Seco S p A : Non-Financial Declaration 2023

Consolidated

Non-Financial Declaration 2023

Consolidated

Non-Financial Declaration 2023

This NFD has been drafted with the technical-methodological assistance by Message S.p.A.

INDICE

How to interpret this document

Letter to the Stakeholders

7 10

3| Giving Our All 67

1| About SECO

13

3.1| People 70 3.2| Customers87

3.3| Suppliers

97

2| Sustainability is Strategy

1.1|	Context
1.2|	From new beginnings to change
1.3|	Business sectors	4| Protecting the Environment	109
22
1.4|	Our business model
28
1.5|	Group Governance	4.1| Environmental management	111
31
1.6|	Research, development and innovation	4.2| Efficient use of natural resources	113
39
1.7|	Value sharing	4.3| Electricity consumption and emissions	116
45
49

15 18

3.4| The local community104

4.4| Circular economy and waste management119

5| Annex	125
2.1| Sustainability context50
5.1| Methodological note	125

2.2| Group Stakeholders

2.3| Materiality analysis and risk assessment

2.4| Our sustainability pillars

56 58 63

5.2| Technical Details130 5.3| GRI Content Index146

How to interpret this document

In line with last year, the SECO Group (hereinafter also the "Group" or "SECO") has prepared and adopted a Consolidated Non-Financial Statement (hereinafter also the "NFS"). The Group is governed by Legislative Decree No. 254/2016, which implements Directive 2014/95/EU of the European Parliament and Council on the disclosure of non-financial and diversity information by large undertakings defined as "public-interest entities".

In accordance with the specific requirements of Articles 4 and 5 of Legislative Decree No. 254/2016, this NFS discusses the SECO Group's performance during the three-year period from 2021 to 2023, in relation to topics concerning the environment, society, personnel, human rights, and combatting active and passive corruption. Specifically, this document analyzes the management policies implemented by the Group in reference to these topics, in addition to the results achieved, current and future risks, and the management approach adopted. It also discusses the key non-financial performance indicators that are most relevant to the Group's business activities.

This document has been prepared in accordance with the reporting principles of the Global Reporting Initiative (GRI)1 to ensure that the information provided is high in quality, and that stakeholders can reasonably assess the Group's performance. As such, data is reported in an accurate, balanced, clear, comparable, complete and timely manner and to reliably report the organization's sustainable ethos and reliability of the information.

More methodological information is available in the "Methodological Note" section of this document.

This NFS therefore opens with this guide, followed by a Letter to the Stakeholders.

1| The Global Reporting Initiative (GRI) is a non-profit organization established to help companies and entities of all sizes around the world report on their sustainability performance and measure the environmental, social, and economic impact of their business activities. The GRI Standards - which are both universal and specific in nature, i.e., relevant to the various dimensions of sustainability - are voluntary and are recognized globally as the gold standard for non-financial reporting.

The main body of the document is subsequently organized into four chapters. Each chapter has a cover page that summarizes the Group's key achievements in that area, the material topics covered2, the relevant GRI Standards3 and their connection to the 2030 Agenda for Sustainable Development Goals4, and finally, the risks and opportunities associated with the material topics covered in each chapter. Each chapter contains text boxes that provide further information on certain topics.

2| More information is provided in the "Sustainability is strategy" section of this document.

3| More information is available in the "Methodological Note" section of this document.

4| The 2030 Agenda was adopted by the 193 Member States of the United Nations at the Sustainable Development Summit in September 2015. It includes a list of 17 Sustainable Development Goals (SDGs) divided into 169 targets, and an action plan for people, the planet, and prosperity. More information is provided in the "Sustainability is strategy" section of this document.

In the first chapter, "The SECO Group", we discuss macro trends in the Group's sector of operation, the key stages of its development, including in relation to product innovation, and the sectors and markets in which it is active. We then make reference to the Group's structure, dedicating several pages to our governance model, commitment to research, development, and product innovation, and the economic value we have generated and shared with key stakeholders.

The second chapter, "Sustainability is Strategy", describes the process that led us to prepare this document and the main actions we have taken to identify material topics for the Group. This chapter also presents SECO's sustainability strategy, its compliance with the European Taxonomy, and its contribution to the achievement of the Sustainable Development Goals.

The third chapter "Giving Our All" focuses on management and social impacts, paying particular attention to the employees of our Group, customers, suppliers, and the local community.

In the fourth chapter "Protecting the Environment", we report on how we are handling the environmental impact of our business in terms of energy resources, water, waste, and atmospheric emissions.

Lastly, the "Annex" at the end of this document contains a "Methodological Note", in which the report's technical details are explored in further detail, as well as a "Technical Details" section containing quantitative data tables, and, finally, an Independent Auditors' Report.

All corporate entities coordinated by the Finance and Investor Relations departments helped write this document, demonstrating their utmost dedication and responsibility in doing so.

We hope you enjoy the report.

8|

Letter to the Stakeholders

Dear Stakeholders,

Although over the preceding two years the raw materials and electronic components shortage drove companies to boost inventories in view of significantly longer lead times, 2023 saw supply chain conditions gradually improve. Within a general economic environment featuring inflation and tight monetary policy, the normalizing of delivery times has resulted in a destocking by customers. In many sectors, this had already been completed by early 2024.

Over recent years, we have worked hard to strengthen SECO's competitive advantage by investing heavily in R&D and by acquiring strategic technologies to cover the entire value chain, from Edge computing to IoT-data analytics, to AI. This has led to a unique technological positioning, enabling us to deliver a best-in-class performance, even within a complex marketplace. In 2023, we reached Euro 210 million in sales, delivering organic growth of +4%. The continued expansion of the software business, with over Euro 22 million just over two years from its launch, has also contributed to our improved margins, with Adjusted EBITDA of approx. Euro 51 million (24.1% of revenues).

With the goal of transferring more added value to customers, our strategy has evolved over time, shifting toward increasingly comprehensive hardware solutions and developing a range of cutting-edge software for IoT-data analytics-AI. A consistent focus on innovation, an ever-improving range, supply chain control and in-house production are the key factors that allow us - year after year - to ensure our position as a partner of choice for our customers.

Digitalization has created a huge space to explore and is behind changing demands among businesses. Edge computing is not just about making hardware that can run software on a device, but rather making it smart and interconnected, to make products available to end users with a human-machine interface that simplifies interaction and improves the user experience. The use of dedicated IoT software platforms makes it possible to benefit from real-time data analysis to design new AI-powered features and services and establish new recurring-revenue business models.

To address these needs, we are building a product line based on AI accelerators, to increase computing power directly on the device, and working on generative AI and Large Language Model techniques - all with a view to enabling instantaneous and offline data analysis, but also to facilitate smoother interaction with the machine. A wide range of hardware solutions, touch displays and software services position SECO perfectly to design integrated plug-and-play systems with reduced time-to-market.

2023 saw us strengthen our long-term collaborations with a number of the leading silicon vendors, including Intel and NXP, and initiate relationships with new partners, such as Axelera on the computer vision front and Mediatek; in addition, we were selected by Qualcomm as an IIoT design center partner and for participation in the IoT Accelerator Program. We have established a relationship with Google

Cloud, enabling us to integrate Clea, our IoT software suite, into the Google Cloud Marketplace, ensuring that it is readily available and expanding its distribution channels.

We also always look to the future when it comes to the quality and efficiency of our industrial processes. We have therefore continued to invest in the latest equipment and software, while the use of SAP has been extended to companies in Germany. The adoption of a single information system further accelerates the integration of the acquired entities, which is already proceeding apace, facilitating the generation of major synergies and the maximization of the assets' potential. In just two years since the acquisition, revenues in the DACH area have almost doubled. In parallel, we have also started work on the construction of two new plants in Arezzo that will see us double our production capacity during 2026.

Acting responsibly is an integral part of the corporate culture, shared and promoted by our people. For us, sustainability means not only efficiently employing natural resources in all our activities, but more importantly using our technology - and in particular Artificial Intelligence - to promote business models with lower environmental impact, fostering automation, optimizing consumption and reducing waste by accurately and instantaneously monitoring the operation of on-field devices.

The eco-digital revolution is just beginning and major growth opportunities await us given the strong demand for digital products and solutions, in which the role of AI will be fundamental, enabling the local execution of increasingly complex computational models. Edge AI will allow our customers to launch new value-added services by fully exploiting the potential of field data: this is the environment that we envision and which guides our strategic decisions.

We look to the future with great enthusiasm, in the confidence that SECO has built a unique technology proposition on the market, capable of best tapping into the needs of companies in key areas such as EdgeAI, IoT, data analytics and artificial intelligence. We believe this will result in significant value creation for customers, shareholders and all stakeholders.

Daniele Conti ChairpersonMassimo Mauri

CEO

10|

1| The SECO Group

More than 40 years

in the business

Present in more than 11 countries

with 10 R&D centers and 5 production plants

Over 450

international customers

32%

of employees dedicated to R&D activities

7% of revenues

invested in R&D activities

Euro 216 million

of economic value generated, of which 93% distributed to stakeholders

MATERIAL TOPICS

• • Data privacy and cybersecurity

• • Business ethics and development of AI

RELATED RISKS

• • Risk of potential cyber threats and individual exposure to hacking or personal data leaks related to an increased use of connected devices and inadequate customer security management.

• • Risk of technology misuse and unethical development of artificial intelligence, leading to discrimination and bias against individuals or groups.

• • Unethical, unreliable and unfair use of AI, leading to violations of end customer privacy and other individual rights.

OPPORTUNITIES

• • Creation of a sensitive data management model in line with the highest international standards on Data Privacy & Security to protect customers and become a model for best practice in the market, making a positive impact on other companies in the sector.

• • Dissemination of technology and digitalization knowledge and skills to create positive synergies with the target area and foster virtuous growth within it.

• • Reducing cybersecurity risks and data privacy breaches through employee training programs and use of state-of-the-art Data Protection systems.

• • Reduced corruption (both active and passive) thanks to practical measures in line with current rules and regulations, creating increased transparency and accountability for SECO in relation to area governance.

• • Raising employee awareness of proper behavior and developing an ethical corporate culture based on the values of legality, fairness and honesty, leading to greater commitments and actions to benefit the local community (such as charitable donations or volunteer initiatives).

• • Active countering of international violations committed by traffickers of "Conflict Minerals" through the use of methods to control and verify the origin of materials used by the organization and pertaining to the category of "Conflict minerals".

MATERIAL TOPICS

Research, innovation and development OPPORTUNITIES

More scientific research into sustainability topics and sustainable product design - contributing to the development of the local communities and business sector in which SECO operates.

GRI

GRI 2-1, 2-6, 2-9, 2-10, 2-11, 2-12, 2-13, 2-27, 201-1, 205-2, 205-3, 207-1, 207-2, 207-3, 207-4

SDG

SDG #5 - Ensure women's full and effective participation and equal opportunities for leadership at all levels of decision-making in political, economic and public life. (Target 5.5)

SDG #8 - Achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high value added and labor-intensive sectors.

(Target 8.2)

SDG #9 - Enhance scientific research, upgrade the technological capabilities of industrial sectors in all countries, in particular developing countries, including, by 2030, encouraging innovation and substantially increasing the number of research and development workers per 1 million people and public and private research and development spending.(Target 9.5)

SDG #16 - Substantially reduce corruption and bribery in all their forms (Target 16.5)

Develop effective, accountable and transparent institutions at all levels (Target 16.6) Ensure responsive, inclusive, participatory and representative decision-making at all levels. (Target 16.7)

1.1| Context

Digital technologies have taken on an even more vital role for organizations recently, becoming key to their business growth due to the unexpected global events of recent years. These technologies have significantly accelerated organizational changes and generated numerous opportunities for development. In order to adapt to a changing landscape, companies must base their value creation on the effective use of cutting-edge, digitalization-based technologies to create innovative business models.

By 2027, it is forecast that more than 50% of IT budgets in most organizations will be allocated to connectivity, security, computing and data processing to enable as-a-service solutions and make products smart.

As part of the drive to increase digitalization, by 2025 more than 60% of IT offerings will require the use of cloud-based platforms that can enable extensive process automation and drive significant reductions in operating costs1.

It is also important to underline that the pace of change in the technology sector has increased exponentially in recent decades. It has never been more important for companies to reinvent themselves and adapt to the changing priorities and demands of their customers and employees. In the years to come, Tech companies will play a leading role in supporting businesses in the integration and use of innovative technologies, as increasing digitalization becomes an ever-more integral part of our society.

Both businesses and government agencies have seen a growing need to strengthen their digital presence, in terms of both the services they offer and the optimization of internal processes. This has led to smoother and more seamless interaction with customers and employees.

Digital integration is therefore not simply a key factor in gaining a competitive advantage, but is also crucial for the very survival of companies in any industry. These entities will be required to redefine their services and functionality, embracing solutions that are technologically innovative.

Incorporating these technologies and advanced features into business models is no mean feat. It requires significant expertise in technology and supply chain management. As such, being able to rely on highly specialized technology partners who offer comprehensive, customized hardware-software solutions (one-stop shops) is incredibly valuable. By adopting this approach, customers can take advantage of cutting-edge technologies while reducing both the time-to-market and execution risks often associated with technology investments.

While geopolitical issues and trends in key macroeconomic indicators have affected many sectors, recent years have demonstrated that access to a digital infrastructure is no longer a privilege, but an unavoidable necessity.

The technology market in 2024 is expected to be driven by rapid growth in the APAC market, strong demand for software, the many possibilities offered by generative AI, and/or the growing need for sustainable and digital innovation.

A general recovery is also expected for the general economy as energy prices gradually fall, supply chains recover and inflation decreases. Global technology expenditure is expected to hit USD 4.7 trillion in

1 | IDC FutureScape: Worldwide IT Industry 2023 Predictions

2024, up 5.3% on 2023, a significant improvement on growth of 3.5% in the previous year2.

For those organizations looking to stand out in data-driven transactions, investment in IoT projects is an essential element.

Against this backdrop, enterprise spending on IoT technology 2023 reached more than USD 200 billion for the European market alone.

IoT Analytics predicts that the IoT market will grow at a compound annual growth rate (CAGR) of 19.4% between 2022 and 2027, reaching USD 483 billion.

IoT SecurityIoT HardwareIoT ServicesIoT Software

Figure 1: The IoT market from 2019 to 2027

The European Green Deal and the "Fit for 55" package of initiatives

Totale

Digital innovation can help bring positive change to society, to the environment and to the economic model under which we operate.

The Green Deal views technologies as having the potential to tackle climate change and environmental challenges in general, supporting the EU's transformation into a modern, competitive economy by improving energy efficiency, circularity, and sustainable mobility solutions.

From a societal point of view, if used properly, digital innovations can help provide an increasing number of people with access to digital tools, allowing them to consume more informative and educational content as a result.

Finally, digital technologies play an important role in the economic sphere as they can optimize production processes, allowing us to use natural resources more efficiently while streamlining the corporate value chain as a whole.

2| Global Tech Spend in 2024, Forrester

Future sector developments3

Finally, since the 17 Sustainable Development Goals defined by the United Nations in the 2030 Agenda are intrinsically linked to the adoption of sustainable technologies, the future developments that digital technologies can bring to the area of environmental and social sustainability are particularly interesting:

• 1. Internet of Things (IoT) to manage environmental and social issues:

  • • Introduction of widespread early-warning systems (e.g. networked devices - phones, computers, televisions that send emergency alerts);

  • • IoT devices to monitor air quality and biodiversity;

  • • Use of IoT sensors to monitor and manage use of resources such as water and energy in real time.

    2. Electric vehicles and sustainable mobility:

  • • Developments in electric vehicle battery technology to increase range and reduce charging times;

  • • Development of smart charging infrastructure and traffic management systems to encourage sustainable mobility.

    3. Renewable energy:

  • • Improvements in energy storage technologies to overcome the challenges of intermittent renewable supply;

  • • Increased efficiency and reduced costs of renewable energy generation technologies (e.g. development of photovoltaic cells to increase solar panel efficiency);

    4. Artificial intelligence (AI) for environmental optimization:

  • • Climate modeling to illustrate and visualize current climatic conditions;

  • • Climate risk analysis, identifying how exposed value chains are to such risks, and modeling predictive systems to prevent environmental accidents and better manage natural resources.

• 5. Augmented and virtual reality to visualize climate impacts, engaging users and helping to increase public awareness of and involvement with the challenges created by climate change.

When drafting this NFS, we first analyzed the context and industry in which SECO operates. This document highlights the direction taken by the SECO Group to tackle these challenges.

3 | Sources:

Innovation and Adaptation in the Climate Crisis: Technology for the New Normal of the World Economic Forum, January 2024 10 Breakthrough Technologies 2024, MIT Technology Review

CleanTech: what are they and what role do they play for ESG?, ESG360, December 2023

1.2| From new beginnings to change

SECO's story begins in a garage in Arezzo, Italy. It was the 1970s, and Daniele Conti and Luciano Secciani had just turned twenty when - unbeknownst to them - they embarked on a journey that would change the world as they knew it.

They had shared an innate passion for electronics and a keen entrepreneurial spirit since they were children. As they grew up together, surrounded by circuit boards and schoolbooks, they realized they could turn their hobby into something much bigger. SECO was established in April 1979 as an electronics workshop. In under a decade, it established itself as a leading player in the electronics industry, thanks to its ability to create solutions for various applications, including small systems for manufacturers of jewelry-making machines and custom solutions for the transportation industry.

Daniele and Luciano's passion for the very first personal computers imported from abroad prompted them to develop SECO SYSTEM 210. It was the very first SECO computer and was showcased at SMAU, the leading Italian trade fair for IT and communication technologies, where it was nominated for the "Best Design" award, along with other innovative products. After gaining experience with personal computers, the duo soon had the idea of utilizing their knowledge in the industrial sector. It didn't take long for them to develop the world's first industrial PC containing a Eurocard circuit board.

After that initial personal computer, SECO continued to develop various solutions based on miniaturized computers and touch panel systems. These technologies have allowed SECO's customers to digitalize their devices and make them "smart." Through data generation and processing, they have facilitated the creation of new features for end users in product categories spanning industrial machinery, gym equipment, and

1979

THE BEGINNING

Daniele Conti and Luciano Secciani found SECO

1991 > 2008

GROWTH

Launch of several standard and custom products, soon becoming a national trailblazer in the embedded sector

2012 > 2018

INTERNATIONAL EXPANSION

2018 > 2020

SECO 2.0

E CRESCITA € 10m capital increase by Fondo Italiano di Investimento to support the international expansion of the Group

Opening of sales offices in

USA, India, Taiwan

FONDO ITALIANO TECNOLOGIA

New HQ, new production plant, new top managers to strengthen the management team

M&A

Aidilab, Fannal, InHand, Ispirata and Hopenly join the SECO Group for an increasingly comprehensive range of IoT solutions

food and drink vending machines. SECO's growth has been driven by its dedication to assisting customers with their digital transformations using technologies. Currently, the company has revenues of over Euro 200 million, an ever-evolving portfolio of software and hardware solutions, and a robust global base of over 450 customers.

The Group is now a point of reference for high technology, computer miniaturization, and IoT and Artificial Intelligence services. With a strong focus on industry, SECO is an international company with plants located in 11 different countries. SECO concentrates a significant portion of its operations in five production plant located in Germany, Italy, and China. This strategic approach has proven to be beneficial, as it allows the Group to directly oversee quality control standards and offer superior service to customers. SECO's internal production planning allows it to optimize delivery times, despite the supply chain obstacles characterizing the current market.

Much has changed for the Group since April 1979, but the SECO team's desire for innovation and excellence has never waned.

Figure 2: Key moments in the Group's history

2022

2021

STOCK EXCHANGE LISTING € 100m new capital raised with the listing on the Euronext STAR

Milan segment

IoT BUSINESS

Lauch of CLEA, the One-stop software platform for IoT-AI

M&A

SECO further expands its reach with ORO Networks (AI skills) and Garz &

Fricke Group (strengthening presence in the DACH area and industrial infrastructure)

STRATEGIC

PARTNERSHIPS

Expansion of the ecosystem of partners to extend Group's offerings to the world of smart cities (Pizzarotti), cybersecurity

(Exein), industrial automation pplications (Camozzi Digital)

and sensors (Libelium)

2023

NEW TECHNOLOGIES AND

COLLABORATIONS

Launch of Studio X, a generative AI platform to automate first and second level support activities.

SECO is selected as Qualcomm's IoT design center partner.

7-Industries joins SECO with a capital increase of €65 million to support Group's expansion plans.