Sustainability governance and strategy

Company profile

Zeppelin's roots lie in the establishment of the Zeppelin Foundation by Ferdinand Graf von Zeppelin in 1908. The Zeppelin Foundation remains a direct shareholder of the Group to this day, as well as an indirect shareholder via Luftschiffbau Zeppelin GmbH. Zeppelin offers solutions in construction industry, mining, agriculture, recycling, propulsion, energy, engineering, and plant engineering. Its portfolio ranges from the sales and servicing of construction, mining, forestry, and agricultural machinery to the rental of equipment for construction and industry and the provision of drive and energy systems, as well as engineering and plant engineering solutions. To ensure targeted market, customer, and product orientation while maintaining cross-country and cross-company management, the Zeppelin Group is organized into strategic business units (SBUs): Construction Equipment Germany & Austria, Construction Equipment International, Rental, Power Systems, and Plant Engineering. The business purpose of Zeppelin GmbH, as well as the SBUs' business models, key product groups, and services, are described on page 86 of the 2024 Annual Report. The countries in which Zeppelin is active and the number of employees in each country are listed under S1 - Targets and Metrics.

Administrative, management and supervisory bodies

The Supervisory Board submits a report for each fiscal year. This report is included in the annual report and published on the Zeppelin Group's website. The Supervisory Board's composition is based on Section 7 of the German Co-Determination Act (MitbestG), which stipulates an equal distribution of shareholder and employee representatives.

The Group Management Board and its Chairman are responsible for overall sustainability. The Group Management Board regularly reports to the Supervisory Board on sustainability matters. The CFO oversees the Zeppelin Group's CSR department, which establishes the company-wide sustainability strategy and overarching CSR goals. This department also monitors the effectiveness of measures, coordinates stakeholder management, handles sustainability communication and reporting, and manages the development of CSR initiatives across the company. The Head of CSR regularly reports to the CFO on the current status of sustainability activity implementation.

At the group level, departmental managers are assigned to key areas of action. These managers drive the implementation of respective targets, analyze key performance indicators (KPIs), and implement measures to ensure target achievement. In each SBU, departmental responsibility for CSR is defined at the management level. CSR managers are appointed at the working level and regularly report to the central CSR department on the development of sustainability management in their SBUs. Larger Group companies have also appointed a contact person for CSR issues.

The CSR Steering Committee discusses key topics, reviews the effectiveness of measures, and ensures continuous improvement in individual areas, thereby improving Zeppelin's overall sustainability performance. The committee comprises the Group Managing Director responsible for CSR, the SBU-level Managing Directors responsible for CSR, the central CSR department, and individual department heads.

Statement on due diligence

The increasing complexity of legal requirements poses a challenge to the Zeppelin Group, which operates globally. However, we view the resulting development of our risk management and the progressive integration of human rights and environmental considerations into our processes as an opportunity. Zeppelin will only be economically successful in the long term if we are equally committed to respecting human and environmental rights, both locally and globally. That is why we are committed to:

• respect human and environmental rights in our business activities and promote them throughout our value chain in collaboration with our suppliers;

• the democratic social order and the values of fairness, appreciation, transparency, diversity and equal opportunities, regardless of age, gender, religion, ethnic origin, or sexual orientation;

• the fundamental rejection of violence, discrimination of any kind, incitement to hatred, excessive nationalism and defamatory political debate.

We are also committed to the following international standards:

• The UN Charter of Human Rights;

• The ten principles of the UN Global Compact, which Zeppelin joined in 2016;

• The International Covenant on Civil and Political Rights;

• The International Covenant on Economic, Social and Cultural Rights;

• The ILO core labor standards (= Conventions No. 29, 87, 98, 100, 105, 111, 138, 182, based on the principles of freedom of association and the right to collective bargaining, the elimination of forced labor, the abolition of child labor and the prohibition of discrimination in respect of employment and occupation), including the Protocol to Convention No. 29 on Forced or Compulsory Labor;

• The UN Guiding Principles on Business and Human Rights.

These commitments are reflected in Zeppelin's integration of guidelines and codes of conduct. These include the Declaration of Principles on Respect for Human and Environmental Rights, the Group Sustainability Policy, the Code of Conduct for Business Ethics and Compliance, and the Code of Conduct for Suppliers. These documents are described in the following section on central regulations. Additionally, the Group policy "Compliance" applies and is explained in more detail in the ESRS G1 Business conduct section.

Management teams at Group companies are responsible for implementing relevant regulations, communicating them to employees, and monitoring compliance. The Supervisory Board is responsible for monitoring, advising, and auditing the Group Management Board with regard to these activities.

As part of the risk management and due diligence process, the Zeppelin Group conducts annual and ad hoc risk analyses of its business units and supply chains. Preventive measures are implemented simultaneously in the company's business area (e.g., training; see section G1, Business conduct) and with direct suppliers (e.g., contractual agreements on compliance with defined criteria). If violations of human rights or environmental obligations are identified, the company takes appropriate remedial measures immediately to prevent, end, or minimize the extent of the violation.

Risk management

As a global company, the Group is exposed to a variety of risks. The Group uses a comprehensive risk management system to address these risks, as well as current operational, market-related, and legal requirements. Risk management is integrated into business and decision-making processes, aiming to identify, quantify, and report risks early on. The focus is on limiting identified risks, improving risk prevention, and avoiding risks that could endanger the company's continued existence. The opportunity and risk report in the 2024 Annual Report provides a thorough description of the Zeppelin Group's risk management system, internal audits, and controls (pp. 101 ff.).

Sustainability risks are monitored, assessed and managed using the following processes in particular:

Non-financial metrics are recorded using the dual control principle via a central data platform. Additionally, the central CSR department carries out automated deviation analyses and manual data checks. The most significant risks, mitigation strategies, and controls are presented in the following section, "Management of impacts, risks and opportunities."

As part of the annual audit, the risk early warning system's functionality is reviewed, and the results are reported to the Supervisory Board. Based on risk reports from Group companies, the Risk Panel prepares a quarterly report on the Zeppelin Group's risk-bearing capacity for the Group Management Board. Reporting is carried out as previously described under "Information of the management and control bodies on sustainability aspects."

Value chain

Zeppelin's entire value chain encompasses the entire product life cycle, from raw material extraction to disposal and/or reuse, in order to bring products and services from conception to delivery to end customers.

As a dealer organization, our main activities in the upstream value chain are raw material extraction, product manufacturing, and raw material and product logistics. Trading and servicing Caterpillar products represent a significant proportion of the Zeppelin Group's business activities, establishing Caterpillar Inc. as the Zeppelin Group's most important business partner. Caterpillar's locations, including production sites, are listed on the company's website.

The portfolio of the respective SBU determines other products and services: The Rental SBU procures construction machinery, materials handling equipment, construction equipment, and heating and air conditioning technology for machine and equipment rental, among other things. It also procures materials and services for construction site equipment, construction site and traffic safety, room and sanitary systems, and construction logistics. The Plant Engineering SBU focuses on materials and components for mixing and silo system production. The Power Systems SBU is a leading provider of drive and energy solutions. More than 1,000 skilled staff provide highly efficient, durable customized system solutions with comprehensive services for industrial and marine applications, the oil and gas industry, rail vehicles, as well as power and heat generation. Digital products, system components and ready-made solutions for treating ballast water complete the portfolio. Additionally, a significant portion of the procurement volume consists of vehicles for the rental business and the company's own field service.

Procured goods and services also include expenditure for the organization's own needs and various services, such as energy supply, IT solutions, and consulting services. With the exception of the trading relationship with Caterpillar, German companies' procurement mainly takes place on national or Western European markets.

Sustainability strategy

As a foundation company, the Zeppelin Group is committed to the principle of infinity. The Group wants to leave behind a planet worth living on for future generations. The Zeppelin Group's strategy is based on the "GPS strategy," which aims to ensure continuous growth, outstanding performance, and sustainable stability. Corporate Social Responsibility (CSR) is a core component of the GPS strategy, ensuring stability and future success. At Zeppelin, the terms CSR and sustainability are used interchangeably and include the aspiration to make an authentic long-term contribution to the environment and society based on the strength of our culture, while securing successful economic development.

Through our CSR strategy, we aim to be a driver of sustainable transformation in our industries. Our focus is on meeting the needs of our customers as they strive to become more sustainable.

Zeppelin's sustainability strategy takes into account the United Nations' 17 Sustainable Development Goals (SDGs). These goals aim to promote sustainable economic, social, and ecological development worldwide. The following illustration shows the SDGs that are particularly important to Zeppelin and are aligned with its commitment to sustainability.

Stakeholder engagement

As a globally active company, it is very important for Zeppelin's business success to maintain an open and constructive dialog with all stakeholders. This helps to build trusting relationships, deepen partnerships and identify sustainability-related requirements for the company. Together with key stakeholders, relevant sustainability issues are identified for Zeppelin as part of the regular materiality analysis, their prioritization is evaluated and fields of action for continuous improvement are defined. The company's own workforce is involved in feedback processes both directly and indirectly via works councils (see also ESRS S1). An intensive exchange takes place at various levels with Caterpillar as the most important supplier and partner. The Supervisory Board is informed about sustainability management issues at regular meetings and directly by the Group Management Board.