Feintool International : 2023 Sustainability Report

SUSTAINABILITY REPORT 2023

Leveraging green energy opportunities

AT A GLANCE

Feintool is a globally leading technology company specializing in fine- blanking, forming, and stamped electrolamination components for the automotive industry and demanding industrial applications. Our portfolio includes ultra-precision parts for rotors and stators used in electric vehicles and wind turbines.

The Group distinguishes itself through economic efficiency, innovation, high productivity, exceptional quality, a strong service orientation, and sustainable corporate management. As a catalyst for innovation and a "learning organization," Feintool consistently pushes the boundaries of steel sheet processing technologies and develops intelligent solutions tailored to customers' needs. In the automotive industry's transition, the company serves as a key development partner in lightweight construction, sustainability, platform and automated drive concepts, electric drives, and hybrid vehicles, thus shaping the future of mobility.

Established in 1959 and headquartered in Lyss, Switzerland, the company now operates on three continents with 17 production plants and technology centers. Following the ethos of "global competence, local presence," approximately 3 300 employees and 100 apprentices are strategically positioned in the world's main economic regions, ensuring proximity to customers.

Imprint

Publisher: Feintool International Holding AG, Corporate Communication, Industriering 8, 3250 Lyss, Switzerland

Contributions, data collection, layout: Feintool employees

Consulting, text, data management: Schnabl + Partner GmbH, ZURBONSEN C&ESG Management

Final editing (english version): Schnabl + Partner

Photos: Feintool-Archiv | Print: Druckstudio GmbH, Germany

carbon neutral

natureOffice.com | DE-263-309182

print production

Ohrdruf, DE

Forming plant

Obertshausen, DE

Forming plant

Ettlingen, DE

Fineblanking plant

Nashville, US

Forming plant

Lyss, CH Fineblanking plant Bipolar plates Headquarters

Cincinnati, US

Fineblanking plant

17

locations

AT A GLANCE

Sachsenheim, DE

E-lamination stamping plant

Vaihingen/Enz, DE	Tianjin, CN	Atsugi, JP
E-lamination
stamping plant	Forming plant	Fineblanking plant
Jessen, DE
E-lamination
stamping plant
Tokod, HU		Tokoname, JP
E-lamination
	Fineblanking
stamping plant
	plant
Most, CZ
Fineblanking plant
	Taicang, CN
Oelsnitz, DE	Fineblanking plant
Fineblanking plant	E-lamination
	stamping plant
	Bipolar plates
Jena, DE
Fineblanking plant

CONTENT

04 CEO STATEMENT

06 ABOUT THIS REPORT

07 DIALOGUE WITH STAKEHOLDERS

08 SUSTAINABLE VALUE CREATION

10 STRATEGY AND GOALS

14 GOVERNANCE AND RISK MANAGEMENT

22 ENVIRONMENTAL RESPONSIBILITY

30 ATTRACTIVE EMPLOYER

36 SUSTAINABLE BUSINESS PARTNERSHIPS

40 INDICES

2 | 3

CEO STATEMENT

CEO STATEMENT

"OUR SUSTAINABILITY MANAGEMENT IS PROVING EFFECTIVE"

Last year, we were able to improve our global standing as a leading supplier of ultra-precise,high-volume parts. Our strategy, both sustainable and successful, remains steadfast. We are intensifying our focus on promising markets such as hydrogen- and battery-powered vehicles, alongside other segments within the realm of green energy. Our product applications and their core technologies support the mega-trend of green energy, spanning energy generation, storage, and utilization. In the future, more than 50 percent of our operations will be associated with green energy. By taking this initiative, Feintool is actively contributing to significant reductions in greenhouse gas emissions, fostering a positive outlook for the future.

The establishment of our new location in India not only caters to the needs of our established customers in the region but also opens avenues in a promising market within a new geo-​graphic domain. Moreover, it allows for the maintenance of shorter, more environmentally friendly supply chains. After all, we consider ourselves to be part of the solution in the global transformation of society and the economy. By being an efficient pure player, we are actively contributing to the energy and mobility transitions and creating value for our shareholders.

Expanded risk management

Over the years, we have systematically integrated sustainability principles into our processes and strategic decision-making. In 2023, the Board of Directors reinforced sustainability gover-​ nance from various perspectives. Dr. Marcus Bollig, a Board Member, now spearheads sustainability initiatives within the company. Additionally, we have opted to incorporate ESG criteria into the remuneration policy for senior management, slated for implementation in 2024. Sustainability management now carries greater weight at the operational level.

We are on track to meet our self-imposed targets in the areas of environment, employees, innovation, and governance (see p. 12). These targets pose challenges for the Feintool Group as both a supplier and an employer. New regulatory mandates prompted intensive scrutiny of two specific areas in 2023. Firstly, we conducted a deeper examination of the ecological and social impacts of our supply chain activities. Secondly, we focused on enhancing due diligence concerning conflict minerals and human rights compliance. Analysis of supply chain

emissions (Scope 3) and a risk assessment of the upstream and downstream value chains revealed that steel procurement plays the largest role in these areas. We are progressively quantifying Scope 3 emissions, and we are supporting initiatives aimed at producing green steel that meets market needs. However, it is apparent that our ability to influence suppliers is limited.

Strong ESG rating

We are taking proactive steps to drive change. In 2024, we will review and update our materiality analysis, laying the groundwork for our sustainability reporting. Concurrently, we are committed to further developing our risk assessment, which has resulted in the implementation of new measures. Specifically, we published a new Supplier Code of Conduct for Ethical Business Practices in 2023, which was implemented by region. Furthermore, as a supplier, we underwent the TISAX assessment for information security. TISAX, short for Trusted Information Security Assessment Exchange, signifies a distinguished certification for digital data transfer in the automotive industry. Upholding information security remains a crucial pillar for the Group's long-term sustainability.

We recognize that the expertise, knowledge, and innovative spirit of our employees are essential for our long-term success. We are committed to fostering a fair and healthy work environment for our employees and trainees, where every individual's contribution counts and is respected. To reaffirm this commit- ment, we initiated an internal campaign last year with the slogan "Details matter. I matter." (see p. 32).

Our sustainability management program is proving effective. The Group underwent an ESG rating assessment by Morning- star Sustainalytics in 2023. The assessment delineates five Risk Ratings that can affect the value of the company. With a rating of "17.7, Low Risk", Feintool is starting out with a very strong initial assessment, positioning it in the top 19 percent among its peers.

Torsten Greiner

CEO of the Feintool Group

4 | 5

ABOUT THIS REPORT

OPERATING SUSTAINABLY, REPORTING WITH TRANSPARENCY

			DIALOGUE WITH STAKEHOLDERS
STAKEHOLDER DIALOGUE
Stakeholder	Requirements/expectations Communication channel	Frequency	Responsibility
Shareholders	High dividends, rising market - Investor relations:		- FIH

Sustainable corporate governance is firmly anchored within the strategy for the overall Feintool Group. The company has been publishing an annual Sustainability Report since 2019 to communicate the impacts of its business activities on people and the environment as well as sustainability targets and performance. These reports align closely with the current guidelines of the Global Reporting Initiative (GRI).

The Swiss Code of Obligations was the authoritative framework for non-financial reporting during the fiscal year 2023, covering January 1st to December 31st, 2023 (see Index, p. 42). This year's report is again based on the GRI Standards 2021 (see Index, pp. 40/41), aligning with the group of consolidated companies outlined in the Annual Report 2023. Governance and corporate strategy have a dedicated section within this report. Additionally, the risk assessment of steel's upstream and downstream value chains is elaborated in compliance with the legally mandated due diligence obligations. Sourcing and processing of steel remain pivotal aspects of the Feintool Group's business model.

Feintool also complies with the ESG (environmental, social, governance) requirements of the capital market. Ratings from external assessments provide transparency on a company's material ESG risks, aiding investors' decision-making process. In 2023, the Group underwent evaluation by Morningstar Sustainalytics. The results were strong. With a rating of "17.7, Low Risk", Feintool is starting out with a very strong initial assessment, positioning it in the top 19 percent among its peers.

Feintool will revise the assessment of key issues for non- financial reporting within the context of double materiality in 2024. This Sustainability Report reflects the most recent materiality analysis concerning stakeholder interests, conducted in 2019 (see list at right). Feedback from the previous report has been integrated into the current one. Feintool maintains an ongoing dialogue with its stakeholders, with a particular focus on customers and employees, throughout the year (see p. 7).

The company's diverse ESG initiatives contribute to advancing the UN's Sustainable Development Goals (SDGs). These efforts are focused on four key areas: clean energy, decent work, innovation, and responsible consumption. Each of these areas corresponds to its respective sections in the report.

Key reporting areas

Business performance Anti-corruption Customer health and safety Energy consumption Emissions

Use of materials Waste

Employment conditions Occupational health and safety Vocational and advanced training Diversity and equal opportunity Nondiscrimination

Protection of customer data

	value, good image, legal	- General Assembly	- annual
	compliance	- Annual Report	- annual
		- Roadshow	- biannual
		- Guided plant tours	- ongoing
		- Media relations	- ongoing
		- Public relations	- ongoing
		- Digital Communications	- ongoing
Customers	Qualitative, innovative just-in-	- Key account management	- ongoing	- per segment and region
	time products and services at	- Exhibitions/events/conventions	- per activity plan	- FIH
	a price in line with the market,	- Media relations	- ongoing	- FIH
	good image in the community,	- Public relations	- ongoing	- FIH
	legal compliance, Code of
	Conduct	- Digital Communications	- ongoing	- FIH
	Sustainability strategy/	- Sustainability platforms such as	- situational, sometimes	- usually site-related or
	targets and evidence of	SAQ, Ecovadis, customer-specific	annual	per company
	implemented standards,	questionnaires
	training and key figures in
	the context of human rights,
	occupational health and safety,
	environmental protection, and
	ethics - internally as well as
	on supplier side.
Partners/	Reliable partnership,	- Supplier visits and evaluations	- ongoing	- per company and
Suppliers	continuity, prices in line with	- Exhibitions	- ongoing	- across the Group
	the market, good image, legal
	compliance
Employees	Attractive and secure	- Employee magazine	- biannual	- FIH
	workplace, good image and	- Notice board	- ongoing	- per company
	commitment to sustainability	- Intranet	- ongoing	- per company
	and future viability, market-
	- Management and employee events	- biannual	- per company
	based remuneration,
	opportunities for development,	- Employee campaigns	- according to demand	- per company/FIH
	legal compliance
Legislator/	Legal compliance, attractive	- Applications/Approvals	- according to demand	- per company/FIH
Authorities	tax payer, creating jobs	- Reporting	- according to demand	- per company
Neighbors	No interference (such as	- Media relations (local media)	- according to demand	- per company
(residents,	traffic, emissions, landscape),	- Digital Communications	- ongoing	- FIH
neighboring	open culture of discussion,	- Personal contacts	- according to demand	- per company
companies)	cooperation, legal compliance
Society	Attractive employer and trainer	- Media relations (local media)	- according to demand	- per company
	in the region, good image,	- Events (e.g., plant tours, open houses)	- according to demand	- per company
	sustainability, legal compliance	- Public relations (e.g., membership of local	- according to demand	- per company/FIH
		chamber of industry and commerce)		per company
		- Digital Communications	ongoing
Associations	Adherence to obligations	- Events	- according to demand	- per company
		- Digital Communications	- ongoing	- FIH

* FIH: Feintool International Holding AG

6 | 7

SUSTAINABLE VALUE CREATION

PRECISION TECHNOLOGY: POWER FOR ELECTRIC DRIVES

INPUTS

Financial capital

SUSTAINABLE VALUE CREATION

OUTPUTS

OUTCOMES

SELECTED KEY FIGURES

Intellectual capital Technological expertise, patents, and innovation to meet market needs

Employees

Production facilities

External resources

Raw materials, products, services, procured energy, other infrastructure

Partnerships

Research partnerships, customer loyalty, supplier network

Good governance

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FEINTOOL GROUP

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Governance | Vision & Values

Strategy 2030

Sustainable corporate objectives

Feintool Portfolio

Product design

Assembly/tool making

Fineblanking

Forming

Electrolamination stamping

Gluing, welding, casting

FEINforming bipolar plates

Sales and marketing

Services

Data management

Products, secondary products

Services

Patents

Efficiency improvements

Technical optimization

Knowledge, skills

Innovation

Emissions

Waste

Profits, cash flow, taxes, and social security contributions

Job creation and positive impact on safer and fair working conditions

Enhanced brand value and customer confidence

Contribution to shaping the future of mobility through high-performance sheet metal technology

Procurement and operations: conservation of resources through carbon-neutral energy sourcing, efficient technologies, and processes

Knowledge transfer and training investments to increase employees' skills sets and their ability to innovate

Dedicated and satisfied employees through good corporate governance

> 60 %

revenue share of climate-friendly applications

- 1 400 tCO2e

annual reduction in carbon emissions through measures

40 %

share of electricity from renewable sources

- 4 700 MWh

annual energy savings through measures

99 %

recycling rate

S								e
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	a	k	e			g
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				h	ia
					older d

Focus on four UN Sustainable Development Goals

Feintool covers the fineblanking process and utilizes key processes such as cold forming and electrolamination stamping to develop and produce high-precision sheet metal technology for the mobility of tomorrow and for demanding industrial applications. The Group has locations in Europe, the US, Japan, and China; India joined this list in 2023. Being present in these regions ensures the Group's involvement in the international markets most critical for its products and services.

To this end, the Group draws on various resources ("inputs") and converts these into value-added outcomes for customers using its knowledge, expertise, and products. The Group makes a significant contribution toward sustainable mobility and the supply of renewable energy as well as the development of other industries. It creates jobs, enhances the skills of employees, and promotes teamwork and strong leadership. In 2023, Feintool again invested approximately CHF 4 million in research and

development, thereby advancing innovations that will benefit many. With tax payments equal to CHF 5.3 million in 2023, the company also contributes to the common good. Feintool, which places utmost value in long-lasting and reliable partnerships, produces high-precision parts that make it an important link in a long value chain (see pp. 16/17).

The technology group is committed to supporting the United Nations Sustainable Development Goals (SDGs). Feintool believes that there are four key areas of activity where it can make the biggest difference (see above). For example, the company has set itself specific climate targets, it creates attractive jobs and sustainable growth through innovation, and it advances resource-friendly processes and workflows.

8 | 9

STRATEGY AND GOALS

STRATEGY AND GOALS

FOCUS ON GREEN MEGA-TRENDS

Feintool pursues a systematic technology strategy

The markets in which Feintool is active are powering through the transformation toward sustainable solutions with great velocity. Feintool produces high-quality precision parts for technological applications the world over. Specific focal points include electromobility, industrial applications, and the generation, storage, and use of green energy.

STRATEGY

Climate-related transformations influence the strategic orientation of the Feintool Group. It has already been several years since the company adapted its governance policies and product portfolio accordingly, thus laying the foundation for sustainable growth.

Feintool's latest challenges stem from digi​tal- ization as well as climate change and its con- sequences. More importantly, these challenges present new opportunities in promising markets such as electric motors for the automotive sector and the hydrogen economy. Opportunities also abound in the industrial sector (motors, ventilation systems, pumps, etc.) and in renewable energy (especially hydroelectric power and wind energy).

The Group considers itself well positioned to play a key role in the transition to a low-carbon economy. Feintool is driving forward a twofold transformation within the Group. One aspect of the transformation is process and product de- velopment; the other is internal governance regarding climate targets and other ESG criteria. Feintool is a powerful name in the automotive sector - an industry that studies show is growing and will return to pre-coronavirus levels in 2026. The trend toward all-electric vehicles

is also evident, with an annual growth rate of around 20 percent until 2030. The charts for green energy also exhibit a clear upward trend (see Annual Report 2023).

Future investments securely financed The Feintool business portfolio is aligned specifically for these trends with high-end,high-volume parts rooted in the core technologies of electrolamination stamping, fineb- lanking, and forming. The Group's appreciable successes in the growth markets of hydrogen- and battery-powered vehicles in 2023 was no accident. An equally calculated achievement is that more than half of the Group's sales already come from future-oriented business areas. The company's strategy rests primarily upon three pillars: technological leadership, global market leadership (already achieved in the

automotive sector), and regional presence. Feintool expanded into India in 2023 with its new site in Pune with the intention of being close to the customer in this important future market. Feintool's transformation includes continuing to employ established technologies in an array of markets so that these revenues can be invested in future technologies and innovations. Put another way, Feintool will finance the future using the operations that have historically yielded success. The associated investment requirement is well covered by a strong balance sheet with low debt. The company's transition in recent years to being a pure player reduces complexity and safeguards capital resources.

However, the markets' transformation process entails risks such as increasing global competition for raw materials used in batteries and electric motors. Systematic analysis of climate-related risks and opportunities and their financial impacts on Feintool will occur in 2024. To improve longevity and achieve sales targets (see Annual Report 2023), the Group is promoting innovation, quality, and environmental management as well as cost control. Further aspects being highlighted are consistent customer orientation and promotion of talent. See pages 12/13 for the corresponding targets.

Strategy pillars

Technological leadership Market leadership in the automotive sector Regional presence on three continents Alignment with mega-trends

Secure financing

10 | 11

STRATEGY AND GOALS

SUSTAINABILITY GOALS

Feintool is on track

ESG (environmental, social, governance) management	2021 (see below). Several of these goals have already been
requirements within the company are expanding in line with	achieved, including those related to the FEINtalent global
global climate targets and new regulatory obligations. Feintool	development program and the strengthening of governance
has been setting sustainability goals in four key areas since	structures.

Environment

50 % reduction in carbon emissions (Scope 1 and 2)		by 2030
ISO 14001 certification of all sites		2024
Employees	continuous
Building a talent pool
Implementation of a new management development program		by 2025
ISO 45001 certification of all Feintool sites	by 2028
Innovation
Increase the revenue share of carbon-friendly applications		by 2028
to 70 %

STRATEGY AND GOALS

Status CO2 reduction target (Scope 1 and 2): -50 % until 2030

60'000
50'000						-23 %
40'000						-50 %
30'000
20'000
10'000	56'932	47'940	43'408	43'446	43'741	28'466
0
	2019	2020	2021	2022	2023	2030

Governance
Introduction of an ESG component in management remuneration	by 2028
Strengthening the global sustainability team	2024

Stabilization of carbon emissions

The Feintool Group's climate target to halve carbon emissions by 2030 is defined in terms of greenhouse gases stemming from internal operations (Scope 1 and 2). This encompasses emissions resulting from power and fuels.

sites in Germany that have not yet completed the transition to 100 percent green power. In the years leading up to 2030, Feintool will persist in advancing the roadmap towards annual emissions reductions and consolidating efforts on a Group level.

In terms of environmental concerns, Feintool had previously set a climate target for Scopes 1 and 2. In 2023, the Group reduced carbon emissions by 23 percent compared to the benchmark year of 2019. Analysis of greenhouse gas emissions along the supply chains, particularly for steel, is still ongoing.

Feintool achieved various milestones in human resources in 2023 (see pp. 30-32), including the successful conclusion of the first year of the FEINtalent development program.

Also accomplished was the rollout of a new program for the continued professional development of managers across the Group. Regionally, sites are preparing for ISO 45001 certification for occupational health and safety management. Notably, the sites in Tokod, Hungary, and Vaihingen, Germany, are already certified, with Japan's final audit scheduled for the end of 2024.

In 2023, Feintool once again demonstrated its innovative prowess by expanding its forward-thinking product portfolio. By the end of 2023, over 60 percent of sales were attributed to carbon-friendly applications.

Feintool also bolstered its ESG program in 2023. Responsibilities among the Board of Directors were reorganized as part of this undertaking. Additionally, an ESG component will later be incorporated into management remuneration. The global sustainability team, which reports to the CEO, coordinates the implementation of all measures to achieve self-imposed ESG targets.

As of the end of 2023, Feintool had reduced emissions by 23 percent compared to the benchmark year of 2019. The reduction in carbon emissions is nearly on par with the achievements of the previous two years. In 2020, just before this timeframe, most Feintool plants in Germany transitioned to green power - a significant stride towards meeting the targets.

Emissions from the divested company Feintool Technologie AG, which contributed less than one percent of the Group's total emissions, were excluded from calculations in 2023. Despite the procurement of additional green power in Japan and substantial energy conservation measures, particularly in Germany and Japan, overall emissions saw a slight increase compared to 2022. The main driver of this increase was a temporary spike in the intensity of emissions from electricity supply for

12 | 13

GOVERNANCE AND RISK MANAGEMENT

GOVERNANCE AND RISK MANAGEMENT

STRONG ESG RATING

Feintool strengthens its sustainability management

International targets concerning sustainable development and climate change pose significant challenges. Feintool considers itself part of the solution to these challenges and aligns its corporate governance policies accordingly. In 2023, the Group enhanced its dedication to sustainability and earned a high ESG rating from Morningstar Sustainalytics.

GOVERNANCE

As a global supplier of high-precision parts, Feintool recognizes its responsibility towards its employees, customers, business partners, and society as a whole. The Group has been integrating sustainability aspects into its management policies for years. Responsible management of raw materials and other natural resources has been a significant component of Feintool Group's corporate governance from the outset.

For many years, the Feintool Group's corporate policy has prioritized two crucial aspects of sustainable action: fostering a fair, healthy, and collaborative corporate culture, and preserving the environment for the long term. Feintool's commitment to sustainability is proving effective. The Group underwent an ESG rating assessment by Morningstar Sustainalytics in 2023. The assessment delineates five Risk Ratings that can impact the company's value. With a rating of "17.7, Low Risk", Feintool is starting out with a very strong initial assessment, positioning it in the top 19 percent among its peers.

The Board of Directors holds ultimate responsibility for all sustainability activities. In 2023, the Board took several measures to strengthen the ESG program. For instance, responsibility for all non-financial sustainability matters was transferred to Board Member Dr. Marcus Bollig, Managing Director of the German Association of the Automotive Industry (VDA). The Group will also be incorporating an ESG component into the performance-based remuneration policy for senior management.

The Board of Directors also approves the annual Sustainability Report, which has been included as a supplement to the Annual Report since the 2019 financial year. The CEO and the international Feintool Group sustainability team hold operational responsibility for implementing ESG activities and non-financial reporting. In 2024, the sustainability team will see an increase in staff. The Executive Board keeps the Board of Directors informed on important ESG matters, with reporting conducted regularly, at least annually.

Risks affecting the company can threaten the success of the Group and its self-imposed targets. At Feintool, these risks encompass environmental concerns The internal control and risk management system (see Annual Report, p. 104) is designed to identify, control, and mitigate these risks. Each Group company's Managing Director holds responsibility for the system. Coordination with the Group's management team

occurs annually. During the current financial year, Feintool will also assess and prioritize climate-related risks and opportunities based on the recommendations of the Task Force on Climate- Related Financial Disclosures (TCFD). The Executive Board acknowledges that internal business activities carry both risks and opportunities and can impact people and the environment within the supply chain, positively or negatively. This inside-out risk assessment methodology was expanded in the reporting year, and included scrutiny of the purchase or processing of minerals and metals from conflict regions (see p. 21).

Already in 2022, Feintool had initiated an initial risk assessment for the steel supply chain, recognizing steel as the primary and most crucial preliminary product for the Group's business model. In 2023, a comprehensive risk assessment was conducted for this value chain, focusing on upholding human rights, particularly addressing concerns related to child labor (see

1. 16-20).In 2023, Feintool concluded a policy statement concerning the protection of human rights. This statement supplements the Code of Conduct applicable to the entire Group and the newly introduced Supplier Code of Conduct from 2023. The company also enhanced the climate assessment for its supply chains (Scope 3).

In the future, group-wide findings of all impacts, risks, and opportunities will be aggregated and standardized more effectively. This analysis is equally critical to the success and reputation of the company as adherence to all laws, standards, and internal policies. Compliance is mandatory for all employees and areas of the Group, with business unit heads bearing responsibility for enforcement. Feintool has established procedures for filing complaints with independent agencies and imposing sanctions in case of any violations (see p. 21); incidents with legal implications are addressed through the legal system. No significant compliance violations were reported in 2023.

14 | 15

GOVERNANCE AND RISK MANAGEMENT

RESPONSIBLE PROCUREMENT

Feintool strengthens its sustainability management program

The Feintool Group embraces its responsibility to prioritize the	and environmental management aimed at reducing carbon
health and safety of its employees and customers, comply	emissions and safeguarding natural resources are also crucial
with international labor standards, and uphold human rights	for sustainable corporate governance and the company's long-
within the company and its value chains. Consequently,	term success. Various management systems and controls are in
the Group's obligations extend well beyond its immediate	place to meet the associated due diligence obligations and legal
sphere of influence. Data security, anti-corruption measures,	requirements. In 2022, the company identified potential social

Upstream supply chain

Raw material		Steel		Feintool
sourcing	Steel industry	processing	Transport	operations
Environmental impact	Environmental impact	Environmental impact	Environmental impact	Environmental impact
Fair wages	Fair wages	Fair wages	Fair wages	Fair wages
Fair working hours	Fair working hours	Fair working hours	Fair working hours	Fair working hours
Health & Safety	Health & Safety	Health & Safety	Health & Safety	Health & Safety
Freedom of speech	Freedom of speech	Freedom of speech	Freedom of speech	Freedom of speech
				Shortage
Child labor	Child labor	Child labor	Corruption	of skilled employees
			Shortage
Corruption	Corruption	Corruption	of skilled employees	Geopolitics
Geopolitics	Geopolitics	Geopolitics	Geopolitics
Forced labor

GOVERNANCE AND RISK MANAGEMENT

and environmental risks in the upstream and downstream value	step, undertaken in 2023, involved investigating the risk of
chains for steel sourcing and processing (see infographic below	human rights violations, particularly concerning child labor (see
and explanations on pp. 18-20). Steel, in the form of coiled	pp. 18-20).
strip, constitutes the most crucial material, or primary product,
for Feintool's parts production business. Therefore, the analysis
focused primarily on this critical supply chain. The subsequent

Downstream supply chain

Transport	Component	OEM/	Final	End of life
manufacturing	manufacturer	customer
Environmental impact	Environmental impact	Environmental impact	Environmental impact	Environmental impact
Fair wages	Fair wages	Fair wages	Customer Health & Safety	Fair wages
Fair working hours	Fair working hours	Fair working hours	Freedom of speech	Fair working hours
			Shortage
Health & Safety	Health & Safety	Health & Safety	of skilled employees	Health & Safety
Freedom of speech	Freedom of speech	Freedom of speech	Geopolitics	Freedom of speech
Corruption	Corruption	Corruption		Corruption
Shortage	Shortage	Shortage
of skilled employees	of skilled employees	of skilled employees		Geopolitics
Geopolitics	Geopolitics	Geopolitics

16 | 17

GOVERNANCE AND RISK MANAGEMENT

GOVERNANCE AND RISK MANAGEMENT

Material sourcing countries

Feintool mainly sources materials from local suppliers, with intercontinental shipping being infrequent. In Europe, steel coils are obtained from suppliers in Germany, Austria, Belgium, and the Netherlands, with a small percentage also sourced from Italy for processing. European plants typically procure their steel from within Europe, although some is sourced from China and Turkey. In the US, plants only receive supplies from domestic companies. In China, most metal supply comes from domestic sources, too, with additional steel from Germany and the Netherlands. In Japan, customers usually provide the raw materials, primarily sourcing their steel from Japanese production operations.

The IW Consult study evaluates how well countries of origin for steel coils meet sustainability criteria. The study focuses mainly on Germany, which is a good fit because Feintool purchases

a significant amount of steel from this country. The study uses data from international organizations. The table below shows how the top nine countries perform in relation to the UN Sustainable Development Goals that are relevant to the steel

industry. Performance data for Germany, the US, Japan, China, and Turkey, which are countries with Feintool suppliers, are highlighted.

Evaluation process

Sustainability rankings apply to Feintool Group's human rights due diligence obligations. The rankings show that Europe, Japan, and the US pose a low risk of related violations. However, China's situation is different. Therefore, Feintool has focused its risk assessment on China's steel supply chain. Turkey and India will also be evaluated in the future. In 2023, the technology group established a new production site in India. >>

Feintool supplies various industries with its high-precision parts produced from steel sheets, with automotive being the primary segment served. These industries' value chains have numerous process steps and suppliers and are traditionally shaped by the use of lean principles to strive for utmost efficiency. In contrast, Feintool's upstream supply chain is rather straightforward, as the company mainly processes coils of various steels to produce high-precision sheet metal components. The upstream supply chain was traced through four stages. It starts with raw material extraction (primarily iron ore and coke), which is followed by the steel industry. Stage three involves processing into hot-rolled,cold-rolled, and electrical steel strip. Finally, coiled steel strip is distributed to Feintool Group plants.

Potential risks

At 95 percent, these coils represent the largest share of Feintool's procurement by far. The Group's total material purchasing cost in 2023 amounted to CHF 452 million, slightly lower than the previous year's CHF 456 million. Risks and opportunities were identified across all four stages of the value chain, often representing two sides of the same coin. What

is perceived as a risk can be transformed into an opportunity to benefit employees, climate action, and natural resources through proper management. All stages in the upstream supply chain involve energy consumption, emissions, the use of natural resources, and waste generation. Risks and opportunities also arise in areas such as working conditions, anti-corruption, and human rights. Additionally, shipping operations are currently facing a shortage of skilled labor, which is another significant factor to consider.

Based on a 2022 IW Consult study¹ conducted in Cologne, Germany, for the German Steel Federation, political risks to the steel value chain are identified as most significant in China and Russia. Events such as Russia's war of aggression against Ukraine, trade tensions between the US and China, and conflicts involving China and Taiwan are among the geopolitical risks highlighted. However, since Feintool does not procure steel from Russia, it is not exposed to the associated risks. >>

1 Institut der deutschen Wirtschaft Köln Consult GmbH (IW Consult), Wertschöpfungskette Stahl: Nachhaltigkeit im internationalen Vergleich. Studie für die Wirtschaftsvereinigung Stahl, Köln 2022

Sustainability ranking by country

Rank	Country	SDG 8	SDG 12	SDG 13	SDG 16

1	Germany	1	1	2	1
2	Japan	2	3	1	2
3	USA	3	5	3	3
4	Korea	4	2	4	4
5	Brazil	6	4	6	7
6	China	7	6	7	6
7	Turkey	8	7	5	8
8	Russia	5	9	8	9
9	India	9	8	9	5

Overall ranking and rankings of individual countries with regard to SDGs pertaining in the steel value chain.

Sources: OECD (2019), UN (2020), World Bank (2021), Transparency International (2021), IEA (2021),

Yale Center for Environmental Law & Policy, IW Consult statistics (2022)

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