Foss A/S

Ledelsesberetning
2023 has been once another strong year for FOSS. Continuing last years record revenue level underlines the need and demand for our innova-tive analytical solutions while our big investments in the development of innovative new products mate-rialized with a vengeance this year, as we have managed to launch a number of new solutions, including two world's firsts, with the potential to revolutionize pivotal areas in the agriculture and food industry. Our level of innovation is a living proof that FOSS is not merely a spectator in thejourney towards a more sustainable fu-ture; we are empowering our customers to truly change it. Committed to innovate for a better world Our world is changing rapidly, and the challenges we face today are unlike any we have encountered before. Climate change, resource depletion, and glob-al health crises have brought us to a crossroad where the decisions we make today will profoundly impact future generations. In this ever-evolving land-scape, FOSS remains committed to createinnovation for sustainability. At the forefront of innovation Through cutting-edge research and development, we are piecing together the solutions that will enable a brighter and more sustainable future. Whether it’s developing advanced agricultural technologies to address food safety or inventing groundbreaking element analysis solutions to reduce the industry’s carbon footprint, FOSS is at the forefront of innovation. Launching a new 2027 strategyInnovation is not just a buzzword for FOSS; it’s a way of life. We are constantly seeking new ways to drive sustainability in our products, processes, and opera-tions. From reducing our own carbon footprint to improving the efficiency of our supply chain, we are committed to being a role model for sustainability in our sphere of operation. Global partnerships addressing global challenges Naturally, our commitment to sustain-ability extends beyond our internal operations. FOSS is an active member of the United Nations Global Compact, the world’s largest sustainability initiative. A dedication reflected in our adherence to its ten principles, encompassing e.g., human and labor rights, environmental stewardship, and business ethics. In 2023, FOSS also joined the AIM for Climate as a global Knowledge Partner, supporting global collaboration in the agri-food industry. Groundbreaking technology investments and revolutionizing product launches In 2023, FOSS took significant strides towards minimizing our environmental footprint. We enhanced the energy effi-ciency of our products, further ingrained sustainability into our corporate culture, and continued to invest in groundbreak-ing technologies with the potential to reshape the world. Revolutionizing prod-uct launches, exploration of new mar-kets, and an expanded global presence underscore our commitment to making a positive impact. Crucial customer collaboration It is crucial to acknowledge that this journey is one we cannot navigate alone. Our deepest gratitude to our customers and partners around the world who have enthusiastically joined us on our quest. Your unwavering support is imperative and indispensable. Thank you for your trust and support in FOSS. Together, we are heading towards a brighter and more sustainable future. FOSS is the leading global provider of analytical solutions for the agri-food industries. The company was founded in 1956 by Nils Foss and remains a 100% family-owned company today. FOSS is a company on a mission for a more sustainable use of the world’s food resources. A fast-growing population means that the global food production will have to increase by 60% by 2050 to meet demand. FOSS wants to be part of the solutions to make that happen in an innovative way. The aim is to help ensure product quality, fair payment, produc-tion efficiency and reduced waste. A growing company of 1,650 employees, with 55 dif-ferent nationalities of which 43 are represented in our locations in Denmark.FOSS has been guided by three core values since our inception in 1956. These values, which con-tinue to shape our business and culture, are a testament to the vision and impact of our found-er, Nils Foss.FIRSTAt FOSS, we continuously strive to be first. This value is not just about being the first to market or the first to innovate; it's about the drive to constantly push boundaries and challenge the status quo. Being first is motivating and rewarding, and it's a mindset that has propelled us forward for over six decades.CUSTOMEROur customers are at the heart of everything we do. We understand that their success is our success, and we are committed to delivering products and services that ex-ceed their expectations. Our customer-centric approach ensures that we are always listening, learning, and evolving to meet their needs.PEOPLE & KNOWLEDGEFOSS is a company built on knowledge, and our people are our most valuable asset. We believe in fostering a culture of collaboration, where employees are empowered to share their exper-tise and ideas. By investing in our people and their development, we ensure that we continue to lead the way in our industry.These values are more than just words; they are the principles that guide our actions and deci-sions every day. As a 100% family-owned com-pany, we are proud to carry on the legacy of Nils Foss and to continue to uphold these values in everything we do.The FOSS misssionWe contribute to the sustainable use of our planet’s agricultural resources and thus to the nutrition and health of the people of the world.We innovate analytics beyond measure to empower to our customers by improving quality and optimizing food and agricultural production.FOUNDING PRINCIPLES Nils Foss founded FOSS Electric back in 1956, with an ambition to pioneer analytical solutions for the food and agricultural industries. Today, our guiding principles still continue to build on his entrepreneurial and innovative approach on how to build a company.THE FIRST “WORLD’S FIRST” OUT OF MANYThe Cera tester, FOSS's first innovation, completely changed the grain industry. Launched with a perfectly lucky timing, it covered a critical need for moisture control in grain during a very wet summer in Denmark in the mid 1950’s.GROWING INTO NEW INDUSTRIESAfter succeeding with innovations in the grain industry, FOSS then expanded into a whole new industry: milk analysis. FOSS continued its growth trajectory, moving on to offering comprehensive solutions for dairy producers – and later on into oilseed, feed, meat, wine, beer, sugar, and other industries.“FAST, DEDICATED AND EASY-TO-USE”Our commitment to innovating the food and agri industry was from the very start focused on operational speed, industrial dedication, and user-friendly solutions for all customer employees – from the skilled engineer to Joe Big Finger. These three pillars have been our unwavering dedication ever since the beginning, driving continuous innovation and challenging what is possible.FOSS has achieved another strong year in both revenue and profit. New launches and high growth in Cus-tomer Care Sales have driven an increase in revenue as well as profit. This com-bined with a successful launch of IQX – our new SaaS solution that enhance data collection and instrument performance – has ensured a year with growth. This isonly partly offset by challenging geopo-litical and macroeconomic uncertainties.The increased scale of our business and focus on cost management has increased the profit compared to previous years. Thus, we continue to invest in new software solutions and groundbreaking R&D projects to ensure our customers cutting-edge FOSS products and services going forward as well. A big thank you to all people at FOSS for their commitment and hard work this year. We can all be proud of the results of 2023.4% Organic growth With double-digit growth rates within Customer Care Sales, 4 new product launches combined with our new soft-ware solution IQX, the growth in 2023 was strong. The strong result comes from many of our regions as well as business segments. 12% Innovation investment Once again, FOSS has consistently allo-cated more than 10% of our revenue towards developing new products and solutions, underscoring our unwavering commitment to innovation. This dedi-cation is evident in our strong perfor-mance, as innovative solutions have con-sistently driven our growth trajectory.570 MDKKOperating profit With increased scaling of our business combined with good cost management, the operating profit has improved to a new record-breaking level. Both variable and fixed costs have contributed to a higher profit, due to efficiency gains as well as higher cost leverage. 39% New products turnover The turnover of new products introduced within the last 3 years has increased to a record-high 587 MDKK. On top of this positive development, the 4 new product launches in the second half of 2023 are expected to accelerate this development even further going forward.In 2023, we continued to demon-strate how we can make sustainabil-ity the foundation for the solutions of tomorrow, utilizing data and insights to drive real change. One of the ways we’ve made sustain-ability a better business is through our data-driven approach. By collecting and analyzing vast amounts of data, we empower our customers with insights on how to reduce waste, improve produc-tion efficiency, ensure food safety, and make operations more sustainable. Our innovative analytics empower food and agricultural producers to optimize their production processes, minimizing waste and reducing their environmen-tal footprint. This not only benefits our customers but also contributes to a more sustainable global food supply chain. Furthermore, our commitment to ESG extends to our operations. We’ve invest-ed in green initiatives that reduce our carbon footprint, minimize waste, and enhance energy efficiency. In 2023, we further embraced diversity and inclusivity within our workplace. We recognize that a diverse team fosters creativity and innovation, which are critical elements in solving the complex issues facing our industry. We’re proud to report that our workforce is more inclusive than ever, ensuring that fresh perspectives and ideas continue to drive our innovation. By focusing on environmental, social, and governance issues, we are laying the foundation for the solutions of tomorrow. Sustainability is not a trend for us; it’s an integral part of our DNA. We firmly believe that by combining our data-driven approach with our dedica-tion to ESG principles, we are creating a better world for the future, one where sustainability isn’t just an ideal but a reality, and where innovative solutions emerge from a commitment to doing what’s right for our planet and society.FOSS is not just a company; it is a catalyst for change, a force committed to fostering the sustainable use of Earth’s agricultural riches. The world is hurtling toward a future where a 60% surge in global food production is imperative by 2050. At FOSS, we rise to the challenge with de-termination, striving to be architects of innovative solutions that transcend conventional boundaries. Our mission echoes through the corridors of prog-ress, focusing on product quality, fair compensa-tion, production efficiency, and waste reduction. As the agri-food industry undergoes a transforma-tive revolution centered on resource efficiency, FOSS remains at the forefront, championing the cause of balance. The clarion call of net-zero ambitions, climate change, and consumer demand for sustainable practic-es resonates, urging us to find intelligent, sustainable ways to feed the global population while preserving our natural resources. Where innovation meets responsibility Our commitment is fortified by continuous innovation, advanced analytics, and actionable data. Our analytical solutions, designed for high-capacity, fast, and cost- effective analysis, empower agri-food businesses to make informed decisions. Balancing what matters At FOSS, we understand that achieving the correct bal-ances is the key to sustainably increasing yields, health, and growth of animals and crops without harming our natural resources. It’s a delicate operation, and we are here to lead the way. We must balance what matters – a commitment to precision, sustainability, and theharmonious coexistence of agriculture and nature.Welcome to a future where innovating for sustainabili-ty is not just a mission – it’s our way of life. Strategy: The global partner within analyticsBuilding on our solid foundation as the leading provid-er of analytical solutions for the food and agri indus-try, FOSS is now launching our new strategy. Here, we present the key elements. FOSS aims to be the preferred global partner for reli-able and innovative analytics that empower food and agricultural producers to improve quality and optimize production. FOSS will follow strategic customers around the globe with standardized interaction and a compre-hensive and competitive product portfolio. THE STRATEGY AT A GLANCE: Advance sustainability and secure qualityThe increasing global business complexity makes food and agricultural producers look for analytics provid-ing data for supply control and automation. FOSS will empower food and agricultural producers with insights from a competitive product portfolio enabling data-driven, integrated, and automated production op-timization to ensure sustainable supply and production of safe food and agricultural products.Improve supply chain management insightsAn increasing population and the environmental challenges will imply increased food and agricultural production in developing countries, and changes in the global food supply. FOSS will provide simple, accurate, and robust analytics substituting chemical testing for small-scale production and enabling insights for segre-gation.Expand FOSS’ software servicesThe new digital software platform ‘FOSS IQX’ aims to provide our customers with a ‘plug-and-play’, easy-to-use, and dedicated platform that can also improve coordination and use of data across the company. FOSS’ ambition is to become a market leading service provid-er of software tools for food quality and sustainability.Innovation highlights FOSS was founded in 1956 by the pioneering engi-neer Nils Foss, embarking on a journey to revolu-tionize the food and agriculture industry. Inspired by the visionary ambition to offer automated and cost-efficient alternatives to traditional analyses, Nils Foss laid the foundation for a company that would redefine standards in analytical solutions. From our inception, our focus was clear: to provide fast, easy-to-use alternatives to time-consuming methods of analysis. Our first breakthrough came with the devel-opment of instruments for testing moisture in grain, challenging industry norms and setting a new standard for efficiency. Over the past seven decades, we have continually pushed the boundaries of what is possible. Evolving from our grain moisture testing roots, we expanded our offerings to encompass a wide array of industries, including dairy, feed & forage, meat, wine, beer, and laboratories. We reinforced our commitment to innovation and ex-cellence with the additions of technological lighthouses like Tecator AB and NIRSystems Inc., in 1997. Addi-tionally, the integration of Soft Flow in 2016 further bolstered our capabilities in biotech. Our dedication to innovation didn’t stop with product development. We pioneered the integration of chem-ical composition analysis into process lines, setting an industry precedent. Today, we stand as the internation-al benchmark in chemometrics and real-time analytics, with over 100 patents and numerous world-first intro-ductions to our name. At the heart of our innovation lies our Innovation Center in Hillerød, Denmark, acclaimed as the “chemo-metrics capital of the world”. Here, algorithms are me-ticulously crafted to turn data into actionable insights, empowering businesses worldwide to optimize their production processes. As we stand on the cusp of a digital transition, we remain steadfast in our commitment to adding value to our customers’ businesses. The launch of FOSS Software Services and the IQX SaaS solution examplifies this commitment, providing agri-food producers with the tools needed to thrive in a rapidly evolving industry and landscape. In summary, our journey from our humble beginnings to our current status as a global leader is a testament to our unwavering dedication to innovation and excel-lence. With Nils Foss’ vision as our guiding light, we continue to pave the way for the future, driving the green transformation of the agri-food industry and empowering producers worldwide to achieve more with less. Celebrating the changemakers Marc & Matthieu DubernetIn the heart of Europe, where the tradition of winemaking intertwines with modern innovation, the Labo-ratoires Dubernet group emerges as the continent’s premier independent analysis and consulting laborato-ry dedicated to the wine industry. The Dubernet family, with its roots deeply embedded in the vineyards of Bordeaux, has evolved into a gener-ational force shaping the future of oenology and environmental stew-ardship. A Legacy Rooted in Bordeaux The Dubernet family’s association with the wine industry traces back through the annals of time, originating in the renowned wine region of Bordeaux. Today, Mathieu Dubernet, the torch-bearer of this esteemed lineage, leads the Laboratoires Dubernet group. As the third generation of oenology experts, Mathieu is not merely continuing a fam-ily tradition; he is steering the company with a blend of generational passion and a modern scientific approach to oenolo-gy and environmental sustainability. Marc Dubernet: Pioneering Oenological Excellence The journey of Laboratoires Dubernet began in the 1960s, under the visionary leadership of Marc Dubernet. Starting with a small team of technicians, Marc established the company’s first oenolog-ical laboratory, laying the groundwork for what would later become a pow-erhouse in the wine analysis industry. Today, the Dubernet group encompasses three laboratories strategically located in Narbonne, Orange, and Tain l’Hermit-age. All three are accredited NF EN ISO/CEI 17025, standing as pillars of quality and precision in oenological analysis. The Dubernet group is not just a labora-tory; it’s a collective of nearly 80 experts, including chemical engineers, doctors, agricultural engineers, oenologists, technicians, and more. This diverse team utilizes high-performance equipment to deliver a comprehensive range of analy-ses and innovations. Their commitment extends beyond routine analysis, offering precise, personalized, and creative advice that sets the Dubernet laboratories apart as a trusted partner in the wine industry. A Revolutionary Collaboration In a groundbreaking partnership that bridges the areas of oenology and cutting-edge technology, Laboratoires Dubernet partnered with FOSS to rev-olutionize the wine industry. Leverag-ing FOSS' expertise in FTIR technology, renowned in the dairy industry for its precision and reliability, the collabora-tion birthed a series of revolutionary instruments tailored specifically for wine analysis.The introduction of the WineScan instruments, derived from FOSS' MilkoS-can platform with bespoke calibrations developed in tandem with Dubernet, marked a paradigm shift in wine analy-sis. Simply empowering winemakers with unprecedented insights into their wines' composition and quality. Nurturing the Vine to the Bottle At the core of Dubernet’s mission is a commitment to providing comprehensive expertise and support throughout the entire production process, from the vine to the bottle. Their influence extends to various industry players, including producers, merchants, and suppliers. By ensuring a seamless journey from grape to glass, Dubernet Laboratories plays a pivotal role in upholding the quality and integrity of wines across the world.As the global demand for sustainable practices in agriculture rises, the Duber-net group has diversified its mission. The establishment of Terra Mea, a subsidi-ary dedicated to soils and support for the agro-ecological transition, reflects Dubernet’s commitment to addressing broader agricultural challenges. Beyond wine, they aim to contribute to a more sustainable and ecologically conscious future for agriculture on a global scale. In celebrating the Dubernet Laborato-ries group, we acknowledge not just a laboratory but a legacy of excellence, innovation, and commitment to the environment. With Mathieu Dubernet steering the ship into the future, the Dubernet family name continues to be synonymous with the highest standards in oenological analysis and a beacon of hope for a more sustainable future in agriculture. Financial highlightsDevelopment in activities and financial conditions The reported group revenue in 2023 is DKK 2,437 mil-lion, which is the same level as last year. Currency im-pacted negatively by 4%, implying an organic growth of 4%, which is a strong result during geopolitical turmoil. Financial growth has been influenced by high growth in Customer Care Sales and the launch of the IQX product. Additionally, within the instrument sector,we've experienced a strong year with the introduction of new products which will also lay the foundation for next year's growth. Operating profit for the Group amounts to DKK 570 million (compared to DKK 501 million in 2022), mark-ing an increase of 14% from 2022. This strong result is attributed to an enhanced gross margin driven by a positive product mix, particularly from increased Cus-tomer Care Sales. Ordinary profit before tax amounts to DKK 544 million (compared to DKK 486 million in 2022), reflecting a 12% increase and indicating a robust performance. The 2023 revenue result is a bit below expectations set out in the annual report 2022, but with a strong oper-ating profit, why the result is satisfactorily.Expected development Investments in sales, distribution activities, and prod-uct development will continue in 2024. Management expects the strategy and market focus to strengthen FOSS’ market position and contribute to fulfilling the growth strategy for the Group by supplying high-qual-ity solutions to meet the increasing demand for food quality. It is the expectation that the coming year will yield growth in both revenue and profitability compared to 2023. Organic revenue growth in 2024 is expected to be in the range of 6-8%. Costs associated with several long-term strategic initiatives will be incurred in 2024, while the profit margin is projected to remain at the level of 2023. Celebrating the changemakers David Julian McClementsIn the ever-evolving landscape of food science, Professor David Julian McClements stands out as a trailblaz-er, making groundbreaking con-tributions that have reshaped our understanding of plant-based foods. As a distinguished professor at the University of Massachusetts Amherst, Department of Food Science, McCle-ments has become a driving force in the scientific community, dedicated to revolutionizing the way we ap-proach and consume food. A Pinnacle of Knowledge and Influence With an impressive 156,889 citations on Google Scholar, Professor McClements holds the title as the world’s most widely cited food scientist. His remarkable career has been marked by an unwav-ering commitment to advancing the field of natural plant-based foods. His pioneering work has not only garnered widespread recognition but has also laid a scientific foundation for the future of food innovation. In 2019, Professor McClements solidified his status as a thought leader in the field with the publication of “Future Foods: How Modern Science is Changing the Way We Eat.” This seminal work explores the intersection of science, technology, and food, offering invaluable insights into the transformative potential of modern scientific approaches in shaping the future of our diets. As the sole author of this influential piece, McClements demystifies complex scientific concepts, making them accessi-ble to a broader audience. Through his writing, he not only educates the public but also inspires fellow scientists, policy-makers, and industry leaders to embrace innovation in the quest for a sustainable and healthier food future. McClements further solidifies his im-pact with his authoritative work, “Next Generation Plant-based Foods: De-sign, Production, and Properties.” This comprehensive resource delves into the intricate processes of designing, produc-ing, and understanding the properties of plant-based foods. By providing a road-map for the development of these foods, McClements empowers researchers, food technologists, and entrepreneurs to con-tribute to a more diverse and sustainable food ecosystem. Professor McClements’ prolific output extends beyond his books, with over 1,300 scientific articles published in peer-reviewed journals. His H-index of 188 on Google Scholar is a testament to the depth and breadth of his impact on the scientific community. McClements has not only contributed to the body of knowledge but has actively shaped the trajectory of food science research. A Catalyst for Change: Industry and Institutional Support McClements’ influence continues beyond academia, with his research receiving support from prestigious institutions and organizations. Grants from the United States Department of Agricul-ture, National Science Foundation, US Department of Commerce, and NASA underscore the significance of his work in addressing real-world challenges. His collaboration with the food industry further exemplifies his commitment to bridging the gap between scientific in-novation and practical applications. As we face global challenges such as climate change and resource scarcity, the importance of sustainable food practices cannot be overstated. Professor David Julian McClements stands at the fore-front of this movement, advocating for the development and adoption of plant-based foods as a viable and eco-friendly solution. Through his unwavering dedication to scientific inquiry, Professor McClem-ents has not only elevated the status of plant-based foods but has also set the stage for a more sustainable and nourishing future. His work serves as an inspiration to aspiring scientists and changemakers, reminding us all that the pursuit of knowledge can pave the way for a healthier, more resilient world. As we celebrate the changemakers in the world of food science, Professor David Julian McClements stands as a beacon of innovation, guiding us toward a future where the intersection of science and food transforms the way we eat for the better, which has previously awarded him the Nils Foss Excellence Prize.Commitments and actions for a better future Acting responsibly and with integrity has been our approach to doing business since Nils Foss founded the company in 1956. We have a holistic approach to sustainability that transcends compa-ny operations and procedures. Our proximity to the food and agriculture production on a global scale comes with a responsibility to ensure sus-tainability, not just at our end of the business, but with our collaborators as well. We aim to ensure that every part of our value chain adheres to the highest standards across human and labor rights, health and safety, environment, etc.UN GLOBAL COMPACTSince 2012, FOSS has been an active participant in the UN Global Compact, the world´s largest voluntary initia-tive based on CEO commitments to implement universal sustainability principles and take steps to support UN goals. This framework outlines ten principles in human rights, labor, the environment, and anti-corruption. To ensure that we can meet these requirements and our ambitions, we have policies that cover the core areas of the UN Global Compact and broader issues. ECOVADIS FOSS joined the EcoVadis platform in 2022. EcoVadis monitors and measures the sustainability performance of over 100,000 organizations globally. We look for-ward to leveraging the assessment scorecard to ensure continuous improvements.SEDEX (SUPPLIER ETHICAL DATA EXCHANGE)FOSS has been a committed member of Sedex since 2013, and we utilize this platform to identify poten-tial risks across our supply chain. Every third year, we complete third-party SMETA audits at FOSS Innovation Center, our production sites in Denmark and China, and our R&D facility Soft Flow in Hungary, against the crite-ria in labor rights, health and safety, the environment, and business ethics.UN SUSTAINABLE DEVELOPMENT GOALS (SDG)FOSS is committed to supporting the UN Sustainable Development Goals. The goals most relevant to our business and where FOSS contributes, can be found in the ESG section of this report.AIM for Climate In a significant stride towards sustainable agriculture and climate resilience, FOSS proudly joined AIM for Cli-mate (AIM4C) as a Knowledge Partner in 2023. AIM4C is a collaborative initiative dedicated to addressing climate change and global hunger through increased investment in climate-smart agriculture and food sys-tems innovation.FOSS actively participated in the AIM for Climate Sum-mit held in Washington, D.C. in May 2023. FOSS hosted a pivotal conversation with participation from the agri-food industry with ADM and from academia with ingthe world-leading food scientist Professor David Julian McClements. This dialogue aimed to explore innova-tive approaches, technologies, and products crucial for adapting to climate change while fostering sustainable growth in the agricultural sector.As climate change continues to pose challenges to traditional agricultural practices, impacting global food production and farmer livelihoods, AIM for Climate serves as a catalyst for transformative climate action. FOSS is committed to contributing expertise and in-sights that align with the initiative's mission, promoting science-based and data-driven decision-making for a resilient and sustainable future in agriculture.UN Convention against Corruption by the UN Global CompactFOSS supports the Call-to-Action from Business to Governments on the 20th Anniversary of the UN Con-vention against Corruption launched by the UN Global Compact.The Call-to-Action was submitted to the UN Convention against Corruption at the tenth session of the Confer-ence of the States Parties (CoSP10). The Conference is the world's largest global anti-corruption gathering. Every two years, the Parties to the Convention meet to review its implementation and discuss how to improve international cooperation to better prevent and tackle corruption. The UN Convention against Corruption is the only legally binding universal instrument to combat corruption and has near-universal acceptance, with 190 States Parties. The convention, negotiated in Vienna and adopted by the General Assembly in 2003, celebrat-ed its 20th anniversary in 2023.Celebrating the changemakers Thomas NikolajsenThomas Nikolajsen, Director of Front-End Innovation at FOSS, trans-forms the landscape of food and agricultural resources. With a PhD in Optical Science, Thomas’ journey be-gan with academic pursuits that laid the groundwork for a career marked by incredible innovation. Since then, he worked for various tech startups, scaleup and mature companies be-fore joining FOSS in 2010. Shaping Future Analytics At the heart of Thomas’ impact is his strategic vision for the future of ana-lytical solutions. His work is founded in LEAP, which gives more opportunities instead of a traditional project model. The LEAP program launched in 2011 and focus was on raising innovation height and ensure FOSS position as technolo-gy leader in the market – being first. It drives Thomas to be a part of creating new capabilities for FOSS and to start and be involved in the beginning of new projects that end with groundbreaking solutions. To work as a change agent through the process and with the history around a product and to make its poten-tial come to life. With a keen focus on innovation sustain-ability, he envisions a world where an-alytical technologies play a pivotal role in ensuring the judicious use of global food and agricultural resources. Togeth-er with his team, he can make huge contributions to a better future, and the initiatives not only push the boundaries of technological innovation but also con-tribute to addressing pressing challenges in the realm of food safety and sustain-ability. MycoFoss and Micral are, after many years of development, results of that incredibly demanding work. Collaboration is the key FOSS products are deeply rooted in extensive external collaboration. The foundation lies in robust and fruitful cus-tomer partnerships, grounded in the fun-damental understanding of their world. It is an ongoing exploration of new markets, emerging needs, and a constant commitment to discerning what the world may require. Universities also play a significant role in the work conduct-ed concerning deep tech, applications, and the sustainable extraction of data from our solutions. This collaborative approach underscores FOSS' dedication to staying at the forefront of innovation and addressing the evolving demands of the global landscape. Furthermore, Thomas fosters collabora-tion with great enthusiasm, maintain-ing continuous and deep contact with external partners. His proactive engage-ment ensures a dynamic and synergistic relationship between FOSS and its collab-orators. He facilitates entrepreneurship in a corporate context and this hands-on approach reflects his commitment to cultivating strong ties, driving innovation through shared insights, and reinforcing the collaborative spirit that is integral to the success of FOSS. Innovation is more than one thing For Thomas, innovation defies a singular definition, with each facet complement-ing the other. His perspective emphasizes the inclusivity of various elements in the innovation process, rejecting the no-tion that one must exclude the others. He acknowledges the uniqueness of being part of a journey that involves taking risks, exploring new territories, and maintaining unwavering belief. He expresses the profound meaningfulness of participating in such a venture, con-trasting it with the potential closure of projects in many other companies. It is not the easy solution, and Thomas has experienced this up close through his years in first R&D and now in front-end. These are long-term solutions and enable innovation for the playground. It enables leaders, that act as champions of innovation within the organization. They demonstrate personal commit-ment to innovative ideas and promote them through informal networks. They are willing to take risks and invest their position and reputation to ensure the success of innovative initiatives. The commitment to investing in a vision over a prolonged period is a source of great pride for Thomas, illustrating his deep sense of purpose in being an integral part of this innovative journey. A journey that continues to shape the future of analytical innovation. Risks We recognize that risks are ever-changing, and form part of a continual improvement cycle to en-sure that our procedures to address these risks remain robust and fit for purpose into the future. FOSS operates in more than 30 coun-tries and derives more than 99% of its revenue from outside Denmark. Our results are impacted by the effects of, and changes in economics, international trade, politics, and regulations, in the world in which we operate. To address these and other risks, FOSS maintains a Corporate Risk Management procedure to identify, review, and adequately pre-vent, control, and mitigate risks. Operating risk The main operating risk for the Group concerns the ability to be strongly posi-tioned in the market and at the cutting edge of technological development, for end-to-end solutions that secure and improve food quality. The Group has reduced the usual operating risk by entering longer-term contracts with key suppliers for delivery of components that are a part of production, intending to secure a stable supply and a higher predictability in price development. As a consequence of the COVID-19 pandemic, global supply chains have slowed, caus-ing shortages of key components. In recent years, our offering to the market contains more digital offerings as well as more online and interface connections within our IT infrastructure. We aim to continuously reduce our risk of being compromised, and thus signifi-cant resources for improving the Group's IT infrastructure and security are being invested. Financial risk The financial risk is primarily related to changes in currency exchange rates. Cur-rently, the Group does not hedge against currency exchange fluctuations. Credit risk The main credit risk for the Group derives from ordinary customer trans-actions with restrictive guidelines for trade with new customers and custom-ers located in zones of particularly high credit risk, while trade with known and credit-rated customers is completed on accommodative conditions. These con-ditions have historically resulted in very few losses on debtors, which is also due to the controlling of debtors on group and local levels. Information security, cybersecurity and privacy protection With an increased focus on digitaliza-tion, the risks related to being subject to cybercrime or data security breaches increase. FOSS is annually certified in the ISO 27001 Information Security Manage-ment System to reduce the new threats constantly emerging. Climate change The frequency and strength of extreme weather events are increasing due to climate change. Vulnerability to extreme weather events, can result in an adverse impact on our customers crop yield, dis-rupt operations, or damage the distribu-tion infrastructure. Environmental, health and safety risk Non-compliance with environmental, health, and safety regulations can lead to incidents, accidents, injuries, and fatalities. We have integrated health and safety organizations along with proce-dures and guidelines to ensure adequate identification of risks and timely remedi-ation. Business ethics riskIssues related to corruption and bribery, fraud, and anti-competitive practices, can impact FOSS’s reputation, and our employees’ morale, and result in finan-cial penalties. We have training courses in business ethics and our Whistleblower framework allows us to monitor, identi-fy, and mitigate risks in an appropriate and timely manner. ESG regulations risk There is an increasing amount of ESG regulations that may affect FOSS' busi-ness and supply chain. Failure to adhere to these may result in legal, financial, and reputational risks. We comply with relevant legislation in the regions we operate within and continuously update our policies and procedures to reflect any regulatory changes. Innovating for Sustainability In 2023, sustainability was strategically anchored into the FOSS strategy, with a mandate in each segment to drive sustainable progress. Actions in 2023In 2023, we strengthened our commitment to sustain-ability by extending our sustainability policy with new sections on topics that are material for FOSS. These topics include human rights, money laundering, anti-competitive practices, climate, air pollution, prod-uct end-of-life, and responsible supply chain manage-ment throughout our operations and value chain. The FOSS Sustainability Policy sets out principles and standards that our employees are expected to adhere to. This policy was updated in 2023 and covers the fol-lowing four key sustainability aspects:- Environment- Human and labor rights- Business ethics- Sustainable procurementEach aspect is complimented with a due diligence procedure assessing the risks, measures to prevent and control adverse impacts, and key performance indica-tors which lay the foundation for tracking our progress. Furthermore, we are now laying the path to enhance how we work with data.Our Pathways to Net ZeroOur materiality assessment was made in December 2022. In 2023, we embarked on our pathway to Net Zero and the journey of identifying FOSS's double materiality assessment. This will entail an impact and financial materiality assessment to ensure compliance with the Corporate Social Responsibility Directive. A sneak peek into some of these topics and data points will be revealed in this report. Building on dataEnvironmental data is provided in absolute numbers to ensure comparability with the guidelines for ESG reporting. In 2023, we launched an ESG data collection project on the topics that are most material for FOSS. These data points are collected from FOSS Innovation Center, our production sites in Denmark and China, our R&D facility Soft Flow in Hungary, and our sales and service subsidiaries around the world, with the baseline set to the year 2022. Our findings include the following:• Waste data from all our subsidiaries is non-existent,as many are based in leased office spaces within anoffice building. Likewise, the daily renovation frac-tion is not measured for our R&D facility Soft Flowin Hungary. Therefore, this data will be estimatedbased on data from FOSS Innovation Center.• Water data from our subsidiaries is sparse. If data isnot readily available, this data is based on esti-mates, as water is not a material topic for FOSS.In this report, we report on energy, waste, and water from FOSS Innovation Center, our production sites in Denmark and China, and our R&D facility Soft Flow in Hungary. The reporting on energy data is expanded to include our sales and service subsidiaries around the world. Looking beyondOur environmental focus for 2024 is to implement sys-tems that ensure reliable data for 2025 data collection on both waste and water. In 2024, we will expand our ISO14001 certification to include FOSS Innovation Cen-ter and FOSS Production in Denmark. The scope of the ISO14001 is energy, waste, and chemicals, where the focus on chemicals will be closely related to our 2024 focus on health and safety for our employees. Our human rights and anti-corruption focus for 2024, is to analyze the data collected in 2023 to gain insight and set targets for our 2025 reporting period. Our focus for our staff related matters is to further enhance the knowledge of our people in environmen-tal protection, and the material aspects for FOSS while expanding our leadership programs. In 2024, we will continue our social focus by collaborat-ing with students from primary schools to PhD students from universities worldwide. We will also ensure to document this fruitful collaboration as we continue our journey to advance people and their knowledge.Securing the environmentWe recognize our position and impact on the en-vironment we operate in, and our ambition is to reduce and minimize any negative footprint we may have on the environment and climate. We strive to set targets and implement procedures that demonstrate best practices in managing these impacts. Our environmental policy is an integrated part of our sustainability policy and outlines our commitment to continued improvements in compliance with all applica-ble requirements worldwide.Environmental Management SystemSince 2021, our production site in Suzhou, China, has been ISO14001 certified. In 2024, we are expanding our ISO14001 certification to include FOSS Innovation Center and the FOSS production in Denmark.In 2023, we implemented procedures to minimize our environmental impact, which will be the basis for ongo-ing self-assessment and internal and external audits.Although we strive to demonstrate best practices, one environmental violation occurred in 2023, due to the lack of a dedicated EHS specialist at our production site in China. This was quickly resolved, through a recruit-ment process. WasteWe strive to recycle and reuse materials and packaging whenever possible and manage waste in a healthy, safe, responsible, and environmentally friendly manner.In 2023, we established a procedure for handling waste, managing risks, and preventing adverse impacts to protect our people and the environment. This includes efforts to prevent the generation of hazardous waste and applies to FOSS Innovation Center, our production sites in Denmark and China, and our R&D facility Soft Flow in Hungary. Our main fraction of waste consists of organic house-hold waste from the canteen in Denmark. The waste which was previously stored in a container that re-quired electricity for cooling, is now diverted to an automated underground biogas storage tank. In 2023, we sorted 35 tons of household waste that generated 34,030 Nm CH (methane). This investment eliminates 4manual transportation of organic waste to the contain-er and prevents environmental, health, and safety risks.How we as a company handle waste on a global level is subject to variation, as each country has its own waste-handling infrastructure. In Denmark, waste is sorted in 9 fractions, in Hungary waste is sorted in 3 fractions, whereas the waste at our production site in China is sorted as hazardous and non-hazardous.Our overall waste generation decreased by 6% from 2022 to 2023. Our fraction of hazardous waste in-creased by 58% due to an increased use of chemicals at FOSS Innovation Center and at Soft Flow in Hungary. This increase is primarily project-related, as some proj-ects require chemical analysis, consequently impacting the consumption of chemicals. The non-hazardous waste decreased by 15% from 2022 to 2023.WaterWe strive to reduce water consumption by reducing and reusing water in our facilities.The total water usage is based on FOSS Innovation Cen-ter, our production sites in Denmark and China, and our R&D facility Soft Flow in Hungary. This water includes water for sanitary-, process-, heating-, and cooling sys-tems in our buildings, as well as water used for instru-ment testing. The assembly process is not water intense, but water is used in low volume for quality assurance of our instruments. In addition to previously reported data from our sites in Denmark, China, and Hungary, we expanded our data collection in 2023, to include all our sales and service subsidiaries globally. We are now in the process of validating these data to ensure adequate reporting in 2024.EnergyWe are committed to responsible energy manage-ment and the reduction of greenhouse gas (GHG) emissions. Our energy consumption and GHG emissions mainly re-late to the use of electricity, the heating and cooling of our buildings, and our company cars. We have expand-ed our reporting scope to include all sales and service subsidiaries globally, with a baseline year of 2022. In 2023, we also laid the foundation for our GHG climate reporting. Harvesting nature's energy sourcesWe continuously evaluate and approve investments in renewables to mitigate climate change and minimize our environmental impact.Since 2022, we have been converting organic house-hold waste from the canteen at FOSS Innovation Center to biogas and nutrient fertilizer. An automated biogas storage tank was installed for this purpose in 2022. With this solution, the amount of CO used for trans-2portation of household waste has been reduced by 90%, corresponding to 4.9 tons of CO saved.2In 2023, new solar panels with an estimated maxi-mum capacity of 120 MWh were installed at Soft Flow in Hungary. This means that as of 2023, 28.5% of all electricity used at Soft Flow is covered by renewable energy.Looking beyond In 2024, we are expanding our renewable energy production. Energy-efficient ATES facilities and solar panels will be installed at FOSS Innovation Center with the potential to reduce our CO emissions by 70%. The 2solar panels have an estimated production of 217 MWh, and the total annual production is projected to corre-spond to two and a half months of the current energy consumption at FOSS Innovation Center. Energy consumptionOur overall energy consumption decreased by 6% from 2022 to 2023. There is a general reduction in electric-ity which can be attributed to achieving the full-year effect of energy-saving initiatives such as LED lighting and solar panels. The overall increase in district heating is due to an increase in office space from two to three buildings in one country. Natural gas consumption remained at the same level with a 2% reduction. The R&D Innovation facility, Soft Flow, in Hungary made extra efforts to find savings opportunities for nat-ural gas and ensured a reduction of 46% from 2022 to 2023. Likewise, Soft Flow reduced electricity consump-tion by 34% through the installation of solar panels and phased out all company cars running on diesel.Human and labor rightsWe support the Universal Declaration on Human Rights and recognize our responsibility for main-taining high ethical standards when it comes to upholding human and labor rights. We pledge to create a workplace and supply chain that respects and safeguards these rights. In 2012, FOSS became a member of the UN Global Com-pact, committing to align our operations and strategies to the UN Global Compact principles on business and human rights. We support the UN Global Compact framework “protect, respect, and remedy”, and the principles of due diligence. Our commitment to human and labor rights is detailed in our Sustainability Policy and employee handbooks, and applies to all parts of FOSS and all employees.Human rightsSince April 2018, FOSS has annually committed to the Modern Slavery Act. Modern slavery encompasses sever-al human rights issues, including forced labor, bonded labor, child labor, human trafficking, and slavery-like practices. We have no reported incidents on human rights issues in 2023 globally.Labor rightsOur labor rights commitment includes working condi-tions, wages and hours, employee councils, and modern slavery. All parts of FOSS are serviced by our HR organization. All employment contracts are reviewed by HR. • HR is responsible for enforcing local laws, ILO re-quirements, and regulations regarding the maxi-mum number of hours employees can work per dayor week.• HR ensures that employees are remunerated ac-cording to the minimum hourly or monthly wagethat employers are legally required to pay.• HR ensures that all job candidates and employeeshave the right to make choices about their lives,work, and personal well-being without being sub-jected to any form of slavery, servitude, or forcedlabor. This includes the right to fair wages.However, our work pertaining to labor rights and modern slavery is primarily focused on our supply chain, which we have assessed to pose the biggest risk in our operations. We have taken a strong position against these practices as set out in the FOSS Anti-Slavery and Human Trafficking Statement, Sustainability Policy, and Supplier Code of Conduct. Health and safetyWe are committed to ensuring the health and safety of our employees.Ensuring a safe and healthy workplace environment for all our employees is an important part of our sustain-ability policy and company values. Health and Safety OrganizationWe have dedicated health and safety organizations at FOSS Innovation Center, our production sites in Denmark and China, and our R&D facility Soft Flow in Hungary. The organizations form a joint team, each of which have their own respective management and employee representatives that are responsible for iden-tifying and assessing hazards or risks in the workplace, as well as developing action plans to address potential issues. In 2023, we continued to review and document poten-tial risks to the health and safety of our employees and initiated social and governance data collection from our subsidiaries. New data points include reporting on the Lost Time Injury (LTI) severity rate.We conduct internal health and safety audits at FOSS Innovation Center, our production sites in Denmark and China, and our R&D facility Soft Flow in Hungary, with independent third-party SEDEX audits conducted every third year. Internally, our management lays the founda-tion by engaging employees in regular “safety walks" to ensure the safe use of equipment and compliance with procedures.Chemical SafetyWe strive to ensure the safe handling, storage, and dis-posal of chemicals and hazardous waste in our produc-tion facilities. Preventive control measures are in place to prevent exposure to our employees and the environment. Workplace hazards must be understood and managed effectively to protect our employees, visitors, sites, and communities. All employees are required to follow company policies, procedures, and appropriate national legislation, and ensure that assigned contractors follow procedures on FOSS premises.Product SafetyFOSS products meet or exceed safety standards and regulations. Our products undergo rigorous testing to ensure that they are safe for their intended use. We provide clear and user-friendly instructions and safety guidelines with our products to inform users of proper handling, and potential associated risks.EmployeesWe want our employees to achieve their ambi-tions within the company. We have developed tailored leadership programs that provide opportunities for employees with leadership aspirations and potential. ‘Leadership Aspire’ is tailored to the specific develop-ment needs of each candidate. The purpose is to gain insight into individual strengths, development areas, and potential blind spots. The course runs annually and clarifies the motivation for moving into leadership and develops the participants’ skills in preparation for their first people manager position. ‘Leadership LEAP’ is designed specifically for people managers with director or vice president potential. The purpose is to assess the candidates’ readiness for the next level of leadership. The participants are trained to maximize their leadership strengths and develop areas where further support is needed.Our goal is to recruit ≥50% of leadership positions internally. In 2023, 54% of our vacant leadership posi-tions were filled by internal candidates. In addition to leadership programs our employees are invited for annual development reviews.In 2023, 92% of the total workforce across all locations received performance and career development reviews. The target is 100%.Employee engagementAll employees in our global workforce are invited to take part in an annual employee engagement survey (EES) with a focus on satisfaction and motivation. The purpose of the survey is to gather feedback and in-sights about management, development opportunities and workplace issues. Our target is to reach a score of ≥77 in 2024.In 2023, FOSS remained above the industry benchmark with a score of 76 based on a 96% response rate. The result has increased with one index point since 2022 and shows a strong engagement.EducationWe have a huge responsibility to motivate the next generation of scientists and engineers and we believe that curiosity is the spark that ignites the passion for Science, Technology, Engineering & Mathematics (STEM) subjects. In 2023, we invited 75 students from our local commu-nity to participate in our annual FOSS Science Day at FOSS Innovation Center, tailored for 8th and 9th grade students. Five different workshops provided hands-on experience with programming, model building, and food analysis as well as insight into the advanced technology used in our food analysis instruments. Our goal is for visiting students to understand the impact of STEM subjects on innovation and progress in our world.Board of Directors FOSS is a 100% family-owned company. The company’s board of directors consists of both FOSS family members, specially appointed business professionals and employee representatives. The latter are elected for a 4-year period. Other members are elected for 1 year at a time at the yearly general meeting. The board chooses its own chairman and deputy chairman.Responsible suppliers We are committed to ensure that our suppliers have appropriate measures in place to address the environmental, ethical, and social risks. The FOSS Supplier Code of Conduct provides informa-tion on our requirements regarding our suppliers. The FOSS Supplier Code of Conduct is based on the FOSS Sustainability Policy, and the FOSS values, and aligns with the Ten Principles of the UN Global Compact. The FOSS Supplier Code of Conduct binds us together across geographies and applies to all suppliers and business partners globally. We will continuously evaluate our suppliers to ensure they meet our high standards. In 2023, we implemented a new policy and procedure to strengthen our engagement in ensuring a responsible supply chain. 100% of our suppliers sign onto the FOSS Supplier Code of Conduct .Supplier collaboration FOSS verifies the identity of both customers and sup-pliers before establishing a business relationship. All new suppliers or suppliers with whom FOSS is about to renew an existing supplier agreement are screened ac-cording to our Supplier Code of Conduct, membership of the UN Global Compact, or commitment to the Ten Principles of the UN Global Compact.This screening is part of our mandatory pre-evaluation CSR questionnaire. This addresses issues, like business ethics, labor and human rights, environment, health and safety, product safety, and quality. Existing direct suppliers are reviewed annually based on corporate social responsibility issues and audited on a prioritized basis. FOSS ensures regular monitoring and auditing of suppliers to ensure ongoing compliance with FOSS sustainability practices, and standards. Conflict minerals FOSS supports the goals of the Organization for Eco-nomic Co-operation and Development (OECD) to avoid and eliminate the use of raw materials, that directly or indirectly finance or benefit armed groups in con-flict-affected and high-risk areas. FOSS does not source minerals directly. However, FOSS does source parts like print circuit boards from suppliers that may contain small amounts of minerals, e.g., tin, tantalum, tungsten, and gold. We therefore take con-tinuous actions to ensure that all our suppliers provide information on conflict minerals. In total, our electronic suppliers constitute 18% of our total suppliers, of which only 2% supply print circuit boards. These suppliers are based in Denmark and Thailand and have both confirmed the absence of conflict minerals in the parts FOSS source. As of December 2023, 98.5% of all our suppliers have provided information on conflict minerals. The FOSS supply chain consists of approximately 500 suppliers across 9 subcategories and 30 countries around the world.