HeidelbergCement : Corporate Governance Statement 2022

Corporate Governance

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Corporate Governance­statement

Corporate Governance statement

The corporate governance statement for

HeidelbergCement­AG and the Group in accordance with the provisions of sections 289f and 315d of the German Commercial Code (HGB) includes the declara­ tion of compliance pursuant to section 161 of the ­German Stock Corporation Act (AktG). It also provides information on corporate governance practices and the functioning of the Managing Board and Supervisory­ Board, including the corporate governance of the com­ pany, the remuneration of the boards, the diversity concept for the Supervisory Board and Managing Board, and the legal requirements for equal participa­ tion of women and men in management positions.

Declaration of compliance with the German Corporate Governance Code

On 13 January 2023 and 30 January 2023, the Manag­ ing Board and the Supervisory Board submitted the following declaration of compliance pursuant to sec­ tion 161(1) of the AktG:

Since issuing the last declaration of compliance in Jan­ uary/February 2022, HeidelbergCement­ AG has com­ plied with all recommendations of the German Corpo­ rate Governance Code in the version of 16 December 2019 published by the Federal Ministry of Justice and Consumer Protection in the official section of the ­Federal Gazette (Bundesanzeiger), with the following exceptions:

• The recommendation in C.4 was not complied with. According to this recommendation, a member of the Supervisory Board who is not a member of any
  Managing­ Board of a listed company shall not hold more than five supervisory board mandates at non- group listed companies or comparable functions, with an appointment as chair of the supervisory board being counted twice. The member of the Super­ visory Board Fritz-Jürgen Heckmann exceeded this number until his retirement on 12 May 2022. However, this has at no time impaired the fulfilment of his
  duties­ as a member of the Supervisory Board of HeidelbergCement AG.
• The recommendation in G.10 is not fully complied with. According to this recommendation, Managing Board members' variable remuneration shall be granted predominantly as share-based remunera­ tion; furthermore, granted long-term variable remu­ neration components shall be accessible to Manag­ ing Board members only after a period of four years. The Managing Board remuneration system of
  HeidelbergCement­AG provides that only the capital market component of the long-term variable remu­ neration is share-based. The management compo­ nent of the long-term variable remuneration is al­ ready paid out after three years.
  The reason for this deviation is that an exclusively share-basedlong-term variable remuneration only measures a partial area of the company's success, whereas the long-term variable remuneration granted
  by HeidelbergCement­AG to the members of the Man­ aging Board allows a more comprehensive rep­
  resentation of the long-term success of the company­ .
• The recommendation in G.13 sentence 2 is not com­ plied with. According to this recommendation, the severance payments shall be taken into account in the calculation of any compensation payments if

post-contractualnon-compete clauses apply. This is not the case at ­HeidelbergCement AG.

The reason for this deviation is that a possible sever­ ance payment and a waiting allowance are intended to compensate for different issues in terms of ­content.

HeidelbergCement­AG currently complies with all rec­ ommendations of the German Corporate Governance Code in the version of 28 April 2022, which entered into force upon publication in the Federal Gazette (Bunde­ sanzeiger) on 27 June 2022, and will continue to comply with them in the future, with the following exceptions:

• The recommendation in G.10 is not fully complied with. According to this recommendation, Managing Board members' variable remuneration shall be granted predominantly as share-based remunera­ tion; furthermore, granted long-term variable remu­ neration components shall be accessible to Manag­ ing Board members only after a period of four years. The Managing Board remuneration system of
  HeidelbergCement­AG provides that only the capital market component of the long-term variable remu­ neration is share-based. The management compo­ nent of the long-term variable remuneration is al­ ready paid out after three years.
  The reason for this deviation is that an exclusively share-basedlong-term variable remuneration only measures a partial area of the company's success, whereas the long-term variable remuneration granted
  by HeidelbergCement­AG to the members of the Man­ aging Board allows a more comprehensive rep­
  resentation of the long-term success of the company­ .
• The recommendation in G.13 sentence 2 is not com­ plied with. According to this recommendation, the severance payments shall be taken into account in the calculation of any compensation payments if

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post-contractualnon-compete clauses apply. This is not the case at ­HeidelbergCement AG.

The reason for this deviation is that a possible sever­ ance payment and a waiting allowance are intended to compensate for different issues in terms of ­content.

Remuneration system and remuneration report

The remuneration system for members of the Manag­ ing Board, which was approved by the Annual General Meeting on 6 May 2021, and the resolution also adopt­ ed by the Annual General Meeting on 6 May 2021 pur­ suant to section 113(3) of the AktG on the remuneration of members of the Supervisory Board, are publicly available on the company's website under Corporate Governance. The remuneration report and the audi­ tor's report are made publicly available at the same internet address pursuant to section 162 of the AktG. The remuneration report can also be found in the

Remuneration­report chapter.

Information on corporate governance­ practices

Fundamentals of corporate governance

­HeidelbergCement AG is a German public limited com­ pany based in ­Heidelberg. In accordance with the legal regulations, it has three institutions: the Annual Gener­ al Meeting, the Supervisory Board, and the Managing Board. The tasks and responsibilities of these institu­ tions are primarily based on the AktG and the compa­ ny's Articles of Association.

As a German public limited company, ­HeidelbergCement AG is required by law to have a two-tier board system.

The Managing Board is responsible for independently managing the Group; its members are jointly account­ able for the management of the Group; the Chairman of the Managing Board coordinates the work of the members of the Managing Board. The Supervisory Board appoints the members of the Managing Board for a maximum period of five years (in the case of an initial appointment, usually for a maximum of three years) and extends their appointment if necessary; they may only be removed from office prematurely for good cause. The Supervisory Board also monitors and advises the Managing Board and is directly involved in decisions of fundamental importance to the Group; the Chairman of the Supervisory Board coordinates the work of the Supervisory Board.

In line with the options provided for in accordance with the law or the Articles of Association, the shareholders exercise their rights before or during the Annual Gener­ al Meeting and thereby exercise their voting right. Each share carries one vote at the Annual General Meeting. The ordinary Annual General Meeting is normally held in the first five months of the financial year. In particu­ lar, the Annual General Meeting passes resolutions on the use of profit, approval of the actions of the mem­ bers of the Supervisory Board and Managing Board, the conclusion of inter-company agreements, changes to the Articles of Association, and the approval of the remuneration report. It also elects the shareholder representatives to the Supervisory Board and the au­ ditor. Shareholders are entitled to file motions and have a comprehensive right to speak and ask ques­ tions at the Annual General Meeting in accordance with the statutory provisions. In special cases, the AktG provides for the convening of an extraordinary general meeting.

All important documents for exercising shareholder rights as well as the resolution issues and documenta­ tion are duly and easily available on our website for

shareholders to access. Both the notice of the agenda for the Annual General Meeting and our website will provide shareholders with the information they need to exercise their rights, and particularly their voting rights at the Annual General Meeting, including by way of proxy or postal vote. Company proxies bound by in­ structions are also available to shareholders to exer­ cise their voting rights at the Annual General Meeting. After the end of the Annual General Meeting, the at­ tendance and voting results for the individual agenda items will be published on our website.

Because of the coronavirus pandemic, and using the legal basis established in this regard, the company again held its Annual General Meeting virtually in May 2022. The main reason for doing so was to avoid health risks to shareholders as well as employees, external service providers, and board members. The virtual for­ mat led to modifications in the course of the meeting and in the way shareholders' rights were exercised. In particular, physical participation by the shareholders or their authorised representatives was not permitted. However, shareholders had the opportunity to follow the entire Annual General Meeting in real time on the internet. Questions could be submitted electronically beforehand, and these were then answered at the An­ nual General Meeting. Shareholders or their authorised representatives exercised voting rights exclusively by postal vote or by granting power of attorney and ­issuing instructions to the proxies appointed by the company.

Internal control and risk management system

­Heidelberg ­Materials is subject to various risks on ac­ count of its international business activity. Responsible risk management is an essential component of good corporate governance. The comprehensive and Group- wide risk management system at ­Heidelberg ­Materials

serves to ensure the early identification, systematic

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assessment, and targeted management of risks. ­Heidelberg ­Materials also has an internal control sys­ tem that consists of process-independent and pro­ cess-integrated control measures. Our risk manage­ ment system and internal control system are used to identify circumstances with the potential to jeopard­ ise the Group. The internal control and risk manage­ ment system is implemented both at the level of

HeidelbergCement­AG and across the Group. The Man­ aging Board of HeidelbergCement­ AG is responsible for fulfilling the obligation to set up the systems and for continuously monitoring their effectiveness. At

Heidelberg­ Materials,­ the two systems are comprehen­ sive in design and, in addition to an accounting-related component, also include business and purely opera­ tional risks and controls, including those associated with our internally defined sustainability targets, which are not directly related to accounting. With regard to the internal control and risk management system's main accounting-related features, there are compre­ hensive statutory disclosure obligations, which are set out in greater detail at Group level by German Account­ ing Standard no. 20 (DRS 20). The relevant disclosures and further information about the internal control and risk management system can be found in the Risk and opportunity report chapter. The statements made there for the accounting-related components of the internal control and risk management system essen­ tially also apply to the business and operational sys­ tem components.

Compliance management system

Integrity, legality, and compliance are integral to every­ day business at ­Heidelberg ­Materials. The company has a compliance management system that is subject to constant further development. In accordance with the Institute of Public Auditors in Germany (Institut der Wirtschaftsprüfer, IDW) auditing standard 980, the structure of the compliance management system in­

cludes compliance culture, targets, risk assessments, and reporting, the compliance programme with guide­ lines and whistle-blower system, the compliance or­ ganisation, communication, training, and controls. Practical implementation in the operating units is the responsibility of the compliance officers of the individ­ ual country organisations.

Further information about the compliance manage­ ment system can be found in the Non-financialstatement chapter.

Based on its review of the internal control and risk man­ agement system, including the compliance manage­ ment system, and the reporting by Group Internal ­Audit, the Managing Board is not aware of any circum­ stances that cast doubt on the adequacy and effec­ tiveness of these systems.

The Managing Board has the quality, adequacy, and effectiveness of the internal control and risk manage­ ment system, including the compliance management system, regularly monitored and assessed by inde­ pendent parties, in particular by Group Internal Audit. The latter performs independent objective audit proce­ dures, which, in addition to examining the design and effectiveness of the aforementioned systems, also ex­ plore the potential for value and optimisation in the operational processes. In compliance with internation­ ally recognised auditing principles and standards, Group Internal Audit contributes to the evaluation and optimisation of the control and risk management sys­ tem and the compliance and governance processes. The activities of Group Internal Audit are thus intended to support the company in terms of both reducing risks and strengthening its organisational governance pro­ cesses and structures.

The Managing Board and the Audit Committee of the Supervisory Board receive regular reports on the audit

results. In addition, the Supervisory Board also satis­ fies itself that the Managing Board has installed an in­ ternal control and risk management system appropri­ ate to the business activities and risk situation of the company, as well as a functioning monitoring system within the meaning of section 91(2) of the AktG that is effective and capable of recognising at an early stage any developments that could jeopardise the Group as a going concern. The Supervisory Board also has cer­ tified the functionality of the accounting-related inter­ nal control system and the early risk identification sys­ tem by the auditor. Furthermore, the Supervisory Board has satisfied itself of the effectiveness of the com­ pliance management programme, which guarantees Group-wide compliance with law, legality and with in­ ternal guidelines.

Code of Business Conduct

1. Group-wideCode of Business Conduct requires all employees to observe the basic rules of business de­ corum - irrespective of whether these rules are pre­
   scribed by law or not. Heidelberg­ Materials'­ Code of Business Conduct is an important element of our cor­ porate governance and is published on the website un­ der Governance and compliance. The Code of Busi­ ness Conduct is binding on the Managing Board and all
   employees­worldwide. It forms part of Heidelberg­
   Materials'­ comprehensive compliance programme and its observance is monitored by control mechanisms in­ cluded in the programme. In particular, the Code of Business Conduct calls for:

• Integrity and professional behaviour towards cus­ tomers, suppliers, authorities, and other business partners
• Strict compliance with all applicable laws
• Compliance with competition and antitrust law

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• The provision of healthy and safe workplaces
• Efforts to combat corruption and the consistent avoidance of conflicts of interest
• The consideration of sustainability and environmen­ tal concerns
• The protection of human rights and employee rights, including fair, non-discriminatory employment condi­ tions and fair dialogue with the employee represent­ atives
• Careful and responsible handling of the Group's property and assets
• Careful and responsible handling of company and business secrets as well as personal data

To ensure that the rules of the Code of Business Con­ duct are understood and observed, all members of the Managing Board and employees must regularly com­

makes sure that all provisions of law and the Group's internal guidelines are adhered to and works to achieve compliance by Group companies. It ensures appropri­ ate risk management and risk controlling within the Group.

The Rules of Procedure for the Managing Board govern, in connection with the schedule of responsibilities, the work of the Managing Board, in particular the depart­ mental responsibilities of individual members of the Managing Board, matters reserved for the full Manag­ ing Board, and the required majority for resolutions. In accordance with these rules, each member of the Man­ aging Board runs their management department inde­ pendently and on their own responsibility, with the pro­ vision that all matters of clearly defined fundamental importance are to be decided upon by the full Manag­ ing Board. This takes place in the regular meetings of

Composition of the Managing Board

the Managing Board, led by the Chairman of the Man­ aging Board, on the basis of prepared meeting docu­ ments. The results of the meetings are recorded in min­ utes, which are issued to all members of the Managing Board. There are no Managing Board committees. Fur­ ther details can be found in the Rules of Procedure for the Managing Board on our website.

Composition of the Managing Board

There are currently nine members on the Managing Board of ­HeidelbergCement AG: the Chairman of the Managing Board, the Chief Financial Officer, the two functional members of the Managing Board (Chief Dig­ ital Officer and Chief Sustainability Officer), and five members of the Managing Board each in charge of the business in one Group area. The Managing Board is composed of the following persons

plete an online training programme.

Functioning and composition of the Managing Board, Supervisory Board, and Supervisory Board committees

Managing Board

The Managing Board is the company's managing body and has overall responsibility for corporate govern­ ance. In this regard, it is obliged to act exclusively in the Group's best interests within the framework of the law. It takes into account the interests of shareholders, its employees, and other stakeholders with the aim of creating sustainable added value. The Managing Board develops the Group's strategy, coordinates it with the Supervisory Board, and ensures its implementation. It

						Initial
Name		Responsibility		Year of birth	appointment		Appointed until
Dr Dominik von Achten	Chairman of the Managing Board	1965		2007		31 January 2025
René Aldach	Chief Financial Officer	1979		2021		31 August 2024
Kevin Gluskie	Group area Asia-Pacific	1967		2016		31 January 2024
Hakan Gurdal	Group area Africa-Eastern Mediterranean Basin	1968		2016		31 January 2024
Ernest Jelito	Group area Northern and Eastern Europe-Central Asia	1958		2019		31 December 2023
Dr Nicola Kimm	Chief Sustainability Officer	1970		2021		31 August 2024
Dennis Lentz	Chief Digital Officer	1982		2021		31 August 2024
Jon Morrish	Group area Western and Southern Europe	1970		2016		31 January 2024
Chris Ward	Group area North America	1972		2019		31 August 2028

Further information on the composition of the Manag­ ing Board and on the areas of responsibility and man­ dates of the individual members can be found in the Boards chapter. Some personal details can be found in the Managing Board chapter.

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Diversity concept for the Managing Board

The requirements for filling a Managing Board position include, among others, many years of international ex­ perience either in leadership positions in operations at plant or country level or in finance at Heidelberg­

Materials­ or in comparable positions at other compa­ nies. With the targeted use of programmes for the ad­ vancement of future executives, ­Heidelberg ­Materials is working at creating a pool of suitable candidates. Subject to the achievement of the below-mentioned target figure for the proportion of women, the Super­ visory Board makes no distinction on the basis of gen­ der, origin, or any other characteristics when filling Managing Board positions. It makes its decisions re­ garding appointments to leadership positions within the company solely on the basis of objective criteria such as professional qualifications (international lead­ ership experience, industry knowledge) and the per­ sonal suitability of the relevant person for the actual task. In this context, the Supervisory Board also pays particular attention to an internationally balanced and complementary composition of the Managing Board. This diversity regarding the origin of the members re­ flects the international and regional positioning of ­Heidelberg ­Materials. The diversity concept mentioned above is taken into account in the composition of the Managing Board. The standard retirement age for members of the Managing Board is 65 years.

Long-term successor planning for the ­Managing Board

With the support of the Managing Board, the Super­ visory Board ensures long-term successor planning for the Managing Board. The chairs of the Managing Board and the Supervisory Board are in regular contact for this purpose. In addition, the Supervisory Board's ­Personnel Committee regularly addresses the issue by discussing the contract durations and renewal options

for current members of the Managing Board and con­ sulting on possible successors. In addition to the re­ quirements of the AktG and the German Corporate Governance Code, the target set by the Supervisory Board for the proportion of women on the Managing Board and the criteria in accordance with the diversity concept adopted by the Supervisory Board for the composition of the Managing Board are taken into ac­ count. This allows candidates to be identified for the Managing Board at an early stage and prepared for their tasks in a targeted way. Structured discussions are held with these candidates, involving the Supervi­ sory Board's Personnel Committee and, if necessary, supported by external advisors. A recommendation for resolution is then presented to the Supervisory Board.

Cooperation between Managing Board

and Supervisory­Board

The Managing Board and Supervisory Board cooperate closely for the benefit of the Group. To this end, the Managing Board coordinates the Group's strategic ap­ proach with the Supervisory Board and discusses the current state of strategy implementation with it at reg­ ular intervals. For clearly defined transactions of fun­ damental importance, the Supervisory Board has stip­ ulated reservations of consent in the Rules of Procedure for the Managing Board.

The Managing Board informs the Supervisory Board regularly, in a timely manner, and comprehensively, of all issues of importance to the Group with regard to strategy, planning, business development, risk situa­ tion, risk management, and compliance. The Managing Board explains deviations of the actual business devel­ opment from previously formulated plans and targets, indicating the reasons for this. Documents required for decisions, in particular, the annual financial state­ ments, the consolidated financial statements, and the auditors' report, are sent to the members of the Super­

visory Board in due time before the meeting. The coop­ eration between the Managing Board and the Super­ visory Board is shaped by mutual trust and a culture of open debate while fully protecting confidentiality.

In the periods between Supervisory Board meetings, the Chairman of the Supervisory Board also maintains regular contact with the Managing Board, especially the Chairman of the Managing Board, to discuss Group issues regarding strategy, planning, business develop­ ment, risk situation, risk management, and compliance. The Chairman of the Supervisory Board is informed by the Chairman of the Managing Board without delay on important events that are essential for the assessment of the situation and development, as well as for the management of the company.

Supervisory Board

The Supervisory Board of HeidelbergCement­ AG con­ sists of 12 members. Pursuant to the German Codeter­ mination Law (Mitbestimmungsgesetz, MitbestG), it is composed of an equal number of shareholder repre­ sentatives and employee representatives. The share­ holder representatives are elected by the Annual Gen­ eral Meeting by a simple majority. At HeidelbergCement­ AG, these elections are held regularly as individual elections. The employee representatives are elected by the employees in accordance with the rules of the Mit­ bestG. Further information on the members of the Su­ pervisory Board and the information required under section 285(10) of the HGB can be found in the Boards chapter.