STS : Non-financial Group Report 2023

Non-financial Group report

2023

Contents
1 - INTRODUCTION __________________________________________________________________________________________ 1
1.1 BUSINESS MODEL	2
1.2 CORPORATE STRATEGY AND SUSTAINABILITY CONCEPT	5
1.3 MATERIAL SUSTAINABILITY TOPICS AND RESPONSIBILITY	8
1.4 RISK ANALYSIS	11
1.5 NON-FINANCIAL RISKS	11
2 - REPORTABLE ASPECTS_________________________________________________________________________________13
2.1 ENVIRONMENT - Environmental issues	13
2.1.1 Climate change and resource efficiency ______________________________________________________13
2.2 SOCIAL - Employee and social matters	16

1. Employees _____________________________________________________________________________________16
2. Company_______________________________________________________________________________________18
3. Suppliers_______________________________________________________________________________________18

2.3 GOVERNANCE - Respect for human rights, combating bribery and corruption

19

2.3.1 Business ethics ________________________________________________________________________________19 3 - INFORMATION ON EU TAXONOMY ______________________________________________________________________21

3.1 APPROACH	22
3.2 RELEVANT AREAS OF THE EU TAXONOMY REGULATION	23
3.3 RESULTS OF THE EU TAXONOMY ANALYSIS	25

1 - INTRODUCTION

Since the 2018 financial year, STS Group1 has published a non-financial statement in accordance with the CSR Directive Implementation Act (CSR-RUG) as a separate sustainability report. STS Group has not used a framework as defined by Section 289d of the German Commercial Code (HGB) to prepare this non-financial statement, as the company is convinced that an individualised reporting format is better suited to reporting on the key factors behind STS Group's actions with regard to non-financial aspects. From the STS Group's perspective, the orientation towards the legal requirements of the HGB and DRS 20 is sufficient. The Group follows all legal and regulatory developments relating to the preparation and disclosure of non-financial information, including the EU Taxonomy Regulation. Two new delegated acts on the EU Taxonomy came into force in December 2023:

• The Delegated Regulation (EU) 2023/2486 ("Environmental Delegated Act") on the changes to reporting and the new technical assessment criteria for economic activities of the four environmental objectives "Sustainable use and protection of water and marine resources", "Transition to a circular economy", "Pollution prevention and control" and "Protection and restoration of biodiversity and ecosystems".
• Delegated Regulation (EU) 2023/2485 on the amendments to Delegated Regulation (EU) 2021/2139 ("Climate Delegated Act") with the inclusion of new technical assessment criteria for additional economic activities and for the two climate-related objectives "climate change mitigation" and "climate change adaptation".

For this reason, the STS Group has once again scrutinised its business activities using the EU taxonomy analysis in order to check the taxonomy eligibility based on the newly disclosed economic activities and the taxonomy compliance of the already identified eligible activities and to collect the corresponding key figures (revenue, CapEx and Opex) for the reporting year.

The contents of the report were reviewed by the Supervisory Board.

1 STS Group refers to STS Group AG and all its subsidiaries.

For reasons of readability, this report refrains from using female, male and diverse language forms simultaneously and uses the generic masculine. All personal designations apply equally to all genders.

1.1 BUSINESS MODEL

The STS Group offers its customers a wide range of system solutions and components for the interior and exterior panelling of trucks, commercial vehicles and cars. STS components enhance the visual appearance of the vehicle design, contribute to the aerodynamics of the vehicle and ensure a significant reduction in weight thanks to their lightweight construction. The STS Group develops and produces vehicle components with SMC (Sheet Moulding Compound) technology, which efficiently replaces metal components and contributes to the reduction of greenhouse gas emissions from vehicles by reducing the overall weight of these vehicles.

Due to its high level of vertical integration, STS is able to map the complete manufacturing process of each component from the idea to the finished product. As a one-stop-shop provider with many years of expertise, the Executive Board sees The Executive Board sees weight- optimised plastic solutions, such as those increasingly found in the passenger car sector, as a clear competitive advantage. Production facilities and logistics are mainly designed for small and medium-sized series, as is typical for light to heavy commercial vehicles, but also for special models and electromobility or weight-optimised plastic solutions, as is increasingly the case in the passenger car sector.

The STS production facilities are located close to the respective customer plant sites. This makes all aspects of co-operation simpler, more efficient and more sustainable. Headquartered in Germany, the Group operates a global network in all key markets. At the end of the financial year, the STS Group had twelve plants in five countries on three continents.

The STS Group combines the production technologies of injection moulding and hot and compression moulding of composites. It manufactures the semi-finished products and composite materials itself and can therefore react flexibly to customer-specific requirements.

STS Group's business activities are managed partly according to product types and partly according to geographical aspects. This principle is reflected in the following segmentation of business activities:

Plastics: This segment manufactures a wide range of exterior body parts and interior modules for trucks, other commercial vehicles and passenger cars. It includes hard trim products made from injection moulding and composite materials such as SMC (sheet moulding compound) or glass fibre-reinforced thermoset semi-finished products. The semi-finished product plays an important role in automotive production thanks to its numerous positive properties, such as high rigidity and heat resistance. It often replaces metal structural parts and makes an important contribution to covering battery systems in electric vehicles. The Plastics segment has production facilities in Europe and Mexico. Customers in North America are supplied from Mexico and the USA.t. Hard trim systems are used in commercial vehicles, e.g. for exterior parts (e.g. front modules, roof modules and other aerodynamic panelling) or interior modules ("bunk box" under the driver's bed and shelving elements) and in passenger cars, e.g. for structural parts (tailgate). The segment also has its own capacities for painting plastics.

China: Activities in the Chinese market are bundled in this segment. These include supplying customers with plastic parts for the exterior panelling of vehicles, primarily for the cabins of commercial vehicles, but increasingly also for passenger cars. The product range offers solutions and components for commercial vehicles such as bumpers, front panelling, deflectors, roofs, mudguards and entrances as well as parts for passenger cars such as battery covers for electric vehicles and complex structural parts such as tailgates for SUVs. Composite moulding processes and injection moulding technology are used here. The segment also has its own capacities for painting plastics.

Materials: This segment comprises the development and production of semi-finished products (Sheet Molding Compound - SMC), fibre molding compounds (Bulk Molding Compound - BMC) and advanced fibre molding compounds (Advanced Molding Compound - AMC). The semi- finished products are used both within the Group for hard trim applications and supplied to external third parties. As part of the development of these base materials, it is already possible to influence key parameters of the end product.

1.2 CORPORATE STRATEGY AND SUSTAINABILITY CONCEPT

The STS Group is pursuing the strategic goal of further expanding its promising lightweight solutions for commercial and electric vehicles. The focus of the corporate strategy is therefore on the future markets of lightweight components and e-mobility. As one of the leading suppliers of components and systems for the automotive industry, the STS Group focuses on components made of composite materials and injection moulding from the initial idea to the finished product. STS products are designed to make vehicles fit for the future by making significant contributions to reducing weight and thus CO2 emissions. In addition, STS Group products improve the look, feel and functionality of vehicles.

STS Group's growth strategy is based on process optimisation through increased automation of manufacturing processes on the one hand, and on addressing technological trends such as autonomous driving and e-mobility on the other. The Group's mission is to manufacture and supply innovative system solutions for smart transport and sustainable growth. In order to expand its competitive position and achieve sustainable profitability, the Group is focussing on four strategic pillars:

• Market leadership
• Technology leadership
• Customer proximity
• Effective production systems

In 2020, the STS Group decided to focus on the core technologies of injection moulding and composite technologies. This was followed by the sale of the Acoustics segment to the Adler Pelzer Group2 . This marked the start of a strategic realignment with the aim of further expanding the promising lightweight solutions for commercial and electric vehicles. As at 31 December 2023, the Adler Pelzer Group holds 74.42% of the shares in STS Group AG. In the 2023 financial year, the process of implementing the Adler Pelzer Group's CSR strategy, which had already begun at STS in 2022, was driven forward. The aim is to strategically align the STS Group with the Adler Pelzer Group in terms of sustainability in order to best fulfil the requirements of customers and suppliers according to certain sustainability standards. The CSR strategy forms the basis of the STS Group for the further development of its sustainability

2 Adler Pelzer Group is the name given to Adler Pelzer Holding GmbH and all its subsidiaries.

concept, for the definition of realisable sustainability goals and the concrete integration of measures to achieve these goals. The sustainability targets and the processes for collecting non-financial performance indicators were also harmonised with the requirements of the Adler Pelzer Group.

Sustainability is an integral part of the corporate strategy and its implementation is derived from the Group's core business. As part of the Adler Pelzer Group's global corporate strategy, four megatrends in the automotive industry were identified, which were integrated by the STS Group as a guide for implementing ESG measures and achieving sustainability goals. At the same time, the four megatrends also represent opportunities and risks for the Group's business activities:

Under the motto "Think Sustainable, Act Responsible", the STS Group is pursuing the goals of a more sustainable business model in order to make its contribution to the environment. In the reporting year, a further principle was added to the existing four pillars of its sustainability concept as part of the strategic realignment: Innovation management and data security.

The Group's sustainability management is therefore based on five pillars that determine the identification of key sustainability issues:

1.3 MATERIAL SUSTAINABILITY TOPICS AND RESPONSIBILITY

The STS Group had already identified the material sustainability topics in 2018 based on the reportable aspects - environmental concerns, employee and social concerns, respect for human rights and combating bribery and corruption. Following the introduction of the Adler Pelzer Group's new CSR strategy, the materiality of the identified sustainability topics was discussed and reviewed internally. The material topics were determined in consultation with the Executive Board and those responsible for the specialist departments at Group level, in particular Human Resources, Purchasing, Quality and Sales, as they are in regular dialogue with relevant interest groups. In addition to the reportable aspects, supplier relationships are of particular importance to the STS Group as a result of the materiality analysis. Supplier relationships are an important part of the value chain and are closely linked to the course of business. They are therefore reported on as a separate aspect in the non-financial statement. In 2023, the Executive Board of the STS Group began to align the existing material topics with the CSR strategy and the expectations and requirements of the Adler Pelzer Group's key stakeholders. Following the entry into force of the Corporate Sustainability Reporting Directive (CSRD) in 2023, the Executive Board of STS Group decided to carry out the materiality analysis in the course of 2024 in accordance with the requirements of the European Sustainability Reporting Standards (ESRS). The perspective of the Adler Pelzer Group will also be taken into account when conducting the materiality analysis for the STS Group.

STS Group's sustainability mission statement is derived from the UN Sustainable Development Goals (SDGs). The SDGs are 17 political goals that are essentially intended to enable global sustainable development by 2030.