Annual Report 2023

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EU taxonomy

The European Green Deal presented by the European Commission in 2019 contains the goal of reducing net greenhouse gas emissions in the European Union to zero by 2050. A central component of this is the EU taxonomy, a classification system for defining “environmentally sustainable” economic activities. The aim is to classify economic activities across the EU in terms of their contribution to six defined environmental objectives on the basis of defined requirements, in order to steer capital flows toward sustainable investments: (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,” and (6) “Protection and restoration of biodiversity and ecosystems.”

HUGO BOSS conducted a comprehensive analysis revealing that, for fiscal year 2023, no financially material taxonomy-eligible or taxonomy-aligned sales, CapEx, or OpEx are to be reported for our Company, first and foremost as our primary economic activities are not yet covered by the EU taxonomy. The following section contains the mandatory reporting in connection with the EU taxonomy.

Reporting on “environmentally sustainable” economic activities

The EU taxonomy requires companies to report on their taxonomy-aligned, i.e., environmentally sustainable, economic activities according to EU criteria, as part of the non-financial statement. The reporting requirements for fiscal year 2023 have been extended from the previous two climate-related objectives (1) and (2) to the remaining four environmental objectives (3) to (6). In this context, the corresponding shares of sales, capital expenditure (CapEx), and operating expenses (OpEx) related to taxonomy-eligible economic activities now have to be disclosed for all six objectives. At the same time, the corresponding shares related to taxonomy-aligned economic activities still only need to be reported for objectives (1) and (2).

Taxonomy-eligible economic activities are those that comply with the respective activity description according to the EU taxonomy, irrespective of the fulfilment of the technical screening criteria. Economic activities are taxonomy-aligned if they make a significant contribution to the respective environmental objective (compliance with the technical screening criteria), do no significant harm (“DNSH”) to the other environmental objectives, and comply with the minimum safeguards outlined by the EU taxonomy. The following disclosures are based on the current interpretation of the EU taxonomy, which was considered dynamic at the time this non-financial statement was prepared.

The delegated acts published to date in connection with the EU taxonomy on the six environmental objectives still only cover a limited number of sectors and economic activities. For the primary economic activities of companies in the global apparel market, and thus also of HUGO BOSS, the delegated acts currently only cover a very limited number of potentially relevant economic activities in connection with the objective (4) “Transition to a circular economy,” including the sale of second-hand goods or repair and refurbishment services. While these economic activities still only have a minor economic role for HUGO BOSS today, our primary economic activities are by definition not taxonomy-eligible.

However, among the economic activities listed in the delegated acts for the six environmental objectives, there are also those that, although not revenue-generating, are generally relevant for HUGO BOSS as they concern our basic infrastructure such as real estate, or facilities for our own energy generation. Overall, the activities relevant to HUGO BOSS were identified as part of a cross-divisional project to implement the requirements of the EU taxonomy. In particular, a shortlist of activities relevant to HUGO BOSS was drawn up on the basis of the comprehensive lists of activities in the respective annexes to the delegated acts.

In light of the extension of the reporting requirements to the environmental objectives (3) to (6) and the resulting multitude of potentially eligible economic activities, HUGO BOSS has further refined the principle of materiality applied in the context of reporting on the EU taxonomy compared to the previous year. Accordingly, an economic activity is determined taxonomy-eligible for HUGO BOSS if the corresponding KPI value at economic activity level is at least 0.5% of the total sales denominator or total CapEx denominator, respectively.

Taxonomy-eligible and taxonomy-aligned sales

The core business of HUGO BOSS is not covered by the current EU taxonomy criteria for the six environmental objectives. However, objective (4) “Transition to a circular economy,” for which taxonomy criteria were introduced in 2023, includes some economic activities that apply to some smaller business activities of HUGO BOSS. As laid out in the chapter “Environmental Matters” of this combined non-financial statement, HUGO BOSS offers a Repair & Rewear service in selected own stores in Germany, while operating an online resale platform in France. However, as the sales generated by these two activities in 2023 are below the defined materiality threshold, the Company reports the shares of taxonomy-eligible and taxonomy-aligned sales in fiscal year 2023 as 0%, as in the previous year. Irrespective of this, HUGO BOSS is striving to significantly expand its activities in the area of circularity going forward, thus having firmly anchored a clear commitment to “Increase Circularity” in its sustainability strategy. Combined Non-Financial Statement, Environmental Matters, Sustainability

Taxonomy-eligible and taxonomy-aligned capital expenditure (CapEx)

For fiscal year 2023, no economic activities were identified whose respective CapEx amounts exceed the defined materiality threshold. For example, the construction of a new office building at the Company’s headquarters in Metzingen (Germany) did not start until December 2023 and therefore only led to immaterial CapEx in fiscal year 2023. Completion of the building, for which HUGO BOSS is aiming for a platinum certification from the German Sustainable Building Council (DGNB), is planned for 2025. Moreover, investments in connection with the commissioning of additional photovoltaic systems at our own production sites were also below the materiality threshold.

Consequently, the taxonomy-eligible CapEx for 2023 in relation to the total CapEx incurred in the past fiscal year of EUR 537 million (“denominator”) amounts to 0% (2022: 2% with a denominator of EUR 419 million). The share of taxonomy-aligned CapEx, again in relation to the denominator, thus also amounts to 0% (2022: 0%). In accordance with the taxonomy regulation, the CapEx to be used in determining the denominator mainly comprises additions to property, plant and equipment and intangible assets before depreciation, amortization, and revaluations, as well as right-of-use asset additions from long-term leases. The calculation was based on data from Business Planning & Analysis and Group Accounting. The amount of the denominator can be reconciled to the disclosures made in the Combined Management Report under Financial Position and in the Consolidated Financial Statements under Note 9. Financial Position, Capital Expenditure

Taxonomy-eligible and taxonomy-aligned operating expenses (OpEx)

The OpEx to be used in calculating the denominator according to the definition of the EU taxonomy essentially comprise direct costs relating to research and development, building renovation measures, short-term leasing, maintenance, and repair. The majority of the OpEx of HUGO BOSS, such as sales and marketing expenses, general administrative expenses, or logistics expenses, are therefore not included in this definition. For fiscal year 2023, the denominator amounts to EUR 135 million (2022: EUR 116 million). The calculation was also based on data from Business Planning & Analysis and Group Accounting. In relation to its total OpEx in fiscal year 2023 of EUR 2,171 million (reconcilable to the operating expenses presented in the consolidated income statement; 2022: EUR 1,921 million), HUGO BOSS classifies the OpEx denominator as immaterial. Consequently, in accordance with the specifications in Annex I of the delegated acts on Article 8 of the EU taxonomy, a determination of the taxonomy-eligible and taxonomy-aligned OpEx is waived also for fiscal year 2023 and both shares are consequently reported at 0% (2022: 0%). Earnings Development, Income Statement

Climate risk analysis

HUGO BOSS has carried out an analysis of physical climate risks for its most important Company locations, which meets both the requirements of the EU taxonomy and the recommendations of the Task Force on Climate Related Financial Disclosures (TCFD), also including the locations of the above mentioned investment projects. The system-based analysis is based on the emission reference scenarios adopted by the Intergovernmental Panel on Climate Change (IPCC). No significant short- to medium-term physical climate risks were identified for the respective projects, so there is no significant harm (“DNSH”) to the environmental objective of “climate change adaptation.” Therefore, from the Company’s point of view, adaptation measures are not necessary at present.

Social minimum safeguards

Compliance with the social minimum safeguards, which comprise the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights, including the ILO Core Labor Standards and the International Bill of Human Rights, was reviewed by respective topic experts at Group level. As in the previous year, HUGO BOSS complies with all of the standards defined therein. Combined Non-Financial Statement, Respect for Human Rights

Additional information

For additional information on the taxonomy-eligible and taxonomy-aligned proportions of sales, CapEx, and OpEx, please refer to the section "Additional Disclosures on the EU Taxonomy.” Additional Information, Additional Disclosures on the EU Taxonomy