Strategy, business model, and value chain of the KION Group

The KION Group is among the world’s leading suppliers of industrial trucks and supply chain solutions. Its portfolio encompasses industrial trucks such as forklift trucks and warehouse trucks, as well as integrated automation technology and software solutions for the optimization of supply chains, including all related services. Across more than 100 countries worldwide, the KION Group sells logistics solutions that improve the flow of material and information within factories, warehouses, and distribution centers. The KION Group, which is included in the MDAX, is the largest manufacturer of industrial trucks in the EMEA region. In China, it is the leading foreign manufacturer.

The KION Group’s brands have been established in the regional markets EMEA, APAC, and the Americas for decades. Dematic is a global leader in warehouse automation, providing a diverse range of intelligent supply chain and automation solutions. The Linde and STILL brands serve the premium and higher value segments of the industrial truck market. Baoli focuses on industrial trucks in the lower value and economy segments. The regional industrial truck brand Fenwick is one of the leading suppliers of material handling products in France, while OM is among the leading vendors in the Indian market.

The KION Group is a global company employing 43,297 people from more than 110 countries as at December 31, 2024.

The EMEA region and the key market of Western Europe accounted for the largest share of the workforce with 69.3 percent (30,018 employees) at the end of the year. The APAC region and the key market of China, a future growth market for the KION Group, accounted for 16.9 percent (7,307 employees). The Americas region, including the key market of North America, accounted for 13.8 percent (5,972 employees).*

The business is combined in the two operating segments Industrial Trucks & Services and Supply Chain Solutions, whose respective market position and regional presence complement each other. Corporate Services comprises holding companies and other service companies that provide services such as IT and general administration activities across all segments.

The Industrial Trucks & Services segment sells forklift trucks, warehouse technology, and related services, including complementary financial services, through the three international brands Linde, STILL, and Baoli plus the regional brands Fenwick and OM. The Industrial Trucks & Services segment has a diversified customer base. Customers range from large key accounts with global operations to small and medium-sized enterprises across all sectors.

The Supply Chain Solutions segment, which operates under the Dematic brand, focuses on concept development for, and the installation of, integrated technology and software solutions that are used to optimize supply chains. With global resources, eleven production facilities worldwide, and regional teams of experts, Dematic is able to plan and deliver logistics solutions with varying degrees of complexity in most parts of the world. Key customer industries are general merchandise, grocery retail, apparel, and food and beverage.

Through its regional market presence, the KION Group has positioned itself in the global markets with the product portfolio of its established brands, its sales and service network, and its varied customer portfolio. KION Group customers include major manufacturers, the logistics and transportation sector, grocery retailers, pure-play e-commerce customers, and small and medium-sized manufacturers.

The business model of the Industrial Trucks & Services segment covers the key process steps of the value chain to fully cater to the needs of material handling customers worldwide: product development, procurement and manufacturing, sales and service, truck rental – including short-term rental – and used trucks, fleet management, and financial services through lease agreements that support the core industrial truck business.

The product portfolio is complemented by services that cover the customers’ use of the products. The spare parts business and the provision of service packages for repair and maintenance underpin the longevity and efficient use of these products. Alongside these recurring services, another important building block in the downstream value chain in terms of circularity is the refurbishment of used forklift trucks, such as returns from leasing agreements, and the remarketing of used trucks and trucks that have undergone a major overhaul (remanufacturing).

The business model of the Supply Chain Solutions segment, with Dematic as one of the world’s leading warehouse automation providers, comprises intelligent supply chain solutions, automation solutions, and the offering in the autonomous mobile robot (AMR) segment. As supply chain installation projects for these customized systems can take a long time, often up to several years, and frequently involve considerable capital expenditure by the customer, it is only natural that customers expect these installations to be durable, not least from a cost perspective. The business activities of the Supply Chain Solutions segment are rounded off by the service business (customer services), which includes maintenance and modernization of, and upgrades to, installed equipment. Further information on the KION Group’s business model and organizational structure can be found in the section ‘Fundamentals of the KION Group’ in this annual report ([ESRS 1.119 a)]).

As a manufacturer of industrial trucks and a provider of intralogistics solutions, it makes sense for the KION Group to take the whole value chain into account in its sustainability strategy due to the size of its supplier base. But this is also a highly complex task due to the number of stakeholders along the process chain. The KION Group has identified the material topics within its value chain in order to meet the requirement of being able to substantially manage material impacts, risks, and opportunities (IROs). These sustainability matters are discussed in the sections of this sustainability report.

* This section contains voluntary disclosures in accordance with ESRS 1.114 a).

Strategic sustainability management

Strategic sustainability management was a key driver of the new ‘Playing to Win’ corporate strategy in 2024 [[see ‘Strategy of the KION Group’]]. The KION Group firmly believes that enshrining sustainability in the corporate strategy can encourage profitable growth, resilience, customer focus, and the successful development of sustainable products and services, and reinforce a sense of responsibility for the Company’s workforce, the environment, and society. Building sustainability into the entire value chain starts with product design and encompasses the supply chain, the KION Group’s own operations, logistics processes and the lifecycle of the products, solutions, and services offered. By focusing on sustainability, the KION Group strives to offer its customers safe products that are manufactured in the most resource-efficient and energy-efficient way possible in a work environment that is safe and free from discrimination.

The global research and development activities, with their focus on intelligent, networked automation solutions and energy-efficient drive solutions, play their part in achieving the groupwide sustainability targets. An additional focus is the development of software solutions for energy management. Through its business model and strategy, the KION Group pursues the goal of offering increasingly integrated, circular, and emission-free intralogistics solutions in order to contribute to emission reduction. This includes the manufacture of low-emission industrial trucks with alternative drive technologies, and the further development of robotic and automation solutions. The goal is supported by the KION Group’s official commitment to net zero (net zero greenhouse gas emissions) by no later than 2050, and by the application of the established international framework of the Science Based Targets initiative (SBTi). This requires responsible practices along the entire value chain.

In the Industrial Trucks & Services segment, the KION Group’s own operations focus on a portfolio of electric trucks, including products powered by batteries and fuel cells. The proportion of industrial trucks ordered with an electric drive system amounted to 91.7 percent in the reporting period.

The KION Group’s Hamburg facility has been manufacturing high-performance, 24-volt fuel cell systems for industrial trucks since 2023. Lithium-ion batteries have been made by KION Battery Systems GmbH (KBS) since 2020. In addition to its used truck business, the KION Group also stepped up its efforts to reuse materials in line with the principles of the circular economy. Furthermore, the company agreed a strategic partnership with Li-Cycle Holdings Corp. in 2023 for the recycling of lithium-ion batteries.

In the project business for automation solutions, the aim is to integrate innovative drive technologies into the standard product ranges in order to harness the use of electricity more efficiently, and to help customers to reduce their energy consumption. Cloud-native software solutions (IT/OT-driven solutions) are also being increasingly deployed. The Supply Chain Solutions segment offers tailored solutions for numerous cloud environments and helps customers to reduce their environmental footprint through lower material consumption and improved energy efficiency.

The ability of the KION Group’s two operating segments to mitigate risk in terms of supply capability, quality, costs, and sustainability along the supply chain is critical for their business activities. Substituting chemical substances that can be harmful to human health or the environment is one of the key principles by which the KION Group operates sustainably and responsibly. The KION Group is continuing to establish a stable supplier base in order to minimize disruptions to production and promote growth. This is an integral element of the ‘Playing to Win’ corporate strategy, supporting growth and sustainability targets and helping to optimize the cost of materials. It should also encourage the circularity of supply chains and a range of sustainability-conscious products and solutions for customers in order to ensure profitability and competitiveness over the long term. Targeted supply chain management is therefore essential for ensuring the best possible traceability of materials along the value chain.

The KION Group’s sustainability activities are managed strategically on a groupwide basis. At its heart, the sustainability strategy is built around the guiding principle of ‘We take responsibility’ with its three strategic dimensions of people, products, and processes. Within these dimensions, eight overlapping sustainability action fields were defined in which each strategic target has been enshrined [[(see ‘Strategy of the KION Group’)]].

The eight action fields of KION Group’s sustainability management

Strategy targets and target achievement in 2024

The KION Group’s sustainability strategy was enhanced in 2024, with the eight action fields retained as the foundation of the targets for the years ahead. In the ‘Product and solution sustainability’ and ‘Climate and energy’ action fields, the targets for an increase in electric industrial trucks ordered by customers from 90 percent to 92 percent by 2027, and a reduction in GHG emissions against the base year of 2021 (per year on a linear basis up to 2030: Scope 1 and 2 from 4.2 percent to 4.7 percent, Scope 3 from 2.5 percent to 2.8 percent, net zero by 2050) based on the Greenhouse Gas Protocol, were made more specific than in the previous year. The GHG targets are based on the well-respected Greenhouse Gas Protocol and its operational control approach, and on the net-zero standard of the Science Based Targets initiative.

A quantification was also carried out in the ‘Circularity’ action field in 2024 with a specific target value for an increase in waste recycling in the Company’s own operations to over 85 percent. In the ‘Sustainable governance’ action field, the KION Group increased the targets for EcoVadis ratings for the Group and for selected subsidiaries from ‘Gold’ to ‘Platinum’, the highest rating.

New targets were also set for other action fields. In ‘Occupational health and safety (OHS)’, a target of full compliance with the HSE Standard (KION HSE Assessment) by 2027 was added; in ‘Climate and energy’, the energy intensity in own operations is to be progressively reduced; and in ‘Supply chain’, the proportion of tier 100 suppliers with a low ESG risk is to be successively increased.

The ‘Product and solution safety’ action field was recalibrated and therefore not included in the specific target-setting for 2024, though the underlying policy remained the same (see ‘Interests and views of stakeholders’). There were no changes to the other targets within the groupwide sustainability strategy.

The sustainability strategy includes a qualitative description of the short, medium, and long-term sustainability targets, which were actively pursued up to the end of 2024. The corresponding quantitative metrics and their status at the end of 2024 compared with the previous year can also be found in the following overview. In 2024, the long-standing targets for complete certification of all KION Group sites in accordance with ISO 45001 (occupational health and safety) and ISO 14001 (environmental management) by the end of 2024 were almost achieved. Year-on-year improvements were also achieved for some of the other medium to long-term targets.

With a view to the double materiality analysis carried out in 2024, the material impacts, risks, and opportunities presented in this sustainability report are predominantly managed through these strategic targets under the sustainability strategy or are managed as part of action field programs at other levels. Material results and newly identified, additional specific topics are taken into consideration when the sustainability strategy is being further developed and targets set.

In the environment, social responsibility, and corporate governance (ESG) dimensions, strategic sustainability targets are also used to set variable remuneration for the Executive Board of KION GROUP AG in connection with ESG targets (see ‘Integration of sustainability-related performance in incentive schemes’).

Business model and value chain

The material inputs of the KION Group’s upstream value chain include: engines, electric and other components, high-performance forged parts, counterweights and safety equipment, industrial tires, batteries, conveyor belts and components, structural steel components, and sheet steel components. To produce these inputs, raw materials such as steel, rubber, oil, lead, and lithium are required, in addition to energy. The key suppliers include companies from the automotive, metal construction, electronics, and battery production sectors. The KION Group follows a sustainable procurement approach with interlinked phases: strategy development, risk assessment, risk mitigation, incident management, and corrective actions. The results of each phase feed into the next with the aim of using largely sustainable inputs and creating a circular process. 

The conservation of resources is a core element of the KION Group’s strategy and business model aimed at minimizing resource outflows from the Group’s own value chain. Energy consumption, water consumption, and quantities of waste are the material resource outflows in the KION Group’s value chain. The KION Group’s aim, therefore, is to offer its customers products and solutions in the future that are resource-efficient as well as energy and cost-efficient. This already involves purchasing and using inputs and materials that were produced in a resource-efficient manner and allow easy reuse, repair, and remanufacturing. By taking appropriate action, the KION Group expects not only a reduction in resource outflows but also benefits, especially for customers, investors, and other stakeholders. This could give the KION Group a competitive edge and increase its profitability.

KION Group customers are very diverse and include major manufacturers, logistics and transportation firms, grocery retailers, general merchandisers (including pure-play e-commerce customers), and small and medium-sized manufacturers. As a result, the KION Group offers its customers a product portfolio with a broad range of product options. Besides its sales business, the Group offers customers – as end-users – product options in the transition to a circular economy that include the acquisition of used trucks, short and long-term lease financing models, and the short-term rental of equipment or rental fleets. The KION Group’s distribution channels comprise trade fairs and an established network of dealers in addition to its direct sales activities. Thanks to its long-standing customer base in both operating segments, KION has a strong relationship with its customers, although its market position can be impacted by the competition at any time. In order to cater as fully as possible to customer requirements in relation to resource-efficient products in the downstream value chain, the KION Group must therefore also consider customer interests when dealing with the upstream value chain. A functioning supplier management system with rules and policies for suppliers is thus essential for monitoring the inputs that are purchased.

But it is important to take into consideration that certain inputs can only be purchased from a limited number of suppliers, meaning that there is a certain dependency on suppliers for KION’s own operations. By acquiring companies, operating in the production of frames for industrial trucks or in IoT-based software, for example, and establishing its own lithium-ion battery production and own fuel cell production, the KION Group has already expanded its business model with the aim of becoming more resilient.

The established KION Group brand companies set high standards of quality for their premium products and integrated solutions. A long product life and repairability are thus core elements of the KION Group business model. The product lifecycle can be extended through regular servicing and repairs, through modernization measures and modifications, and through upgrades to the materials used. The service and spare-parts business and the remarketing of used trucks following remanufacturing are therefore core elements of the KION Group business model. This means that KION products can be used by customers for a longer overall time in the downstream value chain.

Due to the large number of leasing agreements, returned leased trucks (Industrial Trucks & Services segment) are temporarily reintegrated into the KION Group’s portfolio at the end of the contractual lease period. Refurbishment provides at least one more product lifecycle for these trucks as used trucks, and refurbished products can also be used again in the circular economy. Because the majority of materials are recyclable, equipment is returned to the material flow through the recovery of resources at the end of its initial life. The increased use of recycling is an example of recovery here. This lifecycle management comprises the rental, leased, and used truck businesses, as well as repair, maintenance, upgrading, and remanufacturing activities and the recycling of lithium-ion batteries. Through the strategic partnership with Li-Cycle in Magdeburg, the critical conflict minerals used in the Group’s lithium-ion batteries are used to manufacture new batteries thanks to the almost complete recovery of the minerals at the end of the first lifecycle. Coupled with KION’s own KBS battery production facility in Karlstein am Main, this arrangement means that the resource-efficient battery lifecycle from production to mineral recovery is a closed loop in the KION Group.

The automation solutions (Supply Chain Solutions segment) installed on customer sites are predominantly large-scale installations with numerous individual components. This entails a high level of capital expenditure for the end-user, which means that long useful lives of the installed systems are also in the customers’ interests. Modifications and upgrades – including energy-related measures – and the standard spare parts and service business also extend the product lifecycle. Beyond this solution-oriented product lifecycle, materials from these largely bespoke installations and facilities are returned to the materials cycle as far as possible through recycling.

As the KION Group believes that maintaining long-term customer loyalty is a key factor in the Company’s success, great importance is attached to distribution channels in its business model. The KION Group follows a hybrid sales strategy. Besides a network of dealers and direct sales through field staff, a key role is also played by trade fairs, digital trading platforms, and other digital sources of information. The digitalization and connectivity of KION’s own trucks, tools, and customer installations means that the diminishing volume of business travel by field staff helps to limit carbon emissions. Additional physical and virtual showrooms with 3D product visualization and special design tools allow customers to get a personal insight into the product portfolio or automation solutions before the actual production or installation commences. This conserves resources and cuts greenhouse gas emissions.