KPS : Sustainability Report 2022-2023

KPS

SUSTAINABILITY REPORT

TABLE OF CONTENTS

1	INTRODUCTION	PAGE 3
2	THE KPS BUSINESS MODEL AND	PAGE 4
STRATEGY
3	THE KPS SUSTAINABILITY STRATEGY	PAGE 7
4	THE EMPLOYEES	PAGE 12
5	THE ENVIRONMENT	PAGE 15

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Sustainability Report

1. INTRODUCTION

1.1 Preliminary remark

With its Sustainability Report, KPS addresses its customers and business partners, its employees, its shareholders and all other stakeholders who are interested in the values and principles of the company.

KPS reports again on KPS AG and its subsidiaries for the reporting period 2022/2023 (1 Oct. 2022 - 30 Sept. 2023). Deviations are commented on accordingly. The Sustainability Report 2022/2023 is also the Non-financial Group Report for KPS Group in financial year 2022/2023 within the meaning of Sections 315b and 315c in conjunction with 289c to 289e of the German Commercial Code (HGB). KPS does not follow any national or international guidelines for this Non-financial Group Report, but is guided by the criteria and standards of the German Sustainability Code (GSC).

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2. BUSINESS MODEL AND STRATEGY

2.1 Digital challenges and technological change

In order to remain successful on the market in the long term, companies are faced with the challenge of having to react ever faster to technological change by adopting digitalisation strategies and by digitally transforming their company.

Nearly all divisions and processes are affected by this: the company strategy, internal processes, logistics, merchandise management, business processes, marketing, innovation, IT, IT security, human resources and especially changing customer behaviour.

For example, companies are transferring entire business processes from on-site systems to cloud solutions or to hybrid on-site/cloud structures. The volumes of data available are growing exponentially. These need to be structured, analysed and evaluated. Artificial intelligence applications will revolutionise company and business processes. In addition, software systems are becoming increasingly complex.

At the same time, technological opportunities are changing the behaviour and the needs of end consumers.

Consumers are shifting their activities to online channels and are increasingly making purchases over the Internet. In addition, consumers expect goods and services to be available both in-store and online, and supply chains to function smoothly across all channels.

Companies must therefore be in a position to react promptly to both technological change and changing customer behaviour. To do so, they need a customised digitalisation strategy with which the main company and business processes can be holistically digitalised, transformed and further developed. With such a proactive digitalisation strategy, companies can actively shape change and use it positively for their overall company strategy and in competing.

2.2 Business activity

The core of KPS's business activities is to develop individual digital transformation strategies for companies, to implement and provide the respective technologies and to assist companies with their implementation. This is based on the innovative Instant Platforms products of KPS, which provide companies in the retail sector with turnkey solutions.

KPS pursues a holistic "end-to-end" approach that encompasses all the important components of digital transformation:

Digital Strategy

• Development of the digitalisation and transformation strategy for companies

Digital Customer Interaction

• Strategies, solutions, developments, performance improvements and implementation in the field of e-commerce,e-commerce shops and online retail

Digital Enterprise

• Digital transformation of ERP systems and business processes

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KPS positions itself as a partner for its customers and supports them holistically with the digital transformation of business processes and ensures that its customers are optimally positioned with their IT, system and software landscapes.

2.3 Company

Founded in 2000, KPS is one of the leading consulting firms for digital transformation processes in the retail sector with around 1,000 internal and external consultants and sales of EUR 177.8 million in financial year 2022/2023. The company has its own locations in ten European countries and generates more than 50% of Group revenue outside Germany.

KPS Group focuses on companies in the retail sector. This includes in particular the fashion, food, furniture and consumer goods segments.

KPS has been able to successfully expand its target audience in recent years and has won and successfully implemented many projects outside its core industry in the areas of insurance, logistics, energy, services, machinery and plant engineering.

2.4 Business model

The main pillars of the business model are listed below.

End-to-end approach

KPS supports its clients with an "end-to-end" or "one-stop-shop" approach to the issues and challenges of the digital transformation of strategies, processes, IT landscapes, applications, supply chains/logistics, customer relationships, e-commerce,omni-channel and technologies.

Customers can be accompanied throughout the entire digital transformation - digital strategy, digital customer interaction, digital enterprise. Projects can thus be realised faster, more efficiently and at significantly lower costs.

Technology openness

KPS is not tied to a single technology when designing digitalisation solutions. Rather, KPS works with various partners, such as SAP, Spryker, Adobe, Intershop and Open Text. SAP solutions are widely used in the core industry of retail in the area of ERP. Accordingly, SAP solutions are often used for digital transformation projects.

Turnkey platforms ready for immediate use

KPS has developed its project management method "KPS Rapid Transformation," which has proven itself many times over the years, into the platform approach "Instant Platforms." On the basis of current technologies and software solutions, KPS markets standard platforms for digital transformation that are tailored to various industries, can be used immediately and at the same time allow a high degree of customisation according to customer needs. With its "Instant Platforms," KPS can realise the digital transformation for companies even faster and provide them with real added value.

Remote approach

The Instant Platforms products enable KPS to significantly reduce the number of on-site consultants and perform many activities remotely or centrally from the KPS design centres.

Flexible structures

KPS's business activities are mainly to carry out transformation projects. The number of consultants working at clients' locations can be reduced by using Instant Platforms products.

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However, the use of consultants in projects remains at a comparatively high level. This means that expenses for consultants are the dominant cost factor for KPS Group. KPS uses service providers and freelancers in order to be able to quickly and flexibly adjust the number of consultants to the current project volume. This enables the company to react quickly to changing customer needs.

Achievement of strategic goals

KPS's goals are to further develop its operating business and to continuously generate added value for KPS customers with its "Instant Platforms" products. At the same time, the strategy is geared towards minimising negative impacts on the environment and continuously improving the sustainability of KPS.

Key pillars of the strategy

KPS's strategy is based on the three strategic thrusts

• Internationalisation
• Innovation
• Industrialisation

KPS has successfully expanded its international activities in recent years. The expansion of its international business has been accompanied by a broadening of the client base across various industries. By acquiring Graphyte in January 2023, KPS has opened up another European market in Belgium.

With the further development of the KPS Rapid Transformation method into the Instant Platforms products, KPS underscores its focus on innovation. KPS has thus significantly improved its competitive position.

For KPS, industrialisation means offering standardised solutions for immediate use with a high degree of customisation. The Instant Platforms products are also aimed at significantly reducing the number of consultants on site with customers and at delivering services remotely. This means that a key strategic pillar of KPS Group is congruent with the sustainability strategy. Business travel can be reduced and the negative impact of business activities on the environment lowered.

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3. SUSTAINABILITY STRATEGY

3.1 Sustainability management and sustainability strategy

For the management of KPS, a sustainable company policy and corresponding sustainability management are of great importance in the orientation and management of the company.

The Executive Board of KPS therefore strives at all times to make operational and strategic decisions in such a way that the positive impact on the environment, society and stakeholders is strengthened and the negative impact is reduced as far as possible.

The Executive Board is responsible for KPS's sustainability strategy. Besides the monetary objectives, it mainly includes responsible corporate governance, corresponding compliance regulations, relations with stakeholders, the interests of employees and consideration of the impact on the environment.

3.2 Risk management in the context of sustainability

The assessment of risks to the business activities of KPS is the responsibility of the Executive Board. All risks that arise in the course of KPS's business activities are considered. Risks are to be considered as comprehensively as possible, taking all components of the value chain into account.

Sustainable management can contribute to a positive development of the company in the long term.

Therefore, the related, relevant aspects are analysed, elaborated on and evaluated when assessing opportunities and risks, so that sustainable management of KPS Group supports the company's development in a positive and value-creating way.

The opportunities and risks of KPS Group are explained and evaluated in detail in the Group's Management Report. The Management Report is published in the Group's Annual Report for financial year 2022/2023.

Key sustainability aspects for risk assessment

The following are the main sustainability aspects of KPS Group with which sustainability risks are assessed.

• Economic performance and business development, which form the basis for the further expansion of sustainable company structures
• Electricity consumption of the various business sites and the data centre
• CO2 emissions, especially in connection with the necessary travel of KPS consultants
• Ethical and sustainable behaviour of employees, business partners and service providers
• Sustainability aspects in connection with business partners and service providers
• Satisfaction of the workforce
• Compliance with the Code of Conduct
• IT security

3.3 Responsible corporate governance

KPS is committed to a sustainable business policy. The Executive Board and Supervisory Board of KPS AG see it as their task to ensure the continued existence of the company and sustainable value creation

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through responsible corporate governance with a long-term focus. In doing so, they take a long-term approach and only engage in business that is compatible with the sustainable development of political, economic, social and ecological systems.

The declared goal of KPS is to achieve sustainable earnings growth and to bring this in line with KPS's sustainability strategy. As KPS understands it, responsible and sustainable corporate governance therefore takes account of the interests of employees, customers and business partners in particular. In addition, KPS's actions are reviewed for social, societal and ecological effects in order to assume responsibility for a future worth living for future generations.

The company values and the Code of Conduct form the foundation of responsible corporate governance at KPS.

3.4 Company values and guidelines

The company values of KPS form the basis for our dealings with our customers, business partners, colleagues and employees.

Entrepreneurial thinking

• Independent thinking within the scope of personal authority
• Innovative thinking and the use of new technologies and methods to improve the competitiveness of KPS's clients
• Striving for excellent quality of the work we do for our clients

Professionalism and passion

• Enthusiasm for our daily work as a driving force and motivation to think outside the box
• Passion as a source of creativity and inspiration in developing innovative solutions for our clients
• Willingness to think our way into the most complex challenges
• Ambition and joy to develop tailor-made solutions
• Use of proven, consistent, structured and interlocking procedures to ensure the expected high quality, completeness and promised completion dates for clients

Respect for respect and individuality

• Human rights
• The highest appreciation towards our fellow employees as well as our clients
• High empathy as a prerequisite for respectful cooperation
• Reliability at all times on integrity, trustworthiness and honesty
• Open communication and freedom of expression in an internal or customer-related context
• Constructive and collegial cooperation
• Environment of mutual support and responsibility for each other

Equal opportunities

• Protection against harassment and discrimination
• No acceptance of abusive, harassing or hurtful behaviour by staff or client representatives towards colleagues
• No tolerance of derogatory remarks based on racial, ethnic or other characteristics and unwanted sexual advances
• Trustful working atmosphere
• Promotion of performance and individual skills and experience
• Creation of open spaces
• Supporting each individual in achieving their goals and professional self-realisation

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3.5 Code of Conduct

All KPS employees are called upon to always act with integrity and in accordance with the law. Furthermore, it is a matter of course for the management of KPS that everyone always questions their actions with common sense and intuition. The behaviour of all should also be in line with the sustainability strategy and the sustainable company development of KPS and respect human rights.

In the Code of Conduct, KPS formulates its guidelines for dealing with conflicts of interest, loyalty & corruption, benefits, confidentiality, communication, data protection and intellectual property. The most important are, among others:

Conflicts of interest

Conflicts of interest arise when one's own private interests interfere or appear to interfere with work duties or the interests of KPS. KPS employees must always behave loyally and try to avoid getting into situations where their personal or financial interests conflict with the interests of the company. KPS gives its employees a high degree of freedom and judgement to identify actual or potential conflicts of interest, to avoid them and to disclose them.

Loyalty and corruption

KPS prohibits any kind of bribery and corruption. No benefits or objects of value may be offered, promised or handed over to an individual decision-maker in order to convince that person to make decisions in favour of KPS. KPS conducts its business activities free from any active or passive influence through bribery or corruption.

Contributions from third parties

KPS only permits benefits from current and potential clients, suppliers, competitors or partners of KPS as well as invitations to business meals and entertainment events if participation in these serves the initiation or improvement of business relationships and thus the interests of KPS. In doing so, they may not unduly influence the decisions to be made by KPS. Furthermore, they may not obligate KPS to provide a service in return and may not violate laws or ethical principles. They must also be in line with the business practices of the respective country. In order to provide more transparency and clarity, KPS has limited the amount of money by value for accepting invitations to business meals or events to an amount that is reasonable in the context of the business activity.

Allowance to third parties

The same principle applies to benefits to third parties as to benefits from third parties. Current and potential customers, suppliers, competitors or partners of KPS are only offered invitations to business meals and entertainment events if the business meal or entertainment event serves the initiation or improvement of the business relationship and thus the interests of KPS. In addition, these benefits may not unduly influence the decisions to be made by customers, suppliers, competitors or partners and may not oblige them to make a counter-performance. Furthermore, donations to third parties may not violate laws or ethical principles and must of course be in line with the business practices of the respective country.

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3.6 Stakeholder dialogue and stakeholder management

Successful cooperation and interaction with all clients, investors, employees, consultants and partners (stakeholders) associated with KPS is the basis for KPS's business activities. The Executive Board is convinced that the financial objectives can only be optimally achieved if there is a balance between the interests of KPS and the key stakeholders and if a balance of interests can be achieved among the respective stakeholders. The Executive Board firmly believes that the financial goals of KPS can be optimally achieved if they are balanced with the interests of the stakeholders. This results in important aspects for the sustainability strategy of KPS Group, which are defined in a continuous dialogue with the stakeholders.

KPS's interaction with its stakeholders

Clients

KPS develops a digital transformation strategy for its clients and implements it for them. This means that KPS bears a great deal of responsibility for its clients' IT and software landscapes. KPS wants to live up to the trust that its clients place in KPS. Therefore, the company consistently focuses on the needs of its clients and offers them the highest level of service and consulting quality. The employees of KPS continuously exchange information with their clients. Since in many cases projects run for several years, KPS does everything it can to build a relationship of trust with its clients. The intensive contact and interaction enables KPS employees to contribute to the further development of the sustainability strategy at various levels. For example, KPS works together with its clients in the design centres on solutions, procedures and process chains to reduce project times and the number of consultants on site. This allows for a reduction in travel by consultants, which in turn results in a reduction in emissions that are harmful to the environment.

Investors and shareholders

Investors and shareholders of KPS are an important stakeholder group. KPS is in regular contact with them and seeks personal dialogue whenever possible. KPS participates in investor conferences, communicates with investors during roadshows and holds telephone and personal one-on-one meetings. In addition, KPS organises a conference call on the occasion of the quarterly publications of the business figures, where information on the course of business is provided and investors can ask their questions. The KPS website and the Annual Report are yet other sources of information for investors and shareholders.

Employees

Without qualified and motivated employees, a successful and consistent implementation of the sustainable business strategy as well as the financial and non-financial goals would be inconceivable. With their knowledge, skills and commitment, the employees enable the further development of KPS. For this reason, employees and their interests have a high priority for the Executive Board. Partners and managers of KPS therefore hold regular discussions in order to be able to respond flexibly and individually to the individual situations of individual employees. Opportunities for training and further education also play an important role in this.

External consultants

Due to a persistent shortage of skilled workers in the IT and digitalisation sector, KPS again resorted to external consultants in financial year 2021/2022 in order to be able to carry out projects quickly and satisfactorily. In addition, external consultants are brought in to cover phases with high project volumes.

Suppliers and business partners

Technology and software companies that offer corresponding solutions and systems for the digitalisation of company processes and for managing the company are important business partners and suppliers of KPS. KPS has signed many cooperation agreements and regularly engages in intensive exchange with its suppliers. Client feedback also flows into these discussions.

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