At Ontex, we believe that diversity, equity, and inclusion are fundamental principles of an organizational culture that can enable our people to perform to the best of their abilities. It also helps them feel that the work they do has meaning – something that is at the core of performance culture. In 2022, much progress has been made on further embedding these principles, with executive sponsors, and business executives leading this topic. That is important because this is a business topic, not only an HR topic.

We have also built a Diversity,Equity & Inclusion Council with representatives from across the organization: all people who are passionate about this subject and understand its importance. As a team, we’re drawing up a roadmap to take us to 2030 and beyond. This is the framing of key ambitions: gender parity, building an inclusive company and work environment, and advancing equity. With that, we will achieve so much more – that is the true advantage of diversity.

We’re embedding the code of ethics into company-wide practice. Our ‘speak up’ lines allow people to raise concerns anonymously and confidentially and are in widespread use. Those compliance-related issues are automatically raised, investigated, and escalated to board level where appropriate. Since this has been put in place, a series of issues have been resolved. Our belief is that integrity, ethics, and compliance are fundamental parts of our PRIDE values and necessary for success. We’ve introduced a global onboarding program which is deployed locally – so now those key behaviors policies are part of the onboarding of any Ontex employee.

Following the outbreak of war in Ukraine in February 2022, the whole organization came together to find solutions for Ukrainian refugees, and donated more than one million products. It was truly amazing, although our biggest contribution was that we kept supplying retailers in Ukraine under extremely difficult circumstances. When many competitors left, we stayed and supplied essential care products to the local people.

By mid March 2022, more than one million donated items were shipped to people in need in Poland and Ukraine. Hygiene items like diapers, feminine care pads, tampons and adult care products were shipped through Ontex’s own supply chain network and with trucks of other production companies, charities and non-governmental organizations.

To ensure that donated products benefit the most vulnerable groups in society, Ontex has established a donation policy with guiding principles to increase the transparency of donations. For example, it ensures that donated goods reach the right place.

These actions are consistent with the human- centred approach of Ontex which was in evidence throughout the pandemic, with four million products donated.

Increasingly stringent environmental and sustainability regulations are set to have a huge impact going forward. Already, Ontex is gearing up to ensure compliance with recent legislation, such as the Non- Financial Reporting Directive, the Corporate Sustainability Due Diligence Directive, and the Corporate Sustainability Reporting Directive. The requirements of these directives concern a range of segments and subjects across the organization, including on matters such as climate transparency.

Efficiency in production is part of Ontex’s sustainability journey. That’s one of the driving forces behind our large product platforms. Design elements change, but the production is on the same equipment – no need for multiple sets of machines, which drive costs up. The product differentiation that we offer retailers comes from using different raw material, which is much easier to handle on the machines and doesn’t require new, expensive equipment.

This approach has enabled us to bring an adapted baby pant design from our European towards our US market, with minimum transformation cost. We have tested that design in the US with great success, and are now actively working with our customers to fully launch in the US by the third fiscal quarter of 2023.

The two main costs that come into play are the bill of material – the raw materials needed for our products – and the transformation costs – what it takes to convert that raw material into our finished product. Keeping scrap low is a great way to cut down on costs because if less raw material is going to waste, that means we are using as much as possible of the material we have paid for.

We have a lean team who are working continuously on sustainability.

Read more in the Sustainability statements of this report.

Ontex is working continuously on sustainability. In 2022, our efforts were recognised with the award of an A-rating for leadership in corporate transparency and performance on climate change from the global environmental non-profit Carbon Disclosure Project (CDP). Ontex is one of only four Belgian companies to receive such a positive rating.

This is an indication of how seriously we as a company take the basic elements of sustainability. Climate is one of our pillars; we’re anticipating a lot of new regulations in this area in the coming years, so it is a major element in Ontex. We have already set targets for 2030 in the company’s 2030 sustainability strategy, and we will be putting intermediate targets in place to help us get there.

Ontex received its top climate action rating thanks to the transparency on its lean internal climate action governance, reducing carbon emissions from its operations by 55% versus 2020 and sourcing 93% of the electricity used in its plants worldwide – 100% in its European plants – from renewable sources.

CDP’s annual disclosure process is widely recognized as the gold standard of corporate environmental transparency. In 2022, over 680 investors with over US$130 trillion in assets and 280 major purchasers with US$6.4 trillion in procurement spend requested companies to disclose data on environmental impacts, risks and opportunities through CDP’s platform.

In 2022, Ontex reconfirmed its positive CDP B-rating for sustainable forestry. Sustainable forestry is key to Ontex because forests provide the paper fluff and pulp for the company’s personal care products. Ontex sources 100% of its fluff from controlled or certified sources. The company invests in a monitoring system to identify the sources of its agricultural raw materials. Monitoring sources enables Ontex to support suppliers with sustainable practices.

For more information on Ontex’ sustainability strategy and goals, see https://ontex.com/sustainability

In October 2022, Ontex completed a large solar installation at the site of its factory in Ortona, Abruzzo region, Italy. The solar plant will produce more than 10 GWh of electricity per year, equivalent to the yearly consumption of around 3,400 households. The Ontex factory in Ortona now houses one of Italy’s largest systems for on-site solar power generation and consumption. The system was developed and financed by the company Menapy Italia srl, who also installed Ontex’s solar power installation in Eeklo, Belgium and Segovia, Spain.

Annick De Poorter, Ontex’s Executive Vice President for R&D and Sustainability, said: “We can now produce around a quarter of the electricity we need to manufacture essential hygiene goods at our factory in Italy. This is another step towards our goal to have carbon-neutral operations by 2030.”

Ontex plans to become carbon-neutral by 2030. Our energy strategy is a key part of that target; we aim to be less dependent on energy from the grid through onsite renewable energy generation, energy conservation, and purchasing energy from renewable sources.

Towards that end, the company is opening solar power installations in our core markets in Europe and the Americas to produce more energy onsite. Ontex’s factories in Italy and eight other European countries run on 100% electricity from renewable sources. The Ontex Group’s total is 93% electricity from renewable sources.

The high inflation mode we brought in was another strength this year, as well as our pricing discipline and our agility in managing the route to market. We have managed to find the right channels to optimize the way we reach our customers.

We have been ruthless with costs, and we have left no stone unturned because bringing costs down was an absolute necessity.

Price management has been key, and rather than wait for the contract roll- over, renegotiations were initiated with all customers in our core markets. Year-on-year prices increases in our core markets rose from 2% in the first quarter to 14% in the fourth quarter, averaging 8% for the year and more pricing is to come. Despite this, our brands have been resilient and we have not lost market share – to the contrary, retailer brands gained market share versus A-brands.

In emerging markets, price increases were even more substantial, averaging 19% versus 2021. These were easier to implement as we sell mostly our own branded products there, but inflation levels were even higher as well. This was especially the case in Turkey, where we were dealing with 90% inflation. We switched to high inflation mode, where we adapt our operations faster, and with a broader magnitude. For example, rather than reviewing salaries once per year, we did it every quarter. Price increases went from being yearly to almost monthly and went up by more than 10% instead of the usual percentage point increases.

Ontex’s strategy is based on superior customer service, competitive product performance, and being an efficient sustainable producer. An important element of executing the strategy is optimising our network. For example, we shut down our German factory in 2022, allowing us to move volume to Eastern Europe. This also improves customer service, as the consolidation of production means we can share capacity across multiple customers. We invest constantly in faster, more reliable machines, which increases our efficiency and reduces our scrap, in turn saving on costs and energy.

Ontex’s ongoing industrial transformation is a journey, especially because of our extremely diverse asset base. This is driven by our desire to customize but is not always compatible with our ability to be a highly affordable producer. Ontex is increasing our capacity utilization by consolidating production in fewer production sites and fewer product lines. We will continue to build platforms to meet new customer requirements, which constantly change and evolve. This notwithstanding, the fact that we have higher revenue with fewer plants and are using a smaller number of faster machines shows we are moving in the right direction.

There have been multiple challenges industry- wide in 2022, but we have remained resilient and avoided major disruptions, which was recognized by many customers who could continue to offer full shelves to their consumers. In the midst of turmoil, we have still been able to deliver and to satisfy our customers.

Supply chain disruption was simply a fact of life across the industry in 2022. The phenomenon of COVID-19 showed its fat tail early in 2022, with blocked ports disrupting trade flows and the breakout of war driving unprecedented price volatility.

In the face of these challenges, Ontex’s procurement teams took an agile approach to supply, and leveraged their knowledge of the market. Cross-functional collaboration between teams made a major contribution to mitigating supply chain risks. The procurement team flagged raw material supply risks to R&D teams, who in turn accelerated qualification processes to avoid running out of stock and maintaining service levels. The R&D and industrialization teams collaborated to mitigate any shortages.

Our resilience comes from our ability to stay agile. One of the ways we have done this is by changing suppliers at a high speed – we have been able to qualify our new suppliers at double our previous rate, helping to take the edge off supply shortages. One of our key suppliers has told us that we are their fastest-qualifying international customer - a testament to Ontex’s agility. We value this type of external recognition because the whole organisation has mobilized to alleviate a ‘perfect storm’ of issues throughout 2022. We were highly flexible in switching between suppliers and working in an agile way with strategic suppliers to keep raw material flows going. We tested and introduced new materials fast, often co-developed with our strategic suppliers and through flexibility and agility of our teams. We will continue this approach into 2023.