Governance

The following chapter comprises disclosure requirements for ESRS 2 GOV-1 ‘The role of the administrative, management, and supervisory bodies’, GOV-2 ‘Information provided to and sustainability matters addressed by the undertaking’s administrative, management, and supervisory bodies’, GOV-3 ‘Integration of sustainability-related performance in incentive schemes’, and GOV-5 ‘Risk management and internal controls over sustainability reporting’. The ‘Statement on due diligence’ in accordance with ESRS 2 GOV-4 can be found in the notes to this sustainability report.

The role of the administrative, management, and supervisory bodies

From the KION Group’s point of view, being transparent, sustainable, and socially responsible, taking account of the societal expectations of stakeholders and the associated management of resources and environmental protection, as well as compliance with and strengthening of living and working conditions, are key criteria for the Group’s long-term business success.

Close collaboration between the CPSO and the other Executive Board members and the Supervisory Board of KION GROUP AG is therefore the basis for embedding and managing sustainability as a core element of the corporate strategy. The Supervisory Board’s Audit Committee is responsible for all sustainability issues. This non-financial report also falls within its remit. Close collaboration between the Executive Board and the Supervisory Board ensures that sustainability is continually and effectively promoted and embedded in all areas of the Company.

The administrative, management, and supervisory bodies comprised 22 members as at December 31, 2024. Around 27 percent of the positions in the aforementioned bodies are held by women.

The Executive Board of KION GROUP AG bears collective responsibility for the corporate strategy and is responsible for aligning sustainability targets with the Company’s wider goals. It must ensure that decisions are guided by environmental and social aspects as well as commercial aspects.

The CEO is responsible, in particular, for the corporate strategy, including its communication to the Supervisory Board and other stakeholders, and for its implementation in operations.

Within the Executive Board, the CPSO is responsible for human resources and sustainability issues, including occupational health and safety. The CPSO’s role also entails responsibility for ensuring that the sustainability strategy is developed and implemented in line with the Company’s goals. The CPSO also chairs the Sustainability Council, to which action field leads, sustainability leads from the Operating Units and functions, and members of Corporate Sustainability also belong. Another responsibility of the CPSO is to ensure that all relevant sustainability-related data is captured across the Group and regularly presented to the administrative, management, and supervisory bodies. The remit also encompasses actively supporting the implementation of ESG targets in the Group and strengthening its culture of responsible business.

Roles and responsibilities at a glance

A central task of KION’s sustainability reporting is to provide regular updates on current developments and actions to the Supervisory Board, which is informed at least every six months about progress made towards sustainability targets and about strategic initiatives and their impact the KION Group. The Audit Committee reads these progress reports before they are discussed by the Supervisory Board. For urgent matters, additional ad hoc reports are made to ensure the committee’s ability to respond rapidly.

Another fundamental instrument is the materiality analysis, which is used to identify and assess impacts, risks, and opportunities related to sustainability. This analysis is performed by Corporate Sustainability in collaboration with the relevant departments and stakeholders and is signed off by the Executive Board. The results of the analysis are presented to the Supervisory Board for information and discussion.

The Executive Board involves the Supervisory Board and, specifically, the Audit Committee in the development of the sustainability strategy and makes ongoing adjustments to the strategy. The Supervisory Board monitors the Executive Board’s implementation of the sustainability strategy and assists the Executive Board in an advisory capacity.

In connection with the Company’s targets, the Supervisory Board adopted a profile of skills and expertise for itself in 2017, which is regularly reviewed. The last review was carried out in 2022, during which the profile of skills and expertise for the Supervisory Board was supplemented, among other things, by expertise and experience related to sustainability, especially in the area of alternative energies.

Prior to taking up her position of CPSO of KION GROUP AG on May 1, 2023, Valeria Gargiulo already possessed the requisite functional and practical skills in sustainability management in the automotive industry and also had a long and successful track record in HR management.

Information provided to and sustainability matters addressed by the undertaking’s administrative, management, and supervisory bodies

The employees of the KION Group are consulted on an ongoing basis through the representative functions (Corporate Sustainability, action field leads, sustainability leads from the Operating Units and central functions) established by the various governing bodies for the three regions EMEA, APAC, and the Americas. This enables employees’ perspectives on potential impacts, risks, and opportunities in the value chain to be considered in operational decision-making on an ongoing basis. Progress is regularly reviewed by the sustainability leads, the action field leads, Corporate Sustainability, and special committees. Progress reports from the regions and from the functions are made to Corporate Sustainability and the Sustainability Council and presented in Executive Board meetings as part of the KION Group’s groupwide strategy development and implementation. The action field leads manage the overall programs and targets at Group level. They also assign the agreed targets to the individual segments, regions, and functions and monitor progress toward achievement of the sustainability strategy targets.

The selection of potential Supervisory Board members is primarily based on the specific needs of the KION Group. In addition to professional experience, skills, and qualifications, personal qualities are also considered in the selection process. Equally, demographic criteria (including the standard retirement age of Executive Board members), and diversity are considered. The Supervisory Board believes that, in its current composition, it has adequate sustainability-related skills and expertise in terms of sufficient practical experience (skills) and/or professional/academic training and knowledge (expertise). In order to perform their duties properly, the governing bodies must possess in-depth knowledge in all areas of sustainability and enhance that knowledge at regular intervals (‘Profile of skills and expertise for the Supervisory Board’; [ESRS 1.123]).

The Executive Board of KION GROUP AG, led by CEO Dr. Richard Robinson Smith, sets targets and makes decisions on sustainability matters for the KION Group and is responsible for monitoring sustainability-related impacts, risks, and opportunities of the Company’s activities. Within the Executive Board, the CPSO leads on sustainability.

The CEO and CPSO stipulate the targets agreed on the basis of the impacts, risks, and opportunities. They make decisions on open sustainability questions related to ESG targets that are part of the groupwide strategy of the KION Group.

The Sustainability Council, chaired by the CPSO, was introduced in 2023 to succeed the sustainability steering group, which had been created in 2017. The Sustainability Council members include the action field leads, the sustainability leads in the segments, regions, and functions, and members of Corporate Sustainability. The Sustainability Council meets every six weeks on average in order to drive forward strategic initiatives related to sustainability. The Council prepares decision proposals for the Executive Board and oversees implementation of the sustainability program across the KION Group. The Corporate Sustainability & HSE department offers guidance and support for the implementation of sustainability topics in the KION Group and informs the Executive Board and Supervisory Board at least once a quarter about developments and progress using a standardized sustainability report format. The reports by Corporate Sustainability & HSE are used as a basis for making decisions about further steps in connection with the impacts, risks, and opportunities.

The KION Group follows generally accepted standards of sound, responsible corporate governance. The way in which the KION Group is managed and controlled is guided by statutory regulations and by the German Corporate Governance Code (GCGC).

Within the bounds of applicable legal provisions, KION also regularly discusses sustainability-related topics with organizations outside the Group. It does so, among other things, through its participation in professional associations and through regular meetings with analysts, investors, and advisory firms. The sustainability expertise of the Executive Board and Supervisory Board is also enhanced through participation in training and complemented by experts [[(see ‘Profile of skills and expertise for the Supervisory Board’)]].

As part of its corporate governance, the KION Group also considers sustainability matters of relevance for its business model when establishing targets, action steps, and due diligence processes. To be able to fulfill its due diligence obligation with regard to sustainability, the Executive Board is informed about progress, developments, impacts, risks, and opportunities at regular intervals. Corporate Sustainability is responsible for reporting. Information is also shared with the administrative, management, and supervisory bodies through regular meetings of the Sustainability Council. Should serious events occur, the Executive Board also requests proactive ad hoc reports.

Risks and infringements can also be reported directly and anonymously though the Compliance department and its compliance management system (such as the whistleblowing system), meaning that these information channels can also be used for sharing sustainability-related information with the administrative, management, and supervisory bodies.

Integration of sustainability-related performance in incentive schemes

The Executive Board of the KION Group bears collective responsibility for achieving the Group’s short, medium, and long-term sustainability targets. For this reason, sustainability-related performance incentives are an integral element of the Executive Board’s system of remuneration. The incentive structures for the Executive Board of KION GROUP AG and for senior management are an important lever for driving progress in the area of sustainability.

When setting Executive Board remuneration, the Supervisory Board places particular emphasis on sustainability – by considering social and environmental aspects – as well as on the Company’s long-term growth. It does so by giving a high weighting to the variable remuneration components.

The variable Executive Board remuneration comprises a one-year variable component based on the current financial year and a multiple-year variable component based on three financial years (long-term incentive – LTI). The variable components of Executive Board remuneration comprise both short and long-term targets, which are derived from the corporate strategy, including non-financial targets of the sustainability strategy. To ensure that the non-financial sustainability targets remain relevant to the strategy, the Supervisory Board determines the specific targets based on a selection of verifiable ESG targets, which were set for the KION Group’s business model and were identified as material for the achievement of the defined sustainability targets.

Both the short-term variable remuneration (short-term incentive – STI) and the long-term variable remuneration (long-term incentive – LTI), which apply to all KION Group executives, incorporate two ESG performance targets. In each case, the ESG targets account for 20 percent of short-term and long-term variable Executive Board remuneration.

The non-financial measures of performance are linked to ESG targets. For the STI 2024, the Supervisory Board defined the following two non-financial targets, each with a weighting of 10 percent:

• The target chosen for the STI 2024 from the ‘occupational health and safety’ category was the KION Group’s lost time injury frequency rate (LTIFR), which indicates the frequency of accidents resulting in lost time of at least one shift per one million hours worked.
• The non-financial measure of performance defined for the STI 2024 from the ‘sustainability and environment’ category was the extent of ISO certification at KION sites in accordance with environmental and occupational safety criteria (ISO 14001 and ISO 45001). 

The non-financial measures of performance are linked to ESG targets derived from the Company’s sustainability strategy. For the LTI 2022–2024, the Supervisory Board defined the following two non-financial targets, each with a weighting of 10 percent:

• In the ‘attractiveness as an employer’ category, the results of the annual KION Pulse employee survey are used, specifically the participation rate and the engagement score, each with a weighting of 5 percent. The engagement score measures employees’ motivation and commitment.
• The non-financial measure of performance chosen in the ‘sustainability and environment’ category for the LTI 2022–2024 is the score achieved in the independent sustainability rating S&P Global CSA, which evaluates the Company as a whole, and its progress, based on various criteria.

The Remuneration Committee prepares all Supervisory Board resolutions, especially in connection with the Executive Board members’ variable remuneration components (setting of targets and target achievement for the short-term and long-term variable components of remuneration).

The Remuneration Committee of the Supervisory Board comprises five members. Three of its members are shareholder representatives and two are employee representatives. It is always chaired by the chairman of the Supervisory Board. The Remuneration Committee primarily deals with matters relating to Executive Board remuneration and the remuneration report that has to be prepared each year. In accordance with section 87a AktG, the Supervisory Board of KION GROUP AG is responsible for setting and regularly reviewing the Executive Board remuneration system of KION GROUP AG and the total pay of the individual members of the Executive Board. The Remuneration Committee is responsible for preparing all Supervisory Board resolutions pertaining to the Executive Board’s remuneration.

Risk management and internal controls over sustainability reporting

As part of its internal control mechanisms, the KION Group regularly records risks in the Group through a systematic, groupwide analysis and assessment. The risks include corruption and bribery risks, money laundering risks, and risks of non-compliance in connection with antitrust laws, tax regulations, and cybersecurity rules. Sustainability-related risk, such as human rights abuses or environmental breaches in the supply chain are also systematically recorded. To this end, the KION Group has established a supplier management process in which infringements of protected rights in the supply chain are defined. 

In the assessment of potential risk, the characteristics of the corruption perception index for the respective country, the size and structure of the local procurement or sales organization, and contacts with public officials are considered. The groupwide risks are assessed and then assigned a priority in a standardized process. Newly emerging non-financial risks are documented and prioritized. Adequate measures are subsequently determined to eliminate weaknesses, both in processes and control mechanisms.

At regular meetings, the highest supervisory body – the Supervisory Board – is informed of the current situation in the areas of occupational health, safety, and the environment. It also monitors and checks significant sustainability-related risks in relation to corrective actions taken. Furthermore, the Supervisory Board is involved in every key step of the implementation of fundamental initiatives for the future of the Company through regular reports.

Incomplete, inconsistent, or incorrect reporting data is a material source of errors in sustainability reporting and can give rise to erroneous risk assessments for the Group.

Sustainability data covers a broad spectrum of topics and is collated, consolidated, and assessed using raw data from a number of systems of KION subsidiaries. Potential risk in terms of reporting can result from data that is retrospectively updated (e.g., due to improved base data) or from estimates that are replaced with subsequently available actuals, a change in calculation methodology, or regular updates of conversion and emission factors.

To support general data validity and the validity of the data reported by the subsidiaries, the KION Group uses a system-based software solution with integrated controls and an approval process for the individual data packages. Authorized people are assigned specific topics or datapoints, which are run through a standardized process to validate and approve the respective data. This control and its documentation are an integral element of the groupwide internal control system of the KION Group.

With the voluntary initial application of the CSRD in 2024, disclosure requirements and interpretations of the standards entailed risk, which was mitigated by consulting outside advisory firms to meet the minimum requirements of the CSRD.

The risks identified in connection with sustainability reporting are reviewed and classified, and internal control mechanisms are closely scrutinized in the event of any findings relating to them. Risk management concentrates on the content presented in this sustainability report and on the underlying raw data and information, which is incorporated into this sustainability report.