Double materiality assessment (DMA)

Implementation of the DMA began in 2023, using the guidance and interpretation of the CSRD (ESRS 1 and ESRS 2). This assessment was carried out in collaboration with an independent, external sustainability agency. In 2024, the assessment was further enriched with new insights and guidelines from EFRAG. The DMA was carried out in three steps and covers our entire value chain. The foundation of the DMA consisted of desk research, which involved reviewing internal and external documentation. The internal assessment was carried out by analysing Hydratec’s strategic documents and linking the content to the 10 topics and various underlying sub-topics and sub-sub-topics of the CSRD. The external assessment covered a selection of key competitors and customers. Publicly available documentation of these competitors and customers has been analysed to determine the priorities in ESG topics. The internal and external assessment has resulted in the relevant topics of focus for Hydratec and the sector, selected from the full list of possible topics within the ESRS. This list of topics has been used as input for determining the material topics. The material topics identified within our value chain are listed below:

In the second step, a dialogue was held with representatives of the most important stakeholders: a customer, shareholder and employees. In addition, several stakeholders were indirectly taken into account by the discussions with representative employees. These stakeholders are most likely to be affected by our operations and will have the greatest impact on meeting our commitments. In order to safeguard the interests of these groups, representative employees were selected based on the subject matter, material, knowledge and their ability to act as a representative with a broader view of (external) stakeholders. Using the insight from internal assessment, external assessment and the interviews, a final shortlist of ESG topics was drawn up.

As a final step, workshops were held with internal experts to identify the potential impacts, risks and opportunities of our ESG themes and how they can affect the performance of the companies within the Group. The materiality assessment followed the logic laid down by the CSRD. For impact materiality, the assessment was based on ‘severity’, which includes scale, scope and irremediable character, and ‘likelihood’, which is derived from the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. Two factors have been applied to weigh up the financial effects: size and likelihood. The potential impacts have also been assessed on the basis of likelihood. The process behind the assessment consisted of several validation steps involving internal experts, who understand the links between risks and opportunities, the likelihood, magnitude and character of possible financial impacts, and opportunities and risks; these experts also have a mandate to prioritise impacts. If an impact can be described both positively and negatively, it is described and assessed as negative impact.

Finally, the impacts, risks and opportunities assessed, based on the description, are plotted according to the corresponding and/or related requirements under the different ESRS standards.

By focusing on the material topics, resources and efforts are used effectively to achieve the greatest impact and meet the expectations of our stakeholders. The relevance of all topics is assessed on a regular basis and are adjusted when new information or circumstances so require. This will be done through an annual review of our DMA and progress on our ESG strategy.

Review

In 2025, Hydratec perofrmed a review of the double materiality assessment (DMA). This review reflects further improvements that have been made to the approach, whereby impacts, risks and opportunities (IROs) have been assessed separately rather than grouped by topic or sub-topic within the CSRD. This approach enables us to identify and report on only the most significant and material aspects per topic/sub-topic.

The original DMA was carefully reviewed and the information was disaggregated based on individual IROs. This resulted in a renewed materiality framework, which was subsequently checked in collaboration with internal experts to ensure it was accurate and relevant. This included not only consistency with the original assessment, but also new insights and changing priorities within the business operations and the sector. Following the review, waste management is no longer considered material.

The review in 2025 is the new basis of the double materiality within Hydratec and is therefore and is a key point in the current reporting and strategy. The DMA is subject to future revisions due to environmental and societal developments, due diligence (including continued close involvement of the stakeholders concerned), and new insights and experiences gained. In this context, it is important to mention that this sustainability statement does not include every impact, risk and opportunity or additional entity-specific reporting that individual stakeholder (group) may consider important to its own specific assessment.

Material impacts, risks and opportunities and their interaction with strategy and business model

It is important to identify the material impacts, risks and opportunities and understand the interrelationship with our strategy and business model. This assessment enables us to better address the relevant factors that affect our business and make strategic choices that contribute to the long-term value and sustainability of our organisation. It provides a solid basis for informed decision-making and strengthens our position in the market. The table on the next page provides a clear overview of our material topics, including their definitions, scope, time horizon and impact, risks and opportunities (hereinafter: “IRO”). Each topic is described with the scope of application related to the CSRD topic, scope, relevant time horizon from when the IRO becomes relevant, the associated IRO and the category of materiality. Further explanations are provided in the relevant sections and paragraphs. The underlying decision-making process, internal control procedures and the extent and manner of the process of identifying, assessing and managing impacts and risks is integrated into our overall risk management process. In accordance with previous year, the focus was primarily on risks. The opportunities are not considered material in the table below. The scope is defined for each IRO and explained in more details in the following sections.

Following the review, the IROs were assessed independently of each other. This led to refinement of the impacts, risks and opportunities under the themes of climate change, circular economy and own workforce.

The management report as referred to in Part 9 of Book 2 of the Dutch Civil Code monitors the elements from the foreword to the historical summary inclusive. This version of the annual financial reporting of Hydratec Industries N.V. for the financial year ending on 31 December 2025 is not presented in the ESEF format as specified in the regulatory technical standards for ESEF (Delegated Regulation (EU) 2019/815). The set of ESEF reports can be downloaded at the download page.