Basler : Sustainability Report 2023

SUSTAINABILITY REPORT 2023

Our values and our responsibility - for today and the future

Content

1. General information	4
1.1	Preliminary remarks
	on this sustainability report	4
1.2	Scope of consolidation,
	materiality thresholds, and time horizons	4

1.3 Management responsibility and Sustainability Management

	at the Basler Group	4
1.4 Due diligence, internal control,
	and risk management	5
2.1	Stakeholder management	6
2. Sustainability, strategy,
	and business model	6
2.2	Material sustainability impacts and risks
	of the business model	7
2.3	Materiality analysis and changes
	compared to the previous year	8
2.4	The Basler sustainability strategy	9
3. Climate and environment	10
3.1	Climate change	10
3.2	Resource consumption
	and circular economy	13
3.3	Disclosures in accordance with Regulation
	(EU) 2020/852 ("EU Taxonomy")	14

4. Social affairs and employees	15
4.1 Material impacts, risks, and opportunities
	in connection with employment	15
4.2	Employment structure	15
4.3	Basic company policy for employment	16
4.4	Occupational health and safety
	and health management	17
4.5	Representation of interests,
	social security, and remuneration	18
4.6	Equal treatment, diversity, and inclusion	19
4.7	Development and training	21
4.8	Work-life balance	22
4.9	Responsibility in the supply chain	23
4.10 Social commitment	24
5	Business and Governance	25
5.1 Compliance and business practices	25
5.2	Innovation, research, and development	26
5.3	Data security in the products	27
5.4	Associations and donations	27

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Foreword

Foreword by the Chairman of the Supervisory Board

Dear shareholders, employees, customers, and business partners of Basler AG,

We are pleased to present the second independent sustainability report of Basler AG. Previously, it was part of our general corporate reporting. The relevance and regulatory requirements now demand a more comprehensive report on our activities and the status of their implementation.

As a listed family business, social responsibility and sustainable business practices are a matter of course for us. This method of operation has been firmly anchored in the company in various ways for many years. We are pleased to take this opportunity to provide a more comprehensive insight into our efforts with this separate report.

Our company is a leading international manufacturer of high-quality image processing components and solutions for applications in factory automation, medicine, transportation, and a variety of other markets. As a globally competitive supplier of capital goods, we are therefore called upon both as a provider of technical solutions for a more sustainable world and at an operational level to make our contribution to preserving the foundations of life.

With an export ratio of over 80 % and facing strong international competition, we are fundamentally caught between the need to remain competitive on one hand and the need to transform to a more sustainable economy on the other. This balancing act is made more difficult by numerous global challenges and crises (including the Ukraine war, energy crisis, disruption to global supply chains, and coronavirus pandemic). Nevertheless, both must succeed: maintaining our economic license to operate and fulfilling our responsibility for people and the environment.

The World Climate Change Conference in Egypt (COP27) issued mixed results and the impressive warning that the 1.5-degree target is probably no longer achievable, yet everything must be done to prevent a climate catastrophe. That warning, and many others, remind us of our special responsibility for the future.

Against this backdrop, the increasing regulatory requirements and the desire of some stakeholders for a deeper insight into non-financial ("ESG"/sustainability) issues are more than understandable. The desire for transformation and transparency is also driven by numerous regulations and an ambitious program by EU institutions to achieve the goal of a climate-neutral circular economy by 2050.

As a result, information expectations are increasing and the sustainability report of Basler AG follows this development.

Responsibility for this topic is assumed at the Management Board and Supervisory Board level. Dedicated Sustainability Management ensures that sustainability is given high priority in all areas of the company; explicit integration of sustainability into the overall strategy ensures that the competing priorities described above can be balanced all the times. There is a particular focus on climate change and the circular economy as a strategic element. In the future, activities in this area will be brought together, reviewed, and managed in an even more structured way.

Although we are not at the beginning of the transformation and are proud of what we have achieved so far, the pace of change must increase if we want to live up to our responsibilities to all stakeholders and future generations. This assumption of responsibility fits seamlessly into our values, which have shaped our corporate culture from the very beginning.

I wish you an insightful read.

Yours

Norbert Basler

Founder and Chairman of the Supervisory Board

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1. General information

1.1 Preliminary remarks on this sustainability report

The year 2023 represents an economic turning point for the Basler Group. As explained in the financial report of the consolidated financial statements, the sales crisis in 2023 necessitated a significant reduction in personnel and long periods of temporary work, as well as a restructuring adapted to this.

Although Sustainability Management was not directly affected by the reduction in personnel, the supply of various established data streams from the specialist departments was disrupted. The resulting information gaps are being closed as quickly as possible. The focus of the information presented follows the priority according to legal requirements, the wishes of the most important stakeholders and, finally, the activities that appear relevant to the interested public.

Due to this overall situation, some deviations from previously selected reporting standards, methodological procedures, and planned activities were inevitable, resulting in reporting components being removed from the announcements in the non-financial management report 2022. To ensure the greatest possible transparency and continuity, reference is made to the relevant deviations in the text. In accordance with legal requirements, the report for the coming financial year (2024) will change fundamentally and be prepared as an integrated report.

Following this brief classification, the most important points relevant to understanding the sustainability development of the Basler Group are presented.

1.2 Scope of consolidation, materiality thresholds, and time horizons

The contents of this sustainability report generally refer to the Basler Group with 1,004 employees (excluding dormant employment relationships, trainees, and interns), corresponding to the scope of consolidation shown in the group management report, with the exception of the Polish and Jap- anese subsidiaries for the environmental and climate-related disclosures. The integration of the Polish subsidiary, whose task is to support research and development activities, was completed in the reporting year (10 employees at the end of the year). The Japanese subsidiary (6 employees at the end of the year) is a branch that falls below the materiality threshold for most of the climate and environment-related sustainability risks, opportunities, and impacts considered material in this report. The defined materiality threshold for branches without a significant environmental and emissions

impact is less than one percent of employees (>10 employees at the end of the year) in relation to the Group. Deviating from this, individual disclosures are limited to the parent company Basler AG or some of the subsidiaries if a materiality threshold has not been reached or if certain data points are not yet available in sufficient quality. In each of these cases, reference is made to the limited coverage. The basic corporate policy, guidelines, and material sustainability impacts and risks are not affected. For the purposes of this report, the following time horizons are defined: "short-term" refers to one year, "medium-term" to a period from one to five years, and "long-term" to a period from five to ten years. The term "very long term" is used for projections over ten years.

1.3 Management responsibility and Sustainability Management at the Basler Group

Information on the composition, remuneration, and diversity of the Supervisory Board and Executive Board, the independence and expertise of the Supervisory Board, and the compliance organization can be found in the Corporate Governance Report in the Annual Report for the 2023 financial year. In addition, the organization, the role of the Management Board and Supervisory Board, and the information flows within the framework of Sustainability Management are described in more detail below.

A separate staff unit within the "Administration" area of responsibility of the COO/CFO is responsible for managing the material impacts, risks, and opportunities associated with sustainability issues. The tasks of this unit include recording material sustainability issues, reporting and communicating them to stakeholders and the public, integrating sustain-

ability issues into other management areas, and managing specific projects for the targeted improvement of the Group's sustainability impacts, opportunities, risks, and communica- tion. The Sustainability Manager reports regularly on these and on the status of measures and projects to the Head of Administration and the COO/CFO, as well as twice a year to the Audit Committee of the Supervisory Board as part of the preparation and review of the sustainability report, and on an ad hoc basis (e.g. advising on the selection of auditors and external consultants). All members of the Supervisory Board have knowledge of sustainability reporting and auditing in accordance with Section 289 HGB. In addition, Prof. Dr. Mirja Steinkamp and Lennart Schulenburg, as members of the Supervisory Board and the Audit Committee, have special expertise in the requirements for sustainability reporting and auditing.

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General information

At the end of 2023, the central parts of the Group strategy adopted in 2022 were supplemented and specified with regard to climate and environmental sustainability (see Climate and environment section). Within this framework, individual projects and targets were defined, their progress recorded in six-month sprints, and reported to the Executive Board and senior managers. Sustainability Management is also involved in the monthly approval of new and changed company processes, on an equal footing with quality, risk,

and compliance management. This ensures that sustainability aspects are taken into account in new and modified pro- cesses. Regardless of the project, a comparison is carried out with the management of foreign companies at the end of the year as part of the materiality analysis and the preparation of the sustainability report. In practice, a regular exchange also takes place at this level during the year regarding specific projects or the introduction of new guidelines.

1.4 Due diligence, internal control, and risk management

To the extent that due diligence is associated with certain sustainability issues, these are mainly performed by the respective specialist departments. The Human Resources department monitors and is responsible for the effects, risks, and opportunities relating to employees; the Purchasing department for those relating to suppliers and arising along the supply chain; and the Sales department for those relating to customers and downstream value creation. These departments assume group-wide responsibility from within Basler AG, in coordination with the foreign companies. Individual implementation tasks can be delegated to them. The local management is responsible for the locally specific safety, health, environmental, and climate-related impacts or risks associated with the activities of the respective individual companies. They report to the Management Board, are involved in strategy development, and in the regular reviews of the Executive Committee. Sustainability Management at Basler AG advises and supports the data collection, analysis, and management of the respective specialist departments with technical analyses and expertise on requirements and implementation practice, particularly regarding environ- mental, climate, human rights, diversity, and cultural issues. In 2023, workshops lasting several hours were held with all material functions and managers of Basler AG and all subsidiaries to prepare the sustainability report and to improve material sustainability topics. As a rule, the focus was on the changing requirements for the sustainability report, an initial assessment of materiality, and feedback from these groups.

In the foreign companies, the general managers assume responsibility for the implementation of the central guidelines and specifications, as well as for the further development of sustainability topics.

The risk and opportunities analysis on which this report is based goes beyond the risk and opportunities presented in the Group management report by providing a more detailed consideration of the material sustainability risks and opportu- nities. These are mostly indirect in nature, often have a longer time horizon than the usual business risks, and are subject to greater uncertainty. Both risk analyses are coordinated with each other via risk management. In the 2023 financial year, Sustainability Management supported the entire risk analysis process to better understand the materiality of partial business risks. In addition, the Audit Committee of the Supervisory Board reviews the completeness and correctness of the report in accordance with its statutory duties.

The Audit Committee and Supervisory Board review the sustainability reporting as part of a structural and system audit. In addition, the information in the sustainability report is checked with the help of random samples. The Audit Committee and the Supervisory Board have concluded that the Basler Group's sustainability reporting is appropriate and effective.

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2. Sustainability, strategy, and business model

The companies of the Basler Group develop, produce, and market image processing components for professional users. Digital cameras, which are primarily used in industrial mass production, medical applications, traffic control, and logis- tics, currently account for the majority of sales. In addition, the Basler Group is continuously expanding its product range and is therefore gradually developing into a software-supported solution provider of image processing systems and components. According to customer surveys, Basler products are characterized by innovation, high reliability, simple integration, and a very attractive price-performance ratio. Target customers are national and international manufacturers of capital goods (OEM customers) who integrate image

processing components and solutions into their own systems and devices and market these to end users. Decisive factors in the company's 30-year success story are a value-oriented corporate culture, the courage to embrace change, the willingness to see constant change as normal, and the passion to drive forward customer-oriented innovations to lead the company sustainably into the future. Reliability and trustworthiness are material brand values for the Basler Group among customers, employees, suppliers, partners, and other stakeholders. The company's vision/mission is to develop computer vision technology that is used in applications to improve the quality of life of all stakeholders.

2.1 Stakeholder management

The interests and views of the company's stakeholders are collected and recorded as part of the materiality analysis of the responsible functions and departments. This information is updated every two years unless there are no material changes in terms of new impacts and risks in the meantime. Information and inquiries from customers and the downstream value chain are recorded by the Sales Back Office and the Customer Relationship Management team. Information from suppliers and the upstream value chain is collected by Supplier Quality Management. Employee concerns are dealt with by the HR department and, at Basler AG, also by the General Works Council. Compliance-related sustainability aspects are also recorded via the whistleblower system and processed in the compliance team with a "multiple-eye principle". Locally specific impacts, risks, and opportunities in the foreign companies are the responsibility of the respective management teams and are also collected centrally as part of the materiality analysis. As in the previous year, the supplier qualification department, the legal department, the customer quality team, and the HR department carry out numerous comparisons with Sustainability Management on an ad hoc basis. In addition to the whistleblower system, all stakeholders are encouraged via the sustainability web- site to make submissions and inquiries on all sustainability

topics via the email address [e-mail]. Sustainability Management and the Head of Administration are responsible for collecting and responding to the submissions and coordinating them with the specialist departments and the Management Board, depending on the type of submission. It is particularly gratifying to see an increase in employees' own initiative here, who approach Sustainability Management directly with ideas for improvements. The CFO communicates with investors and rating agencies on sustainability issues together with Investor Relations Management and Sustainability Management. Numerous discussions on the topic of sustainability were also held with investor representatives and rating agencies in 2023. Sustainability Management also conducts analyses on specific topics, such as the handling of human rights in the supply chain or the climate and environmental impact of activities at locations worldwide. The key result of these efforts in 2023 is the realization that increasing transparency about the company's overall sustainability impact is the most important concern for corporate stakeholders, as this also affects various disclosure obligations. Among other things, this resulted in a significant expansion of the scope and depth of reporting content.

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Sustainability, strategy, and business model

2.2 Material sustainability impacts and risks of the business model

As outlined, the business model consists of the development and production of high-quality computer vision hardware and software and their global distribution, along with third- party products for industrial customers from a wide range of different industries. Contrary to last year's expectations, the sales figures of previous years were not achieved in the most recent fiscal year. The forecasted relative contributions of the individual sales drivers were not met. The material sustainability impacts, risks, and opportunities described in the 2022 Sustainability Report must therefore be preceded by an additional financial sustainability risk, which influenced the materiality analysis of the following factors to an unexpected extent:

1. Sales development

The decline in sales determined the Group's risk management in 2023 more than any other factor. The necessary course of restructuring and reorganization demanded a great deal from everyone involved. Due to the high relevance of ESG, the chosen sustainability course was maintained without resource cutbacks. Only future investments were adjusted to an appropriate extent to remain in line with the actual sales results.

2. Technology and innovation orientation

With regard to employees, innovation orientation is associated with material impacts as well as opportunities and risks. Attracting and retaining highly qualified employees through an attractive environment and an appreciative corporate culture, flexible working conditions, as well as further development and qualifications have a significant impact on the well-being and prospects of employees and are also crucial to the company's success (see chapter 4). In the last sustainability report, the focus on technology orientation was used to identify potential opportunities and positive impacts for the transformation to a climate-neutral circular economy (see chapter 3). The focus on innovation continues to be an important guarantee of success for the workforce.

3. Development, production, and distribution of electronics Due to its product range and the high proportion of sales generated with electronic hardware, the Basler Group is also

subject to the sustainability impacts typically associated with the electronics industry. On the environmental side, this concerns the transformation to a circular economy: in particular the reduction of electronic waste, repair and recycling, the highest possible resilience and control of substances of concern, and activities in the value chain. Another impact results from the emissions effect associated with the energy consumption of products (see chapter 3.3). The role as an "enabler technology" is complementary. Especially in the areas of so-called GreenTech, opportunities are increasingly opening to make the production of technologies more efficient through the use of our technology and engineering, thus serving as a catalyst for a sustainable energy transition.

4. Global growth

The activities of the Basler Group only cover a limited section of a long and complex global value chain. The entire manufacturing process, from the raw material to the finished com- ponent, as well as the integration of Basler products into the machines and systems of end customers worldwide can only be monitored and influenced to a limited extent. Challenges exist in the possibility of negative social and environmental impacts in the supply chain and in the use of products for purposes that are not compatible with Basler's values and principles (given that products reach the market via distribu- tors). In line with the increasing due diligence requirements, substantial investments will be made in 2024 in the continuous expansion of the monitoring of suppliers, materials, and components in order to counter impending risks at an early stage.

5. Climate change

Climate change and its consequences are categorized as one of the greatest overarching challenges for humanity, every human activity, and every industry, albeit to varying degrees. Neither Basler locations nor the business model are exposed to a specific form of risk from climate change. Nevertheless, the Basler Group will fulfill its responsibility to contribute to its mitigation. The comments on this topic are limited to the future achievements in this area.

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Sustainability, strategy, and business model

2.3 Materiality analysis and changes compared to the previous year

A list of twenty relevant topics was compiled from a comprehensive collection of possible sustainability aspects, taking into account international reporting standards, regulatory and social trends, and industry-specific requirements in 2022. In a survey of top management with the responsible corporate functions, the business relevance (opportunities and risks) and significance for the assigned stakeholders (impact) were assessed in accordance with the principle of "double materiality". In the 2024 financial year, the materiality analysis will be renewed and - also in preparation for

the new reporting obligations of the European Union - the process and thematic categorization will be adjusted again. Due to the changed business situation in 2023, the "Financial performance" factor has become significantly more relevant compared to the chart and would be weighted with maximum values on both axes. However, as no explicit survey of all stakeholder groups was carried out due to short-time working, this information remains unchanged. The following materiality matrix shows the unchanged results:

Materiality matrix for 2023 (unchanged from 2022)

Business relevance

						1
	5		6			15
				17
	18			16
				11
				7
	4
13	2

• I. Inner core
  10 12 3

19

8	14
II. Outer core
	20

Business and Governance		Enviromental
1	Customer satisfaction		3	Decarbonization
2	Data security in products		8	Energy e‰cient products
11	Financial performance		9	Green supply chain
15	Innovation capacity		10	E-waste reduction / circular
16	Integrity & compliance		12	Harmful chemicals
17	Product performance & quality		20	Waste (other than e-waste)
18	Supply chain resilience
Employee matters		Social
5	Development & training		4	Diversity & equality
6	Safety & health		13	Human rights / resp. sourcing
7	Satisfaction & work-life-balance		14	Inclusion
			19	Social Engagement

Significance to Stakeholders

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Sustainability, strategy, and business model

2.4 The Basler sustainability strategy

Improving quality of life with computer vision

"Improving the quality of life with computer vision is not just a marketing slogan - it is what we do and how we see ourselves at Basler. We improve the quality of life with our products and their applications. We also take responsibility for how our products are created, for the people along our value chain, for the environment, and for the way we leave our planet for future generations. We see that the challenges and expectations for a more sustainable industry are increasing every year. But these challenges also offer opportunities. Companies that create financial value by also striving for social and environmental progress are the true leaders of tomorrow."

Hardy Mehl, COO/CFO

The aim of Basler's sustainability strategy is to make effective use of these opportunities. To this end, the Basler Group is guided by the following guidelines:

• Transparency: The Basler Group fulfills all legal requi- rements with regard to disclosure obligations. Commu- nication with customers can go beyond this, especially when it concerns partnership-based cooperation and far-reaching change processes. Communication with the interested public is subject to its own risk assessment of the ethical, social, and environmental impacts of its own activities.
• Stakeholder orientation: The Basler Group is continuously improving the recording of stakeholder interests and dialogue to further develop itself as an organization. This means that different stakeholder interests are recorded and opportunities and risks are recognized.
• Long-termorientation: In economic terms, the Basler Group prioritizes long-term growth and resilient stakehol- der relationships over short-term profit orientation, which is also reflected in the company's successful history. Social and environmental impacts are taken into account with foresight in order to develop positive effects and avoid damage before it occurs.
• Shared value creation and innovation: The combination of economic success with social and ecological sustain- ability defines the company's success as a whole. When this ideal reaches its limits in reality, the Basler Group places particular emphasis on the company's innovative

strength. New products and processes are designed to push traditional boundaries in order to create value in all areas. The dimension of sustainability has also been integrated into the innovation process in a variety of ways. For example, sustainability is an integral part of the Balanced Score Card and a separate pillar in every change process.

• Areas of tension regarding the level of information: The statutory disclosure obligations for various types of information lead to their own audit dynamics and proces- sing challenges. The availability of external data does not mean that it can immediately and automatically lead to an adjustment in every process. Nevertheless, the Basler Group endeavors to keep this information up to date and to subject the resulting findings to a substantive review regarding economic, social, and environmental impacts.

To put these guidelines into practice with the appropriate measures, the company management created a staff position for Sustainability Management in 2021 and further promoted the integration of sustainability into the overall strategy in 2022. Among other things, a strategic initiative on environmental sustainability was introduced to continuously record and improve the climate and environmental impact of the Basler Group, in regular consultation with the Management Board and the Executive Committee. A comparable strategic initiative was launched at the end of 2023 regarding the standards in the supply chain, which will be implemented in 2024. The following chapters present the most material results of these measures from the past financial year.

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3. Climate and environment

3.1 Climate change

The Basler climate and environmental policy regulates how the Basler Group deals with its positive and negative impact on the climate. The Basler Group aims to make an effective positive contribution to climate protection by maximizing customer benefits while reducing emissions and avoiding negative environmental impacts. It describes the Basler climate targets: Net zero emissions in Scopes 1 and 2 by the end of 2030, and a significant reduction in Scope 3 emissions in relation to sales. These targets were pursued through various measures. For example, various service providers were commissioned to provide the emissions database so that the potential and risks could be assessed. This included the estimated CO2 emissions of the Group, CO2 emissions of individual products, and specific calculations of individual measures in Ahrensburg. A transition plan was drawn up on this basis, outlining the development path to climate neutrality by 2030. In the first step, the transition plan aims to realize substantial savings potential, the result of which is largely self-financing. Starting in the first half of 2024, the first measures will be implemented directly and successively by 2030. In the second step, the remaining CO2 emissions will only be sourced from electricity. As Basler AG will obtain 100 % of its electricity from genuine green electricity from January 1, 2024, a zero balance for scope 1 and 2 emissions will be possible for Basler AG in 2030. In the second step and during the transition period, fossil fuels (e.g. gas) will be neutralized via certificates.

The physical risks associated with climate change as well as transition risks related to the Basler Group's business model, strategy, and facilities are limited even in the long term. Stakeholder expectations regarding transparency and the management of the transition to a climate-neutral industry are currently playing a greater role and are being proactively evaluated by the Basler Group. The same applies to the climate impact of the Basler Group's activities. At its own locations, these are limited to heating the premises, a few company cars, and electricity consumption. As is common for the industry, there is greater leverage in the indirect emission effects that occur in the upstream and downstream value chain ("Scope 3" emissions).

The risk analysis is the joint responsibility of Sustainability Management and the risk management officer. For this report, analyses and projections on flood risks, heat, and water stress, as well as known adaptation measures were used. The assessment of transformation risks is based on projections of potentially rising energy costs and their impact on the costs of Basler AG. The climate risk analysis is unchanged compared to 2022.

Since the activities for the development, production, and distribution of image processing components and software are not directly dependent on changing climatic conditions or water and land use, the direct short, medium, and long-term physical risks associated with climate change are low. With the exception of the headquarters and the main production facility in Ahrensburg, Germany, the Basler Group's business model is not tied to specific locations or facilities. All Basler locations are rented and, with the exception of Ahrensburg, Neumünster, and Singapore, are predominantly office spa- ces. No long-term disruption to business operations due to the consequences of climate change is foreseeable at these locations. Even in a worst-case scenario (+5 °C pathway), no long-term business risk can currently be derived for the Basler production sites in Ahrensburg and Singapore with regard to sea level rise, flooding, and extreme temperatures. The city of Hamburg, close to the headquarters and main production site of Basler AG, is currently the most important business and transportation hub for the Basler Group. Since 2013, the city of Hamburg has implemented a convincing action plan to adapt to rising temperatures and flooding risks, which includes structural and emergency measures as well as permanent scientific monitoring of changing climate risks.

As part of the climate risk analysis, the Basler Group carries out an assessment of the water stress situation at Basler locations. Locations with very high water stress are Beijing and Xian. In a pessimistic scenario, the locations Shanghai, Suzhou, Seoul, Tokyo, and Singapore could be exposed to very high water stress in the long term. As the production and sales activities of the Basler Group does not require water, neither a material impact nor a direct material risk can be derived from this. Indirect risks cannot be reliably quantified

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