Momentum 25 Years of Engagement

aam 25 jaar duurz

AGM Engagement Report 2020 Momentum 25 years of engagement

Colofon Vereniging van Beleggers voor Duurzame Ontwikkeling ( ) Pieterstraat , Utrecht + () | [email protected] AGM Engagement Report 2020 Momentum 25 years of engagement Table of content

About VBDO 3

Foreword 3

Highlights from VBDO’s 2020 AGM engagement season 6

List of companies engaged with in 2020 8

Executive Summary 9

COVID-19 Statement 12

1. VBDO Engagement 13

For information please contact About VBDO Mart van Kuijk | Project Manager [email protected] | + () VBDO stands for Vereniging van Beleggers VBDO has been actively engaging with the voor Duurzame Ontwikkeling, which translates Boards of Directors of publicly-listed companies Utrecht, the Netherlands to the Dutch Association of Investors for in the Netherlands for years. We attend AGMs July Sustainable Development. It was established to ask constructive, critical questions in order in to help create a sustainable capital to encourage companies to improve their This VBDO publication is protected by copyright laws. No part of this publication may be reproduced, market. With this goal in mind, VBDO undertakes sustainability policies and practices. distributed, or transmitted in any form or by any means, including copying and/or publishing (parts of) benchmarking exercises, organises seminars this publication, without the prior written permission of VBDO. If you would like to ask VBDO for such and conferences, and engages with companies VBDO is funded by our members: institutional permission, please email: [email protected] and ﬁnancial institutions. investors and more than private investors.

2 agm engagement report 2020 | momentum – 25 years of engagement 3 Foreword

First of all, we want to celebrate our th anniver- only were these types of questions new to com- We have engaged on a significant number of sary and the positive changes we have helped to panies, they were also new to VBDO. topics over the years, including codes of conduct bring about since our launch. Secondly, the name (-), biodiversity (-) and the reflects how the world is changing due to the One of the first things VBDO had to do was build SDGs (-). In , we are introducing coronavirus. The lockdowns have made a major a network and gain access to general sharehold- two new themes. ‘Diversity’ is a new governance economic and social impact; many organisations ers' meetings. We started by buying one share of theme and ‘labour conditions in the supply chain’ and individuals have su¤ered as a result. It is not one company and figuring out how to attend its is a new social theme. only crucial to keep up the momentum of moving general shareholders' meeting and how to make towards a more sustainable, fairer world; we need an impact. Then we started buying shares in other We are very proud of the mature engagement to up the pace. There has perhaps never been a companies. You can imagine how dicult it was process we have developed over the years, and This year, VBDO celebrates our th anniversary. better time to ‘reset’ the world. to hit the right sustainability chord when no infor- also of our passionate project managers. The We are proud that our association has promoted mation was available to draw from. Since most VBDO engagement process has grown stronger sustainability for all these years and that we’ve COVID- is one of the many challenges VBDO companies were not transparent about sustaina- and stronger over the years, and has led to tangi- helped to increase society’s awareness of issues has faced over our year history. While gov- bility issues, ‘transparency’ became VBDO’s first ble improvements by numerous companies. such as responsible investment, climate change ernments and organisations need to tackle the theme. Good reporting is crucial to transparency and many more. Together with our broad mem- immediate impacts of the pandemic, it’s also vital and standards are needed if companies are to be The Netherlands is now leading the way in so bership base of private members and institutional to have a long-term perspective. This long-term benchmarked for their performance, so to begin many sustainability areas. Engagement works. organisations, we strive for a sustainable and view is something that VBDO has advocated for with we focused on encouraging companies to We encourage other European countries to follow socially responsible capital market. since our inception. report on environmental issues. This took some our lead over the next ten years, and contribute to patience and perseverance, but in the end we got the EU’s sustainability ambitions. The world is fac- We focus our activities on listed companies, finan- Piet Sprengers founded VBDO because he rec- what we asked for. ing significant challenges, the greatest of which is cial institutions and private investors. We’ve seen ognised that an independent association was climate change. Countries, companies and inves- many themes returning over the years, including needed to guide companies in a more sustainable As time went on, we received more support from tors must play their role in tackling the crisis. biodiversity and natural capital. This year, the direction and make them aware of the importance outside our organisation, through new sustaina- world has been confronted by the COVID- pan- of other goals, in addition to financial ones. VBDO bility guidelines and frameworks such as the GRI, demic, and all the many repercussions that have was the first association of shareholders in the CDP, Integrated Reporting and later the SDGs and resulted from it. Lockdowns in response to COV- world to discuss sustainability with companies. It TCFD. In fact, our call for reporting standards was ID- have had serious consequences worldwide. was (and is) a challenge, but VBDO has remained a major reason that GRI decided to base itself in The most vulnerable groups have been hardest true to our original mission. Amsterdam. Piet Sprengers was a great advocate hit, both here in the Netherlands and elsewhere of this. in the world. Support measures are not widely A lot has changed over the last years. Sustain- available, particularly in developing countries, ability reports and policies are now much more Looking back in time (see timeline), VBDO has Angélique Laskewitz Piet Sprengers and inequality seems to be increasing. common. A greater proportion of companies now always tried to ensure our themes are salient Executive Director of Founder of VBDO, now understand why topics such as climate change and, in many cases, ground breaking. In ¡, VBDO Manager Sustainability We believe it is vital that VBDO continues our are relevant to businesses and investors, so they we started categorising themes according to ESG Strategy and Policy current activities, including asking questions expect to be challenged on these topics. Early on, (environment, social and governance) principles. at ASN Bank at shareholders' meetings. We have titled this when we asked one of the companies in scope Everything we do supports our key goals of rais- engagement report 'Momentum' for two reasons. about sustainability practices + years ago, the ing the sustainability bar and creating awareness. response was that they recycled their paper. At the time, that was considered to be sucient. Not

4 agm engagement report 2020 | momentum – 25 years of engagement 5 Highlights from VBDO’s List of companies engaged 2020 AGM engagement season with in 2020

PREAGM AGM DIGITAL AGM COMPANY SECTOR MEETING VISIT PRESENCE ING Group Financial Yes No Yes

ABN AMRO Financial Yes No Yes - Aegon Financial Yes No Yes a.s.r. Financial Yes No Yes Van Lanschot Kempen Financial Yes No Yes NN Group Financial Yes No Yes Heijmans Industries Yes No Yes Aalberts Industries Yes No Yes BAM Group Industries Yes No Yes Vopak Industries Yes* No Yes AkzoNobel Industries Yes No Yes ArcelorMittal Industries Yes No No Boskalis Industries Yes No Yes DSM Industries Yes No Yes Corbion Industries Yes No Yes Shell Industries Yes No No OCI Industries Yes No Yes ASML T&E (Technology & Electronics) Yes No Yes TKH Group T&E Yes No Yes Philips T&E Yes No Yes Signify T&E Yes No Yes ASM International T&E Yes No Yes Sligro FBR (Food, Beverage & Retail) Yes No Yes

Ahold-Delhaize FBR Yes No Yes Heineken FBR Yes No Yes Wereldhave FBR Yes No Yes Unibail-Rodamco-Westﬁeld FBR Yes No No Unilever FBR Yes No Yes Randstad Services Yes No Yes SBM O¯shore Services Yes No Yes KPN Services Yes No Yes Graph : Commitments Graph : Commitments PostNL Services Yes No Yes RELX Services Yes No Yes 33 11 DiversityDiversity Wolters Kluwer Services Yes No Yes Arcadis Services Yes No Yes LabourLabour ConditionsConditions 1212 1212 2020 FollowedFollowed upup Fugro Services Yes No Yes ClimateClimate AdaptationAdaptation NotNot followedfollowed upup Altice Services Yes No Yes ClimateClimate MitigationMitigation 2929 companies sectors GeneralGeneral 1515 *VBDO had a post-AGM meeting instead of a pre-AGM meeting

6 agm engagement report 2020 | momentum – 25 years of engagement 7 Executive Summary

We have never before experienced an enga- ’ Supply chains remain a blind spot for many companies gement season like ’s. On the one hand, and transparency is in many cases lacking. Over the next few years, VBDO will therefore engage with it has been successful. We have seen a good – companies on labour conditions in the supply chain. number of companies improving their → Assess and publish physical climate risks and ¡¢£ of the companies in our scope have made a formal performance, including: opportunities for own operations and the supply commitment to improve labour conditions in their chain; supply chains. Many companies have developed a → Work together with governments, peers and local Supplier Code of Conduct, which provides guidelines • Companies stepping up from disclosing NGOs, ensuring the implementation of climate agricultural production regions, strategic assets or their for suppliers and requires compliance. Half of the climate-related information to actually adaptation strategies is context specific; supply chain. Most of these companies collaborate with companies have a strategy in place to address and integrating climate change policies; → Report on the public co-benefits of adaptation specialised firms to assess these impacts. This year, we mitigate impacts on labour conditions. eorts; have also seen many companies committing to expand • Manufacturing companies aiming for → Make use of nature-based solutions; their climate approach and develop comprehensive However, only ten companies actually identified additional transparency on labour → Invest in and/or finance climate adaptation climate adaptation strategies that fit with their specific and assessed impacts in the supply chain. Seven conditions in the supply chain; solutions in regions that will be most vulnerable sector, situation and locations. companies reported on the execution and outcomes • Ten companies committing to to the impacts of climate change; of activities after conducting supplier assessments. → Aim to meet the Taskforce for Climate Related We would like to stress that a climate adaptation report on their gender pay ratio. Financial Disclosures recommendations and strategy is not a one-size-fits all solution. It should be Some companies instruct third parties, such as Eco- respond to CDP (Carbon Disclosure Project). developed specifically for the company in question, Vadis and the Responsible Business Alliance (RBA), On the other hand, COVID- has a¤ected implement sector or region-specific issues and should to carry out supplier assessments on their behalf. corporate decision-making, our engagement All companies now have climate adaptation on the follow the recommendations of the Taskforce for Although the standards and requirements between agenda; now it’s time to implement strategies Climate-Related Financial Disclosures. In , five those parties may dier, VBDO observed that sectoral process and the AGMs we usually attend. This is the second year that we’ve addressed climate more companies in scope stated that they would collaborations can lead to more transparency. This For a full understanding of the impact of adaptation, and we can now see many stock-listed enhance reporting using this framework, taking the could in turn lead to more concentrated eorts to the pandemic on our work, please read our companies moving up the ladder in terms of their total number doing so to . Next year will be the third improve labour conditions in supply chains worldwide. approach. We are pleased to report that we have seen year that VBDO engages on this topic. Considering Although companies that collaborate through these COVID- statement. an improvement for all of the criteria that we analyse to the progress made this year, we are positive that even initiatives tend to perform better, VBDO would like evaluate a company’s maturity. more improvements will have been made by this time to stress that transparency remains crucial. This will The rest of this report will first outline our next year. enable stakeholders to scrutinise results, and also recommendations for companies on each Another achievement is the fact that all companies now prevents suppliers from remaining under the radar reference climate adaptation in their publicly disclosed – when controversies arise. engagement theme, and then look at the information; this is four more companies than last most important results in greater detail. year. This is an important milestone in just one year of → Develop a Supplier Code of Conduct that follows The full list of commitments can be found engagement. Dutch companies are becoming increas- the United Nations Guiding Principles on Business in the second appendix. ingly aware of the physical risks of climate change and and Human Rights (UNGP); are increasingly looking at how first-order eects (heat → Proactively identify salient issues and assess nega- stress, extreme rainfall, drought, cyclones, sea-level tive impacts on labour conditions in the supply chain rise and wildfires), relate to, for example, the company’s through a comprehensive due diligence process; operational facilities. companies, compared to → Track responses of suppliers on labour conditions last year, have publicly disclosed this information. By through qualitative and quantitative indicators; disclosing, they are providing material information → Communicate how salient issues and actual impacts to shareholders and other stakeholders to scrutinise on labour conditions in the supply chain were performance and engage in further discussions. addressed; → Set relevant targets and KPIs, and report outcomes Almost one third of the companies are now executing transparently to stakeholders; specific scenario analyses on dierent global warming → Collaborate within the sector to obtain transparency temperature paths relating to e.g. their fleet, specific and share knowledge.

8 agm engagement report 2020 | momentum – 25 years of engagement 9 COVID-19 Statement

In addition, the financial institutions in scope did not regularly report on the progress of improving labour The coronavirus, besides its evident economic, virtual AGM in a concert hall in Amsterdam. Due to conditions at portfolio companies and other assets. social and health impacts, has changed this year’s the venue being mainly empty, every statement from This may be due to a lack of data from the portfolio AGM season and might impact it for years to come. the CEO, Frans Muller, was accompanied by an echo. companies. However, VBDO does advise financial Engagement with Dutch stock-listed companies has Let us hope that Frans Muller’s words in NRC¹ a few institutions to proactively assess the supply chains been at the heart of VBDO throughout our ¢ year weeks after the AGM will echo with other companies as of portfolio companies, as well as to address salient history. AGMs are the formal vehicle for shareholders well: ‘The coronavirus can speed up the sustainability human rights issues and corresponding vulnerable to exercise their right to ask questions to the Board of transition of Ahold Delhaize.’ groups. Directors of a company, so are a vital opportunity for us to ask questions about sustainability. For VBDO, being physically present at an AGM is – important. It helps when we want to ask a direct → Identify the diversity profile of the organisation, using Normally, companies, investors and other stakeholders question to the Board of Directors of a company, when indicators and voluntary measurement methods; gather physically to confirm and discuss a company’s we react to what has been said in earlier statements, → Publish a comprehensive diversity policy that strategic and financial performance. In , AGMs and when we follow-up on our own questions. It also includes references to (but should not be constricted have had to be held digitally. Importantly, the reporting makes it easier to interact on a human level. Similarly, to) the following aspects: age, gender, culture, the understanding of diversity within the company. cycle and voting on agenda items has not changed for we learned from a CEO that it is di¦cult for him to disability, faith and sexual orientation; However, only a third of the companies actually have the AGMs of the institutions in scope, neither has the present results and future outlooks without receiving → Research, disclose and correct the gender pay gap a comprehensive diversity and inclusion policy that sustaina bility dialogue with management. any response from the room. for at least three levels: workforce, management includes all marginalised groups. and executives; It seems that both engager and engaged would like to → Start discussions inside and outside of the company, Just three of the companies in scope have set relevant see AGMs return to their normal physical state when learn from each other and build upon findings. targets and KPIs on dierent aspects of diversity and it is safe for them to do so. We would especially like to for dierent levels within the organisation. In part this thank the companies that have provided sophisticated The will to enhance (gender) diversity within companies is due to the challenge of encouraging diversity within digital solutions that have enabled attendees to ask is on the rise, but creating and maintaining an overall the talent pool. Some sectors tend to attract certain follow-up questions. However, some learnings may be diverse talent pool and workforce remains a challenge. candidates. Companies in industrial and technology carried forward that benefit all parties, such as using Diversity as a topic has been relevant for a long time, related sectors may find it more di¦cult to attract live video streams to reduce the need for cross-border but it has gained momentum over the last year and women, for example. travel. this increased awareness is likely to expand further. VBDO’s engagement showed that the companies in Eorts and initiatives relating to diversity are mainly Also, we’re pleased to say that the companies in our scope are already aware of the importance of diversity, still focused on gender. We encountered this frequently scope are responding more than ever to the as ¢ out of § have made a formal commitment to during this engagement season, as most of the compa- call from stakeholders to implement more advanced enhance diversity and inclusion within the company. nies tend to report on diversity only in terms of gender, management and control systems to better ¡£ of companies in scope have systems and policies age and type of contract. VBDO wants to emphasise confront crises. The pandemic has enhanced the in place to report and prevent internal ethical and/ that companies must not limit diversity eorts to importance of scenario-analyses. It has also or discrimination complaints. ¨ of the companies in gender alone; they should also seek to ensure that highlighted the need for investment in sustainable scope have training methods in place to enhance they are not discriminating against employees or development to enable communities to adapt candidates based on ethnicity, sexual orientation and to future human-induced catastrophes. so on. Despite the focus on gender, companies often did not assess the internal remuneration dierences These are uncertain times. The COVID-¡ outbreak VBDO is looking forward to next year’s AGM season between men and women. Only eight of the companies could help to speed up companies’ sustainability and our ¨th consecutive year of engagement. assessed, communicated and addressed the gender improvements. Conversely, companies may have to pay gap. In order to help to increase awareness of this delay some of their proposed projects and ambitions. specific topic, VBDO questioned all of the companies in For this year’s AGM season, many companies decided scope on their possible gender pay gaps. We expect to make use of the venues they had already agreed a significant development on this topic in the coming to rent. For Ahold Delhaize, this meant holding its year, with ten companies committing to report on the gender pay ratio.

10 agm engagement report 2020 | momentum – 25 years of engagement 11 1. VBDO Engagement

. ’ and environmental performance. With the introduction of Conduct. Now, we expect companies to apply and of ESG themes at VBDO in ¨, we no longer had to reinforce human rights guidelines across their entire Our history is one of persistence. When VBDO com- advocate for environmental or social reporting as it had supply chains. We also expect them to co-operate with menced our first corporate engagements, our questions become the norm. suppliers, improve due diligence practices and disclose were often seen as unimportant or nonsensical. This progress on targets and KPIs. This contrast is an did not, however, stop us from pressuring companies to Together with our members, VBDO made it our mission example of the steady shift in our expectations. These release environmental and social reports. This pressure to put urgent and salient themes on the agenda. If changes are also reflected in our other work, which has eventually resulted in a steady increase in those we take a look back over the last ¢ years, we can expanded since many years to include benchmarks, reports and, more importantly, increased transparency see similar themes popping up multiple times, but in research and knowledge sharing. on non-financial information. dierent guises. The topic of ‘labour conditions in the supply chain’ is similar to ’s ‘Code of Conduct’, This increase in reports allowed VBDO to start carrying as they both address labour conditions. However, out our primary role: scrutinising results and entering in terms of content, much has changed. In the into dialogue with companies based on their social focus was on motivating companies to create a Code

25 years of VBDO Engagement Climate adaptation means adjusting to new environmental conditions

¤: Biodiversity: the variety CO emissions: release of carbon Biodiversity continues Circular economy: the Natural capital alongside circular Climate First environmental questions and variability of life on in the atmosphere causing climate to be a key theme importance of recycling and economy (-²). Natural Adaptation E asked during AGM Earth (-). change (²-³). (-). reusing consumer goods capital the sole focus (µ-¶). ³- (-²).

: Certiﬁcation and Code of Conduct: reducing AGM voting was advocated alongside Human rights: proper treatment of Grievance Living wage: su´cient wage to sustain See First social questions exploitation of workers (-). other social policies to incre ase pressure on workers in the supply chain, valuing mechanisms worker and family (²-³). S asked during AGM corporations (²-). their human rights (-). ()

The ﬁrst engagement theme for VBDO focused on asking companies to The modern Supply chain management: Remuneration: applying Responsible tax: transparent tax SDGs: integrating Sustainable See report more than just ﬁnancial results (CSR), according to the GRI-standard. balance () improving co-operation with a sustainability criteria to strategy and payments (-²). Development Goals in governance During this period (³³-), the VBDO also built our network suppliers ( -¶). renumerations (³-). (µ-³). G

¥ ¥ ¥ VBDO Introduction The themes for this year founded Initially, companies treated £: The modern balance (or ¡: ESG themes are ¤: All of the SDGs, are diversity for VBDO’s questions at AGMs integrated reporting) means established, giving companies that providing governance, labour as unimportant, responding to that environmental, social and further legitimacy and brushed aside VBDO with a conditions in the supply questions about environmental ﬁnancial performance should structure to the VBDO’s VBDO’s questions new framework. chain for social and reports with: ‘we don’t have all be part of the ‘balance’; i.e. eorts. From here on, it in the previous climate adaptation for time for that’ or ‘such a report a company should not solely has been seen as poor century now have environmental. is unneccesary’. focus on ﬁnancial performance. practice for a company fully-formed CSR not to have social or reports. environmental reports.

12 agm engagement report 2020 | momentum – 25 years of engagement 13 1. VBDO Engagement

. ¦ .¤ VBDO aims to create an open exchange of ideas around a company’s sustainability policy and practice, in order Over the years, many motivated VBDO project managers have led the AGM engagement season. VBDO has pursued constructive dialogues with to improve its overall sustainability performance. Figure We have asked several of them to provide insight into what they remembered. Three anecdotes were selected. companies on material sustainability themes. Engage- shows VBDO’s AGM engagement process. Our process ment at each AGM was preceded by in-depth research has been updated and developed over the last ¢ years, of the company’s sustainability performance over the to ensure that we make an impact as great as possible. previous year. This research included analysing the company’s annual report and sustainability report(s), as Selected sustainability themes well as undertaking web-based research and consulting for AGM engagement in with relevant experts. Following these analyses, relevant → Environmental – Climate adaptation issues were selected and questions were formulated. → Social – Labour conditions in the supply chain The questions were shared with the selected compa- → Governance – Diversity nies and VBDO conducted meetings and calls prior to the AGMs, to enhance each company’s understanding A more detailed explanation of how we select our Liesbet Hanekroot Jeroom Remmers Ingmar Schuurmans of the questions. Based on these conversations, VBDO sustainability themes, measure the impact of our Sector Commission Chair (now) Project manager for the Project manager for the then selected the most material questions to ask the engagement, select companies to engage with and and project manager for the § - AGM seasons AGM season company’s Board of Directors at the AGM. decide questions, can be found in Appendix I. AGM Season I am proud that, thanks to our It is and with a former VBDO In February , I picked up the questions, around ¬£ of compa- colleague, I'm visiting more than Figure : Engagement Process challenge to lead and organise nies made commitments to improve headquarters of stock-listed ﬁrms the AGM season together with CSR KPIs on climate, biodiversity, in the Netherlands, United Kingdom Ingmar Schuurmans. We intro- human rights and remuneration, and Germany. On a sunny after- duced, amongst other initiatives, and most of them kept their noon, I arrived at the headquarters Selection the Theme Handbooks. These promises. During two Shell AGMs, of a large defence specialist of themes Follow-up Handbooks describe the three I represented VBDO and I was the and weapon producer in central Sending engagement theme letters ESG themes of that year in more ﬁrst to raise the issue of stranded London. We were well-prepared with to companies detail, and also the objectives of assets (carbon bubble). Human and covered topics such as human companies the VBDO in regards to these three rights issues, low investments in rights, responsible tax and the themes. At the evaluation session renewables and Nigeria oil spills circular economy. My conversation of that AGM season, the VBDO were hot issues too. Stakeholder partner appeared interested in researchers and spokespersons dialogues with TMG (Telegraaf), all the topics but reverted back Reporting In-depth informed us that these Handbooks KPN, Ordina, Beter Bed and USG with a binary question: “When our of results research had been very helpful for the People resulted in new sustainabili- soldiers are at the frontline, do you quality of their dialogues with the ty initiatives. want them to have a) functioning representatives of the companies. or b) non-functioning guns?”. Our Nowadays, I observe a trend that ESG-based investment advice was representatives of the companies negative. Evaluation Formulations consult with the VBDO spokesper- of the of questions for sons for their knowledge and for assessments engagement inspiring examples of solutions. I am very grateful for being able to Call contribute to such uplifting ways of Engagement company working towards positive impact! at the AGM to discuss questions

14 agm engagement report 2020 | momentum – 25 years of engagement 15 2. Results per engagement theme

·¸¹º»¼ - Graph : Progress on Climate Adaptation

Companies identifying 18 climate adaptation opportunities 15

23 Companies assessing ﬁrst-order climate impacts 14 ENVIRONMENTAL SOCIAL GOVERNANCE 25 Climate adaptation Labour conditions Diversity Companies having a policy in the supply chain on climate adaptation 19

36 Companies referring to climate adaptation 32

36 Engaged companies 37

. – 0 5 10 15 20 25 30 35 40 2020 2019 ..

Companies excluded from engagement on topic of climate adaptation LAGGING LEARNING LEADING Randstad

PostNL RELX Group .. climate change, both for their own operations and in Unilever Vopak Heineken The term ‘climate adaptation’ is used to describe their supply chain. For the financial sector specifically, ArcelorMittal Arcadis DSM approaches that address the consequences of climate VBDO expects companies to identify these risks and BAM Group ASM International ABN Amro Van Lanschot KPN change. Companies are a primary cause of climate opportunities for every asset class. Depending on Kempen Heijmans ASML ING Group OCI Shell Philips change due to the CO emissions that result from their the materiality for the company, it could assess what Ahold Delhaize SBM O£shore Corbion Signify business activities (for example, using fossil fuels, risks production locations are facing, how extreme Sligro WoltersKluwer Aegon a.s.r. Wereldhave clearing forests and engaging in livestock production). weather will influence the products it produces, and to TKH Group NN Group Aalberts Uniball-Rodamco- While companies hold the key to dealing with the what extent clients/portfolios are exposed to physical Altice Westfield AkzoNobel causes of climate change, the physical eects of climate change impacts. Fugro Boskalis global warming are already here and growing. Climate change is driving the occurrence of extreme weather Subsequently, VBDO expects companies to develop a Disclaimer: This report is not to be read as a bench- years. VBDO will continue to improve how we visualise events, such as hurricanes, droughts and floods. These strategy in order to mitigate these risks. Finally, compa- mark. The scores and results demonstrate the impact the work that has been done and seek to make our first-order eects lead to second-order impacts, such nies should report on physical climate change impacts of VBDO’s engagement process over the last few engagement impact more tangible. as a decrease in social development, economic activity (if they are material to the organisation) and how to and human health. In order to prevent these impacts manage these impacts in an environmentally and so- from intensifying, it is essential that companies start cially sound manner, in line with the recommendations is the second year that VBDO has engaged on all companies in scope now have a policy on climate adapting to the physical eects of climate change. of the TCFD. Climate change, and more specifically the topic of climate adaptation. We are pleased with adaptation. Another key point to note is that there has physical climate change impacts, do not just aect the steps that companies have taken over the last year. been a surge in physical risk assessments related to ..¤ ’ ° companies. Therefore, for every step that companies Graph shows that companies have improved on all the exposure of suppliers. In order to deal with the consequences of climate take, they should include local communities, and take criteria that are mentioned below. More than half of change, companies need to identify risks and wider society into consideration in decision-making opportunities that result from the physical impacts of around this topic.

16 agm engagement report 2020 | momentum – 25 years of engagement 17 2.1.4 Maxﬁeld Weiss From CDP on the topic of climate mitigation and adaptation

Companies must show their As we look towards our recovery ..¥ ± ± ² Scenario analysis and risk assessment shareholders that they have clear from the coronavirus crisis, we must Companies regularly focus on mitigating the causes If we look at climate change scenarios and risk assess- plans to thrive and be on the right ensure that we build back better of climate change (e.g. reducing CO emissions) and ments, we can see that some of the companies in scope side of this transition. But how do and do not prop up an old economy assess the risks of a swift transition to a low-carbon primarily consider short-term risks or have a limited companies get there and deliver on with increasing and impending economy (e.g. the risk of a price on carbon). VBDO timeline for long-term risks (e.g. years). Since CDP began in , the idea their climate ambitions? It starts by climate hazards. expects companies to also report on how they intend to of disclosing environmental data closely integrating climate change manage the consequences of climate change. In ¡ Both first- and second-order impacts can aect com- has moved from unknown concept into governance and business and , we asked companies to assess the physical panies. First-order impacts comprise sea level rise and to business norm. This year, ¢¢ strategy. ¡¢£ of Dutch companies In the Netherlands, risks of climate change for their business operations. extreme weather events, such as hurricanes, droughts major investors like Robeco, NN have done so, according to our there are five companies We’ve seen an increase in the number of companies and floods. The resulting second-order impacts aect Group and Triodos, with ´ ¡¢ trillion latest data. Companies must also on CDP’s ‘A’ List of climate that use the TCFD recommendations as guidance humans, the economy and ecosystems. These may in assets, backed the request we take eective adaptation actions. and learn from these recommendations. Last year, include changes in the availability of natural resources, sent to companies. Our partnership This is where Dutch companies leaders: ING Group, KPN, we focused on the importance of reporting physical agricultural productivity, the geographic distribution with VBDO is important and flows can improve: less than £ of Philips, BAM and Signify. risks. This year, we asked companies to take into of species, migration and macroeconomic indicators, in two directions. We collaborate to them use an internal carbon price account stakeholders in the wider regions in which they such as GDP. These eects can have major impacts on support and inform Dutch investors to build resilience, and just half operate, such as local communities, when assessing companies and should therefore be factored into their about how to take environmental have mapped and tested against Companies must not lock them- these risks. Communities should benefit from climate regular scenario analysis. issues into account, and VBDO dierent climate scenarios. Putting selves into a pathway of greater adaptation strategies and people’s livelihoods should uses CDP data to research Dutch in place these actions will help risk. Those that disclose their be preserved in the wake of climate change. We’ve had The companies in the Industry and Technology sector companies’ environmental steward- companies to communicate their environmental information, meas- discussions relating to the availability of water in the that VBDO engage with are generally well informed ship. future trajectory to investors. ure and manage their risks, invest Food & Beverage and Technology and Electronics sec- about first-order climate risks for their own organisation in climate adaptive solutions and tor, as well as the public co-benefits of climate-resilient and their suppliers. This is important because of the Companies and investors know To help investors pick the winners set robust science-based targets real estate, and how to protect customers and wider complicated supply chains that are necessary for busi - that climate change presents huge and encourage laggards to do will increase their resilience and society from the eects of climate change without ness continuity. However, the majority of these compa- risks. CDP disclosers reported more, CDP scores companies’ thrive in the future. It is down to making them pay the price. nies still need to assess the second-order impacts. nearly ´ trillion in climate risks annual progress across these key investors to support them. last year. Dutch firms reported ´¬ climate actions. For an ‘A’ score, billion of that, based on expected companies must disclose publicly, Table : Assessment of climate change impacts physical impacts and the eects show that they’re aware of their of market and regulatory changes. climate risks, and demonstrate But this historic transition to a market-leading adaptation and Assessment on supplier's exposure to first-order impacts low-carbon and resilient economy environmental stewardship ¤¥¦§ ¦¥% of companies is also an opportunity. Dutch practices. But a third of listed Dutch companies, for example, see over companies that have been asked ¤¥¤¥ ©¥% of companies ´ billion in opportunities, much to disclose climate data still don’t. Change + ª¥% of which is a result of the financial That’s why we need more investors services sector identifying areas of in the Netherlands to engage com- Maxfield Weiss N= ¬¥ (without financials) new investment. panies and request this transpar- Director Corporate Engagement, ency. Last year, VBDO’s Pension Europe. Funds report² found that too few Dutch pension funds are doing this, Financial institutions were specifically asked if they §£ of the companies in scope (without financials) so things need to improve. have assessed the physical risks of their portfolio. At currently assess second-order impacts. The remaining this point in time, only a.s.r. and NN Group have made companies have indicated, in response to VBDO’s an assessment of first-order impacts. Second-order questions, that they will look into TCFD’s recommenda- impacts were not assessed by the financial sector yet. tions, and consider how to report on physical climate Next year, we expect more financial institutions to start risks in line with these recommendations. or further develop both exercises in .

18 agm engagement report 2020 | momentum – 25 years of engagement 19 Table : Assessment of climate change impacts

Companies Commitments on climate scenario analysis GOOD PRACTICE – Unibail- GOOD PRACTICE – DSM – GOOD PRACTICE – KPN – ASM ASM International will include its operations, communities where the company operates and Rodamco-Westfield (URW) TCFD is a journey and not using intelligent information to International the supply chain in the scope of its climate scenario analysis. – considering multiple the end goal help companies and society to SBM O£shore SBM O£shore will further develop climate change scenarios and aims to further expand scenarios and time scales become more climate resilient its long-term horizon. Unibail-Rodamco-Westfield has firmly DSM has one of the most compre- Through its newly developed LoRa PostNL PostNL will take climate adaptation into consideration when engaging with clients and integrated climate adaptation and hensive climate change approaches, network, KPN aims to respond to op- partners, possibly leading to an additional assessment of physical climate risks. biodiversity in its newly developed which dates back many years before portunities that it has identified which Better Places strategy. The com- the arrival of the TCFD recommenda- relate to climate adaptation. LoRa Sligro Sligro aims to report on climate scenario analysis relating to the most material product groups. pany will include long-term climate tions in . Through a continuous stands for Long Range, Low Power. It risks in all newly development projects process and senior management has been specially developed to facil- and create a climate change risk plan buy-in, the company has been able itate the exchange of small amounts Climate adaptation strategy Climate change opportunities and biodiversity action plan for all to turn climate-related risks into of information between objects and The companies that we have engaged with are taking Terrible things can create opportunities. While climate of its assets by . The company climate-related opportunities. It systems. One LoRa module can dierent approaches when integrating climate adap- change will cause suering and tragedy, it will also sees an opportunity in the need for focuses its strategy on providing prod- transmit data for more than years tation into their corporate strategy. According to the create a new status quo, opening space for new enhancing the resilience of buildings ucts and services that enable clients on only two batteries. that are facing climate change to limit their own carbon footprints TCFD recommendations, companies should describe discussions and positive change. VBDO is very pleased impacts, and has performed exten- and provide solutions for people and The company is working on two pilots. the resilience of the organisation’s strategy, taking to report that a growing number of companies are sive research in line with the TCFD customers to the direct and indirect The first of these relates to dyke into consideration dierent climate-related scenarios. disclosing climate adaptation solutions (¬ out of §). recommendations. This study covered physical e¤ects of climate change, monitoring and is being worked on in Some companies within our scope explicitly mentioned This is especially the case in the Technology and Indus- both transitional (policy and legal, such as hunger and malnutrition, pub- collaboration with Rijkswaterstaat. climate adaptation within their corporate strategy (see try sectors, ( out of ¨). AkzoNobel sets an example technology, and market) and physical lic health, food loss and humanitarian One of the physical e¤ects of climate box-out on Unibail-Rodamco-Westfield). The financial by developing products (such as fire-, heat-, weather- risks (precipitation, tempe rature, disasters. In particular, the company's change in the Netherlands is the sector, in particular, has made progress when it comes and corrosion resistance products) to protect buildings, drought and sea level rise) and was internal carbon price and the CFO's drought that increasingly now occurs based upon IPCC scenarios RCP§. climate advocacy have contributed during the spring and summer period. to disclosing both actual and potential impacts of infrastructure and windmills against increased climate and RCP.³, with di¤erent time to the comprehensive integration of During this drought, the Dutch water climate-related risks and opportunities, and detailing impacts. AkzoNobel also supports building developers horizons: short term (), medium climate-related financial disclosures. boards spray the dykes to prevent how these considerations have been further integrated by supplying heat reflective products that reduce heat term () and long term (). cracks. Using soil moisture sensors into management practices. There are several leading islands in cities and limit the use of energy. that are connected by KPN to the companies within our universe that have started years Companies in the service industry have also demon- LoRa network, means that the correct ago with integrating climate change in their govern- strated that they are seeking to build upon their amount of water can be sprayed, ance, strategy, risk management and targets and are strengths. KPN, for example, is experimenting with Simon Gobert, Sustainability Performance and so that cracks in the dyke and using TCFD as a journey, not an end goal, to continu- a network that helps organisations to adapt to the Reporting Manager at DSM subsidence can be prevented. As a result, the safety of people in times of ously improve their comprehensive approach. This year increasing droughts that we are experiencing in the drought is further guaranteed. we discussed this journey in more detail with DSM, a Netherlands. Being aware of the potential opportunities “Senior management mission and want to put it on the commit ment is crucial for a agenda. However, integrating company that mentions the importance of commitment created by climate-related instability will become comprehensive climate change climate change in financial The second pilot supports farmers from the top (see box-out on DSM). increasingly important in the future when we experi- approach. Without commitment disclosures should make sense to measure and calculate detailed ence further extremes as predicted by dierent from the top, implementation for your organisation. It's not just information about soil and weather, climate paths. will be more challenging. It reporting through TCFD because using sensors and the LoRa network. takes a team of people from it's a tick box. It needs to be a Farmers can then use this information di¤erent departments within the material and relevant issue for to determine exactly how much water organisation who support the your organisation.” and pesticides their crops need, and maximise their yields.

20 agm engagement report 2020 | momentum – 25 years of engagement 21 Why dialogue is important TCFD GOOD PRACTICE – Aegon, & Dialogue is not only necessary for mutual understand- As of February , § (compared to ¢¬ in Febru- a.s.r. – publicly disclose TCFD ing and raising awareness; it is crucial if organisations ary ¡) organisations support the TCFD recommen- reports are to collaborate to make society more climate dations and have started to implement them⁴. VBDO resilient. Adapting to the eects of climate change expects companies to disclose their performance NN Group and a.s.r. both dedicated NN Group’s risk policy framework In , a.s.r. established a group- (both transitional and physical) should never be looked in line with these recommendations. In , VBDO a full chapter in their annual report aims to ensure that all risks are wide TCFD project team focused on on how the company responded to managed consistently and that climate change, in order to align its at from a single perspective. A company can conven- asked seven questions related to TCFD disclosure at the TCFD recommendations. Aegon the Group operates within set risk various businesses, ensure consistent iently move a factory from one place to another if water AGMs. of the Dutch publicly-listed companies within included a detailed report in its ap- tolerances. It has established a and coherent reporting and drive resources run out. However, this does not solve the our scope have referred to the recommendations of pendices. The Executive Boards of all climate change dialogue group to a.s.r.’s climate change programme increasing water scarcity that the company might have the TCFD. Some have partly disclosed climate-related three companies are clearly commit- support implementation of the TCFD going forward. Aegon has a similar caused or contributed to, nor does this help the commu- ﬁnancial information; others are still in review. ted to ensuring that the company has recommendations. This multi-disci- working group called the Climate nity that relies on the water basin. Companies should adequate internal risk management plinary working group advises the Change Working Group, which has take responsibility and aim to solve the problem, This year, the value of disclosing climate-related and control systems in place. Management Board on climate risks representatives from di¤erent areas instead of passing it along to someone else or even a information is recognised by OCI and TKH Group. and opportunities. across the company. next generation. Additionally, VBDO believes that the Those companies may not have fully implemented the costs of climate adaptation should not be passed on to TCFD recommendations yet and nor do they disclose communities, customers or wider society. their climate-related information in detail, but they do recognise the importance of doing so. VBDO would like to stress that TCFD disclosure is not only related to → ABN AMRO will start a dialogue with other banks transparency, as transparency is not the only reason to on how they can protect customers from the e¤ects communicate a company’s sustainability performance of climate change and ﬁnd a joint solution. to external stakeholders. Disclosure can also open up opportunities for the company’s own operations, its Through an active dialogue, companies can learn supply chains and the surrounding communities. from a wider group of stakeholders, including other companies. Climate change is a shared problem, therefore VBDO believes it is vital for companies and → TKH will organise a stakeholder dialogue stakeholders to share experiences and solutions in in which, amongst other topics, the TCFD order to gather information, data and ideas. Collab- recommendations will be discussed. orative action is also needed in order for companies → OCI aims to broaden its climate-related to take responsibility for their actions and to be held disclosure next year and report in line with accountable as a sector. either SASB or TCFD recommendations.

Graph : ¤ out of ¤½ listed companies report following the TCFD recommendations

2 Food Beverage and Retail 6 Services 4 Technology and Electronics

Industry

Financials 4 7

22 agm engagement report 2020 | momentum – 25 years of engagement 23 . – .. analysis of ¢ multinational companies, The Interna- tional Trade Union Confederation found that ¡£ of the .. Labour conditions in the supply chain is one of VBDO’s total supplier workforce comprised so-called ‘hidden new themes for the AGM season. While is workers’; workers that are not classed as employees⁶. LAGGING LEARNING LEADING certainly not the ﬁrst year that VBDO has asked ques- Companies do not always take full responsibility for tions relating to labour conditions, we are now taking the subcontractors and other workers in their supply a.s.r. Heineken a much more comprehensive approach. From ¡ chains. Ahold Delhaize Randstad Unilever ABN AMRO RELX Group to , VBDO engaged on social policies concerning KPN NN Group WoltersKluwer employees and suppliers. The initial focus on social ..¤ ' ° Philips ING Group ASM International policies shifted towards human rights from to Signify Corbion ASML AkzoNobel , while responsible supply chain management VBDO has developed various criteria relating to how DSM OCI ArcelorMittal received special attention in . From ¨ to ¡, we expect sectors to address labour conditions in the Shell Altice we focused on the living wage. All of these previous supply chain. VBDO expects companies to formally Sligro Vopak Fugro Aegon Aalberts PostNL Wereldhave Unibail Rodamco topics have now been brought together in our new commit to improving labour conditions, enhancing due Westﬁeld Heijmans SBM O£shore Boskalis engagement theme: labour conditions in the supply diligence strategies, tracking progress and being trans- Van Lanschot BAM Group TKH Group Arcadis Kempen chain. parent about all of this. Companies should have an overarching goal of ensuring that the labour conditions Disclaimer: This report is not to be read as a bench- years. VBDO will continue to improve how we visualise The results from the ¡ Corporate Human Rights of workers in their supply chain adhere to the UNGP. mark. The scores and results demonstrate the impact the work that has been done and seek to make our Benchmark indicate that companies are reactive re- of VBDO’s engagement process over the last few engagement impact more tangible. garding human rights violations, rather than proactively In order to increase transparency, companies should preventing issues⁵. Supply chains remain a blind spot identify relevant issues and vulnerable groups. It is for many companies. Therefore, we feel it is important also vital that companies put in place grievance Graph : Results on Labour Conditions to increase our scrutiny, because experience shows mechanisms and collective bargaining provisions for that pressure can lead to change, and we believe that the entire workforce, including (sub)contractors, in order Adressed negative impacts 7 on labour conditions engagement can help companies to enhance their to ensure that the company is made aware of, and can Assessed negative impacts policies and practices. work to resolve, any concerns. Companies need to be 10 on labour conditions able to identify and assess negative impacts on labour Strategy to improve 22 Companies can use the United Nations Guiding conditions across every tier of the supply chain. To labour conditions Principles on Business and Human Rights (UNGP) to this end, it is important that companies engage with Identify risks, issues and 22 improve labour conditions within their supply chains. stakeholders to gain a detailed overview of the supply vulnerable groups As part of the ‘due diligence’ process, it is important chain. Code of Conduct that 3731 follows the UNGP for a company to have an overview of the possible

Formal commitment to risks and salient issues regarding labour conditions Strategies can then be developed to improve these 35 improve labour conditions in supply chains. These issues include human rights, labour conditions. Such strategies can be reﬁned by such as the right to non-discriminatory treatment, tracking responses of suppliers, asking questions Engaged companies 37 freedom from child labour, the right not to be subjected relating to labour conditions, and using both qualitative to slavery, and freedom of association. Some groups and quantitative indicators. Companies can then set 0 5 10 15 20 25 30 35 40 are particularly vulnerable to human rights abuses or relevant targets and KPIs in order to maintain progress poor labour conditions. These groups include women, and make tangible improvements. Additionally, it is children, LGBTI people, ethnic minorities, disabled crucial to communicate the progress that has been Table : Questions on Labour Conditions people, indigenous people, temporary employees and made on labour conditions, e.g. in a separate report or employees with uncommon working hours. as a speciﬁc section in the company’s annual report. Labour conditions in the supply chain question topic ¿ of questions

Addressing impacts and reporting progress ¦© One particularly salient issue is subcontracting in Compliance of suppliers © dierent tiers of supply chains. Subcontractors can be Collaborative e£orts (in sector context) ª seen as a vulnerable group in some instances as they are often not granted the same rights as employees Identifying and assessing risks ¦¬ and are not subjected to regular labour contracts. In an

24 agm engagement report 2020 | momentum – 25 years of engagement 25 2.2.4 Rob Lederer, Executive Director of the RBA on the topic of labour conditions

in global supply chains, including Wherever companies are on the ..¥ ± ± ² Assessing suppliers beyond tier one remains those of Dutch companies. The spectrum of maturity, the increas- a challenge RBA has been piloting a unique ing expectations from a wide array From theory to practice §£ (¨ out of §) of the companies within our scope In today’s globalised world, supply and robust set of tools over the of stakeholders, including Dutch During this year’s engagement season, VBDO en- only assess and directly engage with the first-tier sup- chains are a highly complex web last several years to identify and policy makers, consumers, inves- countered many companies that were still relying on pliers, because those are critical for business continui- of business relationships. They’re eradicate issues that can lead to tors and public buyers mean that their old-fashioned due diligence processes. Such due ty. This means a lack of transparency internally, as well often spread across numerous forced labour. These issues are it is vital to at least make a start diligence does not go beyond the traditional annual as externally, on the deeper tiers, resulting in problems countries, and rely on resources extremely complex; each case is on addressing labour rights in the auditing of production sites and self-assessments, emerging further down the chain more frequently. that come from diverse regions with dierent and requires a unique set supply chain. whereby suppliers receive advance notification that varying cultures, standards and of solutions, including the use of they are going to be assessed. This approach is not We found that only ¬ (¡£) companies have assessed regulations. Most companies have collaborative supply chain lever- Collective action is a prerequisite adequate; the relationship between companies and risks relating to working conditions and that only nine thousands of customers and sup- age. This leverage is a key tool that to eective due diligence. Compa- suppliers should be proactive as well as continuously companies communicated transparently towards pliers, and these suppliers typically has been successfully applied by nies that are engaged in industry or interactive. Proper due diligence consists of multiple external stakeholders about assessed negative provide services to more than one RBA and its membership. multi-stakeholder supply chain sus- steps but should at least start with assessing and impacts on working conditions. Only (£) of these industry. This reality also applies to tainability initiatives are therefore mitigating negative impacts in the supply chain. Some companies have a comprehensive overview of what Dutch companies, who as a result RBA’s Code of Conduct requires better positioned to tackle issues of the financial institutions in VBDO’s scope already happens further down the chain than tier and publish face a complex undertaking when it that no worker should pay recruit- such as poor working conditions. demonstrate this kind of approach, as detailed below. their findings in their annual report. comes to conducting due diligence ment fees or costs for employment, For companies, responsible busi- across their global supply chains. as that can lead to conditions of ness is a long journey of continuous After ABN AMRO published its second human rights However, it must be said that mapping and keeping forced labour. When allegations of improvement. RBA is proud to see report, Kees van Dijkhuizen, former CEO of ABN AMRO, track of supply chains before a serious problem arises International well-recognized poli- non-conformance at manufacturing Dutch member companies contrib- commented: “I’m proud of the steps we are taking, but is easier than mitigating controversies after the event. cy frameworks (such as the OECD sites in Thailand were brought to our uting significantly to advancing mindful of the fact that the path from theory to practice During this year of engagement, VBDO found such pro- Guidelines and the UN Guiding attention, we organised a sustained collective eorts and industry is long and not without setbacks. While so much activity at multiple companies, including Corbion and Principles) guide companies on the eort to verify conditions on the collaboration. more needs to be done to protect human rights, I am KPN, which tracked and addressed negative impacts steps of due diligence: embed due ground and develop appropriate hopeful.” on labour conditions in their supply chains. Corbion diligence policies into company remediation plans for workers. Cases such as the one cited disclosed all levels of control and risk management management systems; assessing This included rigorous, independ- above demonstrate the power that VBDO agrees that progressing from theory to practice procedures regarding all raw materials that are crucial actual and potential human rights ent factory and field assessments collaboration and shared leverage is di¦cult, especially when an organisation is taking for production. KPN mapped all dierent tiers of the impacts involved with the com- with significant worker engage- can have, and it is rewarding to see a pioneering stance. ABN AMRO’s recognition of how company’s supply chain and published its expectations pany’s business operations or prod- ment. growing collaboration among com- much work there is to be done paves the way for further of suppliers in its Supplier Code of Conduct, in order to ucts; prevent and mitigate potential panies result in meaningful impacts improvements, which involves working together with ensure that it has a clear overview of the origin of raw and actual adverse impacts; track As a result, at the end of ¡, for workers. and educating employees, clients, peers, governments materials. due diligence implementation actions the RBA reported that (with the and NGOs. and eectiveness; and to cooper- help of some of its members) it Collaborating with suppliers ate for remediation. Remediation is had facilitated the return of nearly ING has stated that its human rights report will The Organisation for Economic Co-operation and De- key to ensuring that due diligence USº¢ million to ,¢§ migrant help to assess whether its approach is successfully velopment (OECD) estimates that more than half of the actually benefits the very people factory workers in Thailand to reducing the most severe impacts on people. Although world’s manufactured imports are intermediate goods. that it is designed to protect. Let’s repay recruitment fees and other transparency is not the goal in itself, it does support an These are goods that are used in the production of look how this works in practice. costs the workers had paid during organisation to track progress and achieve its mission. other goods. Supply chains have grown more complex, their recruitment. This is just one Multiple companies, in almost all sectors, now share making them less transparent and more di¦cult to get One pressing issue in the space example of success in our fight progress on their human rights strategy through their a grip on. of labour rights, is that of forced against forced labour, as eorts by human rights reports. We have not seen many exam- labour. The ILO estimates that ¢ RBA and our members had already Rob Lederer ples of companies reporting on all negative impacts Our research shows that ¢ of the § companies million people worldwide are in led to the return of more than º Executive Director of the related to working conditions, however. We look in scope have made a formal commitment towards forced labour⁷. This creates a risk million of recruitment fees and tens Responsible Business Alliance (»¼½) forward to further developments in this area. improving labour conditions through their Code of of thousands of passports. Conduct, but that only nine companies actually assess negative impacts in their supply chain. We believe that this is partly due to companies seeing the issue

26 agm engagement report 2020 | momentum – 25 years of engagement 27 as not being material, due to a fairly safe and short able groups. The real positive impact is made when a topical approach on labour conditions in the supply more than auditable requirements. Together, these supply chain. For those companies where the issue actual issues are assessed, discussed and addressed chain should not neglect other relevant issues. When address, amongst other issues, health and safety, is material, a key problem may lie in the view that in order to mitigate or stop abuses from occurring in the companies solely focus on one specific issue in their human rights and local communities. ArcelorMittal extensive work and expertise is required to build an future. supply chain, for instance child labour, other issues has started a dialogue with the company’s key raw extensive approach. Many companies, for example, may be overlooked. VBDO suggests that companies material suppliers to gain their commitment towards have self-assessments, but are not actively engaging We have found several examples of companies take a comprehensive or multi-topical approach this certification. As a member of the Initiative for with suppliers or identifying actual impacts on the engaging with stakeholders on specific topics. In the towards both human rights and labour conditions, as Responsible Mining Assurance (IRMA) steering commit- ground. In some sectors, there are examples of specific past few years, companies and sectors have focused obviously, one cannot exist without the other. tee, ArcelorMittal participates in the multi-stakeholder sectoral approaches; one of these is the Technology on child labour, conflict materials and living wage, expert panels shaping IRMA’s standards. Discussion and Electronics sector, where Philips and Signify are amongst other topics, and these focuses have provided Setting the standard in supply chains with and collaboration between all stakeholders within the leaders on this topic. new insights and, in some cases, significantly improved coordinated strategies steel supply chain, as well as with customers and other the situation in a sector or region. If companies want to improve labour conditions or relevant parties, is crucial for achieving improvements Engaging with stakeholders is crucial make a significant operational dierence, they need to to labour conditions. to achieve improvement Topical and comprehensive approach roll out specific strategies that tackle the salient issues Positive impact is not achieved by only rolling out a Clearly, topical approaches can be very eective in relating to conditions in their specific supply chains. Similar to ArcelorMittal, Unilever has a Responsible policy that sums up possible salient risks and vulner- solving specific problems. However, companies taking Without a concrete plan, the goal of improving labour Sourcing Policy that sets a threshold for minimum re- conditions will remain just an ambition. Therefore, quirements as well as defining best practices, with the VBDO was pleased to see that some of the companies goal of helping suppliers to further improve. Unilever in scope made tangible progress on setting standards procured §£ of its products in line with its responsible with stakeholders to manage and and rolling out strategies. sourcing policy. Both companies mentioned here aim improve labour conditions in the to source their materials in a responsible manner, but supply chain. ArcelorMittal aims to audit all of its production sites dierent issues in dierent sectors result in dierent GOOD PRACTICE – ABN AMRO and conflict areas, ABN AMRO and These types of engagement includes, and mines according to the most extensive standards measures. Therefore, it is key that companies aim and ING’s human rights reports ING always apply enhanced human for example, supplier development, within the industry. The company has taken a leading to develop their own standards or policies, working rights due diligence. As signatories to including topical training sessions, role in developing ResponsibleSteel™ since ¢. Last together with a wide variety of stakeholders, in order to ABN AMRO uses three indicators to the Dutch Banking Sector Agreement, procurement engineering and a year, ResponsibleSteel™ launched its first site certifi- tackle the issues that are present in a specific sector or ABN AMRO and ING are two of the calculate its impact on human rights. supplier sustainability stakeholder cation standard. This standard sets out principles, region. ING uses five. Amongst other areas, driving forces behind a value chain day. Both companies are active within which are underpinned by more than ¢ criteria and both reports look at child labour, study into cocoa, which led to a report industry working groups, such as the discrimination and underpayment by the Dutch Social and Economic Responsible Business Alliance (RBA). (living wage). Council (SER). Information concerning the e¤orts of Table : Highlighted commitments impacts For both organisations, the develop- The financial institutions both Philips and Signify to improve labour ment and public disclosure of indicators prefer inclusion and engagement, conditions in their supply chains is is still a work in progress. This is rather than excluding companies. This disclosed both within each company’s Companies Highlighted commitments on labour conditions in the supply chain partially because results are not means that they undertake long-term annual report and through separate (see Appendix II for full list of commitments) always shared with stakeholders and engagement processes with clients in reports. relevant data is frequently focused on order to facilitate structural improve- AkzoNobel In ¤¥¤¥, AkzoNobel aims to accelerate its supplier programme by requesting specific cases instead of overall im- ments relating to human rights issues. As Philips and Signify are clearly improvements from the suppliers under development and inviting more suppliers to provement. However, ABN AMRO and demonstrating, responsible supply take part in the assessment. ING are at the forefront of working to GOOD PRACTICE – Philips and chain management goes beyond improve labour conditions and human Signify – proactive, continuous traditional audits and box ticking. DSM DSM will engage with EcoVadis and its peers in Together for Sustainability to improve transparency about the assessment and the performance of its supply chain. rights within the financial sector. engagement Annual assessments or visits to production sites are not sucient by Signify Signify states that it will keep a target for supplier sustainability in the company's These financial institutions both have Philips and Signify both developed themselves. Business cases need next five-year programme (¤¥¤¦-¤¥¤©). tools in place to help them to identify and published a sustainable supplier to be built together with suppliers, country-specific human rights issues. declaration that follows the UNGP, (sub)contractors and other relevant a.s.r. a.s.r. commits to improving its due diligence processes and further aligning them ABN AMRO uses the Sustainability OECD’s guidelines and the conven- stakeholders. This year, VBDO is with the UNGP. Country Risk Tool, and ING uses the tions of the International Labour pleased to see Philips and Signify ESR Transaction Assessment. For Organization (ILO). The companies building such business cases with Wereldhave Next year, Wereldhave will review and update its Supplier Code of Conduct. transactions in high-risk countries proactively and continuously engage their suppliers.

28 agm engagement report 2020 | momentum – 25 years of engagement 29 .¤ –

.¤. Table : Questions on Diversity

LAGGING LEARNING LEADING Diversity question topic ¿ of questions

Ahold Delhaize Aalberts Rolling out a diversity and inclusion (D&I) policy/profile for the organisation ¦¬ Heineken Shell Unibail Rodamco Alice Setting relevant KPIs and targets ± Westfield Arcadis AkzoNobel Gender pay gap analysis ¤¬ KPN Unilever ArcelorMittal RELX Group Corbion ASM International Sligro SBM O£shore DSM ASML Wereldhave WoltersKluwer OCI Philips .¤. for the supervisory board will be binding instead of volun - BAM Group TKH Group ABN AMRO Signify In these times of societal turmoil caused by institutional tary (yet remains to be enforced). There is an information Heijmans Van Lanschot ING Group Kempen AEGON Vopak Fugro and systemic racism, diversity as an engagement asymmetry regarding disclosure about gender composi - Boskalis a.s.r. Randstad PostNL theme helps to address the inequalities in our society. tion at dierent levels in the workforce. Disclosure of the NN Group Since companies reflect our society, VBDO believes gender composition at the board level is legally obliged, they should make sure every employee is treated fairly and most companies publish about the gender compo- Disclaimer: This report is not to be read as a bench- years. VBDO will continue to improve how we visualise and feels fully included. Inclusive societies are created sition of the entire workforce. However, few companies mark. The scores and results demonstrate the impact the work that has been done and seek to make our through equal access to information, equal pay for disclose the gender composition at management levels of VBDO’s engagement process over the last few engagement impact more tangible. equal work and involvement in decision-making for all, below the board. Additionally, few companies disclose especially for marginalised groups. information about their supplier diversity.

Graph ¡: Results on Diversity According to the Dutch Constitution, all persons Almost a quarter of the Dutch population ( million out in the Netherlands should be treated equally in of § million), are ﬁrst- or second-generation migrants. equal circumstances, so discrimination is prohibited. People with this type of background are more likely to Setting relevant 5 Companies must not discriminate against someone, be unemployed (Western background: ¨£; non-Western targets and KPIs either intentionally or unintentionally, on the grounds background: £) than people with a Dutch background Addressing and communicating 8 of any of the diversity aspects mentioned above. It’s (£)⁹. There are currently no benchmarks or data the gender pay gap important to note that inclusion is crucial to diversity: an available on cultural diversity in top positions in Dutch Speciﬁc knowledge 16 and training methods employee may not be discriminated against in employ- companies, but case studies show that a relatively ment decisions, and should also be and feel included. small percentage of leaders have non-Western back- Recruitment strategy 24 ensuring non-discrimination Additionally, an inclusive workplace allows for fair and grounds. At the top in high management, only up to

Formal commitment respectful treatment of all individuals. ¢£ of leaders are from non-Western backgrounds. This 3735 to enhance diversity rises to £ for the sub top¹⁰. A pilot project, ‘Talent Number of engaged The Netherlands has a lot to win regarding gender naar de Top’, found that five out of the ¨ participating 37 companies equality. Women work part-time more often, are less companies have a target figure for cultural diversity (its represented in high management positions, and earn definition is people from a non-Western background) at 0 5 10 15 20 25 30 35 40 less than men (which can be partly, but not completely the top management level¹¹. explained by the preceding factors). The dierence in labour force participation between men (§£; ¬) and VBDO believes that there are many benefits to diverse women (¨£; ¬)⁸ became smaller in last decades but (leadership) teams. Diverse teams generate more crea- is still ten percentage points. In the adjusted pay tivity and better decision-making, for example. There- gap was §£ for the private sector and ¢£ for the public fore, companies with more diverse Boards tend to have sector. Since , there is a voluntary quota for £ higher returns and lower risk profiles¹². High performing women both in the Executive and Supervisory Boards teams tend to be both cognitively and demographically in listed companies. In ¡, it is decided that the quota diverse¹³. Additionally, diverse companies attract

30 agm engagement report 2020 | momentum – 25 years of engagement 31 2.3.4 Diana van Maasdijk of Equileap on Gender Diversity

talent¹⁴, and inclusive work cultures are more likely to there is still room for improvement. This should result in You cannot change what you As companies adapt and restruc- be innovative and achieve better results. With all this companies setting relevant diversity targets and KPIs cannot measure. The first step ture, this could be a chance to pay in mind, we asked companies several diversity-related for dierent levels of the organisation. in reaching gender equality is to greater attention to diversity and questions during this year’s engagement season. Gender diversity is an area where assess where we stand. That is inclusion, adding a gender lens to Finally, companies can emphasise their ambitions Dutch companies have room for exactly why we launched Equileap, workforce strategies and policies. .¤.¤ ’ ° concerning diversity by signing pledges, such as the improvement. There have been and are now thoroughly assess- UN Women Empowerment Principles and the charter some recent developments in ing the ,¢ biggest companies VBDO encourages companies to commit to enhancing Talent naar de Top. Dutch legislation that may sup- globally on gender equality, using diversity. Companies should develop a comprehensive port this transition. Firstly, the ¡ criteria. diversity (and inclusion) policy and/or strategy to .¤.¥ ± ± ² parliament voted last December in improve the diversity of the company’s workforce, favour of legislation that requires A first step for Dutch companies activities and suppliers. The next step for companies A comprehensive policy does not necessarily listed companies to have at least willing to improve would be to set is to assess the organisation’s own diversity profile, mean eÃective implementation £ of women on their supervisory gender balance targets for each leading to more transparency about diversity. VBDO found that many companies have updated their boards. Secondly, have at least level of the company. Our data diversity policy this year or are planning to do so next £ of women on their supervisory shows particularly low percentages Companies should also ensure that they have robust year. Additionally, of course, every company must boards. This is important, because of women in senior management Diana van Maasdijk systems and policies in place so that employees are abide by the Dutch constitution and so prohibit discrim- it starts to shift the prevailing gen- and at the executive level. A sec- Co-Founder and able to report any issues, e.g. sexual harassment, and inatory conduct. However, prohibiting discrimination der norms that keep fathers at work ond step would be to measure and Executive Director at Equileap to mitigate the risk of such issues arising in the first does not address the obvious inequalities in society. and mothers at home with kids, or report the company’s gender pay place Additionally, companies that provide detailed If a company does not have specific actions in place working part-time. gap, as very few companies in the About Equileap information about the topic and training methods in when it comes to actually implementing a policy, then Netherlands currently do so. Only Headquartered in Amsterdam, place are more likely to foster a proper understanding it will likely have little eect. Therefore, as well as Interestingly, the leading company one, KPN, had no pay gap in ¡ Equileap is the leading provider of diversity throughout the company. designing a diversity policy, companies need to know on this VBDO theme, Unilever, is (i.e. it published a mean overall of data and insights on gender how they’re going to implement it. This policy should also the top Dutch company in gender pay gap of less than £). equality in the corporate sector. Once a company has a clear overview of the topic work to address all main inequalities, including (but not our ¡ global ranking. Unilever Equileap researches and ranks and knows whether there are any issues that need to limited to) race, religion, gender, disability and sexual stands out for its policies on living Lastly, implementing and promot- over , public companies be tackled within the organisation, it can then roll out orientation. A recent example of a company imple- wage, global parental leave and ing policies that support gender around the world using a unique a recruitment and promotion strategy that ensures menting its diversity policy successfully is ING, which anti-sexual harassment. It is very equality in the workplace, such as and comprehensive Gender non-discrimination against any demographic group. introduced a §£ principle striving for a £ dierence telling that ¡£ of the companies flexible work hours/locations and Equality Scorecard™ with VBDO expects companies to carry out audits on the in team composition. By introducing this principle, ING in VBDO’s survey have a formal anti-sexual harassment policies, criteria, including the gender implementation and execution of their diversity strat- is acknowledging that the company needs to do more, commitment to enhance diversity help to attract diverse talents and balance of the workforce, senior egies, for instance by assessing, communicating and e.g. to make the gender, age and nationality balance but, when it comes to having actual retain them, ultimately building a management and board of addressing the gender pay gap within the company. more representative, in teams across all layers of the targets and objectives for gender stronger, more diverse company. directors, as well as the pay Conducting audits enables companies to see where organisation. diversity, that number drops to £. gap, parental leave, and sexual The coronavirus situation has creat- harassment. ed a huge shift in how we work and Table ²: Commitments on D&I Policy what the workplace looks like. Will employers recognise the triple bur- Commitments on the further development of a comprehensive D&I policy/strategy den that some women are facing at the moment? Or will women face a Fugro higher unemployment rate?

KPN

ASML

Unibail-Rodamco-Westﬁeld

NN Group

32 agm engagement report 2020 | momentum – 25 years of engagement 33 Companies should also strive to learn from each other or publishing their (possible) gender pay gap (mean two ways: voluntary documentation through surveying and listen to their employees and the communities that and adjusted) for three dierent levels of the entire employees, and/or coupling databases with informa- they operate in. This year, VBDO had dialogues with workforce (general workforce, senior management and tion about employees and jobs. Measuring employee companies about launching programmes that foster executives). Some of these companies also mentioned engagement will allow companies to determine their conversations, mutual understanding and learning correcting a possible gap in pay, when imparity is LGBTI network: Workplace Pride points of improvement concerning diversity. VBDO was between all employees throughout the organisation. found. VBDO will continue engagement on this topic Based in Amsterdam, Workplace Pride’s activities include pleased to find that Unilever, Fugro and RELX Group, A logistics employee can learn from the CFO; a mar- and hopes to find improvements in closing the possible both the Netherlands and many countries around the among others, are already setting relevant targets keting manager can learn from a factory worker and so gender pay gap. world. The organisation strives, using over a decade’s and KPIs for multiple aspects of diversity throughout experience and accumulated knowledge to push the on. VBDO encourages companies to have interaction dierent levels of their respective organisations. boundaries of LGBTI inclusion in the workplace. It supports methods in place to enhance the internal understand- Diversity beyond gender companies by awareness raising, measurement, research, ing of diversity. For this reason, we were pleased that In §, ¨£ of the management positions in companies training and network building through targeted events. Measure the degree of inclusion – make people belong PostNL expanded its onboarding process by including were occupied by woman¹⁵, putting the Netherlands Diversity and inclusion… While many organisations a mentoring programme. The mentor, who may be from in the th position within the EU (out of a total of ¬). are measuring the first one, the second one may still another department, layer or background, introduces Clearly then, gender inequality is still an issue and cause confusion. Diversity and inclusion are distinct the job and answers any questions or concerns the new companies need to step up their eorts to close this terms for dierent concepts. Yet, both are critical to employee may have. representation gap. The gender pay gap also needs Setting relevant KPIs and targets developing a healthy workforce. Many companies addressing, as it is currently ¢£ in the Netherlands. We recognise that companies often struggle to define still question how to measure inclusion. Simply put, If you’re aware of the gender pay ratio (gap), Almost all of the companies within our scope have and communicate their performance on diversity using inclusion is about belonging. Therefore, companies can be honest about it been making an eort over the last year to have fairer common indicators and targets. As a stakeholder, we use multiple questions in engagement surveys to gain Generally speaking, women are often still disadvan- and more equitable gender representation. believe it is important for companies to identify the an understanding of whether employees feel that they taged compared to men. On average, women in the diversity profile of their organisation; however, we belong. Statements can also be given for employees European Union earn approximately ¨£ less than men. However, diversity and inclusion need to extend be- appreciate that this is often di¦cult due to cultural and to respond to. These could include: “My ideas and Organisations that treat their employees fairly may see yond gender alone. Companies need to ensure that all legal constraints. We are fully aware of these barriers suggestions are heard”, “This organisation values my an increase in productivity due to higher morale and people are represented and heard. ¢£ ( out of §) and dierent approaches between countries. We en- work and input”, “My boss treats me with dignity and employee commitment. Such companies can also find of the companies in our scope currently have specific courage companies to record and disclose diversity in respect” and “I can be myself”. it easier to recruit and retain a skilled workforce as well systems and or projects in place beyond gender. as to sustain or improve their reputation. During this The last couple of years we’ve seen LGBTI networks, year’s engagement season, VBDO discussed this topic diverse talent campaigns and buddy systems really with all § companies and asked a total of questions taking o and gaining ground amongst employees. Table ¶: Highlighted commitments on Diversity relating to the gender pay gap at the AGM’s. As a One of those organisations successfully advocating for result, ten companies committed to researching and/ LGBTI equality within the workforce is Workplace Pride. Companies Highlighted commitments on labour conditions in the supply chain (see Appendix II for full list of commitments)

Unibail-Rodam- Unibail-Rodamco-Westﬁeld will communicate internally and externally on its new Diversity and Table µ: Commitments on gender pay gap co-Westﬁeld Inclusion Framework (which focuses on all forms of diversity) in ¤¥¤¥.

Companies committing to report on the gender pay gap Van Lanschot Van Lanschot Kempen will report on the company's analysis of the gender pay gap (for three Kempen levels) in ¤¥¤¥. Arcadis ING Group OCI OCI will work on diversity and inclusion targets and communicate about progress made in due Heineken Van Lanschot Kempen course.

RELX Group OCI ASML ASML aims to develop additional activities related to diversity and roll out its updated diversity, integrity and gender strategy at the end of ¤¥¤¥. SBM O£shore Altice RELX Group RELX Group will start to provide manager training on pay principles and equal pay and consider Philips Randstad expanding commitments in this area.

KPN KPN will broaden its diversity scope towards gender, LGBTI, cultural diversity and disabilities and report on this in next year's annual report.

34 agm engagement report 2020 | momentum – 25 years of engagement 35 Every organisation is in a dierent stage of its maturity, However, policies are still not very comprehensive questions this year to ensure that companies are the greenhouse gas (GHG) emissions related to their but engaging with employees is an ongoing process. and mostly cover gender. VBDO advises financial aligning their emission reduction targets with the Paris investments. This approach should provide financial Having specific goals for inclusion, and regularly institutions to start discussions aimed at integrating all Climate Agreement, and participating in climate-relat- institutions with the starting point required to set measuring progress, is key. §¬£ (¡ out of §) of the aspects of diversity within RI policies and instruments. ed benchmarks. science-based targets and align their portfolio with the companies within our scope have measured their Paris Climate Agreement. PCAF enables transparency inclusion rate. We expect this number to increase in the .£ Reducing CO emissions is at the forefront of sustaina- and accountability and will develop an open-source years to come as more companies begin to understand bility discussions with Dutch companies. CO emissions global carbon accounting standard for financial the value of an inclusive workforce. Introduction are a primary cause of climate change and should institutions. As well as engaging on our three ESG themes, VBDO be limited to prevent severe disruption of the global Diversity in responsible investment (RI) also engages on other topics that are material to the economy. In the Paris Climate Agreement of ¢, the The initiative was launched via a Dutch Carbon Pledge, instruments companies within our universe. To do this, we work world agreed to limit global warming to a maximum which called on the negotiators at the Paris Climate The financial institutions within our scope are, in most to develop a solid understanding of the dierent of well-below °C, with a preferred maximum of .¢°C. Summit in ¢ to take ambitious steps in tackling cases, relatively active on the topic of diversity, and we companies we engage with and their current situations, Since of the largest companies emit §£ of global carbon emissions. At the same time, the financial are pleased to see companies committing to enhancing as well as their previous commitments. We also strive industrial CO emissions between them, companies institutions that signed the pledge committed to play diversity and inclusion within the organisation itself. to keep abreast of new developments and innovations hold the key to ‘reach Paris’. VBDO asked questions their part in supporting the transition to a low carbon Although most of these organisations are relatively by, for example, monitoring relevant news items and about aligning CO reduction targets with the Paris economy, starting with measuring and disclosing the large, the biggest impact most can make relates to their external reports. We use this research to identify key Climate Agreement seven times. Not surprisingly, we GHG emissions of their loans and investments. portfolio. By integrating the topic of diversity within topics to discuss with companies. have engaged with companies in the ‘Industries’ and their RI, active ownership and/or ESG policies, financial ‘Financial’ sectors, given their relatively large impact Participation in the CDP benchmark and institutions can make a much larger impact, as they VBDO scrutinises the strategic performance of every on global warming and opportunities to mitigate it. We implementing the TCFD recommendations finance and invest in a multitude of companies around company in scope. If needs be, we aim to ask any followed up on seven out of of last year’s commit- VBDO encourages companies to participate in the world. Shareholders, like VBDO, and the financial performance-related questions during the pre-AGM ments on this topic, and are pleased to report that two climate-related benchmarks, such as the CDP, in institutions themselves should take responsibility on call. Usually, this means there is no need to address companies made new commitments to publish targets order to provide transparency to stakeholders. TCFD the topic of diversity and ensure it is integrated into this at the actual AGM. for emissions reduction. has designed guidelines to support companies with their RI strategy. Additionally, VBDO has engaged with companies on integrating climate-related risks and opportunities into climate mitigation for the past few years. Therefore, The financial sector and CO emissions strategies. Some companies have made a formal com- This engagement season, we have seen diversity we expect progress to have been made on this specific reduction targets mitment to reach climate neutrality by ¢. Such an included in the RI policies of three financial institutions. topic. To ensure that this is the case, we asked several The financial sector has an important role to fulfil in the ambition should be accompanied by publicly disclosing transition to a low carbon economy. It is ideally placed climate-related information in annual benchmarks, such to raise the subject with heavy-emitting companies as the CDP’s. VBDO considers it a sign of a company’s Table ³: Questions on other engagement topics in engagement conversations. It can also assist the maturity to participate in climate-related benchmarks transition by investing in low-carbon technologies and as it provides insight in the performance of a company Topic of question ¿ of questions ¿ of commitments by divesting from heavy-emitting industries. for its management, employees, stakeholders and shareholders. Targets in line with Paris Climate Agreement ² This work is already demonstrated in the Partnership for Carbon Accounting Financials (PCAF), a global Strategic company performance ¤ N/A partnership of financial institutions. The institutions are collaborating in order to develop and implement a harmonised approach to assessing and disclosing Table : Commitments on climate mitigation

Companies Highlighted commitments on labour conditions in the supply chain Table : Disclosure of climate-related information (see Appendix II for full list of commitments) Disclosure of climate-related information ¿ of companies ¿ of questions Wereldhave Wereldhave aspires to report on its ¤¥¬¥ science-based target in the next annual report. Participation in CDP benchmark ¬¥ Van Lanschot Van Lanschot Kempen has committed to align the company’s climate mitigation targets with Kempen the Paris Climate Agreement, when science-based targets and COµ data are available. Reference to the TCFD recommendations ¤¬ ³

36 agm engagement report 2020 | momentum – 25 years of engagement 37 Appendix I - Engagement process

In total, § out of § companies participated in (pre-) a positive dialogue with companies, so we aim to the impact of our engagement. Before we engage with us to ask the right questions and track the impact of engagement meetings or calls with VBDO. A member do rigorous research beforehand and formulate our a company, we score it per theme based on its maturity our engagement over the years that we engage on of the Board of Directors was present four times during questions in a constructive manner. level. In this process. companies are given the oppor- a speciﬁc topic. A company’s score dictates which of these calls or meetings. VBDO strives to enter into tunity to provide feedback on their score. This enables three categories we place them in:

Figure : Engagement Process

LAGGING LEARNING LEADING

Selection of themes Follow-up Sending engagement theme letters with to companies companies ³ - ¶ - ¶

In-depth Reporting - ¶ of results research

Evaluation Formulations of the of questions for Company selection for engagement season Basis of selection for engagement assessments engagement VBDO did not add any additional companies to its → Presence in the AEX index; scope for engagement in . In both ¡ and → If no relevant peer is included in the AEX index, Call § companies were engaged, compared to ¡ compa- at least one peer in the AMX or AScX indices Engagement company at the AGM to discuss nies in ¬. (AMX, AScX); questions → and/or companies VBDO deemed necessary Due to the COVID-¡ crisis, it was not possible for to engage with based on their sustainability us to attend AGMs in person. Fortunately, ¢ of the performance. companies held a virtual AGM, which we were able to attend. Two AGMs (RELX & Unibail-Rodamco-Westﬁeld) Nature of questions that we could not previously attend in person were We ask a number of questions to companies. accessible to us this year due to them being held On the whole, these relate to: VBDO selects three priority themes for AGM engage- each theme, in order to ensure that engagement is virtually. Two companies (Shell & ArcelorMittal) did not → VBDO’s priority themes; ment. These are chosen on the basis of international constructive and impactful. We engage on our priority allow stakeholders to attend their AGMs virtually. → transparency issues; sustainability trends, regulation and prominent issues, themes for a minimum of three consecutive years, in → themes of particular relevance to the company; following consultations with the companies in VBDO’s order to measure progress. → commitments made in previous engagement scope, as well as discussions with VBDO’s members seasons; and sustainability experts. Impact of engagement → the company’s presentation or other relevant We track our impact in several ways. An obvious point information revealed during the AGM. The selected priority themes for were shared of measurement is the amount of relevant commitments with the companies that VBDO engages with, in a letter that companies make each year following our engage- to the Board of Directors of each company. VBDO ment. This year VBDO took a further step, by introduc- assesses relevant issues per selected company for ing a categorisation system to publicly keep track of

38 agm engagement report 2020 | momentum – 25 years of engagement 39 Appendix II – List of 2020 engagement season commitments

Aalberts (Industries) a.s.r. (Financials) OCI (Industries) Sligro (Food, Beverage & Retail) → Aalberts will expand its initiatives to enhance → a.s.r. commits to improving its due diligence processes → OCI aims to broaden its climate related disclosure next → Sligro aims to report on climate scenario analysis (gender)diversity within the company in . and further aligning them with the UNGP. year and either report according to SASB or TCFD. relating to the most material product groups. → OCI will work on diversity and inclusion targets and → Sligro will consider reporting in more detail on ABN AMRO (Financials) Boskalis (Industries) communicate about progress made in due course. progress related to the implementation of the → ABN AMRO will start a dialogue with other banks on → In Boskalis will update its Code of Conduct → OCI will analyse the potential gender pay gap within company's supplier requirements. how they can protect customers from the e¤ects of and include the topic of Living Wage the company and provide further information on this climate change and find a joint solution. → Boskalis aims to intensify the dialogue with the to its stakeholders in due course. TKH Group (Technology & Electronics) financial sector (with VBDO as a facilitator) on → TKH will organize a stakeholder dialogue in which, Aegon (Financials) financing climate adaptive solutions. Philips (Technology & Electronics) among other topics, the TCFD-recommendations → Aegon commits to disclose specific engagement → In Boskalis will update and publicly disclose → Philips will scale up and harmonise its gender pay will be discussed. case studies related to labour rights and conditions its diversity policy. ratio analysis in the coming years. After that, the → TKH will review how the company can improve when these have reached sucient progress. company commits to review public disclosure. transparency on its due diligence process. Corbion (Industries) AkzoNobel (Industries) → Corbion will include the outcomes of the in-depth PostNL (Services) Unibail-Rodamco-Westfield (Food, Beverage & Retail) → In , AkzoNobel aims to accelerate its supplier climate-related risk & opportunity assessments in the → PostNL will take climate adaptation in consideration → Unibail-Rodamco-Westfield will communicate internally programme by requesting improvements from the company's response to the CDP Climate Change survey when engaging with clients and partners, possibly and externally on its new Diversity and Inclusion Frame- suppliers under development and inviting more and in the Annual Report of . leading to an additional assessment of physical work (which focuses on all forms of diversity) in . suppliers to take part in the assessment. → Corbion aims to implement additional tools to further climate risks. → AkzoNobel will request EcoVadis to provide more integrate its D&I strategy, e.g. D&I workshops on → PostNL will engage with stakeholders on labour Van Lanschot Kempen (Financials) transparency on their data and assessment to external global scale. conditions risks and PostNL's role in this as well as → Van Lanschot Kempen has committed to align the stakeholders. to determine possible next steps. company’s climate mitigation targets with the Paris DSM (Industries) Climate Agreement, when science-based targets and Altice (Services) → DSM will engage with EcoVadis and its peers in Together Randstad (Services) CO data are available. → In , Altice will participate in the CDP-benchmark for Sustainability to improve transparency about the → Randstad will measure its impact on the value → Van Lanschot Kempen will report on the internal and report on the company implementing the TCFD- assessment and the performance of its supply chain. chain and share auditable results with the company's analysis of the gender pay gap (for three levels recommendations. stakeholders in the coming years. within the company) in . → Altice will consider publishing relevant results Fugro (Services) → Randstad aims to report on the gender pay gap in . and targets on labour conditions in the supply chain → Fugro will report on the progress and outcomes of Wereldhave (Food, Beverage & Retail) for . its diversity roadmap in next year's annual report. RELX Group (Services) → Wereldhave aspires to report on its science- → Altice will consider reporting on the gender pay gap → RELX Group will create an ethical supplier channel based target in the next annual report. in the company's Annual Report of . Heineken (Food, Beverage & Retail) on the company's training portal, concentrating on → Wereldhave will review and update its Supplier → Heineken will report on progress and results of suppliers located in high risk areas. Code of Conduct next year. Arcadis (Services) its new water strategy in the coming years. → RELX Group will start to provide manager training on → Arcadis will provide more transparency about male/ → Heineken hopes to have a first overview of the pay principles and equal pay as well as to consider female pay ratios within the organisation. gender pay ratio in this year or the next. expanding the company’s commitments on this topic.

Arcelor Mittal (Industries) ING Group (Financials) SBM OÃshore (Services) → ArcelorMittal intends to increase the implementation of → ING will update the market on its climate-related → SBM O¤shore will further develop climate change the IRMA-standards at its mine sites and will seek com- actions and results in scenarios and the company aims to further expand mitment for certiﬁcation with its raw material suppliers. → ING will aim to create a global overview of job levels its long-term horizon. in order to begin to asses and compare salaries of men → SBM O¤shore will consider consulting with local ASM International (Technology & Electronics) and women in like-for-like jobs. authorities and/or NGO’s in relation to the company’s → ASM International will include its operations, communi- physical climate risk analysis. ties where the company operates and the supply chain KPN (Services) → SBM O¤shore considers reporting on the gender in the scope of its climate scenario analysis. → KPN will broaden its diversity scope towards gender, pay ratio and will consult its auditors on how to → ASM International will further collaborate with peers, in LGBTI, cultural diversity and disabilities and report move forward on this topic. RBA-member capacity, to achieve greater transparency on this in next year's annual report. on labour conditions in the supply chain. Signify (Technology & Electronics) NN Group (Financials) → Signify states that it will keep a target for supplier ASML (Technology & Electronics) → NN Group will publish an updated statement on sustainability in the company's next ﬁve-year → ASML aims to develop additional activities related Diversity & Inclusion and go beyond the topic of gender programme (-). to diversity and roll out an updated diversity, integrity (early ). → Signify will increase its e¤orts to improve the number and gender strategy at the end of . of women in leadership roles within the company.

40 agm engagement report 2020 | momentum – 25 years of engagement 41 Abbreviations and references

Abbreviations References AEX Amsterdam Exchange Index ¹ NRC Handelsblad. (). Corona crisis speeds up sustainability process Ahold Delhaize AGM Annual General Meeting ² VBDO Benchmark Responsible Investment by Pension Funds in the Netherlands. (). AMX Amsterdam Midkap Index Retrieved from: www.vbdo.nl/wp-content/uploads/¡//VBDO-BM-PF-¡-.pdf AScX Amsterdam Small Cap Index ³ Representative Concentration Pathways (RCPs): Scenarios that include time series of emissions and concentrations of the full suite of greenhouse gases (GHGs) CBS Centraal Bureau voor de Statistiek (Central Bureau of Statistics) ⁴ Taskforce on Climate-related Financial Disclosure. CDP Carbon Disclosure Project On // retrieved from: www.fsb-tcfd.org/tcfd-supporters/ CEO Chief Executive O´cer ⁵ Corporate Human Rights Benchmark (CHRB). On // retrieved from: www.corporatebenchmark.org CFO Chief Financial O´cer ⁶ International Trade Union Confederation. COVID-· Coronavirus Disease ³ On // retrieved from: www.ituc-csi.org/ilo-conference-takes-a-strong?lang=en CSR Corporate Social Responsibility ⁷ International Labour Organization, Global estimates of modern slavery. On // retrieved from: D&I Diversity & Inclusion https://ilo.userservices.exlibrisgroup.com/discovery/delivery/ILO_INST:ILO_V/¬¨¡§¨§¨ ESG Environmental, Social & Governance ⁸ Centraal Bureau voor de Statistiek (CBS). (). Retrieved from: www.cbs.nl/nl-nl/nieuws/¡//verschil-arbeidsdeelname-mannen-en-vrouwen-weer-kleiner ESR Environmental and Social Risk ⁹ Centraal Bureau voor de Statistiek (CBS). (). EU European Union Retrieved from: www.cbs.nl/nl-nl/publicatie/¬//monitor-brede-welvaart-¬ FBR Food, Beverage & Retail ¹⁰ Sociaal-Economische Raad. (). GDP Gross Domestic Product Retrieved from: www.ser.nl/-/media/ser/downloads/adviezen/¡/diversiteit-in-de-top.pdf ¹¹ Monitor Talent naar de Top. (). GHG Greenhouse Gas Retrieved from: https://talentnaardetop.nl/monitor-talent-naar-de-top-¬ Global Reporting Initiative GRI ¹² Equileap. (). ILO International Labour Organization Retrieved from: https://equileap.org/¡-global-report/ IPCC Intergovernmental Panel on Climate Change ¹³ Deloitte Review, issue . (). Retrieved from: IRMA Initiative for Responsible Mining Assurance www.deloitte.com/us/en/insights/deloitte-review/issue-/diversity-and-inclusion-at-work-eight-powerful-truths.html ¹⁴ McKinsey&Company, Delivering through Diversity. (). Retrieved from: ITUC International Trade Union Confederation www.mckinsey.com/~/media/McKinsey/Business£Functions/Organization/Our£Insights/Delivering£through£ KPI Key Performance Indicator diversity/Delivering-through-diversity_full-report.ashx LGBTI Lesbian, Gay, Bisexual, Transgender or Intersex ¹⁵ Centraal Bureau voor de Statistiek (CBS), Monitor Brede Welvaart. (). Retrieved from: https://longreads.cbs.nl/monitor-brede-welvaart-en-sdgs-¡/de-sustainable-development-goals-in-de-nederlandse- NGO Non-governmental organization context/ OECD Organisation for Economic Co-operation and Development RBA Responsible Business Alliance RCP Representative Concentration Pathways RI Responsible Investment SASB Sustainability Accounting Standards Board SDGs Sustainable Development Goals SER Sociaal-Economische Raad (Dutch Social and Economic Council) T&E Technology & Electronics TCFD Taskforce on Climate-related Financial Disclosure UNGP United Nations Guiding Principles on Business and Human Rights US¸ United States Dollars VBDO Vereniging van Beleggers voor Duurzame Ontwikkeling (Association of Investors for Sustainable Development)

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