HUGO BOSS : TCFD Report 2023

TCFD REPORT 2023

TCFD Report 2023

Contents

1	Governance	1
2	Strategy and Risk Management	3
3	Metrics and Targets	12

>Sustainability Report 2023

TCFD Report 2023

By disclosing climate-related risks and opportunities in accordance with the recommendations of the Task Force for Climate Related Financial Disclosure (TCFD), HUGO BOSS provides a summary of the measures taken to review and develop a strategy to manage the material risks and opportunities arising from climate change and the potential impact on its business. The underlying information and data in this report relate to the fiscal year 2023. We intend to update and expand its TCFD reporting on an annual basis to provide information on further progress in climate-related risk management.

1 Governance

HUGO BOSS regards sustainability as an important element of its "CLAIM 5" strategy and thus as an integral part of our business activities. Consequently, being "Sustainable Throughout" is firmly embedded in our daily business activities.

We are committed to protecting the planet and ensuring a viable future for tomorrow's generations. We want to make a meaningful difference. Our vision for sustainability is a planet free of waste and pollution. This vision is reflected in the five key pillars of our new sustainability strategy, "For A Bold & Better Future," which came to life in 2023.

The overall responsibility for the sustainable development of the Group lies with the Managing Board. Strategic responsibility is assigned to the Group Strategy and Corporate Development division, which reports directly to the Chief Executive Officer (CEO). Operational responsibility along the supply chain lies with Business Operations, while Investor Relations is responsible for sustainability reporting. Both divisions report to the Chief Financial Officer (CFO)/ Chief Operations Officer (COO). He is also responsible for the central Sustainability Committee, which consists of representatives of the main business areas involved in sustainability topics and drives relevant decision-making processes in the area of sustainability. The Sustainability Committee serves as a key driver in advancing environmental, social and governance topics within the organization and ensures that sustainability is a core consideration in the company's operations and decision-making processes.

The Sustainability Committee regularly analyzes, discusses and takes decisions on climate-related issues and informs the Managing Board about the progress and measures towards achieving the

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TCFD Report 2023

Company's climate-related targets. In addition to this, specific Managing Board meetings are held on a case-by-case basis if there are relevant climate-related issues to discuss in more detail. Depending on the Scope of the issue under discussion, the responsibility lies with the respective board member and its organization. Responsibility is being shared if the issue involves more than one Board member.

The Managing Board together with the Audit Committee of the Company's Supervisory Board have overall responsibility for managing and overseeing climate-related issues regarding the Group's business operations. Group Risk Management & Internal Controls informs both the Managing Board and the Audit Committee twice per year about climate-related risks and opportunities: the Managing Board by means of Managing Board meetings and the Supervisory Board via the Audit Committee meetings.

The following chart shows the overall sustainability governance of HUGO BOSS, including Group Risk Management & Internal Controls which is responsible for coordinating climate-related risks and opportunities.

SUSTAINABILITY GOVERNANCE

The Internal Audit department is an independent part of the governance system with objective assurance and consulting activities designed to add value and improve the organization's operations. It also supports the oversight function of both the Managing Board and the Supervisory Board reviewing compliance with and the effectiveness of the defined controls with regard to the accounts and business processes. The annual audit plan is coordinated with the Managing Board and the Audit Committee of the Supervisory Board. This is where key audit matters are defined. Some departments are audited on a regular basis, including Risk Management & Internal Controls which was last audited in fiscal year 2021.

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TCFD Report 2023

2 Strategy and Risk Management

Climate change has been identified as a main risk for HUGO BOSS, with the potential to impact business in the short (<1 years), medium (1-3 years) and long term (>3 years). The physical risks and opportunities that the Company faces from climate change include water scarcity and the risk of severe weather events damaging buildings and infrastructure. The transitional risks and opportunities include for example future regulation, changing consumer preferences, and access to raw materials and workforce.

The responsibility of identifying and assessing climate-related risks is shared between Group Risk Management, the affected internal departments and Group subsidiaries. Risk Management is responsible for coordinating and providing a framework for risk assessment, while individual departments are responsible for assessing and managing their climate-relatedrisks. Climate-relatedrisks also include impacts on biodiversity and potential negative consequences for the Company resulting from the disruption of biodiversity. Due to the complexity of those risks, a multidisciplinary approach and integration into the company-widerisk management process is a prerequisite to successfully manage them. This integration of the climate related risk is illustrated by the following chart, it shows the process of identifying, assessing, mitigating and reporting these risks.

RISK MANAGEMENT

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The significance of climate-related risks is evaluated first by the Company's experts in the affected departments. They define their general relevance by qualitatively categorizing risks into low, medium and high risk in either the short, medium or long term. If a risk is categorized as either medium or high and it is likely to occur in a relevant time frame, the potential negative impact is quantified. This quantification is taken into consideration when making relevant decisions which might be affected by the underlying risk. Short-term risks are mitigated by the respective departments as part of their daily business. Medium- and long-term developments are constantly monitored and included in strategic decision-making if necessary.

The following table shows the most relevant climate related risks identified in the course of the materiality assessment, which is integrated in the existing Enterprise Risk Management process. As part of this process, the first assessment is on a quantitative basis and will be continued with a quantification of the potential impacts influencing HUGO BOSS. At the end of the table, mitigation/resilience measures taken by the Company to address each respective risk are summarized.

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CLIMATE-RELATED RISKS FOR HUGO BOSS

Risk

Regulatory risk

Reputational risk

Raw materials

Limited access to

Changes in consumer

Water scarcity and

Physical business

scarcity

labor due to climate

demand due to

security

continuity risk (severe

change-induced

changes in seasonal

climate events)

demographic change

weather

Consequences			Increased pricing of
			GHG emissions
			Enhanced reporting
			obligations
			Regulation of
			existing products
			and services
Potential			Increased operating
impact			costs
			Increased
			compliance costs
			Increased costs
			and/or reduced
			demand for
			products and
			services resulting
			from fines and
			judgements
Time period		Short- to medium-term
relevance
Mitigation /			Embedding
resilience			sustainability into
			overall business
			strategy
			Constant monitoring
			of trends and

developments that could potentially lead to increasing legal requirements

• Shifts in consumer preferences
• Negative image of the textile industry
• Increased stakeholder concern or negative stakeholder feedback
• Reduced revenue from decreased demand for goods/services
• Reduced revenue from negative impacts on workforce management and planning (e.g. employee attraction and retention)
• Reduced capital availability

Short- to long-term

• Public commitment to the targets within the framework of the UNFCCC Fashion Industry Charter for Climate Action
• Transparent reporting of target achievement and related measures

• Reduced availability of raw materials
• Changes in raw material prices
• Lower quality of raw materials
• Increased production costs and less plannability
• Decreased production volume leading to loss of sales
• Loss of social license to operate

Short- to long-term

• Constant monitoring of raw material prices and search for alternative materials.
• Investing in new alternative technologies and raw materials, which contributes to decarbonizing the textile industry.

• Reduced production capacities
• Longer product time
• Political instability
• Intercommunity violence
• Increased labor costs
• Changed sourcing portfolio
• Delayed product supply

Medium- to long term

• Balanced regional distribution to avoid dependencies
• Actively managing and optimizing the sourcing portfolio

	Reduced demand			Lower yields in raw			Damage to buildings
	for certain product			material production			and infrastructure
	groups in respective			Reduced capacity			Disruption of supply
	regions
			for water intensive			chains
				processes like
				dyeing, tanning,
				printing and
				laundering
	Loss of sales			Increased			Increased costs to
 Loss of margin (if			production costs			repair damages
	products with			Increased regulatory			Increased insurance
	smaller margins			penalties			premiums/less
	replace those with			Lost social license to			coverage
	higher margins)
			operate			Increased need for
	Increased inventory			Damaged brand			investments
					Increased business
				image		
							interruptions and
							delayed product
							supplies
Medium- to long-term		Medium- to long-term		Long-term
	Constant monitoring			Improving water			Monitoring the
	of consumption			efficiency in the			resilience of own
	patterns and			Company's direct			locations regarding
	consumer			operations and			severe climate
	preferences			across the supply			events.
	Optimized and			chain			Emergency plans to
		Decreasing water
	flexible merchandise					ensure business
	management			pollution in the			continuity
				production
				processes through
				chemical
				management along
				the supply chain
				Water risk mapping

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Physical climate risk assessment of HUGO BOSS' most relevant locations

HUGO BOSS uses expert software that is specialized and science-backed on assessing climate change related risks including scenario analysis for both physical and transitional risks.

The scenarios are based on the Representative Concentration Pathway (RCP), which is a greenhouse gas concentration (not emissions) trajectory adopted by the IPCC. Four pathways were used for climate modeling and research for the IPCC fifth Assessment Report (AR5). The pathways describe different climate futures, all of which are considered possible depending on the volume of greenhouse gases (GHG) emitted in the years to come. The RCPs - originally RCP2.6, RCP4.5, RCP6, and RCP8.5

• are labelled after a possible range of radiative forcing values in the year 2100. The RCPs were chosen to represent a broad range of climate outcomes.

The following table shows the range of temperature increase for each RCP scenario, the related emissions, and the general impact of those scenarios resulting from a physical and transitional risk perspective.

Emissions pathway RCP	8.5 (3.2 - 5.4 °C)	7.0 (2.0 - 3.7 °C)	4.5 (1.7 - 3.2 °C)	2.6 (0.6 - 2.3 °C)
(temperature)
Emissions	High emissions	Moderate-high	Low emissions	Very low
		emissions		emissions
Physical risk impact	Very high	High	Medium	Low
Transitional risk impact	Low	Medium	High	Very high

Overview of analyzed physical risks

Physical risks1

	Temperature extremes		Tropical cyclone
	Fluvial flooding		Drought
	Wildfire		Water stress
	Coastal flooding

The following tables show which kind of physical risks are going to impact the locations, with the severity being ranked from left to right - the scenario analysis covers the four RCP scenarios mentioned before and the impact by decade up to 2100. The Company applied no minimum threshold for those physical risks, so that the potential Model Average Annual Loss can also be very low, especially for the fluvial flooding and wildfire risks.

1 Source of the used symbols is S&P Global

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Offices and Warehouses

Headquarters (Germany - Metzingen)

Warehouse (Germany - Filderstadt)

Warehouse (Germany - Wendlingen)

Warehouse (Germany - Bad Urach)

HUGO BOSS Ticino S.A. (Switzerland - Coldrerio)

HUGO BOSS USA Inc. (Savannah)

HUGO BOSS Canada, Inc. (Toronto)

HUGO BOSS Hong Kong Ltd.

HUGO BOSS China Retail Co. Ltd. (Shanghai)

HUGO BOSS Mexico S.A. de C.V. (Miguel Hidalgo)

Production sites (own & partners)

HUGO BOSS Textile Industry Ltd. (Turkey)

HUGO BOSS Shoes & Acc. Italia S.p.A. (Italy)

Supplier Bangladesh

Supplier Vietnam

Supplier Tunisia

Supplier Turkey

Supplier Portugal

Supplier Peru

Supplier Bulgaria

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Point of sales (POS)

POS Germany

POS United States

POS France

POS Dubai

Physical climate risk adaptation

The most relevant adverse impact by physical climate change related causes is due to temperature extremes. HUGO BOSS considers the following four drivers causing financial damage to the business, all caused by high temperatures:

• Cooling costs
• Employee productivity
• Revenue impact
• HVAC (Heating, Ventilation, Air Conditioning) degradation

For all locations that have been analysed, the biggest financial impact might be caused by a decreasing employee productivity in the future, also resulting from health challenges that could lead to more sick days. Independent of the identification of this new negative impact on employee productivity, we are already focusing on initiatives to support the health of our employees thereby maximizing employee productivity. In order to identify a decreasing employee productivity due to increasing temperatures at an early stage, the local management is encouraged to monitor the developments and to receive feedback from the employees. If necessary, the local management will implement mitigations to compensate the loss of employee productivity.

Other physical hazards are expected to be less significant than temperature extremes based on their financial impact on HUGO BOSS' locations and their performance. The few locations close to the coast without any elevation are endangered by a rising sea level. A more common potential impact for our locations is resulting from increasing fluvial floodings, but the modelled annual average loss is lower than the consequences of temperature extremes for all locations.

Resilience of HUGO BOSS' strategy

Based on the assessment of the identified transitional and physical climate related risks and the actions in place to mitigate those risks, HUGO BOSS is well prepared to cope with challenges resulting from increasing temperatures and climate change. Based on the current scenarios analysis, also covering the high emissions and warming scenario RCP 8.5 (3.2 - 5.4 °C), the physical risks of our most important locations are not requiring us to relocate or invest heavily in our main offices, productions sites or warehouses by the end of the century.

By successfully executing its "CLAIM 5" strategy that includes sustainability throughout the entire value chain as a key criterion for success, we mitigate the potentially high transitional risks pro-actively, like the regulatory and reputational risks as well as the risk of a change in consumer demand, resulting from a 2°C and lower scenario (RCP 2.6 ranging from 0.6 - 2.3 °C). Reputational risks and the changing

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