10 Navigation Principles for CSRD - Double Materiality — AFM — NL

SUPERVISORY VISUAL SUMMARY
10 navigation principles for CSRD – double materiality In short: The double materiality analysis gives users of annual reports insight into impacts, opportunities, and risks in the field of sustainability. This can provide input for the strategic direction of a company. The AFM supports this with 10 navigation principles, based on the European Sustainability Reporting Standards (ESRS) and the good practices we already see in the annual reporting of listed companies. Even though it is complex, we already see good examples of transparent sustainability reporting.

10 navigation principles
Stakeholder engagement:
show how stakeholders are included
Be transparent about the representativeness of stakeholder engagement. Show the input received from stakeholders. Due diligence:
inventory the sustainability effects
Inventory sustainability effects via due diligence.
Use international frameworks, such as OECD guidelines.
Show the relationship between due diligence and the double materiality analysis. Double materiality analysis:
explain the analysis transparently
Make the role of the value chain visible.
Link business activities to identified material topics. Provide insight into the materiality determination of sustainability topics. Bring the materiality of impact, opportunities, and risks into view. Show the relationship between impact and risk in the short and long term.

Report
Double materiality analysis interests and opinions 5 2 4 3 Can lead to new input for conversations with stakeholders Due diligence Stakeholder engagement JULY 2024

SUPERVISORY REPORT
Table of Contents

Introduction 3
1.1 Insight into sustainability effects 3
1.2 We still have steps to take, but it is possible 3
1.3 10 navigation principles provide direction 4
Stakeholder engagement: show how stakeholders
are included 5
2.1 Be transparent about the representativeness of stakeholder
engagement 5
2.2 Show the input received from stakeholders 5
Due diligence: inventory the sustainability effects 8
3.1 Inventory sustainability effects via due diligence 8
3.2 Use international frameworks, such as OECD guidelines 9
3.3 Show the relationship between due diligence and the
double materiality analysis 11
Double materiality analysis: explain the analysis transparently 13
4.1 Make the role of the value chain visible 13
4.2 Link business activities to identified
material topics 16
4.3 Provide insight into the materiality determination of
sustainability topics 17
4.4 Bring the materiality of impact, opportunities, and risks
into view 17
4.5 Show the relationship between impact and risk in the short
and long term 21
Appendix. Justification and upcoming activities 22

10 navigation principles for CSRD – double materiality 3 SUPERVISORY REPORT

Introduction
1 ESRS refers to double materiality and explains in ESRS 1.37 that when ESRS speaks of materiality, it means double materiality. This forms an important contextual factor and contributes to a good understanding of the chosen material topics. The implementation of the Corporate Sustainability Reporting Directive (CSRD) and the European Sustainability Reporting Standards (ESRS) marks a new phase in sustainability reporting by companies. Reporting plays a key role in enabling users to make informed decisions. Furthermore, it can help companies to identify their own impacts, opportunities, and risks and determine their course in terms of sustainability. The CSRD and ESRS enter into force from the 2024 financial year for large listed companies. The Authority for the Financial Markets (AFM) is committed to fair and transparent financial markets. Therefore, we have researched the information that listed companies already provide regarding double materiality analyses in their 2023 annual reports.
1.1 Insight into sustainability effects
The double materiality analysis forms the starting point of sustainability reporting.1 Double materiality combines impact materiality and/or financial materiality. Impact refers to the effect the company has on its environment from an ecological and social perspective, while financial materiality includes the financial effects of opportunities and risks arising from sustainability aspects for the company and in the value chain in which the company operates. The result is the starting point for determining both sustainability and financial aspects of sustainability reporting. Part of the analysis is stakeholder engagement. Good involvement of stakeholders and transparent communication about this strengthens trust in the organization.
1.2 We still have steps to take, but it is possible
Many listed companies have already started reporting on double materiality, even though this only becomes mandatory in the 2024 annual report. Although this early start is commendable, they still have steps to take to report fully and transparently for 2024. Given the novelty, the current optional nature, and the complexity of double materiality, this is understandable. The diversity of approaches we have observed is encouraging; it shows that companies are actively preparing their reporting for the requirements of the CSRD/ESRS. Our goal is to contribute to good application and transparent reporting for users by sharing in this report some examples of companies we already see in reporting and are thus well on their way ('good practices'). With this, we want to provide direction to the different approaches that are possible and that we already see in the market. We encourage all companies to delve into these good practices and the reports of others and to engage in dialogue about them. This interaction promotes a common understanding and consistency in sustainability reports, enables companies to learn from each other, and continuously refine their reporting processes. Our message is clear: despite the challenges, it is indeed possible to report on this transparently.

10 navigation principles for CSRD – double materiality SUPERVISORY REPORT
1.3 10 navigation principles provide direction
Identifying material topics contributes to gaining insight into impacts, opportunities, and risks in the field of sustainability. This can provide input for both the sustainable and financial course. The AFM supports this with 10 navigation principles, derived from the European Sustainability Reporting Standards (ESRS) and based on a number of good practices we already see in the annual reporting of listed companies. With this, users can engage in conversation with the company about that course. Stakeholder engagement: show how stakeholders are included

Be transparent about the representativeness of stakeholder engagement
Show the input received from stakeholders
Due diligence: inventory the sustainability effects
Inventory sustainability effects via due diligence
Use international frameworks, such as OECD guidelines
Show the relationship between due diligence and the
double materiality analysis
Double materiality analysis: explain the analysis transparently
Make the role of the value chain visible
Link business activities to identified
material topics
Provide insight into the materiality determination of sustainability
topics
Bring the materiality of impact, opportunities, and risks into view
Show the relationship between impact and risk in the short and
long term
Understandable and transparent reporting on (the determination of) material topics is important. It is difficult and complex, especially due to the open standards. The AFM therefore supports with the above navigation principles. The following chapters explain this. 2.1 2.2 3.1 3.2 3.3 4.1 4.2 4.3 4.4 4.5

10 navigation principles for CSRD – double materiality 5 SUPERVISORY REPORT
2. Stakeholder engagement:
show how stakeholders are included
2 See ESRS 2-43
3 Delegated Regulation - EU - 2023/2772 - EN - EUR-Lex (europa.eu) – European Sustainability Reporting Standards (ESRS) 4 See ESRS1-AR7 Stakeholders are inextricably linked to the company. Their diverse and sometimes conflicting interests and opinions influence the company, its business model, and its strategy.2 A clear explanation of how stakeholders are involved is essential to understand the impact thereof. It is important that the company reports transparently on the creation of its list of representative stakeholders: how were they selected, how was communication conducted, and on what information sources was this based?
2.1 Be transparent about the representativeness
of stakeholder engagement
According to the ESRS reporting standards,3 companies must clearly explain how they choose their stakeholders and how they interact with them. They must report transparently on the representativeness of their stakeholder engagement, the challenges they face, and where they get their input from. Insight into the interaction between the company and stakeholders gives a clear picture of how the company deals with material topics. Report on challenges in stakeholder engagement A thorough double materiality analysis requires input from stakeholders. Stakeholder engagement is a reciprocal process in which the company and stakeholders engage in dialogue. Our interviews show that companies often experience challenges in this regard, because stakeholders are not sufficiently familiar with the CSRD. The legislation is new; many stakeholders do not yet know they have a role, or that role is unclear. Stakeholders will still have to work out their role regarding the impact analysis, reporting, and possible adjustments to the company's business model. This can limit the quality of stakeholder input. It is therefore positive if companies report transparently on how the collected information is expected to sufficiently represent the interests of the stakeholders. Expand stakeholder input with literature from interest groups and science Affected stakeholders have a voice at the table, either directly or through interest groups such as trade unions. Nature, a silent stakeholder, does not. In that case, data on ecological developments and species conservation can support the company's materiality analysis.4 Input from stakeholder dialogues and external sources, including academic publications and reports from interest groups such as the World Wildlife Fund (WWF) and the International Labour Organization (ILO), contribute to a better-informed and more comprehensive discussion of stakeholder engagement, which helps in a more thorough double materiality analysis.
2.2 Show the input received from stakeholders
Effective stakeholder engagement also requires that the input is clearly explained and that it is explained what has been done with it. It is essential that the interests of all stakeholders are represented in a direct and reciprocal manner and made visible. This not only increases the credibility of the annual report, but also strengthens the trust and relationship between the company and its stakeholders. On the next page is a good practice from Koninklijke Ahold Delhaize, which reports transparently on stakeholder input.

10 navigation principles for CSRD – double materiality 6 SUPERVISORY REPORT Good practice 1 (Ahold Delhaize) Transparency on stakeholder input; Ahold Delhaize annual report (page 46) Ahold Delhaize, in its 2023 annual report, in addition to providing insight into the results of the stakeholder engagement process, clearly indicates what the received messages were from the different stakeholders. Furthermore, 'what they tell us' shows what input stakeholders have provided regarding Ahold Delhaize's sustainability performance on various sustainability topics such as climate change and human rights. By providing insight into what input Ahold Delhaize has received from the different groups of stakeholders, the user of the annual report also gains better insight into the relationship between the received messages from stakeholders and their expectations of Ahold Delhaize as a company. In the image below, we see an example of three (of a total of ten) identified stakeholders of Ahold Delhaize. COMMUNITIES CHARITIES AND CIVIC ORGANIZATIONS GOVERNMENTS NON-GOVERNMENTAL ORGANIZATIONS (NGOS) SUPPLIERS EXPECTATIONS ó Being an integral part of the communities our brands serve ó Helping address broader societal challenges ó Respecting regulations ó Adopting a stakeholder approach that takes into account society and the environment ó As a major global grocery retailer, helping resolve global challenges related to climate, health, human rights and other topics ó Long-term relationships that are mutually beneficial ó Cooperation on important topics, such as health, human rights, product safety and climate HOW WE ENGAGE WITH THEM ó Partnerships with local community organizations and charities. For example, Hannaford donates to local non-profit organizations such as the Simmering Pot, which provides 150 meals per week to those experiencing food insecurity. Another example, that kicked off in December 2023, is Alfa Beta’s partnership to send products close to expiration from their HSCs to a local NGO restaurant in Athens. ó The GIANT Company partners with the Rodale Institute, global leader in regenerative organic agriculture, to create a more sustainable food chain through education, research and training. ó Brand-owned foundations. For example, bol’s Bright Sparks (“bollebozen”) initiative, contributes to creating equal opportunities for children in the Netherlands and Belgium by encouraging them to enjoy reading stories and helping them develop digital skills. Bertík Helps, the largest grant campaign of the Albert Foundation, supports 80-100 charity projects per year. ó Sponsorships. For example, Albert Heijn works with the Dutch Food Bank, and donated more than four million products in 2023. ó Engaging with public policymakers through industry associations, face-to-face meetings, written contact, information on our website and participation in public hearings or conferences ó Ahold Delhaize cosigned an open letter from business to EU policymakers in support of
the proposed EU Nature Restoration Regulation. ó Advocating for Nutri-Score as an EU-wide food nutrition label and for completion of the EU internal market for food retail operators ó Discussing efforts toward a more sustainable agricultural supply chain with the European Commission ó The U.S. brands made commitments in service of the White House Challenge to End Hunger and Build Healthy Communities. ó Albert Heijn held a meeting for industry associations, NGOs, scientists, government officials and business partners to launch its Sustainability Report. ó Responding to requests from and reaching out to NGOs ó Individual and group meetings as well as written communication and contact with NGOs ó Being a founding partner and member of various ESG-related networks and institutions – for example:
ó Founding partner of the LEAD network, which aims to attract, retain and advance women in Europe’s Consumer Goods and Retail sector. ó Member of Network for Executive Women. ó Founding partner of the World Resources Institute’s 10x20x30 initiative. ó Member of the Ellen MacArthur Foundation to mitigate the impact of plastics. ó Signatory of the UN Global Compact. ó Partner with WWF to support, for example, reducing our environmental footprint or improving a local fishery. ó Providing input for and discussing results of benchmarks on ESG topics ó Individual meetings and online communication. For example, we are working closely with our extensive supply chain to reduce GHG emissions. ó Surveys: In 2023, for example, Albert Heijn conducted independent impact studies in high-risk chains, speaking to local workers and stakeholders and creating action plans with suppliers to improve conditions. ó Supplier events ó Partnerships, including the “Better for Nature and Farmer Program,” Albert Heijn’s cooperation with more than 1,200 farmers and growers, through which it makes agreements about sustainability, innovations and earning capacity within the food chain ó ADvantage, ADUSA Supply Chain’s industry-leading supplier collaboration program. One year after its launch, the program now includes more than 200 CPG suppliers partnering with Ahold Delhaize USA brands to innovate supply chain management practices and ensure customers can access the products they need, when they need them, through their channel of choice. WHAT THEY TELL US ó Community stakeholders provide valuable feedback – for example, on how our brands can be stronger partners in creating healthier communities. ó We (are invited to) engage with public policymakers to share our views, strengthen the reputation of Ahold Delhaize and the brands and, where deemed appropriate, of our sector, and to create a favorable policy and regulatory framework for the company and society, the brands, and our sector in the long term. Our Ahold Delhaize strategy is central to our efforts in engaging with public policymakers. ó Opportunities to improve our performance and transparency on topics including human rights, climate change, deforestation and animal welfare ó In some cases, NGOs expect us to change policies or work with our brands’ suppliers to improve their ESG performance. ó Input on how our brands can create healthier and more sustainable products for customers ó Finding new ways to reduce food waste and increase economic, social and environmental value for the communities our brands’ suppliers source from throughout the supply chain ó Discussing the impact of climate change on the supply chain and ways to mitigate the risks ENGAGING WITH OUR STAKEHOLDERS Ahold Delhaize Annual Report 2023 46

10 navigation principles for CSRD – double materiality 7 SUPERVISORY REPORT Be open about discussed topics When presenting stakeholder input, openness about the topics discussed is important. Clarify which themes came up, which priorities stakeholders have set, and especially their underlying motivations. Link these messages to impacts, opportunities, and risks. This approach not only provides an understandable picture of the interactions, but also offers valuable insights into the interests of the stakeholders.

10 navigation principles for CSRD – double materiality 8 SUPERVISORY REPORT
3. Due diligence: inventory the sustainability effects
5 Accounting Directive 2013/34/EU, Article 19a, second paragraph f, as well as ESRS 1-4. 6 ESRS 1-4 Due Diligence. 7 CSRD Directive, recital 31. 8 ESRS1-58 The result of the company's sustainability due diligence process (referred to as "due diligence" in the international instruments mentioned below) underpins the assessment the company makes of its material impacts, risks, and opportunities. The inventory of sustainability effects of products and services and the associated value chain is an indispensable and mandatory step according to the standards.5 Together with the stakeholder analysis, this forms the basis for transparent and understandable reporting on potential impacts, opportunities, and risks. Sustainability effects are not limited to direct activities but extend over the entire value chain. By making them visible, transparency is promoted and sustainable action is stimulated.
3.1 Inventory sustainability effects via due
diligence
Robust due diligence6 is a prerequisite for gaining insight into the sustainability effects of the company and the value chain.7 This due diligence identifies both (i.) the most significant positive and negative impacts, as well as (ii.) opportunities and risks8 for the company. This provides insight to inventory and monitor sustainability effects. It is important that this research covers the entire value chain, including its products, services, and business relationships. Various companies, such as SBM Offshore (see good practice 2), already report understandably and transparently on some aspects of their due diligence. Good practice 2 (SBM Offshore) Transparency on due diligence regarding human rights; SBM Offshore annual report (page 45) SBM Offshore describes in its 2023 annual report how it has set up and implemented its 'Human Rights Program: Due Diligence' with regard to human rights from its own activities and the value chain. Additionally, the important results ('salient issues') of this process are described and to what extent these results are prevented or mitigated by SBM Offshore. Furthermore, SBM Offshore outlines what this process entails and what activities it performs to shape this process, and makes this visual. This increases visibility for users regarding the management and strengthening of due diligence with regard to human rights within SBM Offshore.

10 navigation principles for CSRD – double materiality 9 SUPERVISORY REPORT
3.2 Use international frameworks, such
as OECD guidelines
Due diligence is a dynamic process that continuously responds to changes in strategy, business model, activities, (business) relationships, and the value chain, and also influences them. The UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises describe how this process is executed.9 By going through these steps and reporting transparently on them, the company's due diligence process becomes visible to users of the annual report. Below is a schematic representation of the due diligence process according to the OECD guidelines.
Figure 1. Due diligence process10
9 ESRS 1 chapter 4 paragraph 58 & 59.
10 https://mneguidelines.oecd.org/Oeso-Due-Diligence-Handreiking-voor-maatschappelijk-verantwoord-ondernemen.pdf 11 See herefor Research into the implementation of the six steps of due diligence | Report | Rijksoverheid.nl Results of research on compliance with OECD guidelines 2024 The Ministry of Foreign Affairs published on April 5, 2024, the results of a research into compliance with the six steps of the due diligence research according to the OECD guidelines11. This report shows that 3,322 large companies established in the Netherlands fall within the scope of the CSRD (based on data from the Trade Register 2021). This report makes practical recommendations to improve the explanation of the due diligence research for all these companies. Our research shows that some companies partially apply the international OECD guidelines for their due diligence process. Ahold Delhaize is one of those companies. We consider their annual