General part

The EU Taxonomy as Part of the European Green Deal

The declared goal of the European Union - taking into account the Paris Climate Agreement - is to become climate neutral by 2050. The course for this is being set by the European Green Deal, which includes the "EU Action Plan Sustainable Finance" strategy as an important driver. The aim is to redirect capital flows towards sustainable investments, take sustainability into account in risk management and promote transparency and a long-term approach.

The EU Taxonomy Regulation (EU Regulation (EU) 2020/852; in short: "EU Taxonomy") is a key instrument for redirecting financial flows into sustainable and future-proof economic activities. The EU Taxonomy is a classification system that aims to create a uniform understanding of sustainable economic activities in the EU and make the sustainability performance of companies more comparable.

The EU Taxonomy includes the following six environmental objectives

1. climate change mitigation
2. climate change adaptation
3. sustainable use and protection of water and marine resources
4. transition to a circular economy
5. pollution prevention and control
6. protection and restoration of biodiversity and ecosystems

At the time of preparing this annual report, the economic activities for all six environmental objectives are to be checked for their taxonomy eligibility and for the first two environmental goals for their taxonomy alignment.

The Delegated Act on the EU Taxonomy is applicable for the first time from the 2021 reporting year. The content and presentation of the EU Taxonomy Regulation is defined by Delegated Regulation 2021/2178 of July 6, 2021 and supplemented by Delegated Regulation 2022/1214 of March 9, 2022 and the six annexes to Delegated Regulation (EU) 2021/2139. EU documents published after the end of the 2023 financial year for further clarification could no longer be taken into account in this annual report. Due to the obligation to disclose non-financial information (EU Directive 2014/95/EU), Uzin Utz has been subject to the EU taxonomy reporting obligation since the 2021 financial year.

Disclosure

Uzin Utz reports on the taxonomy eligibility and taxonomy alignment of its own economic activities in accordance with the EU documents on the EU Taxonomy published in the 2023 financial year. In addition, information is provided on the process of assessing taxonomy eligibility and taxonomy alignment. All fully consolidated companies of the Uzin Utz Group are taken into account.

Reporting is based on the key figures turnover, capital expenditures (CapEx) and operating expenditures (OpEx). A ratio is calculated in each case to determine the taxonomy-eligible, taxonomy-aligned and non-taxonomy-eligible shares of these key figures. The denominator is formed by the total sales, CapEx and OpEx within the defined framework of the EU Taxonomy. The numerator results from the taxonomy-eligible and taxonomy-aligned shares of the corresponding key figures. The key figures are defined as follows:

In accordance with Directive (EU) 2021/2139 Annex I in conjunction with Directive 2013/34/EU, revenue is defined as net sales of goods or services including intangible assets in accordance with International Accounting Standard (IAS) 1. This corresponds to the disclosures on net sales in the statement of comprehensive income.

Capital expenditures (CapEx) is defined as additions to property, plant and equipment and intangible assets in the financial year under review before depreciation and amortization and revaluations, including those from revaluations and impairments in the financial year under review and excluding changes in fair value. In accordance with the EU Taxonomy Regulation, investments in property, plant and equipment (IAS 16), intangible assets (IAS 38), investment property (IAS 40) and right-of-use assets from leases (IFRS 16) are taken into account. Leases that do not lead to the recognition of a right-of-use asset are not to be recognized as capital expenditure.

According to the EU Taxonomy, operating expenditures (OpEx) include direct and non-capitalized costs relating to research and development, building refurbishment, short-term leasing, maintenance and repair. In addition, all other direct expenses for the ongoing maintenance of property, plant and equipment that are carried out by the company itself or by contracted third parties to whom activities necessary to ensure the continuous and efficient operation of the property, plant and equipment have been outsourced are taken into account. This definition is narrow and only takes into account the part described and therefore not all of a company's operating costs.

Double or multiple counting in the allocation of turnover, CapEx and OpEx indicators across economic activities is avoided by the fact that each economic activity is only recorded and identified once when determining its taxonomy eligibility, regardless of which of the six environmental objectives this economic activity is listed in. Double counting is avoided by using appropriate control instruments when recording the data and calculating the indicators.

Taxonomy eligability

An economic activity exists when resources such as capital, goods, labour, production techniques or intermediate products are combined for the purpose of producing certain goods or services. The main characteristics are the use of resources, a production process and the products (goods or services) produced. If a company generates turnover or if it incurs capital expenditures (CapEx) or operating expenditures (OpEx) associated with an economic activity described in the delegated act, then an activity is taxonomy-eligible. Taxonomy-eligible economic activities are generally capable of making a significant contribution to one of the environmental objectives defined in the EU Taxonomy. In particular, large industries with CO2-intensive economic activities are taken into account in the EU Taxonomy Regulation. Not every economic activity is currently included in the delegated act of the EU Taxonomy.

Taxonomy alignment

According to Article 3 of the EU Taxonomy and the criteria set out therein, an economic activity is considered environmentally sustainable, i.e. taxonomy-aligned, if the following three criteria are met in addition to taxonomy eligibility:

• It makes a significant contribution to the achievement of one or more environmental objectives of the EU Taxonomy by fulfilling the technical screening criteria (TSC).
• It does not contribute to a violation of the other environmental objectives (Do no significant harm (DNSH) principle).
• The defined criteria of the minimum standards for labour and human rights (Minimum Safeguards) are complied with.

Procedure Uzin Utz

Background research on the European Green Deal and the EU Taxonomy Regulation is carried out annually to ensure that information on the implementation of the EU Taxonomy is up to date. Due to the expansion and adaptation of the EU Taxonomy directives, the existing process was scrutinized and adapted to the new circumstances. In order to analyse Uzin Utz's business activities, all business areas were identified and then classified in the EU's classification scheme of economic activities (NACE codes).

Assessment of taxonomy eligibility

For the financial year 2023, taxonomy-eligible and taxonomy-aligned economic activities of Uzin Utz are reported on the basis of key figures (turnover, CapEx, OpEx). In the first step, the taxonomy-eligible economic activities were identified and checked for their taxonomy alignment in the second step.

1. Revenue according to EU taxonomy

The EU Taxonomy Regulation defines a classification of environmentally sustainable economic activities. This classification is based on the statistical classification scheme of economic activities in the EU (NACE codes).

The business model of the Uzin Utz Group is focussed on its core competence in flooring, encompassing its eight product range areas. As a globally active full-service provider, Uzin Utz develops comprehensive system solutions and offers its customers a wide range of products, from construction chemical product systems and surface finishes to machines for floor treatment. The economic activities were therefore determined on the basis of the product categories and classified in the classification scheme of economic sectors. The following table provides a detailed breakdown of these allocations.

The reference to the NACE economic activities in the EU Taxonomy Regulation is only indicative and not to be understood as complete. Therefore, an economic activity may correspond to the description of an activity and the Technical Assessment Criteria of the Delegated Act (see six annexes of Delegated Regulation (EU) 2021/2139, (EU) 2023/2485 and (EU) 2023/2486), even if the NACE sector of the economic activity is not explicitly listed in the corresponding annexes of the Delegated Regulation. For this reason, additional potentially applicable activities and their description in the Delegated Regulations (EU) 2021/2139, (EU) 2022/1214, (EU) 2023/2485 and (EU) 2023/2486 were examined in detail. A detailed review revealed that taxonomy-eligible turnover can be reported for the Group for the first time for the 2023 financial year. Due to the expansion of the environmental objectives in 2023, turnover from the electrical and electronic equipment product group will be declared taxonomy-eligible as part of the environmental target of the circular economy. Even if the proportion of taxonomy-eligible turnovers is low, this does not mean that Uzin Utz's activities contradict the EU's environmental objectives. The screening of economic activities for taxonomy relevance is an ongoing process that takes place continuously.

Turnovers in accordance with the EU Taxonomy amounted to EUR 22,023 thousand (0) in the financial year, which corresponds to a share of 4.6% (0) of the Group's total operating revenues of EUR 479,337 thousand (EUR 487,134 thousand).

2. Investments - CapEx according to EU taxonomy

With its 30 fully consolidated production and sales companies, the globally active group of companies has a large number of capital expenditures. Taking into account cost-benefit aspects, a screening of the economic activities in relation to investments was carried out in accordance with the definition of the EU Taxonomy and a catalogue of the categories relevant to Uzin Utz derived from this.

With the help of the catalogue, all companies analysed and categorized their capital expenditures made in the period under review. Subsequently, all listed capital expenditures were checked again centrally to determine whether other capital expenditures not included in the catalogue, which are part of the EU Taxonomy, were made.

The capital expenditures, as defined by the EU Taxonomy, are shown below (the economic activity that is attributable to the investment according to the EU Taxonomy is listed in brackets), provided they were capitalized as fixed assets:

• Purchase of containers for waste separation (collection and transportation of non-hazardous waste in separate fractions at the source)
• Purchase and leasing of trucks (transportation of goods by road)
• Purchase and leasing of passenger cars (transportation by motorcycles, passenger cars and light commercial vehicles)
• Purchase and leasing of bicycles (operation of devices for personal mobility, bicycle transport logistics)
• Installation of wallboxes for charging electric vehicles (installation, maintenance and repair of charging stations for electric vehicles in buildings and in parking lots belonging to buildings)
• Electric heat pumps (installation, maintenance and repair of renewable energy technologies)
• Photovoltaic/solar systems (installation, maintenance and repair of renewable energy technologies (photovoltaic systems))
• Construction (new construction), purchase or leasing of buildings (acquisition and ownership of buildings)
• Capital expenditures in servers and data centers (data processing, hosting and related activities)
• Capital expenditures in the manufacture of electrical and electronic equipment
• Renovation of buildings (renovation of existing buildings)
• In accordance with the EU Taxonomy Regulation, Uzin Utz's taxonomy-eligible capital expenditures were set in relation to total investments. Total investments are the sum of additions to property, plant and equipment, intangible assets, rights of use and additions to investment properties in accordance with IAS 40 (excluding income from revaluation).

Capital expenditures in accordance with the EU Taxonomy amounted to EUR 12,572 thousand (EUR 28,969 thousand) in the financial year, which corresponds to 45.9% (61.5%) of total Group investments amounting to EUR 27,388 thousand (EUR 47,134 thousand).

3. operating expenses - OpEx according to EU taxonomy

The term OpEx in the definition of the EU Taxonomy does not take into account all operating expenditures of the Uzin Utz Group. Uzin Utz uses the total cost method. For this reason, the OpEx to be reported within the meaning of the EU Taxonomy were identified by evaluating general ledger accounts. These are mainly R&D, maintenance and repair expenses as well as short-term leasing. Relevant operating expenditures from each group company were provided, analysed, and centrally evaluated through a data query.

As a manufacturing and distribution group, the main cost drivers are the cost of materials (47.2% of total operating expenditures) for the production of products and the personnel costs (27.8% of total operating expenditures) incurred along the value chain from the manufacture to the distribution of these products. Expenditures for R&D, maintenance and repair as well as short-term leasing are therefore relatively low. The taxonomy-eligible OpEx is therefore not calculated due to the high procedural effort involved. Thus, the share of operating costs across all product ranges according to the EU Taxonomy is not significant compared to total operating expenses and Uzin Utz applies the simplification option according to the Delegated Regulation (EU) 2021/2178 Annex I 1.1.3.2 in accordance with the principle of materiality.

Expenses in accordance with the EU Taxonomy amounted to EUR 19,139 thousand (EUR 16,973 thousand) in the financial year, which corresponds to 4.3% (3.7%) of the Group's total operating expenditures of EUR 450,325 thousand (EUR 458,850 thousand). The usage of the simplification option results in the recognition of taxonomy-eligible operating expenditures in the amount of EUR 0 thousand (EUR 0 thousand).

Assessment of taxonomy alignment

Due to the existing taxonomy eligibility of the listed economic sectors, a review of turnovers and capital expenditures (CapEx) for taxonomy alignment is required. However, proof of a contribution to achieving one of the environmental objectives, which would be required to demonstrate taxonomy alignment, has not yet been provided. Furthermore, the processes required to comply with the minimum safeguards have not yet been fully established within the Group. These are designed in accordance with the Supply Chain Due Diligence Act in order to utilize existing synergies.

In the case of operating expenditures (OpEx), the simplification option in accordance with Delegated Regulation (EU) 2021/2178 Annex I 1.1.3.2 is used in the context of materiality when reporting taxonomy-eligible and taxonomy-aligned economic activities. For this reason, a separate standard table is not shown for OpEx.

Ulm, March 27, 2023

The Board of Management