. This includes management by objectives, multidimensional performance appraisal, team-based performance appraisal or agile conversations. We encourage manager positions to deliver ongoing feedback to their teams and we have a formal process for performance reviews once a year. Training ratio1 (% of total employment cost spent on training) Training hours per FTE (# of hours per FTE) Job related training hours per FTE (# of hours per FTE) Total training hours2 (# million of hours) Job related training hours (# million of hours) Performance reviews (% of employees who have received performance reviews out of the total eligible3) 2023 2022 2021 3.6% 3.2% 2.6% 61.2 54.7 45.8 48.1 43.3 38.9 6.0 4.7 5.3 4.2 4.3 3.6 79% 85% 88% 1. 2. Training and hours spent cost per total employment cost, including safety training hours. On a constant currency basis. Broken down by type of training: Management and leadership development: 2%; Apprentice & trainee training programs: 3%; Technical training: 14%; Non-Technical training: 3%; Operational integrity training: 57%; Compliance training: 17%; Other: 4% 3. 62% of employees were eligible for performance reviews in 2023 . Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 170 Databank continued Employee engagement We value feedback and encourage employees to voice their opinions via our voluntary annual employee engagement survey. Each year we survey different geographies, and we benchmark ourself against external norms; local management takes appropriate actions to improve our scores. This year we have implemented a new Employee Voice & Engagement platform. The score is now shown in a scale out of 10. Employees invited to participate in the employee engagement survey (# of employees) Response rate (%) Engagement index (2023: average score out of 10; 2022 and previous: average score out of 100) Actively engaged employees1 (%) Management support index2 (2023: score out of 10; 2022 and previous: score out of 100) 2023 2022 2021 25 412 28 569 30 129 81% 79% 86% 7.6 69 75 79% 64% 73% 8.3 72 78 1. 2. Employees that are Promoters and Passives (those that gave score from 10 to 7) based on employee NPS. Management support index (formerly, ‘Manager effectiveness index’ before the new Employee Voice & Engagement platform) is calculated based on the combination of the two questions of the engagement survey: ‘My manager provides me with the support that I need to complete my work’ and ‘My manager communicates openly and honestly with me.’ Talent attraction and retention Our recruitment process is designed to enable us to select creative, innovative people who have passion, potential and integrity. We make our selection based on a combination of candidates’ skills, competencies, experience and motivation. Through this approach and targeted talent attraction strategies, we have welcomed 27 288 new hires (internal and external) in 2023. New hires (# of employees) Internal new hires (% of total new hires) New hires (female) (% of internal hires) New hires (male) (% of internal hires) External new hires (% of total new hires) New hires (female) (% of external hires) New hires (male) (% of external hires) Voluntary turnover (% of permanent employees) Total turnover (% of total permanent employees) Total turnover female (% of total female employees) Total turnover male (% of total male employees) 2023 2022 2021 27 289 28 430 29 486 16.3% 15.1% 14.8% 45.8% 50.3% 50.3% 54.2% 49.7% 49.7% 83.7% 84.9% 85.2% 36.1% 36.8% 35.2% 63.9% 63.2% 64.8% 12.7% 14.8% 14.7% 18.8% 20.3% 20.5% 18.3% 19.6% 20.1% 19.1% 20.8% 20.7% Non-financial statementsSGS | 2023 Integrated Report 171 Talent attraction and retention continued Internal new hires External new hires Employees that left on their own will Male Female 45.8% 54.2% Male Female 63.9% 36.1% Male Female 59.4% 40.6% <30 years 28.5% 30-50 years 65.6% >50 years 5.9% Top management 0.2% Middle management 5.5% Junior management 33.1% Non- management positions 61.2% <30 years 46.3% 30-50 years 47.0% >50 years 6.7% Top management 0.1% Middle management Junior management Non- management positions 1.7% 7.7% 90.5% <30 years 38.0% 30-50 years 53.3% >50 years 8.7% Top management 0.4% Middle management 2.5% Junior management 8.8% Non- management positions 88.3% Remuneration Our goal is to offer our existing and future talent a competitive compensation package, to attract, engage, motivate and retain them. We systematically assess the competitiveness of our reward practices in all the markets in which we operate. Mean gender pay gap1 (% of difference between men and women employees) Median gender pay gap1 (% of difference between men and women employees) Mean bonus gap1 (% of difference between men and women employees) Median bonus gap1 (% of difference between men and women employees) CEO and mean employee compensation ratio2 2023 2022 2021 3.0% 2.4% 3.0% –4.7% –7.3% –4.7% 21.4% 21.0% 17.3% –4.0% –6.3% –20.1% 31.9 28.5 40.6 1. 2. This data has a coverage of 94.5% of all SGS employees. 0% means no gap, negative percentage benefits women and positive percentage benefits men. To make the ratio comparable, we have implemented cost of living adjustments using the Purchasing Power Parity conversion rates and it is calculated based only on base salary and bonuses (excluding pension funds and extra hours). Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 172 Databank continued Operational integrity Employee health and safety along with environmental protection are a priority. As detailed in our business principles, protecting employees and the environment from harm are fundamental behaviors at SGS. In 2023, we have continued to make progress towards our target and have achieved a further reduction in our incident rates. Total Recordable Incident Rate (TRIR)¹ (occurrences per 200 000) TRIR variation (% against a 2018 baseline) Number of recordable incidents² (# of incidents) Lost Time Incident Rate (LTIR)³ (occurrences per 200 000) LTIR variation (% against a 2018 baseline) Sites certified to ISO 45001 and/or ISO 14001 standards (number of sites) Sites dual certified to ISO 45001 and ISO 14001 standards (number of sites) FTE covered by ISO 45001 standard (number of FTE) FTE covered by ISO 14001 standard (number of FTE) FTE covered by ISO 45001 and/or ISO 14001 standards (number of FTE) Safety training hours (# of hours) Operational Integrity training per employee (# of hours per FTE) 2023 2022 2021 0.32 0.35 0.37 –22% –16% –9% 326 346 357 0.17 0.19 0.22 –31% –25% –14% 644 278 562 229 537 224 28 222 20 862 12 750 26 204 18 195 8 750 54 426 39 057 21 500 3 423 056 2 937 914 2 692 702 34.7 30.4 28.9 Total absence rate4 (% of days of sickness absence plus days lost per incidents with lost time per total days worked) 1.91% 2.22% 1.85% Sickness absence rate (% of days of sickness absence per total days worked) Work-related absence rate (% of days of days of lost time and restricted duty due to recordable incidents per total days worked) 1.89% 2.20% 1.82% 0.02% 0.02% 0.03% 1. 2. 3. 4. Number of lost time, restricted duty, medical treatment incidents and fatalities per 200 000 hours worked. Number of lost time, restricted duty, medical treatment incidents and fatalities. Number of lost time incidents per 200 000 hours worked. Days of sickness absence and restricted duty per total days worked. Non-financial statementsSGS | 2023 Integrated Report 173 Community donations We are committed to give back to the communities where we operate, and we do so across three pillars: empowerment, education and environmental sustainability. In doing so, we are helping to tackle global challenges such as poverty, equal opportunities, health, education, climate change and environmental degradation. In 2023, we have almost doubled the number of volunteering hours. Community donations1 (CHF thousands on constant currency basis) Community donations variation (% against a 2019 baseline) Total community projects (# of projects) Community hours (# of hours dedicated to community) Community hours variation (% against a 2019 baseline) 1. Community donations include: cash, donations in kind and volunteering hours. 2023 2022 2021 1 722 1 850 1 384 22.0% 43.4% 7.2% 595 526 382 32 590 18 691 9 284 89.5% 8.7% –46.0% Donation per type Donation per nature of contribution Donations per pillar Community donation Occasional charitable donation Philanthropic sponsorship 53.6% 40.0% 6.4% Cash contributions Volunteering contributions In-kind contributions Management contributions 55.5% 29.0% 8.3% 7.2% Empowerment Education Environmental sustainability Disaster relief 42.1% 30.2% 24.6% 3.1% Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 174 Databank continued Climate change – energy consumption As a sustainability leader that recognizes the threat posed by global climate change, we are setting the benchmark for reduced energy consumption. Through initiatives such as our Energy Efficiency in Buildings (EEB) program, sustainable transport and Green IT, we are actively reducing our own energy consumption at source. We are also moving away from fossil fuel based sources of energy by transitioning to renewable energy. Total energy consumption (MWh) Total energy consumption by use (MWh) Vehicle fuels energy Non-transport fuels energy Total electricity Standard electricity1 Renewable electricity2 Total energy production (MWh) Non-renewable energy production Renewable energy production Total renewable electricity (% of total electricity consumption) Energy intensity per sales3 (MWh/CHF million) Energy intensity per average FTE4 (MWh/FTE) Electricity intensity per sales3 (KWh/CHF million) Electricity intensity per average FTE4 (MWh/FTE) 2023 2022 2021 948 152 947 571 927 654 311 551 310 792 300 624 140 695 149 182 147 242 495 906 487 597 479 788 12 794 15 541 15 674 483 112 472 056 464 116 – – – 3 981 2 312 305 97% 97% 97% 143 9.6 155 149 9.8 9.9 74.9 79.6 77.1 5.0 5.0 5.1 1. 2. 3. 4. Electricity bought from a non renewable tariff linked to Energy Attribute Certificates. Electricity bought from local renewable sources of production and through Energy Attribute Certificates. Being the denominator the sales on a constant currency basis. Energy consumption within the organization. Being the denominator the average FTEs (see table ‘Average number of employees by geographical area’ on p. 107). Energy consumption within the organization. Climate change – energy efficiency in buildings program The energy used in our offices and laboratories worldwide accounts for 84% of our global energy consumption. It is therefore a key area of focus for us to reduce energy use. In 2023, additional buildings were included in the program and further measures were identified across the network. Buildings covered by the EEB program (# of buildings) Energy consumption from buildings covered by the EEB program (% of total energy consumed by SGS buildings) Energy conservation measures identified (# of measures identified since beginning) Vehicle fleet average theoretical emissions (gCO2/km) 1. 2022 vehicle fleet average theoretical emissions was updated following a fleet reclassification. 2023 722 2022 701 2021 694 84% 80% 83% 904 786 708 126.7 129.21 134.6 Non-financial statementsSGS | 2023 Integrated Report 175 Climate change – greenhouse gas (GHG) emissions We have committed to reducing greenhouse gas emissions through the Science Based Targets initiative (SBTi), which advocates the setting of targets and deadlines in line with climate science in order to future-proof growth. In 2023, we have continued our efforts towards these targets by focusing on our major source of scope 1 and 2 emissions (vehicle emissions) and our scope 3 emissions associated to our supply chain. Scope 1 GHG emissions1 Gross scope 1 GHG emissions (tCO2e) Percentage of scope 1 GHG emissions from regulated emission trading schemes (%) Scope 2 GHG emissions2 Gross location-based scope 2 GHG emissions (tCO2e) Gross market-based scope 2 GHG emissions3 (tCO2e) Significant scope 3 GHG emissions Total Gross indirect (scope 3) GHG emissions (tCO2e) 1 Purchased goods and services 2 Capital goods 3 Fuel and energy related activities (not included in scope 1 and scope 2) 4 Upstream transportation and distribution 5 Waste generated in operations 6 Business travel 7 Employee commuting 8 Upstream leased assets 9 Downstream transportation and distribution 10 Processing of sold products 11 Use of sold products 12 End-of-life treatment of sold products 13 Downstream leased assets 14 Franchises 15 Investments Total GHG emissions Total GHG emissions (location-based) (tCO2e) Total GHG emissions (market-based) (tCO2e) Carbon off-setting credits Voluntary carbon-offsetting CO2 credits retired4 (CO2e tons) Carbon off-setting credits Scope 1+2 intensity per sales market based1,2,3,5 (CO2e tons/CHF million) Scope 1+2 intensity per average FTE market based2,3,6 (CO2e tons/FTE) Scope 3 intensity per sales7 (CO2e tons/CHF million) Retrospective Milestones and target years Base year Comparative N %N / N-1 2019 2022 2023 2030 2050 113 443 108 046 104 760 –3% 61 033 11 344 0% 0% 0% 0% 0% 215 752 16 758 220 398 8 459 225 036 7 269 786 371 441 064 137 633 850 621 525 111 131 003 812 049 498 086 127 168 2% –14% -5% -5% -3% – 116 075 9 016 – 423 067 237 292 74 047 76 354 87 454 72 932 –17% 41 078 – 10 531 29 647 91 142 – – – – – – – – – 19 128 18 125 69 800 – – – – – – – – – 19 045 23 003 71 815 – – – – – – – – 0% 27% 3% – 5 666 15 950 49 034 – – – – – – – – – 21 575 1 676 – 78 637 44 106 13 763 7 635 – 1 053 2 965 9 114 – – – – – – – – 1 115 566 916 572 1 179 065 967 126 1 141 845 924 078 –3% –5% 600 174 493 115 111 557 91 657 159 848 116 505 112 029 –4% 21.7 1.4 19.0 1.2 16.9 –11% 1.1 –6% –4% 131.3 138.8 122.6 1. 2. 3. 4. Refrigerant gas emissions are not included in this figure. District Heating emissions are not included in this figure. 97% of total electricity consumption is linked to purchased electricity bundled with instruments: 66% I-RECs, 29% guarantees of origin, 2% RECs, and 3% other country-specific certificates. 100% of carbon credits retired are linked to carbon reduction projects verified against the Clean Development Mechanism standard. The total amount of carbon credits purchased during 2023 were cancelled during the year, with no credits pending to be cancelled next year. 0% of carbon credits were issued from projects in the EU and 0% qualify as a corresponding adjustment under Article. 6 of the Paris Agreement. 2019 credits retired correspond to offsetting emissions of scopes 1, 2 and business travel (3.6) while in 2022 and 2023 credits were retired to offset scopes 1 and 2 only. Being the numerator the total scope 1 + 2 market-based GHG emissions and the denominator the sales on a constant currency basis. Being the numerator the total scope 1 + 2 market-based GHG emissions and the denominator the average FTEs (see table ‘Average number of employees by geographical area’ on p. 107). 5. 6. 7. Being the numerator the total scope 3 GHG emissions and the denominator the sales on a constant currency basis. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 176 Databank continued Water and waste management While our water consumption and waste impact is relatively small compared to other industries, we monitor our impact and reduce our resources’ footprint. Water purchased (m3) Water use/average FTE2 (m3/FTE) Weight of waste generated (metric tons) Weight of hazardous waste generated (metric tons) SGS offices and labs Client samples Weight of non-hazardous waste generated (metric tons) SGS offices and labs Client samples Weight of waste recovered (metric tons) Weight of hazardous waste recovered (metric tons) SGS offices and labs Client samples Weight of non-hazardous waste recovered (metric tons) SGS offices and labs Client samples Environmental incidents (# of environmental incidents including significant spills) 2023 2022 20211 2 051 434 1 985 965 1 919 430 20.8 20.5 20.6 70 348 78 560 65 199 15 020 16 217 13 377* 8 598 10 829 9 710* 6 422 5 388 3 667 55 328 62 343 51 822* 29 448 36 558 29 829* 25 880 25 785 21 993 22 616 24 783 20 888 5 643 5 107 3 521* 2 792 2 851 2 343 2 764 2 435* 1 087 16 973 19 676 17 366* 8 018 8 943 9 374* 8 955 10 733 7 993 29 26 45 1. 2021 values were updated after a reclassification: 1.3 tons of SGS waste were reclassified from non-hazardous to hazardous waste resulting in a change of the figures marked with an *. 2. See table “Average number of employees by geographical area” on p. 107. Non-financial statementsSGS | 2023 Integrated Report 177 2023 Global Reporting Initiative (GRI) content index SGS has reported the information cited in this GRI content index for the period 1 January 2023 to 31 December 2023 with reference to the GRI Standards. GRI standard and disclosure Reference Assured quantitative indicators Assurance GRI 2: General Disclosures 2021 2-1 2-2 2-3 2-4 2-5 2-6 Organizational details Page 98 Entities included in the organization’s sustainability reporting Pages 155-157 and 159 Reporting period, frequency and contact point Pages 159, 204, and 187-189 Restatements of information Page 159 External assurance Pages 65, 159 and 187-189 Activities, value chain and other business relationships Pages 2, 10-11, 32-33, 44-45, 52, 155, 157, 161, 166 and 202 2-7 Employees Pages 42, 167-168 Information regarding the total number of non-guaranteed hours employees, full-time employees and part-time employees including its breakdown by gender and by region is not disclosed. Information not broken down by region as this is considered confidential information. – Spend by SGS category1 – Spend by SGS supra-region1 – Number of employees at year end (# of employees) – Permanent workers (as a % of total employees) – Casual workers (as a % of total employees) 2-9 2-10 2-11 2-12 2-13 2-14 Governance structure and composition Nomination and selection of the highest governance body Chair of the highest governance body Role of the highest governance body in overseeing the management of impacts Delegation of responsibility for managing impacts Role of the highest governance body in sustainability reporting Pages 50-65 Page 54 and 58 Page 18, 55 and 60 Page 59-60 Page 18 and 59-60 Page 18 and 59-60 2-15 Conflicts of interest Page 58 and 61 2-16 Communication of critical concerns Page 61, 164 and 203 – Total number of substantiated breaches of the Code of Integrity received through integrity helplines and broken down by type of breach – Total number of integrity issues reported through integrity helplines 2-17 Collective knowledge of the highest governance body Pages 18 and 59 The sustainability committee receives regular information about SGS sustainability programs and initiatives. New regulations or requirements are analyzed during the regular meetings to assess their potential impact in SGS operations, supply chain and services. Specific analysis sessions are organized on demand depending on the level of complexity of a given topic and additional training needs are constantly evaluated. 2-18 Evaluation of the performance of the highest governance body Page 54, 58 and 66 2-19 Remuneration policies Pages 66-91 2-20 Process to determine remuneration Pages 66-91 2-21 Annual total compensation ratio Pages 66-91 and 171 The information is limited only to CEO and mean employee compensation ratio as this is confidential information. – CEO and mean employee compensation ratio 2-22 Statement on sustainable development strategy Pages 5-7 2-23 Policy commitments Page 3 and 199 Code of integrity SGS Code of Conduct for Suppliers 1. Additional information to the GRI requirements. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 178 2023 GRI content index continued GRI standard and disclosure Reference Assured quantitative indicators Assurance 2-24 Embedding policy commitments Page 3, 61 and 202 2-25 2-26 2-27 Processes to remediate negative impacts Mechanisms for seeking advice and raising concerns Compliance with laws and regulations Pages 25-31 and 197-203 Page 203 As indicated in our Code of Integrity, SGS complies with applicable laws in the countries where it does business. During 2023 the SGS Group was not condemned to any significant fines or penalties for non-compliance with any kind of laws and regulations. – Fines for non-compliance with regulations 2-28 Membership associations Page 165 2-29 Approach to stakeholder engagement Pages 22-23 2-30 Collective bargaining agreements Page 167 We respect our employees’ right to have collective representation and to enter into collective bargaining agreements where this is accepted by local law. – Contributions to trade associations – Customer satisfaction score1 (as a % score) – Engagement index1 – Percentage of employees covered by collective bargaining GRI 3: Material Topics 2021 3-1 3-2 3-3 Process to determine material topics List of material topics Pages 22-24, 159 Pages 24, 159 Management of material topics Pages 24, 159 GRI 201: Economic Performance 2016 3-3 Management of material topics Pages 34-37 201-1 Direct economic value generated and distributed – Total economic value generated: CHF 6 651 million (Sales: CHF 6 622 million; Financial income: CHF 29 million) – Total economic value distributed: CHF 6 697 million (Salaries and wages: CHF 3 316 million; Subcontractors’ expenses: CHF 400 million; Depreciation, amortization and impairment: CHF 545 million; Other operating expenses (including other taxes, community contributions and charitable donations): CHF 1 511 million; Financial expenses: CHF 86 million; Dividends distributed (expected): CHF 634 million; Income taxes CHF 205 million) – Total economic value generated – Total economic value distributed – Total economic value retained 201-2 201-3 201-4 Financial implications and other risks and opportunities due to climate change Defined benefit plan obligations and other retirement plans Financial assistance received from government – Total economic value retained: CHF –46 million Pages 190-196 Page 124-129 SGS does not receive any significant financial assistance from governments, but we benefit from incentives in the form of grants from certain government schemes, such as energy- saving incentives. However, these benefits are of low value. This information is based on our global information gathering system. We are not aware of any significant incentives granted by governments or any financial aid granted to political parties at local level during 2023. GRI 202: Market Presence 2016 3-3 Management of material topics Page 171 202-1 Ratios of standard entry level wage by gender compared to local minimum wage SGS is committed to comply with the applicable labor regulations in the countries where we operate. Whenever possible, we improve the minimum wages set by the local legislation. The quantitative information breakdown is unavailable. The deployment of our global HR data management tool is under review. We are currently evaluating alternative reporting options and expect to report in coming years. 1. Additional information to the GRI requirements. Non-financial statementsSGS | 2023 Integrated Report 179 GRI standard and disclosure Reference Assured quantitative indicators Assurance GRI 203: Indirect Economic Impacts 2016 3-3 Management of material topics Pages 32-33 and 162-163 203-2 Significant indirect economic impacts GRI 204: Procurement Practices 2016 Pages 32-33 and 162-163 3-3 Management of material topics Pages 44-45 204-1 Proportion of spending on local suppliers Page 166 The percentage of global and local suppliers is calculated considering 92% of the global spend. We consider global suppliers those managed by Global Procurement at corporate level and local suppliers those managed by local procurement teams at affiliate/regional level, regardless of where the supplier is based or the number of affiliates where it provides its services/deliver its products. – Number of local suppliers (as a % of total suppliers) – Number of global suppliers (as a % of total suppliers) – Spend of local suppliers (as a % of total spend) – Spend of global suppliers (as a % of total spend) GRI 205: Anti-corruption 2016 3-3 Management of material topics Pages 42-43 205-1 Operations assessed for risks related to corruption Our non-financial macro risk assessment model analyzes economic, political, social and environmental risks across 220 geographies and includes our own employees, suppliers, indigenous people, migrant labor and local communities. The analysis of economic and political risks includes the following categories: government instability, policy instability, state failure, recession, inflation, currency depreciation, capital transfer, sovereign default, under-development, tax issues, corruption, infrastructural disruption, energy security, cybersecurity commitment, data protection and regulatory. Our most recent risk assessment was performed in 2022 and the results of that assessment resulted in the following risk exposure: – Direct operations (as a % of sales): Low 58%; Medium 40%; High 2% – Supply chain (as a % of spend): Low 59%; Medium 40%; High 1% 205-2 Communication and training about anti-corruption policies and procedures This selected indicator was externally assured by PwC as part of the assurance of the 2022 Integrated Report. Pages 42-43, 164, 203 Breakdown by gender and employee category is not reported as this is considered confidential information. The calculation is based exclusively on for permanent workers. – Percentage of employees trained on the Code of Integrity 205-3 Confirmed incidents of corruption and actions taken Page 164 In 2023, there were no public legal cases regarding corruption brought against the organization or its employees. – Number and nature of confirmed incidents of corruption identified through corporate helplines GRI 206: Anti-competitive Behavior 2016 3-3 Management of material topics We are committed to using competitive and fair practices. As such, we do not engage in any understandings or agreements that may improperly influence markets, or discuss pricing, competitive bid processes, contractual terms, division of territories or customer and market allocations with competitors. We do not make disparaging or untruthful allegations regarding competitors, or endeavor to obtain confidential information about them using illegal or unethical means. Finally, our services and capabilities are never advertised in any way that could appear to be deceptive or misleading. We provide customers with detailed quotes and invoices so that they are informed about every aspect of our service, including pricing. Our Global Pricing Initiative, developed through expert review of pricing practices across the Group, ensures robust pricing processes and governance. 206-1 Legal actions for anti-competitive behavior, anti-trust, and monopoly practices In 2023, we did not identify any legal actions related to anti- competitive behavior, antitrust and monopoly practices. This information is based on our global information gathering system based on incidents reported via the SGS integrity helplines. We are not aware of any significant incidents of this type at a local level during 2023. – Number of legal actions pending or completed during the reporting period regarding anti-competitive behavior and violations of anti-trust and monopoly legislation in which the organization has been identified as a participant Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 180 2023 GRI content index continued GRI standard and disclosure Reference Assured quantitative indicators Assurance GRI 207: Tax 2019 3-3 Management of material topics Pages 109-110 GRI 302: Energy 2016 3-3 Management of material topics Pages 46-47 302-1 Energy consumption within the organization Pages 46-47, 174 The information reported is limited to the total fuel and the total electricity consumption broken down by renewable and non-renewable electricity. Heating consumption, cooling consumption and steam consumption are not reported as it is not applicable to SGS. 302-3 Energy intensity Pages 46-47, 174 302-4 Reduction of energy consumption Page 174 GRI 303: Water and Effluents 2018 3-3 Management of material topics 303-5 Water consumption GRI 304: Biodiversity 2016 3-3 Management of material topics GRI 305: Emissions 2016 3-3 Management of material topics 305-1 Direct (Scope 1) GHG emissions Compared to 2022, our energy consumption has increased by 0.06% in 2023. Variation in the energy consumption is calculated as a gross percentage between the total consumption of energy, within the organization in 2022 and 2023 (not based on SGS energy efficiency initiatives). Not applicable. Given our activity, we are not a company with high water consumption, hence why this is not a material topic for us. Page 176 The information reported is limited to the total water consumption. Not applicable. Being a service based company, SGS does not have a significant impact on biodiversity. Pages 46-47 Our base year is 2019 as, given the Covid crisis, we consider it to be the most representative year in terms of business activity. Pages 46-47, 175 We are currently improving our refrigerant gases collection system to ensure the accuracy of the data. To date, reliable data about refrigerant consumption is unavailable and therefore they are excluded from the Group’s carbon footprint. 305-2 Energy indirect (Scope 2) GHG emissions Pages 46-47, 175 305-3 Other indirect (Scope 3) GHG emissions Pages 46-47, 175 305-4 GHG emissions intensity Pages 46-47, 175 – Total energy consumption (MWh) – Total energy consumption by use (MWh) – Vehicle fuels energy (MWh) – Non-transport fuels energy (MWh) – Total electricity (MWh) – Standard electricity (MWh) – Renewable electricity (MWh) – Total renewable electricity (as % of total electricity consumption) – Energy intensity per sales (MWh/CHF million) – Energy intensity per FTE (MWh/FTE) – Water purchased (m3) – Gross scope 1 GHG emissions (tCO2e) – Gross location-based scope 2 GHG emissions (tCO2e) – Gross market-based scope 2 GHG emissions3 (tCO2e) – Total Gross indirect (scope 3) GHG emissions (tCO2e) – Purchased goods and services – Capital goods – Fuel and energy related activities (not included in Scope 1 and Scope 2) – Waste generated in operations – Business travel – Employee commuting – Scope 1+2 intensity per sales market based (CO2e tons/CHF million) – Scope 1+2 intensity per FTE market based (CO2e tons/FTE) – Scope 3 intensity per sales (CO2e tons/CHF million) Non-financial statementsSGS | 2023 Integrated Report 181 GRI standard and disclosure Reference Assured quantitative indicators Assurance 305-5 Reduction of GHG emissions Pages 46-47, 175 Scopes 1 and 2 absolute GHG emissions have decreased by 14% since 2019. Score 3 absolute GHG emissions have increased by 3.3% since 2019. Variation in GHG emissions is calculated as a gross percentage between the total emissions, within the organization against a 2019 baseline (not based on SGS reduction initiatives). – Scope 1+2 emissions variation (as a % against a 2019 baseline) – Scope 3 emissions variation (as a % against a 2019 baseline) – Weight of waste generated (metric tons) – Weight of hazardous waste generated (metric tons) – Weight of non-hazardous waste generated (metric tons) – Environmental incidents (as # of environmental incidents including significant spills) – Weight of waste recovered (metric tons) – Weight of hazardous waste recovered (metric tons) – Non-hazardous waste recovered (metric tons) – New hires (# of employees) – Voluntary turnover (as a % of permanent employees) – Total turnover by gender (as a % of total permanent employees) GRI 306: Waste 2020 3-3 Management of material topics Pages 46-47 306-3 (2020) Waste generated Pages 46-47, 176 306-3 (2016) Significant spills Pages 46-47, 176 306-4 Waste diverted from disposal Pages 46-47, 176 GRI 308: Supplier Environmental Assessment 2016 3-3 Management of material topics Pages 44-45 308-2 Negative environmental impacts in the supply chain and actions taken Page 166 The information reported is limited to the number of suppliers assessed for environmental impacts. Our most recent risk assessment was performed in 2022. This selected indicator was externally assured by PwC as part of the assurance of the 2022 Integrated Report GRI 401: Employment 2016 3-3 Management of material topics Pages 42-43 401-1 New employee hires and employee turnover Page 170-171 Information not broken down by region. 401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees 401-3 Parental leave We offer benefits such as healthcare plans and occupational pension plans to our employees considering their type of contract. Many of our affiliates provide paid maternity and paternity leave in excess of legally required minimum. For example, SGS in Switzerland offers 16 weeks of maternity leave paid at 100%. SGS in Australia offers 8 weeks of paid maternity leave in excess of the local legally required minimums and SGS in South Africa, offers 5 paid days while local regulation provides 3 paid days. We also provide different childcare facilities in many of our affiliates. Some of our offices count with special rooms equipped with armchairs and freezers dedicated to breastfeeding. We also offer our employees the possibility of flexible working arrangements such as flexible check-in and checkout, remote or part-time working to promote worklife balance. No quantitative information available. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 182 2023 GRI content index continued GRI standard and disclosure Reference Assured quantitative indicators Assurance GRI 402: Labor/Management Relations 2016 3-3 Management of material topics 402-1 Minimum notice periods regarding operational changes We strictly adhere to tariff structures and arrangements negotiated with trade unions, while we also inform and consult employees on relevant business activities. We respect statutory minimum notice periods and give reasonable notice of any significant operational changes in line with local practices and labor markets. Our affiliates’ communication and consultation processes are tailored to local needs. Organizational changes and relevant events that occur are formally communicated in compliance with the different regulations that apply both globally and locally as well as, when applicable, in accordance with what is established in the collective bargaining agreements of the group’s companies. GRI 403: Occupational Health and Safety 2018 3-3 Management of material topics Pages 42-43 403-1 403-2 Occupational health and safety management system Pages 42-43, 201 Hazard identification, risk assessment, and incident investigation All site managers are expected to perform risk assessments and to develop associated action plans. Employees have the right to stop work at any time, without reprisal, if they consider there to be a health, safety or environmental risk. Any such instances are reported through our Crystal OI system. Our OI management system defines the criteria to be met to comply with our own requirements and with the local laws and regulations. To ensure compliance, we audit regions and countries centrally, while local OI managers audit our laboratories, offices and facilities. The audit results go into our performance reports, along with incidents and hazards information captured in Crystal. 403-3 Occupational health services Pages 42-43 403-4 Worker participation, consultation, and communication on occupational health and safety Pages 42-43 Each role at SGS requires specific OI knowledge to support the safety and well-being of our employees. All employees are given training on site standard operating procedures, along with regular training sessions on Group OI management systems and Rules for Life. We also operate a behavior-based safety peer-to-peer observation program. Page 201 In line with our culture of care, we promote initiatives to enhance the physical and mental well-being of our employees so as to ensure their fitness for work. This includes the provision of preventative health measures, such as vaccinations, mental and physical health programs focused on awareness, support and resilience. Pages 42-43 403-5 Worker training on occupational health and safety 403-6 Promotion of worker health 403-7 Prevention and mitigation of occupational health and safety impacts directly linked by business relationships 403-8 Workers covered by an occupational health and safety management system Page 172 We only report on the number of sites certified and the number of employees covered by certified management systems. 403-9 Work-related injuries Page 172 2 fatalities occurred in 2023. – FTE covered by ISO 45001 standard (number of FTE) – Total Recordable Incident Rate (TRIR) (occurrences per 200 000) – Lost Time Incident Rate (LTIR) (occurrences per 200 000) – Sickness absence rate (as a % of days of sickness absence per total days worked) – Total absence rate (as a % of days of sickness absence plus days lost per incidents with lost time per total days worked) Non-financial statementsSGS | 2023 Integrated Report 183 GRI standard and disclosure Reference Assured quantitative indicators Assurance 403-10 Work-related ill health Page 172 Information not broken down by gender and employee category. Number of fatalities as a result of work-related ill health: 0 – The number of fatalities as a result of work-related ill health GRI 404: Training and Education 2016 3-3 Management of material topics Pages 39-41 404-1 Average hours of training per year per employee Page 169 Information not broken down by gender and employee category. 404-2 404-3 Programs for upgrading employee skills and transition assistance programs Percentage of employees receiving regular performance and career development reviews Pages 39-41 Page 169 GRI 405: Diversity and Equal Opportunity 2016 3-3 Management of material topics Pages 42-43 – Training ratio (as a % of total employment cost spent on training) – Percentage of employees trained on the Code of Integrity – Performance reviews (as a % of employees eligible to performance review) 405-1 Diversity of governance bodies and employees Page 55-57, 62-63, 168 The Board of Directors is composed of 9 members (6 men and 3 women). The Operations’ Council is composed of 16 members (14 men and 2 women). – Percentage of employees by gender – Percentage of managers by gender – Percentage of women in leadership positions (CEO-3) – Diversity on the Board and Operations Council by gender, nationality and age 405-2 Ratio of basic salary and remuneration of women to men Page 171 GRI 406: Non-discrimination 2016 3-3 Management of material topics Pages 42-43, 201 406-1 Incidents of discrimination and corrective actions taken Pages 167, 203 GRI 407: Freedom of Association and Collective Bargaining 2016 3-3 Management of material topics Page 167 – Total number of proven incidents of discrimination 407-1 Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk Page 167, 201 Our most recent risk assessment was performed in 2022. This selected indicator was externally assured by PwC as part of the assurance of the 2022 Integrated Report. – Number of operations identified as having a significant risk of incidences of child labor, forced or compulsory labor, or where the right to exercise freedom of association may be violated GRI 408: Child Labor 2016 3-3 Management of material topics Page 201 408-1 Operations and suppliers at significant risk for incidents of child labor Page 167, 201 Our most recent risk assessment was performed in 2022. This selected indicator was externally assured by PwC as part of the assurance of the 2022 Integrated Report. – Number of operations identified as having a significant risk of incidences of child labor, forced or compulsory labor, or where the right to exercise freedom of association may be violated GRI 409: Forced or Compulsory Labor 2016 3-3 Management of material topics Page 201 409-1 Operations and suppliers at significant risk for incidents of forced or compulsory labor Page 167, 201 Our most recent risk assessment was performed in 2022. This selected indicator was externally assured by PwC as part of the assurance of the 2022 Integrated Report. – Number of operations identified as having a significant risk of incidences of child labor, forced or compulsory labor, or where the right to exercise freedom of association may be violated GRI 413: Local Communities 2016 3-3 Management of material topics Pages 44-45 Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 184 2023 GRI content index continued GRI standard and disclosure Reference Assured quantitative indicators Assurance 413-1 Operations with local community engagement, impact assessments, and development programs Pages 44-45 We have implemented such programs in 53% of our affiliates. “Community investments” reported in previous years is now reported as “Community donations”. – Community donations (CHF thousands on constant currency basis) – Total community projects (# of projects) – Community hours (# of hours dedicated to community) 413-2 Operations with significant actual and potential negative impacts on local communities Pages 44-45, 162-163 GRI 414: Supplier Social Assessment 2016 3-3 Management of material topics Pages 44-45 414-2 Negative social impacts in the supply chain and actions taken Page 166 Our most recent risk assessment was performed in 2022. This selected indicator was externally assured by PwC as part of the assurance of the 2022 Integrated Report. GRI 415: Public Policy 2016 3-3 Management of material topics Page 165 415-1 Political contributions Page 165 GRI 417: Marketing and Labeling 2016 3-3 Management of material topics We provide customers with detailed quotes and invoices so that they are informed about every aspect of our service, including pricing. Our Global Pricing Initiative, developed through expert review of pricing practices across the Group, ensures robust pricing processes and governance. 417-2 Incidents of non-compliance concerning product and service information and labeling In 2023, we were not issued with any significant fines or penalties for non-compliance with regulations concerning product and service information and labelling. 417-3 Incidents of non-compliance concerning marketing communications In 2023, we were not issued with any significant fines or penalties for non-compliance with regulations concerning marketing communications. GRI 418: Customer Privacy 2016 3-3 Management of material topics Pages 39-41 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data Pages 39-41, 167 The total number of identified leaks, thefts, or losses of customer data is not reported. – Contributions to local, regional or national political campaigns, organizations or candidates (CHF) – Total number of incidents of non- compliance with regulations and/or voluntary codes concerning product and service information and labeling – Total number of incidents of non- compliance with regulations and/or voluntary codes concerning marketing communications, including advertising, promotion, and sponsorship – Number of substantiated complaints concerning breaches of data customer policy – Number of complaints from regulatory bodies – Number of complaints received from outside parties and substantiated by the organization Non-financial statementsSGS | 2023 Integrated Report 185 Sustainable Accounting Standards Board (SASB) framework alignment The following tables illustrate how the Company’s sustainability disclosures align with the SASB Disclosure Topics for the Professional & Commercial Services industry, and where specific information may be found. Sustainability disclosure topics and accounting metrics Topic Code Accounting metric Data Security SV-PS-230a.1 Description of approach to identifying and addressing data security risks Level of disclosure Page number(s) and/or URL(s) Disclosed Pages 39-41 SV-PS-230a.2 Description of policies and practices relating to collection, usage, and retention of customer information Disclosed Privacy at SGS Privacy policy SV-PS-230a.3 (1) Number of data breaches (2) Percentage involving customers’ confidential business information (CBI) or personally identifiable information (PII) (3) Number of customers affected Disclosed Page 167 Workforce Diversity & Engagement SV-PS-330a.1 Percentage of gender and racial/ethnic group representation for (1) Executive management, and (2) All other employees Disclosed Pages 55-57, 62-63, 168-169 SV-PS-330a.2 (1) Voluntary, and (2) Involuntary turnover rate for employees SV-PS-330a.3 Employee engagement as a percentage Professional Integrity SV-PS-510a.1 Description of approach to ensuring professional integrity Disclosed Pages 170-171 Disclosed Disclosed Page 170 Page 42-43, 164 SV-PS-510a.2 Total amount of monetary losses as a result of legal proceedings associated with professional integrity Disclosed Code of integrity Privacy policy In 2023, we were not issued with any significant fines or penalties for noncompliance with regulations associated with professional integrity Activity metrics Activity metric Number of employees by: (1) Full-time and part-time (2) Temporary, and (3) Contract Code Level of disclosure Page number(s) and/or URL(s) SV-PS-000.A Partial1 Page 167 Employee hours worked; percentage billable SV-PS-000.B Not available2 – FTEs, number of employees and percentage of casual and permanent workers are disclosed. We are working on reporting the requested breakdown in future reports. 1. 2. We are working on reporting these figures in future reports. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 186 Non-financial matters required by article 964b of the Swiss Code of Obligations In compliance with the new Swiss rules on non-financial reporting (article 964b of the Swiss Code of Obligations), Shareholders are invited to approve a report on non-financial matters. The Company publishes an integrated report, which covers a larger scope than is strictly required by legislation. The vote of the shareholders is limited to the contents included in the following table. Requirement Sections in the Integrated Report Description of the business model Testing, Inspection and Certification industry overview TIC in focus Description of the policies adopted in relation to the relevant matters and measures taken to implement these policies Environmental matters Social issues Employee related issues Natural capital TCFD Report Social and relationship capital Human capital Human rights report Respect for human rights Human capital Combating corruption Description of the main risks related to the relevant matters and how the undertaking is dealing with these risks Human rights report Our principal risks Human capital Our material topics Risk management Our principal risks Main performance indicators Our progress towards our sustainability ambitions 2030 Databank Page number(s) Pages 10 and 11 Pages 12 and 13 Pages 46 and 47 Pages 190 to 196 Pages 44 and 45 Pages 42 and 43 Pages 197 to 203 Pages 42 and 43 Pages 197 to 203 Page 30 Pages 42 and 43 Page 24 Pages 25 to 27 Pages 28 to 31 Pages 160 to 161 Pages 164 to 176 References to national, European or international regulations Our approach to sustainability reporting (External standards) Page 159 2023 GRI content index Pages 177 to 184 Sustainable Accounting Standards Board (SASB) framework alignment Page 185 Coverage of subsidiaries Our approach to sustainability reporting (Scope and boundaries) Page 159 Non-financial statementsSGS | 2023 Integrated Report 187 Independent practitioner’s limited assurance report on selected 2023 sustainability indicators presented in the non-financial statements section of the 2023 Integrated Report to the Board of Directors of SGS SA Geneva We have been engaged by the Board of Directors to perform assurance procedures to provide limited assurance on selected 2023 sustainability indicators (including the GHG statement) of SGS SA and its consolidated subsidiaries (‘SGS SA’) presented in the non-financial statements section of the Integrated Report (‘Report’) for the year ended 31 December 2023. Our limited assurance engagement focused on selected 2023 sustainability indicators as presented in the 2023 GRI Content Index of the Report on pages 177 to 184 as marked with the check mark . We do not comment on, nor conclude on any prospective or retrospective information nor did we perform any assurance procedures on the information other than those marked with the check mark for the reporting period 2023, accordingly we provide no assurance on other information. The selected indicators (including statements on greenhouse gases) in the Report were prepared by SGS SA based on the criteria disclosed on page 159 in the section ‘Our approach to sustainability reporting’ defining those procedures, by which the related sustainability indicators are internally gathered, collated and aggregated. Further, this section describes and defines the principles, processes as well as data collection and reporting. The section ‘Our approach to sustainability reporting’ and the document ‘Basis of reporting’ have been developed using, among others, the GRI Sustainability Reporting Standards (GRI Standards) published by the Global Reporting Initiative (GRI), Version 2021 and the GHG Protocol Corporate Accounting and Reporting Standard, Corporate Standard, Revised edition (GHG Protocol Standard). We evaluated the selected indicators 2023 against the GRI Standards and the GHG Protocol Standard (‘reporting Criteria’). Inherent limitations The accuracy and completeness of the selected 2023 sustainability indicators (including the GHG statement) in the Report are subject to inherent limitations given their nature and methods for determining, calculating and estimating such data. In addition, the GHG quantification is subject to inherent uncertainty, because of incomplete scientific knowledge used to determine GHG emissions factors and values needed to combine e.g. emissions of different gases. Our assurance report should therefore be read in connection with the reporting Criteria. Board of Directors’ responsibility The Board of Directors of SGS SA is responsible for the preparation and presentation of the Report (including the GHG statement) in accordance with the reporting Criteria. This responsibility includes the design, implementation, and mainte- nance of the internal control system related to the preparation and presentation of the 2023 Integrated Report of SGS that is free from material misstatement, whether due to fraud or error. Furthermore, the Board of Directors is responsible for the selection and application of the reporting Criteria and adequate record keeping. PricewaterhouseCoopers SA, avenue Giuseppe-Motta 50, case postale, 1211 Genève 2, Switzerland Telephone: +41 58 792 91 00, www.pwc.ch PricewaterhouseCoopers SA is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 188 Independence and quality management We are independent of the SGS SA in accordance with the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code). We have fulfilled our other ethical responsibilities in accordance with the IESBA Code, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour. PricewaterhouseCoopers SA applies International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements. Practitioner’s responsibility Our responsibility is to perform a limited assurance engagement and to express a limited assurance conclusion on selected 2023 sustainability indicators (including the GHG statement) as presented in the 2023 GRI Content Index of the Report on pages 177 to 184 as marked with the check mark . We conducted our engagement in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (Revised) ‘Assurance engagements other than audits or reviews of historical financial information’ and the International Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements (‘ISAE 3410’), issued by the International Auditing and Assurance Standards Board. These standards require that we plan and perform this engagement to obtain limited assurance about on whether anything has come to our attention that causes us to believe that the selected 2023 sustainability indicators (including the GHG statement) presented in the 2023 GRI content index of the Report on 177 to 184, as marked with the check mark not, in all material aspects, prepared in accordance with the reporting Criteria. , were Based on risk and materiality considerations, we performed our procedures to obtain sufficient and appropriate assurance evidence. The procedures selected depend on the assurance practitioner’s judgement. A limited assurance engagement under ISAE 3000 (Revised) and ISAE 3410 is substantially less in scope than a reasonable assurance engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the procedures performed in response to the assessed risks. Consequently, the nature, timing and extent of procedures for gathering sufficient appropriate evidence are deliberately limited relative to a reasonable assurance engagement and therefore less assurance is obtained with a limited assurance engagement than for a reasonable assurance engagement. Summary of the work performed Our limited assurance procedures included, among others, the following work: • • • • • Assessment of the section ‘Our approach to sustainability reporting’ in the Report and the SGS Group Sustainability Manual and observing the application, including the criteria to determine whether they are appropriate when applied in relation to the disclosures and indicators; Interviewing SGS representatives at Group and at affiliate level in Brazil, Canada, China, Germany, New Zealand, United Arab Emirates, United States and Taiwan responsible for the data collection and reporting; Inquiries of personnel involved in the preparation of the Report regarding the preparation process, the internal con- trol system relating to this process and selected disclosures in the Report; Inspecting the relevant documentation on a sample basis; Performing tests of details on a sample basis as evidence supporting the selected 2023 sustainability indicators concerning completeness, accuracy, adequacy and consistency. We have not carried out any work on data other than for those selected indicators as defined above. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our assurance conclusions. Conclusion Based on the work we performed, nothing has come to our attention that causes us to believe that the selected 2023 sustainability indicators (including the GHG statement) as presented in the 2023 GRI Content Index of the 2023 Integrated Report of SGS SA for the period ended 31 December 2023 as marked with the check mark prepared, in all material respects, in accordance with the reporting Criteria. are not 2 SGS SA | Independent practitioner’s limited assurance report Non-financial statementsSGS | 2023 Integrated Report 189 Intended users and purpose of the report This report is prepared for, and only for, the Board of Directors of SGS SA, and solely for the purpose of reporting to them on the selected 2023 sustainability indicators (including the GHG statement) as presented in the 2023 GRI Content Index of the Report as marked with the check mark and no other purpose. We do not, in giving our conclusion, accept or assume responsibility (legal or otherwise) or accept liability for, or in connection with, any other purpose for which our report including the conclusion may be used, or to any other person to whom our report is shown or into whose hands it may come, and no other persons shall be entitled to rely on our conclusion. We permit the disclosure of our report, in full only and in combination with the reporting Criteria, to enable the Board of Directors to demonstrate that they have discharged their governance responsibilities by commissioning an independent assurance report over the selected 2023 sustainability indicators (including the GHG statement) as presented in the 2023 GRI Content Index of the Report as marked with the check mark responsibility or liability to any third parties on our part. To the fullest extent permitted by law, we will not accept or assume responsibility to anyone other than the Board of Directors of SGS SA for our work or this report. without assuming or accepting any PricewaterhouseCoopers SA Guillaume Nayet Maegan Gokarn Geneva, 21 February 2024 ‘The maintenance and integrity of SGS SA’s website and its content are the responsibility of the Board of Direc- tors; the work carried out by the assurance provider does not involve consideration of the maintenance and in- tegrity of the SGS SA website and, accordingly, the assurance providers accept no responsibility for any changes that may have occurred to the selected 2023 sustainability indicators or reporting Criteria since they were initially presented on the website.’ 3 SGS SA | Independent practitioner’s limited assurance report Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 190 TCFD report We are leading the way on climate change. This report presents SGS’s governance, strategy, management practices and metrics in relation to climate change and its impact on the organization. This report follows Task Force on Climate-Related Financial Disclosures (TCFD) recommendations and methodology, which we will further adopt going forward. TCFD report Introduction Governance Risk management Strategy Scenario analysis and quantification of financial impact Metrics and targets 190 191 192 192 193 195 196 AppendixSGS | 2023 Integrated Report TCFD report As a sustainability leader, SGS is committed to a climate change strategy and to helping our customers transition to a low carbon economy. 191 During the last three years, we have worked on embedding climatic risks and opportunities in our company decision making. In 2022 we quantified the financial impact of some of our key transition risks and opportunities and in 2023 we performed a quantitative assessment of the direct impact of physical climate risks on a selection of 80 buildings owned by SGS. Introduction To add to our industry leading sustainability performance and reporting, and to meet future reporting requirements, we are publishing our TCFD report. The purpose of the TCFD is to promote international financial stability through the provision of consistent information to financial market participants that assess and value climate-related risks and opportunities. This increases our transparency and will help our stakeholders make more informed decisions when engaging with SGS. It also aligns with the Swiss regulation, according to which, from 2024, large Swiss firms will be legally bound to report on climate issues including climate-related risks and opportunities. Inspector, Industries & Environment, Belgium. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 192 TCFD report continued Governance Board oversight The SGS Board of Directors is ultimately responsible for the direction of the Group. This includes assessing risks facing the business and reviewing risk management and mitigation policies. The Board is ultimately responsible for SGS’s group strategy, mission and values, including those related to climate change. In 2023, the Sustainability Committee met four times. During these meetings, the members of the Board receive reports on progress against our corporate targets and information about specific projects targeting key sustainability matters, including climate-related issues. The Board of Directors, the Sustainability Committee and the Audit Committee review, discuss and approve our climate change risk strategy and assess the effectiveness and appropriateness of the Group’s risk management, internal controls and governance processes as well as the reliability of internal financial and operational information. They also review and guide our risk management policies and ensure that the standards and policies of the Group are respected. The cross-membership organization of the board contributes to the robustness of discussions and transparency. By reviewing and guiding risk management policies, the Board gets the information it needs to follow up on climate change risk issues and give direction to the organization, as this information enables it to mitigate risks and identify potential areas for improvement. Management’s role Our Operations Council, chaired by the CEO, formulates, approves and implements group strategy. It also approves and implements more detailed strategies, policies and targets through all operations across the Group including those related to climate change. During the Operations Council’s monthly meetings, sustainability and climate change are usually an agenda item and the corporate sustainability team often attends these meetings to present and discuss sustainability and climate change topics. The Operations Council is comprised of a wide range of senior management representing the full breadth of the SGS Group: • The chief operating officers provide insight in terms of our operations at a regional level (e.g. the impact that a climate mitigation program could have on the regions or how to best implement it) • The executive vice presidents provide insight in relation to our services (e.g. how to maximize the opportunities that climate change brings in relation to our service offer) • The senior vice presidents provide insight in relation to our functions (for example, the chief compliance and legal officer advises on the legal implications of climate change and associated regulation), processes and risks, including those related to climate change These are monitored on an ongoing basis by the Board of Directors with the approval of the Operations Council. Environment, social and governance (ESG) metrics are included in the long-term incentive scheme for all executive members and local management teams across the organization, accounting for 20% of the incentive opportunity. For more information, please see pages 85-87 Risk management Identifying and assessing risks Climatic risks and opportunities are identified through various channels: • Climatic scenario analysis: through climatic analysis models, market trends, upcoming regulations and megatrends • Our operations: they are up to date with market changes that can result in risks and/or opportunities • Business continuity team: analyzes, anticipates and prepares the organization for potential business disruption, which includes extreme weather events Identified climatic risks include upstream and downstream activities across the supply chains for all our stakeholders, which are input into our risk intelligence tool for evaluation. Managing impact In addition to identifying and evaluating potential risks, our operations and functions at local, regional and global levels are required to explain the associated mitigation programs, in order to define the residual risks. These residual risks are then evaluated against SGS risk appetite and risk tolerance level. Executive vice presidents of each of our business lines consider climatic risks when defining the strategy of the business line and in their financial planning. In most cases, where a portion of the business could be disrupted due to market or regulatory changes, this includes diversifying into other services or geographies, and investing where new opportunities are likely to appear or where there may be an increase in demand for an existing service. These risks and opportunities are prioritized depending on this assessment. Integration with risk management We manage climatic risks in our operations through our risk management framework. For more information, please see page 25 The objective is to ensure that the risks faced by SGS are managed properly to reduce the impact of negative risks while increasing the impact of opportunities, and to provide a tool for reporting risk to key stakeholders, senior management, the Board of Directors and our external community. AppendixSGS | 2023 Integrated Report 193 Strategy Main climate-related risks and opportunities Time horizons We have defined the following time horizons for climate-related risks and opportunities: Time horizon Short term Time period Present to 2024 Rationale Our Sustainability Ambitions 2030 set short-term targets Time horizon Medium term Time period 2024 to 2030 Rationale Our Sustainability Ambitions 2030 set medium-term targets Time horizon Long term Time period 2030 to 2050 Rationale We are committed to achieving Net Zero by 2050 These horizons were chosen because they are aligned with our business and sustainability strategies. Below are the main risks and opportunities that could have a financial impact on the organization: Main climate-related risks identified Risk category & risk Impact description price of carbon y Increasing r o t a l u g e R Increased compliance costs l y Failing to adapt g to new low o carbon o n technologies h c e T An increase in the price of carbon off-sets (to maintain our carbon neutrality) and an increase in carbon taxes from governments. Mitigation Reduce our carbon emissions and energy consumption through our climate change mitigation strategy. Implement a strategy to mitigate the increase in carbon offsets and increase self-generation of renewables. Time horizon and geography Medium term Global Higher operational costs to comply with climate related legislation (e.g. EU Taxonomy, adoption of TCFD recommendations, etc.) We take a proactive approach and adopt best-in-class practices towards climate change mitigation and adaptation. Short term Global Not adopting low carbon technologies (such as low carbon vehicles, energy efficiency measures for our buildings or renewable energy generation) would reduce our competitiveness and affect our reputation. Our climate change mitigation strategy ensures that we continuously innovate, for example through our Energy Efficiency in Buildings program, or our vehicle emissions policy. Medium term Global demand t Shifts in service e k r a M Market changes due to climate change can have a significant impact on client demand for SGS services, either directly or indirectly. Some of the specific potential shifts we have identified by business line are: • Natural Resources: risks associated with coal phaseout and different types of crops in several regions, and with climate change regulation and market demands • Connectivity & Products: two potential risks associated with carbon pricing and changes in customer behavior • Industries & Environment and Business Assurance (prev. Knowledge): risks associated with transition- related new markets Medium term Global We are diversifying our market segment, to increase sales from markets that will be developing as a result of climate change. Key to this are our sustainability services, a wide range of services that help organizations to implement better and more efficient processes, address stakeholder concerns, address risks and accomplish their sustainability goals. The impact of this mitigation measure is displayed as an opportunity below, under “Main climate- related opportunities.” Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 194 TCFD report continued Risk category & risk Impact description Mitigation reputation n Climate o i t a t u p e R weather l Extreme a c i s y h p e t u c A l Increase a c in mean i s y temperatures h p c i n o r h C Failing to address appropriately our impact on climate change, or to comply with climate regulations, would impact the value of our brand and imply the loss of clients. Our sustainability team ensures that our approach to addressing climate change is best- in-class and credible. Our sustainability and legal teams ensure that we stay up to date with legislation and comply with all regulations. Extreme weather conditions, such as cyclones, hurricanes or floods, can affect our business performance and continuity, by forcing us to close sites disrupting our logistics, etc. Higher mean temperatures result in higher energy consumption and usage of refrigerant gases, which translate into CO2 emissions. We have business continuity guidelines and a global emergency management standard which our affiliates must implement at local level. This ensures that 100% of our sales, as well as any new operations, are protected against extreme weather-conditions. Business continuity programs across SGS define roles and responsibilities in case of crisis and provide guidelines and group procedures to organize a coordinated response in case of emergencies. Through our Energy Efficiency in Buildings program we implement measures to optimize energy consumption in our facilities. Our energy efficiency in buildings program covers our entire operations, ensuring that 100% of our sales, as well as any new operations, are protected against the increase in mean temperatures. We are also working on reducing the fugitive emissions of refrigerant gases. Time horizon and geography Long term Global Short, medium, and long term Global Short, medium, and long term Global Rising sea levels Our coastal facilities could be impacted, requiring relocation. This also contributes to tidal flooding and storm surges. Given that rising sea levels is a slow phenomenon, we continually assess when it will be necessary to move affected facilities. Long term Global Main climate-related opportunities identified Opportunity category & opportunity Impact description Strategy to maximize opportunity l y New and more g affordable o o low carbon n h technologies c e T Increased demand for low carbon technologies is resulting in new technologies appearing, being developed faster and being made more affordable, in most cases. Adopting these technologies will help us implement our climate change mitigation strategy, also reducing costs associated with energy and carbon. Time horizon and geography Medium term Global Cost savings associated with climate strategy implementation Reducing the energy that we consume in our buildings, as well as the amount of employee travel, will not only reduce our carbon emissions but also the associated costs (such as the cost of energy, the trip and carbon offsets). Reducing our carbon emissions and energy consumption through our climate change mitigation strategy (including amongst others our Energy Efficiency in Buildings program and our vehicle emissions policy). Short, medium, and long term Global AppendixSGS | 2023 Integrated Report 195 Time horizon and geography Short, medium, and long term Global Opportunity category & opportunity Impact description Strategy to maximize opportunity Through our sustainability services we will be proactive about maximizing the opportunities presented by climate change, enhancing existing services and creating new ones. t Shifts in e k r a M service demand Market changes due to climate change can have a significant impact on client demand for SGS services, either directly or indirectly. Some of the specific potential shifts we have identified, by business line, are: • Natural Resources: opportunities associated with energy and water efficiency, and several opportunities associated with different types of crops in Eastern Europe, the Mediterranean region and North East Asia • Connectivity & Products: several opportunities associated with electric mobility, supply chain certification and higher demand for product testing • Industries & Environment and Business Assurance (prev. Knowledge): opportunities to increase our energy efficiency, carbon pricing, green building and climate-related reporting services clients Scenario analysis and quantification of financial impact Scenario analysis As part of our climatic risk and opportunity management process, we conduct scenario analysis to improve our strategic resilience and explore climate vulnerabilities that might impact our business. Analyses are carried out in accordance with TCFD recommendations, which indicate that at least two scenarios should be used. These should include one scenario aligned with the Paris Agreement and another based on business as usual. Scenario RCP1 2.6 RCP1 4.5 RCP1 8.5 Temperature rise Transition risks Physical risks Rationale 1.5-2°C 2-3°C >3°C All climate commitments made by governments for 2030 targets and longer-term net zero and other pledges will be met More conservative benchmark for transition risks, because it does not take for granted that governments will reach all announced goals Only current climate policies are implemented. Paris Agreement targets are not met. It is an extrapolation of what could happen if no additional measures were taken 1. Representative Concentration Pathway. Transition risks As transition risks and opportunities are those expected to have the largest impact on Group operations, we have quantified the estimated financial impact of: • Increasing price of carbon (risk) • Cost savings associated to climate strategy implementation (opportunity) • Shifts in service demand (risk and opportunity) The estimated values presented in the table below represent the total discounted value of future sales and costs driven by transition risks and opportunities, for the period from 2023 to 2050, using a weighted average discount rate of 7.4%. The calculated financial impact on SGS is denominated in Swiss francs (CHF). Where financial projections were denominated in another currency, these have been converted to CHF by using forward exchange rates from Oxford Economics. Where projections were made in real terms, inflation expectations for Switzerland were considered, taken from Oxford Economics. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 196 TCFD report continued Risk category & risk Regulatory Increasing price of carbon Market Shifts in service demand Opportunity category & opportunity Technology Cost savings associated to climate strategy implementation Market Shifts in service demand IEA STEPS 2050 IEA APS 2050 Gross financial impact (CHF million) Net financial impact (CHF million) Gross financial impact (CHF million) Net financial impact (CHF million) –29 –6* –25 –6* IEA STEPS 2050 –54 –140* –25 –140* IEA APS 2050 Gross financial impact (CHF million) Net financial impact (CHF million) Gross financial impact (CHF million) Net financial impact (CHF million) 0 515 0 510 419* 577* 656* 944* * The financial impact related to shifts in service demand covers SGS’s services related to renewable energies, electric vehicles and minerals required for clean energy transition. Physical risks In 2023, we performed a physical risk assessment considering our top 80 key owned buildings, including offices, laboratories and warehouses scattered around the world. The results of this first quantitative assessment will help us identify key assets highly exposed and vulnerable to physical risks, as well as their respective hazard(s) of concern. The analysis was limited to the property value itself and therefore, no capital equipment (within the building) was considered. We have assessed the exposure and vulnerability assessment of direct physical risks (direct damage caused to the assets) and therefore, indirect physical risks were not considered (e.g. the loss of worker productivity due to high temperatures). The climate risk assessment was conducted by analyzing: a) Hazards: the probability of occurrence of a hazardous event at a given intensity b) Exposure: number of assets present in a given location potentially affected by the selected hazard, and c) Vulnerability: expected value loss of the asset, should an event of a specific intensity occur 1. Qualitative results considering RCP 8.5 and time horizon 2050. Qualitative overview of the results1: • Europe is the region with the highest exposure, primarily driven by floods (fluvial, pluvial and tidal), as well as wind and high temperatures, to a lower extent. Finland, Belgium and the Netherlands will be the countries most impacted • North America is the region with the second highest exposure, mainly driven by pluvial and fluvial flooding • Latin America is the region with the third highest exposure, driven by floods (fluvial and pluvial) in Brazil and Colombia • Asia Pacific is the region with the fourth highest exposure, driven by floods (all types), as well as wind and high temperatures • Africa Middle East is the region least exposed to hazards, which will be driven by fire and high temperatures Resilience strategy In order to enhance our resilience, SGS’s framework aims to minimize climatic risks and maximize climatic opportunities. To minimize risks, for each identified risk in which the gross risk level is unacceptable (i.e. the risk can have a significant impact on business sales, profit margin, business continuity, reputation or operations), mitigation programs are defined in order to manage them and bring the residual risk level to an acceptable level. In addition, our global business continuity strategy aims to enable us to respond to any disruption efficiently and effectively, while minimizing the impact on our operations in terms of our sites, processes and service delivery. For more information see our risk management section, pages 25-27 Finally, each business line takes into consideration identified risks and the results of our scenario analysis to define our business strategies and ensure that we anticipate any market or regulatory changes and that we also exploit any new opportunities. Our resilience strategy also includes the programs that we have in place to reduce our CO2 emissions and our dependency on energy. Some examples are our Energy Efficiency in Buildings program and our vehicle emissions policy. Metrics and targets The following information can be found in the ‘Non-financial statements’ section of this Integrated Annual Report: • The key metrics used to measure and manage climate-related risks and opportunities • Scope 1, 2 and 3 greenhouse gas (GHG) emissions and the related risks provided for historical periods to allow for trend analysis • Key climate-related targets AppendixSGS | 2023 Integrated Report Management report Corporate governance Remuneration report Financial statements Non-financial statements Appendix 197 Human rights report We are fully committed to supporting human rights and preventing violations across our global network. At SGS, we commit to respecting human rights – not just as an ethical obligation, but as an important part of our role in society. This report consolidates the principles, policies and initiatives that demonstrate our commitment to human rights. We aim to improve transparency to our stakeholders in everything we do, and to report on our progress around these efforts. Human rights report Governance Embedding human rights in our policies, principles and due diligence processes Delivering on our human rights commitments 197 198 199 200 SGS | 2023 Integrated Report 198 Governance At SGS, human rights permeate the highest levels of management. The SGS Human Rights Executive Committee, formed in early 2017 and chaired by the CEO, is ultimately responsible for and oversees the application of our human rights commitments across the Group. Laboratory managers, Health & Science, Germany. The Chief Compliance Officer is responsible for managing compliance with the SGS Code of Integrity, while the SGS supplier code of conduct is jointly managed by our global procurement and corporate sustainability teams. Senior managers are expected to demonstrate visible and explicit support for human rights as defined in the SGS Code of Integrity, the SGS business principles, the SGS human rights policy and the SGS supplier code of conduct. Our human rights task force oversees strengthening SGS’s human rights due diligence program and ensuring it remains suitable to the Company’s nature and operations. This taskforce is integrated by high-ranking representatives and steered by corporate sustainability. Lastly, a dedicated sustainability committee of the Board has been appointed to reflect the growing importance of sustainability, including human rights, to all our stakeholders and build on the substantial work already achieved. AppendixSGS | 2023 Integrated Report Embedding human rights in our policies, principles and due diligence processes 199 Our unwavering commitment to respecting human rights is grounded in our SGS Code of Integrity and our SGS business principles, and reflected in our human rights policy, supplier code of conduct and other relevant policies. Furthermore, we employ an extensive array of controls to evaluate, avert and alleviate risks associated with human rights violations and more general labor rights violations throughout our activities. Our enterprise risk management system incorporates relevant human rights issues and brings accountability and responsibility for risk management close to our operations. In addition, we have integrated controls, specifically targeting human rights related risks in our group-wide internal control framework. These controls include, but are not limited to, compliance with minimum wage requirements, overtime rules, changes to pay, collective agreements, etc. To further mitigate any adverse human rights impact, SGS applies the four-eyes principle in a rigorous manner to all employment- related decisions. All employment contracts and any changes in an employee’s general conditions require at least two levels of approval and the validation of a human resources professional. In our continuous effort to integrate human rights considerations throughout our operations, we have developed a Human Rights Due Diligence Checklist, tailored for use during social compliance audits within our own operations. This initiative helps us manage operational risks more effectively, uphold our responsible business practices, and foster positive engagement with our stakeholders. We continue our efforts to integrate human rights into our group-wide policies and control systems. For more information see our Human rights policy Inspectors, Industries & Environment, Belgium. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 200 Delivering on our human rights commitments To bring our human rights commitment to life, we embrace and follow the principles of the United Nations Global Compact and United Nations Guiding Principles (UNGPs) on business and human rights. The UNGPs incorporate by reference the rights and principles expressed in the International Bill of Human Rights and in the International Labour Organization Declaration on Fundamental Principles and Rights at Work with its eight core conventions, all of which we respect. SGS has put in place several policies, procedures and plans to prevent and reduce the risk of having a negative impact on human rights as part of our ongoing commitment to upholding such rights. Unless specified otherwise, all policies, programs and plans aimed at preventing and mitigating human rights risks, as described in this report, apply to all SGS employees and over 2 600 offices and laboratories operated by SGS. Fair labor practices As an employer, we impact the lives of over 99 600 employees and their families. We want our employees to be well and thrive during their time with SGS. We embed human rights in our policies, principles and due diligence processes and invest in programs and services to support human rights throughout the entire employee life cycle. Embracing diversity in our recruitment process To ensure that we are increasing the diversity of our hiring, we train our recruiters on recruitment best practices and talent acquisition, and our managers in recruitment, interviewing and diversity best practices. We are also measuring the gender diversity of our applicants. SGS has a standardized recruitment process. The process includes the use of interview scorecards to standardize the evaluation of our candidates in the interview process. The proper and consistent use of interview scorecards helps us to remove potential interview bias, create a quantitative standard for candidate evaluation and to make better hiring decisions. Furthermore, SGS designed a gender bias toolkit to help us prevent using gender-biased wording in job adverts. Gender-biased words can be viewed as discrimination towards male or female candidates and could discourage people from applying to work for SGS. Enhancing our recruitment practices, we have increased the use of AI predictive analytics. By integrating AI tools, we are able to analyze a wide array of candidate data without prejudice, effectively removing unconscious biases from the hiring process. The utilization of AI in our recruitment strategy reinforces our dedication to promoting diversity by ensuring that hiring decisions are based on merit and potential, regardless of the candidate’s background. Fair and competitive remuneration SGS is committed to providing fair and competitive remuneration packages in all the markets in which we operate. Our approach ensures a fair and competitive remuneration package by utilizing a globally recognized job architecture methodology throughout the SGS Group. This methodology evaluates each job based on its contribution to our business success as well as the knowledge, qualification, skills and experience required to perform the job. It allows us to benchmark our remuneration packages against local market practices, using data collected from salary surveys conducted by reputable professional service providers. Salary adjustments are a reflection of the employee’s contribution to our business success as well as external factors such as local legislation and collective bargaining agreements where applicable. The deployment of our new Human Capital Management system, mySGS, has significantly enhanced our ability to manage and evaluate global job architecture effectively. With mySGS, we have centralized job data, including job grades. This enables us to conduct comprehensive data analysis, such as gender pay gap analysis. It provides immediate insight into pay disparities, which we can address promptly through corrective measures. This level of analysis and proactive management ensures our remuneration packages remain fair and competitive while reinforcing our commitment to equal pay for work of equal value across the SGS Group. Our consistent application of these methodologies is a testament to our dedication to promoting the principle of equal pay and supporting diversity within our global operations. In adherence to our anti-discrimination and dignity at work policy, we continue to ensure that every employment-related decision, including compensation, benefits, recognition and promotions is based solely on an individual’s qualification, performance and behavior or other legitimate business considerations without discrimination. We rigorously respect minimum wages defined by the local regulations and comply with all the mandatory requirements defined by local legislation or binding collective bargaining agreements with regards to wages and their evolution. No cash policy SGS recognizes that cash-based wage payments are not only inefficient for employers, but also risky and disempowering for workers. We therefore follow the recommendations of the International Labour Organization and the UN-based Better than Cash Alliance to shift wage payments from cash to digital, in order to promote respect of workers’ rights, broaden financial inclusion and to make payments safer and more transparent. Our group policies require wages to be paid digitally and not through cash or cheques. Education and employability SGS promotes the right to education by offering continuous learning opportunities to all our employees. Our employee online learning portal offers a large portfolio of learning opportunities, ranging from technical knowledge to interpersonal and management skills. It enables our employees to fully customize their individual learning path to their needs. We believe that helping our employees embrace a lifelong learning mindset will empower them to increase their employability and help them be more resilient to life challenges. The recent integration of an auto-translation tool into SGS Campus allows for course materials to be translated into 72 languages, significantly increasing the accessibility and reach of these resources. This enhancement ensures employees worldwide can engage with learning in their native language, promoting inclusivity and fostering a learning environment that accommodates a diverse workforce. AppendixSGS | 2023 Integrated Report 201 Anti-discrimination and dignity at work As a global company, we consider that it is our responsibility to stand up for human rights and practice tolerance, inclusion and respect to enable a better, safer and more interconnected world. We achieve this goal through the promotion of greater debate and transparency, and the exchange of different views, experiences and perspectives. The general obligation of every employee to abide by the principles of anti-discrimination is embedded in our SGS Code of Integrity and our group policy on anti-discrimination and dignity at work. The latter aims to raise awareness of our zero tolerance of any form of discrimination and provide guidance on how to deal with it. It supports our commitment to promoting an equal opportunity workplace for all employees and an environment in which we treat everyone with dignity, consideration and respect. We encourage our employees to act immediately and speak up if they encounter discrimination. At SGS, there is no place for any form of discrimination. SGS’s commitment to an inclusive workplace has earned significant acknowledgment. We are proud to have been ranked 45th among the top 100 publicly traded companies in the 2023 Refinitiv Diversity and Inclusion Index, which reflects our unwavering commitment to promoting diversity and inclusion throughout the Group. Facilitating the freedom of expression and opinion At SGS, we are dedicated to fostering an atmosphere where people can freely engage in dialogue, offer ideas and voice their opinions without worrying about facing consequences. We place a high priority on open communication. In order to foster sharing, cooperation and engagement, we are dedicated to fostering an open and sincere relationship with our employees, as stated in our business principle on leadership. To enable our employees to share their honest feedback anonymously and to help us understand how our employees feel about working for SGS, we conduct regular employee engagement surveys. We use communication tools, such as MS Viva Engage, as SGS’s private and social collaboration network to foster open dialogue. All our employees can join the SGS private network on MS Viva Engage, ask questions, share ideas, express their opinion, and create and join communities. Bonded labor, child labor and forced labor SGS does not engage in bonded labor, child labor or forced labor. As an inspection, verification, testing and certification company, it is in the nature of our business to employ workers with a certain level of occupational qualifications (e.g. inspectors, auditors, office workers, laboratory personnel, etc.) In our own operations, a large part of our activities is therefore considered inherently low-to- medium risk for bonded labor, child labor or forced labor. We believe the policies and procedures in place mitigate any risks related to bonded labor, child labor or forced labor. Health and safety At SGS, we recognize that our operations can impact the health of our workforce. Some of the harmful health risks and agents in our workplaces include exposure to noise, dust, chemicals, thermal and musculoskeletal stressors. In order to ensure early detection of potential ill health, we conduct pre-employment and periodic health surveillance on our workforce. Through appropriate case management, we support management and recovery from illness resulting from these exposures. In line with our culture of care, we promote initiatives to enhance the physical and mental well-being of our employees to ensure their fitness for work. This includes the provision of preventative health measures, such as vaccinations, and mental and physical health programs focused on awareness, support and resilience. SGS advocates for educating and raising awareness among its entire workforce as a means of ensuring the health and safety of all its employees and delivers around 3 million training hours on health and safety per annum to our employees. In addition, SGS has identified roles and responsibilities of managers. By establishing a clear mechanism for clarifying responsibilities, managers are encouraged to ensure the safest possible working conditions for their employees. Zero-recruitment-fee policy Large recruitment fees can leave employees in situations of debt bondage, a form of forced labor in which a person’s labor is demanded as means of repaying a loan, trapping the individual into working for little or no pay until the debt is repaid. SGS applies a zero-recruitment-fee policy. As part of this fair recruitment practice, SGS never requires an administration fee for processing job applications and never requests money or financial information from an applicant to secure a job as an employee, intern, or to provide services as a contractor. In recent years, it has come to our attention that various individuals and organizations have contacted people offering false employment opportunities with SGS. We have taken this matter seriously and notified appropriate legal authorities in an effort to stop such fraudulent schemes. In addition, we have launched internal and external communication campaigns to prevent candidates from becoming victims. We invite candidates to check the legitimacy of a job offer or to report potentially fraudulent job offers to our corporate security department. Home working To mitigate the risks related to employees working from home, a group policy is in place outlining applicable rules, regulations and norms governing home working. The policy includes, but is not limited to, guidance on health and workspace safety at home, and rules to prevent potential harassment or discrimination of employees working from home. It also clarifies that the requirements relating to absence, sickness and recording of work time at home must be observed in the same way by home workers as by employees who work in the office. To help our employees manage mental health while working from home, we offer employee assistance programs in different locations. These include mindfulness sessions, stress management training, virtual yoga, mental health virtual talks, and much more. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 202 Delivering on our human rights commitments continued Vulnerable groups Individuals from certain groups or populations may be particularly vulnerable to impacts on their human rights, such as children, women and migrant workers. SGS takes responsibility for paying special attention to vulnerable groups and recognizing the specific challenges that they may face. Children SGS does not employ children under the age of completion of compulsory schooling and, in any case, under 16 years. To ensure this, we closely monitor the age of our employees and confirm a potential candidate’s identity and right to work through our global standards on pre-employment screening. Women SGS strives to have proportional representation of women in leadership positions throughout the group. We have included Women in Leadership (CEO-1, CEO-2 and CEO-3 management positions) as a non-financial KPI into the long-term incentive plan of the SGS Group. In addition, our gender-inclusive recruitment process for leadership positions requires that there is at least one woman on every interview panel and at least one female candidate on every final shortlist for CEO-1, CEO-2 and CEO-3 positions. In 2021, SGS became signatory of the Women Empowerment Principles – a United Nations private sector initiative that offers guidance to businesses on how to promote gender equality and women’s empowerment in the workplace, marketplace and community. As an example of our efforts, in 2022, SGS in Switzerland obtained Equal Salary Certification, a symbol of excellence in terms of equal pay for all its employees in the country. After successfully passing the statistical analysis of all salaries, The company underwent an internal audit entrusted to an external audit company proving equal pay for women and men. To further accelerate our progress in diversity, equity and inclusion, we have conducted surveys, one-on-one interviews, and held workshops with our leaders. This valuable feedback will guide the development of our DE&I program. Migrant workers We realize the importance and extent of the migration phenomenon and recognize the vulnerable situation in which migrant workers frequently find themselves. We mitigate the risk of employing workers who are non-documented or in an irregular situation through our global standards on pre-employment screening. Our global standards include, but are not limited to, the confirmation that the identity of our candidates is genuine and that they have a valid visa and work permit for the country of employment. SGS has also conducted a global compliance review of cross-border employment relationships. Each identified cross-border case was reviewed, tailor- made guidance was provided, and corrective actions were implemented where required. Following the compliance review and, to mitigate any risks related to cross-border employment relationships, SGS set global standards. Through the avoidance of cross-border employment relationships, SGS ensures that employees working in the same location have access to the same rights and working conditions. Supply chain With a CHF 2 billion annual supply chain spend, we have a significant opportunity to extend our sustainability principles to many more businesses and employees beyond our own. As a responsible major purchaser, we ensure that goods and services are sourced sustainably and that our suppliers respect human rights. Code of conduct for suppliers Our supplier code of conduct sets out the basis of our responsible sourcing approach. It defines not only the non-negotiable minimum standards that we ask our suppliers to respect when conducting business with SGS, but also the values which are shared throughout SGS, its various businesses and affiliates. Every supplier that wants to do business with SGS is required to sign the SGS code of conduct to ensure that they are aligned with our standards and commitments, including those related to human rights. As part of our commitment to sustainable sourcing, we have also included specific questions related to human rights in all our tender activities. Supplier self-assessment questionnaire In 2023, we have implemented the SGS self- assessment questionnaire (SAQ) for our key global and local suppliers operating in the top 25 countries. This is a strategic program that aims to identify potential sustainability risks in our supply chain, especially those concerning human rights and childhood protection, and take action to mitigate these risks, towards a full human right protected partnering. This program is mandatory for all suppliers in scope to ensure that our current/potential partners comply with our standards. By the end of 2024 we plan to include all existing and new suppliers into the program within the procurement scope. Supplier diversity program SGS knows that diverse supplier networks bring uniquely rich insights and experiences that are vital to our innovative edge. Therefore, we are working to promote diversity and inclusion across our supply chain. As a result of these efforts, SGS in North America is ensuring that minority-run suppliers have fair opportunities in procurement tenders. By doing so, SGS is not only improving the well- being of underrepresented groups, but also creating a positive socioeconomic impact on society as a whole, as it supports small firms. AppendixSGS | 2023 Integrated Report 203 Data privacy SGS is committed to treating the right of any individual to control their own personal information and to decide about it. Privacy is a fundamental human right and SGS has adopted an approach that protects the personal data of our customers, employees and third parties from the moment we collect it to the time we destroy it. Data privacy is a key principle of our Code of Integrity. SGS respects the privacy and confidential nature of the personal information of any individual we interact with to the extent required for the effective operation of its business or for complying with legal requirements. Our data privacy policy governs how we collect, use, and manage the personal data of customers, employees and third parties. Moreover, we have developed a management framework to allow us to manage personal data in a manner that is consistent with the data privacy policy across all affiliates. Aside from the policies, our data protection officers provide continuous advice, identify privacy risks, develop policies on specific issues, and train employees on data privacy. We also take data privacy into consideration from the outset when developing new services or processes. By following the privacy by design approach, we aim to avoid a ‘collect first, ask questions later’ approach to personal data. For those projects that entail data privacy concerns, our data protection officers work closely with the relevant business and IT security teams to undertake a data protection impact assessment, documenting both the potential risks to individuals and the measures being taken to minimize them. Finally, any individual who wants to exercise their privacy rights can do so by simply visiting our online privacy request form at www.sgs.com. We will not discriminate against individuals who choose to exercise any of their rights. Specifically, SGS will not deny goods or services, charge different prices or rates, or provide a different level of quality of services. Empowering human rights At SGS, we believe that people are empowered when they understand their human rights, know how to raise concerns and are provided with remediation consistent with local laws and the United Nations Guiding Principles (UNGPs) on business and human rights. Human rights related training We strive to build a culture of respect for human rights at SGS. We offer training on human rights related topics, because we believe that raising awareness and sharing values through training is crucial to ensuring that our employees act responsibly. Some examples of courses related to human rights, in addition to those described above, include: • Human rights • SGS Code of Integrity • The integrity minute • Health and safety • IT security and data privacy Grievance mechanism We communicate extensively throughout the Group on the different channels through which employees, external rights-holders and stakeholders can bring any violations or risks of human rights violations to our attention. Our SGS integrity helpline is available 24/7 in multiple languages online and by phone and is one way to report concerns confidentially and anonymously. The SGS integrity helpline is operated by an independent service provider specialized in dealing with compliance and ethics concerns. Communications made to this helpline are treated confidentially and are reported to the SGS compliance team which protects the anonymity of the informant, where required. SGS ensures that nobody faces any form of retaliation or adverse consequences for having sought advice or reported any violations or risks of human rights violations. Retaliation against a rights- holder who has reported a violation in good faith will result in disciplinary action. More information on our grievance mechanism can be found in the SGS Code of Integrity and human rights policy as well as our group policy on anti-discrimination and dignity at work. Remediation We recognize that even with the best policies and practices, SGS may cause or contribute to an adverse human rights impact that we have not foreseen or been able to prevent. When this occurs, SGS applies remediation actions to ensure that the people who were negatively affected receive an effective remedy. In line with the UNGPs, when an adverse human rights impact is detected in our own operations, SGS is committed to taking transparent action to remedy the situation in a fair and equitable manner. Should the adverse impact be found in the supply chain, SGS will encourage its suppliers to respect human rights, either through the development and implementation of corrective action plans or governance. We do not tolerate violations of the Code of Integrity. Violations of the SGS code will result in disciplinary action, including termination of employment and criminal prosecution for serious violations. In 2023, there were three cases of human rights grievance identified through the SGS integrity helpline. These resulted in three disciplinary actions and one termination. Non-financial statementsFinancial statementsCorporate governanceRemuneration reportManagement reportSGS | 2023 Integrated ReportAppendix 204 Shareholder information Key dates and events 26 March 2024 26 April 2024 24 July 2024 25 October 2024 November 2024 11 February 2025 Stock listing information Annual General Meeting 2024 Q1 sales update 2024 half year results 2024 Q3 sales update Capital Markets Day 2024 full year results Stock exchange listing SIX Swiss Exchange, SGSN Stock exchange trading SIX Swiss Exchange Common stock symbols Bloomberg: Registered Share: SGSN.SW Reuters: Registered Share: SGSN.S Telekurs: Registered Share: SGSN ISIN: Registered Share: CH0002497458 Swiss security number: 249745 Ariel Bauer Group Vice President, Investor Relations, Communications & Sustainability t +41 (0)22 739 99 85 m +41 (0)79 863 49 23 Livia Baratta Manager, Investor Relations t +401 (0)22 739 95 49 m +41 (0)79 586 48 53 Magali Dauwalder Global Head of Corporate Affairs t +41 (0)22 739 95 51 m +41 (0)79 329 46 70 John Coolican Group Head of Communications Beatriz Cebrián López Global Sustainability Manager Key contacts Investor relations Media relations Project management SGS SA 1 Place des Alpes P.O. Box 2152 CH – 1211 Geneva 1 t +41 (0)22 739 91 11 e sgs.investor.relations@sgs.com sgs.com AppendixSGS | 2023 Integrated Report When you need to be sure SGS Headquarters 1 Place des Alpes P.O. Box 2152 1211 Geneva 1 Switzerland sgs.com ) 4 2 0 2 ( . A S e c n a l l i e v r u S e d l e a r é n é G é t é c o S S G S © i