5.6 Circular economy

In our Nedap portfolio, hardware and software work together to help people succeed in their professional lives. At Nedap, we have a long history of designing products that last a long time. The lifespan of our hardware products, such as our neck tags for the livestock market and Electronic Article Surveillance (EAS) gates for the retail market, often exceeds our customers' expectations. In some cases, the balance between durability and the end-of-life treatment of our products meant that we had to compromise on circularity, resulting in a loss of valuable materials in the value chain and environmental impacts through the global distribution of our products. We aim to incorporate circular principles into our product designs while safeguarding the durability of our products to reduce our environmental impact. In addition, upcoming regulations related to design and circularity could impact our business. Therefore, we consider our outflow of products to be material as both a negative impact, as well as a risk.

5.6.1 Policies related to the circular economy

Nedap's circularity strategy centers on three key pillars:

1. Lifespan
   Extending product life through durable design, repairability and long-term spare part availability.

2. Materials
   Minimizing material use.

3. Waste
   Reducing waste through reuse, recycling and efficient end-of-life management, following the waste hierarchy (prevention, reuse, recycling, recovery and disposal).

In 2024, we drafted the Sustainable design policy, which defines our strategy for minimizing the use of resources that negatively affect the planet. It aligns with our commitment to optimizing resource efficiency and reducing waste by designing products with consideration for their end of life. For additional information on the policy, please refer to subsection Our Products in section 2.3 Progress on our sustainable impact.

With the actions that we will formulate based on our policy, we will ensure that our products meet increasingly stringent circularity standards. These actions include integrating circularity into our design processes, both proactively by focusing on ecodesign for new products and reactively by making improvements to the existing portfolio. The policy also aims to ensure compliance with upcoming legislation such as the Ecodesign for Sustainable Products Regulation (ESPR), thereby mitigating both regulatory and reputational risks. When the actions are formulated and the targets set, we will publish the policy on our website.

By aligning our operations with the principles of a circular economy, Nedap supports a net-zero future, while maximizing resource efficiency and minimizing environmental impact.

5.6.2 Actions and resources related to the circular economy

We are in the process of setting targets and objectives related to the circular economy, which will become part of our Sustainable design policy. Once completed, we will formulate actions for achieving these targets and objectives. The business units will be responsible for adopting, planning and rolling out these actions. We expect to finalize the process of formulating actions and assigning resources in 2025, allowing us to begin making progress toward our circularity objectives.

5.6.3 Targets related to the circular economy

Nedap does not yet have targets related to resource outflows. In 2024, we determined our baseline level for resource outflows, which is included in subsection 5.6.4 Resource outflows of section 5.6 Circular economy. In 2025, we will define targets to comply with the objectives outlined in the Sustainable design policy, taking into account the actions and allocated resources for each key market. Any targets we will set are not mandated by any current regulation or legislation.

5.6.4 Resource outflows

We prioritize durability and reparability out of the waste hierarchy when designing the electronics in our hardware portfolio, resulting in a typical product lifespan of around ten years. This is supported by our partner network and the reliable availability of spare parts. In addition to electronics, we sell consumables. These are single-use items that are necessary for the ongoing functionality of our electronics solutions but that are not permanent components. Examples include RFID labels and cards.

With the help of an external professional party, we determined our 2023 baseline. We analyzed our top 75 products in terms of our 2023 product sales volume multiplied by the weight of these products, which represented 75% of the total. With the external professional party's help, we concluded that this is a representative distribution of products within our hardware portfolio. We removed the Pigs solution data from the baseline to prevent the skewing of the data; the Pigs solution is already being phased out and its inclusion would have resulted in a significant and unrealistic improvement in the data. After removing the Pigs solution data and backfilling with two products, 60 products remain as a representative baseline, accounting for 69.9% of our sold volume.

Comprehensive information or industry averages on durability are not available or readily accessible. For this reason, the Research & Development teams and Product Management teams of each hardware-developing business unit assessed the durability, reusability, repairability, ease of disassembly, recyclability and remanufacturing potential of their products and packaging, resulting in an overview of our product life cycle impacts. For durability, repairability and recyclability, no objective external market data is available, and these estimations are made by Nedap by using internal subject matter experts, product specification information, sales information in product databases and business partner inquiries. Based on management’s understanding of our business, we concluded that the numbers are representative. For 2025, we aim to collect and register more data to provide a more accurate calculation.

We distinguish two types of hardware products in our portfolio, namely consumables (e.g., RFID labels for the retail market), which have a short lifespan, and electronics, which have a much longer lifespan. Our baseline values are based on 2023, due to the lack of information available.

• 1Our durability is measured by the weighted average expected lifespan of our products within the category.
• 2Repairable weight is measured as the sum of the weight of the parts that can be repaired within the products sold in the corresponding year.
• 3Recycle content of the products is measured as the sum of the weight of the parts that can be recycled within the products sold in the corresponding year.
• 4Recyclable content is calculated as the weighted average percentage of the packaging (e.g., boxes, bags, pallets) that can be recycled.

We disclose the estimated durability of our products in comparison to the industry average for each product group:

• Durables (mostly electronics)
  The estimated weighted average lifespan for our products is 10.1 years, compared to 9.7 years for our competitors' products.

• Consumables
  Our analysis indicates no difference in expected durability between our consumables and those of our competitors, so we consider them to be two years for both our products and those of our competitors.

Due to limited publicly available competitor data, we have made prudent estimations based on customer feedback, market insights and internal expert opinions. We recognize the importance of improving data transparency and expect that more comprehensive industry-wide durability benchmarks will become available in the near future.