6. ESG

Sustainability is a fundamental part of our Accelerate and Strengthen strategy.

With our plant-based products, we reduce the ecological footprint of our customers in the food industry and in the construction and packaging sectors. For the latter, it is also important to mention that our products are bio-based and circular. We aim to reduce our footprint in line with the Paris Climate Agreement, for our own operation and for our customers. Thus, we focus on structurally lowering our energy consumption, reducing water intrusion and the circular use of residual streams.

On the cultivation side, we are also mindful of changes in the climate. Our subsidiary Averis develops new varieties that are more resistant to drought and potato diseases, for example. But which also deliver higher yields in potato starch and potato protein per hectare us i ng fewer crop protection products. In total, Avebe has set up seven sustainability programs within the current strategy, which focus on making our entire value chain more sustainable. These programs and the set targets associated with them have been approved by the executive committee and supervisory board in the strategy process. For each program, a program manager is responsible for implementation. The program managers are accountable to the Director Sustainability. The Director Sustainability informs and reports to the Executive Committee on the progress of the overall sustainability program. Avebe's board is responsible for implementing the strategy Accelerate and Strengthen, which is supervised by the supervisory board. At least once a year, the board reports on the implementation and status of the strategy to the supervisory board. Read more about the Accelerate and Strengthen strategy here.

Besides embedding sustainability in our strategy, our climate ambition is also visible through our commitment to the Science Based Target initiative (SBTi) this year. This involves setting and having emissions targets validated in line with the Paris Climate Agreement, which aims to keep global warming below 1.5 degrees Celsius. Our commitment to the SBTi shows our confidence in a more sustainable future with specific targets and action plans towards the 2030 climate goals.

The board of directors, executive committee and supervisory board attend several meetings each year where sustainability topics are discussed. These include both internal and external meetings. The program managers report on the material impacts, risks and opportunities they see in their strategic program. Other topics discussed include sustainable agriculture, energy management, biodiversity, waste, transport and (future) laws and regulations.

In addition, within Avebe, the sustainability strategy is fully integrated into the planning and control cycle. This means monthly reporting to the board, the executive committee and the supervisory board on key performance indicators related to sustainability. The knowledge carriers in the fields of water, energy, circularity, sustainable procurement and sustainable agriculture also periodically share knowledge from the strategic sustainability programs with the Executive Board and the Executive Committee.

Furthermore, specific knowledge in the field of sustainability, developments therein and also applicable laws and regulations is vested in the Sustainability department and the ESG-CSRD project team. From here, we report periodically to the Management Board and the Supervisory Board on the progress of the implementation of CSRD, important developments in the field of ESG and monitoring on performance indicators in relation to sustainability.

A dual materiality analysis determines which sustainability topics are most important to an organisation. As the name suggests, this analysis is carried out from two different perspectives. On the one hand, an outward impact analysis, which determines Avebe's impact on its surroundings (people and environment) with regard to a specific theme. This impact may be caused by Avebe in its own operations, but Avebe may also be associated with the impact. In that case, the impact happens in the organisation's value chain. And on the other hand, an analysis of the impact inwards. This looks a t the financial consequences for Avebe related to a theme. Thus, a sustainability theme is assessed from two perspectives. The higher the score, the more important this theme is for our cooperative.

The steps Avebe went through to arrive at the material topics are shown visually below:

For our materiality analysis, we mapped Avebe's environment. This includes understanding our value chain, our value creation model and the identificating stakeholders. Our main stakeholders are: our members, employees, customers, suppliers, credit institutions and regulatory bodies. Other stakeholders with whom we actively engage in dialogue and cooperation include knowledge institutions, social organisations, NGOs, residents of our production sites and industry organisations, such as VNCI and BO Akkerbouw. Furthermore, we take into account other stakeholders whose interests may be affected by Avebe's activities and its direct and indirect business relationships within its value chain.

We then drew up a list of potential material topics (longlist). Through internal analysis, we reviewed and adapted the longlist from the new Accelerate and Strengthen 2023-2028 strategy and discussions with the sustainability programs' program managers. We c ondu c t ed the external analysis based on a desktop review. In doing so, we consulted known and available sources including (draft) standards and guidelines. Furthermore, we reviewed publicly available information from suppliers and peer companies, taking i n to account company size, type of companies and sustainability maturity. The outcome of these analyses resulted in a list of potential material issues for Avebe.

Climate change from the focus on CO₂ reduction impactsboth our own operations and our value chain. Producing (modified) starch and protein costs energy and therefore results in CO₂ emissions. This concerns both our own emissions and indirect emissions. Our main risks are climate-related regulatory changes, as are regulations to reduce emissions in production and agricultural activities. There are also (substantial) costs associated with high CO₂ emissions, for example by having to purchase CO₂ allowances. By saving energy and a (cost-efficient) switch to sustainable energy sources, we can reduce CO₂ emissions.

Our Accelerate and Strengthen strategy includes our sustainability targets for 2030, as that year is a key measuring point towards climate neutral in 2050. Avebe's ambition is to have CO₂ reduction targets in line with no more than 1.5 degrees Celsius of global warming, in line with the Paris Climate Agreement. We have committed to the Science Based Target initiative (SBTi) and are now in the process of aligning our targets with the SBTi criteria. We are targeting a CO₂ reduction target of 30 per cent for the period 2023-2030, with 2022/2023 being the baseline year. This is the target for scope 1 emissions (direct greenhouse gas emissions from our operations). Scope 2 emissions (indirect emissions from electricity consumption) from Avebe are already 0 and the target for 2030 is to remain so. 

For our scope 3 emissions (indirect emissions of CO₂ , caused by business activities of another organisation), we also have the ambition to reduce 30 percent. By making this scope distinction, we are in line with the way governments formulate targets for the reduction of greenhouse gases. We have included in the strategy the CO₂ and energy reduction program 'Towards climate neutral', and scope 3 is included in the 'Sustainable procurement' program.

We have translated energy management into the availability, affordability and consumption of energy at Avebe. Excessive costs make us vulnerable because we use a lot of energy. Because we use a lot of energy, and because of the resulting CO₂ emmisions, we have a negative impact on the environment and climate change. A key risk is climate-related changes in laws and regulations. This can result in rising costs for energy consumption. It can also cause problems in obtaining permits for future investments. In addition, grid congestion may pose a risk with regard to the future availability of electricity, especially if, in the course of the energy transition, our cogeneration plants are phased out.

Energy management is strongly linked to the theme of climate change, see the 'Mitigating Climate Change' theme above. For the new strategic period 2023-2028, we have set sustainability targets for 2030, as that year is an important measuring point for us. Apart from CO₂ reduction, we aim at least 1.5 per cent on energy consumption at each production site every year. We have included in the strategy a CO₂ and energy reduction program 'Towards climate neutral'.

Improving energy efficiency is part of the WCOM program. The basis for this is expansion of inline energy metering and local energy dashboards for monitoring energy consumption. In addition, a number of energy-saving investments are planned in the multi-year investment plan. For the availability of sufficient electricity in relation to the grid congestion issue, we are investigating opportunities for further connection of local renewable electricity production to Avebe's grid in addition to the already connected solar farms at Avebe sites.

Avebe's members face additional agricultural policies, the effects of climate change, high growing costs and competition in the f ield with other crops. These factors affect Avebe's short- and long-term supply of raw materials. Avebe needs to gain early insight into the possible changes in raw material supply and manage accordingly with a good payout for members, robust potato varieties and take its role towards a sustainable starch potato crop. Insufficient steps in this gives the risk of loss of attractiveness of starch potato cultivation. Lower volume of starch potatoes also has financial impact as it affects, among other things, the coverage of our plants and potential sales volumes.

In addition to the risks mentioned above, Avebe's required cultivation by its members also has an indirect impact on the environment, and we are committed to reducing the impact and adapting to climate change. The cultivation of starch potatoes has an impact on climate, water and soil, among other things. Developments in this area include experimentation and education on new, more sustainable cultivation techniques and providing appropriate support for the introduction of new varieties bred by our breeding company Averis.

We are committed to improving disease resistance of our Averis varieties, breeding and promoting robust varieties with less impact on the climate (e.g. through reduced required nitrogen application), our current business set-up with organised transport and our reliable image as a potato starch processor.

Avebe facilitates the exchange of knowledge and experience on topics such as climate, soil, water, crop protection and weed control. We proactively support our members in finding answers to crop challenges that come their way and to which we, as a cooperative, want to and can contribute.

Avebe draws in a lot of water for the production process. But on net, we return more water to the environment because a starch potato contains a lot of water. The risk and impact are particularly in the necessary intake of water for our production process. There is more ecological and social pressure on the use of water, partly due to dry summers. Water is necessary for our production process. Water scarcity is a risk for Avebe. If we cannot withdraw enough water, it might lead to reduced production or even production stoppages.

To reduce the impact of our operations, we have for years set targets for reducing our intakes of water. Avebe has included the importance of reducing water withdrawals and using them as efficiently as possible in the program 'Every drop counts', which is part of the strategic program Plant-based sustainable growth.

To meet our targets, we are particularly committed to reducing salinity in wastewater. Read more about this in the material topic 'Water pollution'. We are in the process of drawing up concrete plans for each production site. For our largest production site, the plan of action has been finalised. Furthermore, we continue to focus on stable operations to minimise water requirements. We also aim to optimise cooperation between our production sites to reduce water requirements.

Avebe has included the importance of water outflow in the 'every drop counts' program, as part of its strategic program Plantbased sustainable growth. Our goal is to facilitate Avebe's desired growth while remaining compliant with permits. The strategic goal for 2030 is to reduce enough salt so that we can achieve our water conservation ambition.

 For each production site, we started making a plan in the 2023/2024 financial year that focuses on saving water by reducing the amount of salt. The solutions will be product-specific and we look at each site.

Important waste streams for Avebe are sludge and tare. We process the wastewater from our processes in wastewater treatment plants. This creates sewage sludge. By the growth of our vegetable protein products, we produce more wastewater and therefore more sewage sludge. Currently, sludge is a residual stream with a negative value for Avebe, mainly because it can contain heavy metals, which means we cannot always use it in a circular way and therefore have to pay a fee for its disposal.

In addition, when potatoes are delivered to our factories, sand, foliage and stones come along unintentionally. We call this tare. Tare is a waste stream because it is difficult to find a valuable or low-cost application for it. The circular application of residual flows and reducing costs is therefore a financial opportunity for Avebe.

Avebe produces residual streams with a net negative economic value. Our goal is to avoid these residual streams or find applications where we can (re)use these residual streams at the highest possible value. This will result in minimising or eliminating the use of primary (new) raw materials, thereby increasing Avebe's circularity. In our Accelerate and Strengthen  strategy, we have included a number of targets in relation to our residual streams in our program 'increasingly circular':

• set up internal reporting around 'resource use and circular economy';
• minimise the use of primary raw materials;
• improve the operating margin of our residual streams.

Initially, we identified the net negative value for Avebe for the various residual streams, set specific targets for each residual stream and then, based on a positive business case or a 'licence to operate' float, drew up a concrete plan for valorising or minimising the residual streams. These plans will be further geëffected in the coming years, such as certificating sludge from our production and originating from agriculture as fertiliser.

Our industrial customers are looking for better, cleaner alternatives from the (consumer) market demand for more sustainable products. Avebe plays an important role in the consumer demand for plant-based alternatives, because with potatoes we have a unique raw material and the application knowledge. We have and are developing a portfolio of products that responds to this. As Avebe, we have the opportunity to expand our place as market leader in sustainable ingredients for industrial applications.

We work from a collaborative approach to commerce, market development and marketing. Specifically, this runs through the following action plans.

• From business development, define areas where Avebe's products and expertise can offer a unique solution;
• Work with customers to identify their specific requirements and wishes and collaborate on solutions.

Safety has been a key focus within Avebe for many years. We want all employees, suppliers and visitors to be able to do their work safely and go home safely. Despite this, accidents happen and have a negative impact on the safety and health of employees. A lack of safety measures creates risks for the individual and for Avebe as a whole. These consequences include production stoppages, penalties, legal liability and loss of reputation. This can damage confidence in Avebe and its products and thus negatively affect our revenues.

We strive for a safe workplace to effectively manage risks. Productivity and efficiency of processes also improve when employees and visitors are well aware of safety rules and protocols.

We take the following approach:

Behaviour-based safety programme
In this financial year, we started implementing a behaviour-based safety program across the organisation entitled 'Life Saving Rules'. These rules are a set of very important agreements and practices that we, as Avebe, do not compromise on. This means that we always follow the Life Saving Rules, even when it can be difficult or lead to loss of production. If we do, you yourself but also your colleagues can go home safely at the end of a working day. The rules behind the Life Saving Rules concept already existed, but were sometimes formulated too generally. Strict adherence to requirements means we need to create clarity in these requirements and then solve the barriers that employees encounter.

Safety training
We have reviewed the existing training matrix and made additions for various positions as to what training is necessary to work safely and responsibly. We train our employees on safety topics at least once a year. We offer these via our internal digital learning platform and they are compulsory in nature. This way, we enforce that every employee can work on site with the right knowledge on safety.

Digital work permits
Part of the 'Life Saving Rules' is improving the quality of the work permit. A work permit defines how safe maintenance work can be carried out. In this context, we have introduced a digital work permit process at all Dutch production sites, which has replaced the paper version. The major advantage that a digital work permit process offers us lies in the mandatory workflow with mandatory fields and the use of checklists that are 'automatically' invoked depending on activities. Besides being mandatory, this helps us make our employees' work easier.

For years, there has been a growing awareness of sustainability, health and also stricter food legislation; often translated as food safety. Although we do not supply end consumers directly, we do have a great responsibility to supply products that meet the quality standards and legislation around food safety. If problems occur in relation to food safety, this has a negative impact on our customers and/or environment. There are health risks associated with quality standards that are not met. Through internal and external audits, Avebe is FSSC22000 certified as a food-safe producer/supplier. The requirements are getting stricter and food safety problems can lead to health damage, reputation damage and reduced confidence in our products.

The composition of the workforce, now and in the future, is crucial. Avebe will see an ageing workforce in the coming years, while there are shortages on the labour market for several professional groups. In addition, the world is changing faster than ever before; rapid digitalisation and artificial intelligence (AI), climate change, a 'challenge for talent' and competition on arable land. Ensuring sufficient numbers of high-quality skilled staff and then developing and retaining them requires considerable efforts. Insufficient attention to this may lead to loss of attractiveness on the labour market and an inefficient organisation. In addition, as an employer, we have a major impact on our employees. Our impact is focused on providing an inclusive working environment and facilitating employee development.

To keep Avebe strong and future-proof as an organisation, we have set up the overarching strategic program 'Strengthen the organisation'. This program looks at further establishing an organisation that makes best use of the talent of our people. It includes the following objectives:

• effective Play to Win leadership supported by an integrated leadership development program, tailored to the different levels, personal development plans and appropriate to the future organisational set-up;
• efficient and effective design of the organisation with the right people in the right place at the right time including an understanding of the required skills and competences;
• the Avebe Academy as a learning platform where talent management, training, personal development and compliance requirements come together;
• a recruitment and selection policy in line with the future design of the organisation and our diversity policy.

Both strategic programs include speciic products and applications in which we aim to achieve sustainable growth in vegetable solutions with potato starch and protein for the food industry together with our customers.

In our Accelerate and Strengthen strategy, two strategic programs specifically target growth in plant-based food products: 'Good food++' and 'New applications'. The first focuses on accelerating and strengthening the commercialisation of our current good food portfolio by working with (potential) customers on plant-based solutions. The New applications program also focuses on adding value to our potato starch and protein products in new applications in the food industry.

Avebe stands for fair and transparent business practices. This means that we carefully manage the interests and rights of employees, suppliers, farmer members, customers and our environment. An appropriate corporate culture is crucial in this respect. This translates into being a reliable employer, supplier and partner, and gives Avebe a good social role and position. We also stand for responsible lobbying activities and contacts with local and national politics. For us, business conduct and responsible lobbying is very important. Good business ethics allow us to distinguish ourselves positively within our sector. One risk is that Avebe is not seen as a company that advocates honest and transparent business practices.

The cooperative is known as a transparent and democratic form of enterprise with a long-term strategy. That is why Avebe applies the principles and best practices contained in the Governance Code of the National Cooperative Council. This increases the transparency and quality of governance and supervision in our cooperative.

Doing business with honesty and integrity and with respect for people and the environment is central to us. This cannot simply be captured in procedures and guidelines. That is why we are committed to a culture of respect and trust, where there is no room for undesirable behaviour and non-integrity. We actively propagate associated norms and values and provide employees with channels for questions or reports. Our approach is implemented by offering training courses, independent confidential counsellors and complaints procedures, among other things. All this rests on a solid foundation of policies and procedures that set out Avebe's norms and values.

Corporate governance policy
Our organisational structure, our values and business principles and standards of behaviour we apply towards stakeholders are included in our Corporate Governance policy. All codes of conduct are shared with employees and can be found on our website.

SpeakUp and whistle-blower scheme
Avebe has a SpeakUp scheme that allows anyone to anonymously report serious violations that cannot be reported in any other way. This can be done both by phone and via a secure website, without the intervention of a human operator. Avebe also operates a whistleblower scheme.

Responsible Sourcing Policy
We have a responsible procurement policy, with requirements to our suppliers from Corporate Social Responsibility (CSR) firmly embedded in it. In our view, this is crucial for the way we do business. Responsible procurement and outsourcing is one of the most important factors contributing to our CSR. The way we do business should improve the lives of the people in our supply chain and not harm the environment unnecessarily. Our Responsible Sourcing Policy (RSP) provides the guidelines we follow and describes the responsibility we take on in our supply chain. Corporate Social Responsibility is an integral part of our business activities. This Responsible Sourcing Policy is fully in line with our Corporate Governance Code. We require our suppliers to comply with the principles included.