Annual Report 2021

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The European Green Deal presented by the European Commission in 2019 contains the goal of reducing net greenhouse gas emissions in the European Union to zero by 2050. A central component of this is the EU taxonomy, a classification system for defining “environmentally sustainable” business activities. The aim is to classify business activities across the EU in terms of their contribution to six defined environmental objectives on the basis of defined requirements, in order to steer capital flows toward sustainable investments: (1) “Climate change mitigation” (2) “Climate change adaptation” (3) “Sustainable use and protection of water and marine resources” (4) “Transition to a circular economy” (5) “Pollution prevention and control” and (6) “Protection and restoration of biodiversity and ecosystems”.

The EU taxonomy requires companies to report on their taxonomy-aligned, i.e. environmentally sustainable, economic activities as part of the non-financial statement. For fiscal year 2021, the reporting requirements extend to the two climate-related objectives (1) and (2), as so far, criteria have been only defined for these targets. In addition, for the first reporting year, simplifications were granted that limit the reporting to the disclosure of the share of taxonomy-eligible and non-taxonomy-eligible economic activities in relation to sales, capital expenditure (CapEx) and operating expenses (OpEx), as well as selected qualitative disclosures based on these. Taxonomy-eligible business activities are those that comply with the respective activity description according to the EU taxonomy, irrespective of the fulfillment of the technical screening criteria. The following disclosures are based on the current state of interpretation of the EU taxonomy, which was considered dynamic at the time this non-financial statement was prepared.

The delegated acts published to date in connection with the EU taxonomy on the two climate-related objectives cover only a limited number of sectors and corporate activities. For example, the Taxonomy Regulation currently focuses primarily on the sectors responsible for the largest emissions of CO2 within Europe. There are also no specific taxonomy criteria yet for companies in the global apparel market and their primary economic activities. Therefore, the economic activities of HUGO BOSS and thus the sales of these activities as well as CapEx and OpEx in connection with these activities have not yet been covered by the taxonomy to a large extent and are therefore mainly to be classified as not taxonomy-eligible for fiscal year 2021. However, among the economic activities listed in the context of the delegated acts already in force for the two climate-related objectives, there are so-called cross-cutting activities which, although not revenue-generating for HUGO BOSS, are generally relevant, even if they are not directly related to the primary business activity. The cross-cutting activities relevant to HUGO BOSS were identified as part of a cross-divisional project to implement the requirements of the EU taxonomy. This was based on the overview of activities listed in the annexes to the delegated regulation on the two climate-related objectives. While the share of taxonomy-eligible sales in fiscal year 2021 is consequently 0%, the taxonomy-eligible shares of the cross-cutting activities in CapEx and OpEx are to be determined and reported for fiscal year 2021.

HUGO BOSS has determined the CapEx to be classified as taxonomy-eligible in principle in connection with the cross-divisional activities for fiscal year 2021. For example, investments in connection with the commissioning of a photovoltaic system at the production site in Izmir (Turkey) planned for the first half of 2022 or for the construction of the new daycare center at the company headquarters in Metzingen (both to be allocated to the section “Construction and real estate activities” of section 7 of Annex I of the Delegated Regulation on the two climate-related objectives) were classified as generally taxonomy-eligible CapEx. The survey was based on data from Group Controlling and Group Accounting as well as on inquiries at relevant Group companies. The data were allocated to the corresponding cross-cutting activities in the further course of data collection. In total, the CapEx to be classified as taxonomy-eligible for 2021 in relation to the total CapEx of EUR 257 million incurred in the past fiscal year (“denominator”) are to be classified as immaterial (less than 5% of the total CapEx incurred) and are consequently not reported. By definition, the CapEx to be used in calculating the denominator mainly comprises additions to property, plant and equipment and intangible assets before depreciation, amortization and revaluations, as well as additions to rights of use under long-term leases. The amount presented can be reconciled with the disclosures made in the Combined Management Report under “Financial Position” and in the consolidated financial statements under Note 9.

The OpEx to be used in calculating the denominator according to the definition of the EU taxonomy essentially comprise direct costs relating to research and development, building renovation measures, short-term leasing, maintenance and repair. The majority of the OpEx of HUGO BOSS, such as sales and marketing expenses, general administrative expenses or logistics expenses, are therefore not included in this definition. In total, the OpEx to be used as a basis according to the definition of the EU taxonomy in fiscal year 2021 (“denominator”) amount to EUR 87 million. Here, too, the survey was based on data from Group Controlling and Group Accounting. In relation to the total OpEx of EUR 1,493 million incurred in fiscal year 2021 (reconcilable to the operating expenses presented in the consolidated income statement), HUGO BOSS classifies these OpEx as immaterial. Consequently, in accordance with the explanations in Annex I of the Delegated Regulation on Article 8 of the EU taxonomy, the determination and reporting of the taxonomy-eligible OpEx for the fiscal year 2021 is waived.

In the event that technical evaluation criteria for the remaining four environmental objectives are available for fiscal year 2022 and are to be applied accordingly, HUGO BOSS assumes that, for fiscal year 2022, it will be able to disclose taxonomy-eligible or taxonomy‑aligned portions of revenue, CapEx and OpEx in relation to the environmental objective (4) “The transition to a circular economy”, which will be particularly relevant for the global apparel industry 2022.