This Report of the Supervisory Board sets out the manner in which the Supervisory Board fulfilled its duties and responsibilities in 2022. PostNL's organisational structure and remuneration report forms part of the Report of the Supervisory Board and is disclosed in the 'Corporate governance' and 'Remuneration report' chapters.
Supervisory Board chairman Jan Nooitgedagt reflects on a challenging year for PostNL.
It was a very challenging year. The macroeconomic and geopolitical environment led to high inflation and put pressure on labour costs, leading to low consumer confidence which impacted consumer spending. While this led to higher costs and lower than expected performance at Parcels, Mail in the Netherlands performed in line with expectations. The challenging and turbulent macroeconomic environment and prolonged uncertainty resulted in the company adjusting its outlook, then suspending its concrete outlook for 2022. And PostNL was subject to a criminal investigation by the Belgian judicial authorities into alleged breaches of labour law in Belgium.
At the same time, however, there were opportunities and things to be proud of. PostNL has made further progress in areas such as ESG (environmental, social, and corporate governance), while the acceleration of PostNL’s digital transformation is progressing steadily. Consumers and customers are increasingly digitally connected to the company’s platform. Also in 2022 PostNL completed the company’s first-ever buyback of 51 million shares. And PostNL’s pension plan was adjusted with an agreement benefitting both the employees, the participants of the pension funds and PostNL. These were among the topics the Supervisory Board focused on in 2022 and which have an influence on PostNL’s strategic direction and the long-term value it creates for stakeholders. And as a Supervisory Board, we were particularly proud of our people and our partners, working day and night to ensure we can deliver mail and parcels responsibly.
The situation at PostNL in Belgium has been a recurring discussion topic in the Supervisory Board, both in the presence of the Board of Management and during Supervisory Board-only sessions. The Supervisory Board was shocked by the arrest of a number of our people. We stand firmly behind our people and support our delivery partners where we can. At the same time, we will continue to cooperate fully, as we have done throughout, with the authorities' questions and investigations, and look forward with confidence to any legal proceedings.
ESG is an important topic with many different dimensions covering the environment, the responsibility companies have for their employees and their impact on the society in which they operate, and governance. The Supervisory Board believes ESG is our license to operate.
When it comes to environmental progress during 2022, PostNL improved the carbon efficiency of its own fleet by increasing the use of renewable fuels and further electrification. The company also offset the remaining carbon emissions from its own transport and that of delivery partners, cutting its carbon footprint to net zero. The Supervisory Board discussed the importance of tackling climate change and the sustainability goals set by the company with the Board of Management and senior management, including the underlying plans in reaching those goals. We were also informed by the Board of Management on the Econnections programme (more information about this programme can be found in the 'Clean kilometres' section of the 'Environmental value' chapter).
And through the Audit Committee, the Supervisory Board is continuously informed on the progress the company is making in relation to the reporting obligation of the EU Taxonomy and future reporting obligations, for example of CSRD. We are proud that PostNL has once again been ranked as one of the top three most sustainable companies in the transport and logistics sector worldwide in the Dow Jones Sustainability Index (DJSI), and that PostNL has again been placed on CDP’s A List. Sustainability as a whole was a topic of regular discussion in the Supervisory Board, and will continue to be an important topic for discussion in 2023.
The social dimension of ESG is of clear importance to the Supervisory Board, with PostNL being one of the largest employers in the Netherlands, offering thousands of people the certainty of having a job, a stable income, security and opportunities for personal development and growth. The Supervisory Board was closely involved in developments connected to the employment model, which led to the announcement in August that the company will be taking thousands of additional parcel deliverers onto its own payroll over the next few years, while encouraging delivery partners to grow and facilitate further professionalisation and sustainable development. Additionally, an interactive deep dive was held on the social policy of PostNL at the company's Waddinxveen sorting centre, in the presence of both employees and delivery partners. Further items discussed with the Supervisory Board were the labour market and the impact on the organisation, compliance as a whole, delivery quality, employee engagement and diversity and inclusion, PostNL's culture, and negotiations on the PostNL collective labour agreement and collective labour agreement for Saturday deliverers.
The Supervisory Board also discussed the ambitious and appropriate targets for the Board of Management and senior management to promote gender diversity. Changes in the Executive Committee were also discussed, and constructive discussions were held with the departing EC-members Marcel Krom and Resi Becker, and in 2023 also Liesbeth Kaashoek, but also with all newly appointed and existing EC-members. Furthermore, several members of the Supervisory Board met with the daily management of the Central Works Council, and regular informal sessions were held between members of the Supervisory Board and PostNL employees and senior management, to get their view on the company. And of course performance reviews were held with Herna and Pim.
Finally, on the governance side, we remained focused on being transparent, responsible and accountable. PostNL has clear business principles and acknowledges the importance of stakeholder dialogue. The growing prominence of ESG signals a broader societal development in which companies are accountable, directly or indirectly, for more than just their financial performance or only to their shareholders. They are accountable to society itself. This means engaging with stakeholders to find the right balance. This is a process that will take time and will not always be easy.
As can be read throughout this annual report, and which is underlined by the Supervisory Board, working together with customers to understand their needs, and how PostNL can improve its services to meet these needs, is essential in realising the ambition to be everyone's favourite deliverer. The change in customer and consumer demands and expectations is a regular topic of discussion in the Supervisory Board. The Supervisory Board was kept up to date and had regular discussions on initiatives initiated by PostNL to further develop customer value, such as the roll-out of fully-automated parcel lockers. The Supervisory Board was provided with updates on the development of the digital KPIs and investments in digitalisation. An important aspect of this is the Net Promoter Score (NPS), which is used as a key client satisfaction indicator. The Supervisory Board was updated on NPS and the NPS measurements within PostNL, and will be kept informed on the outcome of the NPS measurements. And finally, the Supervisory Board organised a vision session with an external facilitator, to get an outside perspective on the rapidly changing world, customer and consumer needs, the role of PostNL, and how the Supervisory Board’s role is connected.
Given the challenging environment, the Supervisory Board fully supports the Board of Management in securing the company’s robust financial position, the measures taken to mitigate the impact from cost increases and a softer than anticipated volume development, and the adjustment to investments to align with volumes and manage working capital strictly. Throughout the year we had in-depth and thorough discussions with the Board of Management, in particular on the business and financial performance. The need to issue trading updates during the year was extensively discussed with the Board of Management. In this light the balance sheet as a whole was a recurring discussion topic, in conjunction with the company’s credit rating. Naturally, the finalisation of the buyback of 51 million shares was discussed with the Supervisory Board, as well as the adjustment of PostNL’s pension plan which the Supervisory Board considered a good agreement for all parties involved but has some accounting implications as can be seen in this annual report.
As a Supervisory Board we fully support the company’s strategy, and the continuation of the current strategy in these challenging times. At the same time the Supervisory Board recognises that as a result of the circumstances the pace in executing the strategy needed adjusting, for instance by adjusting investments. Despite such adjustment, important elements, such as the digital transformation and sustainability goals, are still making good progress. The Supervisory Board fully supports the execution of the strategy while adhering to the company’s financial policy.
The company’s competitive position, competition and market share were regular discussion points with the Board of Management. And in June we have held the regular strategic plan update together with the Board of Management and the members of the Executive Committee. The role of the Supervisory Board as such is to challenge the establishment of the strategy in a constructive and critical manner. In light of our digital transformation, accelerating digitalisation across the company will enable us to strengthen our competitive position and further develop customer satisfaction, as well as reducing our cost base and attracting new customers. In this regard, PostNL's IT strategy, the speed of digitalisation, and cyber security were discussed regularly between the Supervisory Board, the Board of Management, the Executive Committee and management, and were the topics of deep-dive sessions, whereby we acknowledge the importance of compliance with the GDPR and digital ethics.
The year 2022 was a turbulent year for society as a whole, and for PostNL. The company has adjusted as well as possible to the difficult circumstances, making the most of the challenging situation. While also 2023 is expected to be a challenging year, we are convinced that the proper actions have been taken and will be taken by the Board of Management and we have the right people, who are motivated, and good management teams to tackle any challenges that come our way. This gives us the confidence that when macroeconomic circumstances improve, resulting in a positive effect on consumer spending and growing parcel volumes, PostNL will be ready to deliver. In this regard we are very pleased that Herna is available for a new term at this important stage for PostNL.
In closing, I would like to again thank our people for their hard work and commitment over 2022, and to compliment them for the way they are working together to overcome the new challenges we are facing. I also want to thank our other stakeholders for their trust in PostNL and for their constructive feedback. It helps us to continuously improve the way we deliver on our purpose and our strategy.