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RevisionspåtegningÅrsrapport40296638WS Audiology A/SNymoellevej63540LyngeDK2019-02-28Allerød2020-10-012021-09-302019-10-012020-09-302022-01-04Casper Moltke-LethEric Alain BernardSøren Westh LonningChief Executive OfficerChief Financial OfficerMarco GadolaJan TøpholmAdam WestermannEgbertus Adrianus Johannes van EchtJes Carøe Munk HansenJulian TøpholmKaren Naomi PrangeKasper Grundtvig Knokgaard Malou AamundMarcus Eckart Friedrich Karl BrenneckeChairmanVice-Chairman3396355633963556Deloitte Statsautoriseret RevisionspartnerselskabDeloitte Statsautoriseret RevisionspartnerselskabWeidekampsgade62300København S33963556Deloitte Statsautoriseret RevisionspartnerselskabWeidekampsgade 62300 København STo the shareholders of WS Audiology A/SOpinionWe have audited the consolidated financial statements and the parent financial statements of WS Audiology A/S for the financial year October 1 2020 to September 30 2021, page 68-121, which comprise the income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including a summary of significant accounting policies, for the Group as well as the parent. The consolidated financial statements and the parent financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the parent financial statements give a true and fair view of the Group’s and the parent’s financial position at September 30 2021 and of the results of their operations and cash flows for the financial year October 1 2020 to September 30 2021 in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act.Basis for OpinionWe conducted our audit in accordance with International Standards on Auditing (ISAs) and the additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements and the parent financial statements section of this auditor’s report. We are independent of the Group in accordance with the International Ethics Standards Board of Accountants' Code of Ethics for Professional Accountants (IESBA Code) and the additional requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.Management is responsible for the management commentary. Our opinion on the consolidated financial statements and the parent financial statements does not cover the management commentary, and we do not express any form of assurance conclusion thereon. In connection with our audit of the consolidated financial statements and the parent financial statements, our responsibility is to read the management commentary and, in doing so, consider whether the management commentary is materially inconsistent with the consolidated financial statements and the parent financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the management commentary provides the information required under the Danish Financial Statements Act. Based on the work we have performed, we conclude that the management commentary is in accordance with the consolidated financial statements and the parent financial statements and has been prepared in accordance with the requirements of the Danish Financial Statements Act. We did not identify any material misstatement of the management commentary.Management is responsible for the preparation of consolidated financial statements and parent financial state- ments that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act, and for such internal control as Management determines is necessary to enable the preparation of consolidated financial statements and parent financial statements that are free from material misstatement, whether due to fraud or error. In preparing the consolidated financial statements and the parent financial statements, Management is responsible for assessing the Group’s and the parent’s ability to continue as a going concern, for disclosing, as applicable, matters related to going concern, and for using the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements unless Management either intends to liquidate the Group or the Entity or to cease operations, or has no realistic alternative but to do so.Our objectives are to obtain reasonable assurance about whether the consolidated financial statements and the parent financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and these parent financial statements. As part of an audit conducted in accordance with ISAs and the additional requirements applicable in Denmark, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the consolidated financial statements and the parent financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the parent’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the consolidated financial statements and the parent financial statements, and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group's and the parent’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements and the parent financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the entity to cease to continue as a going concern. • Evaluate the overall presentation, structure and content of the consolidated financial statements and the parent financial statements, including the disclosures in the notes, and whether the consolidated financial statements and the parent financial statements represent the underlying transactions and events in a manner that gives a true and fair view. • Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.Copenhagen2021-12-09Kirsten Aaskov MikkelsenNikolaj ThomsenState-Authorised Public AccountantState-Authorised Public Accountantmne21358mne33276Overview of the global market Our purpose is to serve all people suffering from hearing loss worldwide. According to the WHO, over 430 million people have disabling hearing loss requiring rehabilitation – and nearly 700 million people will suffer from this disability by 2050. Fewer than one in five people with disabling hearing loss is currently wearing a hearing solution. The hearing aid market is expected to grow on average 5-6% annually with an estimated 18 million units sold worldwide in 2021. The largest markets are the US, Germany, France, Canada, the UK, Japan and China. The markets are very different due to regulation, infrastructure and other regional conditions. The adoption rate of hearing aids therefore varies significantly from 40% in the most mature markets to less than 10% in emerging markets. Our market is developing at a rapid pace and WSA is uniquely positioned for both scale, growth and leadership, enabling us to pursue our purpose of bringing wonderful sound to all and becoming a market leader. 4 types of hearing solutions Hearing loss Over-the-counter (OTC) hearing aids sold directly to consumers without prescription Hearing aids fitted by hearing care professionals and dispensed by licensed audiologists Bone-anchored hearing aids (BAHA) covering surgical titanium implants Electronic cochlear implants surgically inserted A complex and highly resilient market The global market for hearing aids is comprised of multiple sales channels and points of contact with professional customers and end consumers. The adoption rate in the relevant hearing-impaired population, reimbursement schemes and the overall maturity of markets varies significantly across WS Audiology’s geographical areas. In addition to the well-established channels where consumers are supported by hearing care professionals, over-the-counter (OTC) hearing aids are being introduced in some markets. OTC hearing aids are sold directly to consumers without prescription, and the products address mild-to-moderate hearing loss. In October 2021 – after the end of the financial year – the US Food and Drug Administration (FDA) published its proposal to establish a new category of OTC hearing aids in the US. The final version of the proposal is expected to come into effect in the second half of 2022. During the financial year 2020/21, the French hearing aid market was significantly stimulated by the introduction of carenew regulation, which established full hearing aid reimbursement and drove market growth in excess of 50% in the first nine months of 2021. The change increases affordability and is expected to have a significant and lasting impact on the adoption rate and market development in France for years to come. COVID-19 continued to impact the global market in 2021 with significant variation across regions. The US market was severely impacted initially, but recovered as restrictions eased. The global market for hearing aids saw good recovery in 2021 and proved highly resilient against economic turbulence. Key channels for consumers • Independent hearing clinics • Government clinics and hospitals • Manufacturer-owned retail stores • Specialized hearing retailers • Big retail chains • Opticals • Online • Managed care Strategy Our strategy focuses on driving market expansion by innovating beyond the product and leading in high-growth segments. It is fueled by a clear purpose and supported by two unique audiology platforms – Widex and Signia – as well as different business models designed to encourage and enable more people to live a better life. We are unlocking human potential by making wonderful sound part of everyone’s life – with the ambition to become a market leader. 7 million people with hearing loss were served with our hearing aids since the inception of WSA in March 2019. Innovation is at the core of our business. We aim to go beyond what is expected and break down stigma and other barriers to hearing health. In 2021 we launched the Signia Active Pro hearing aid shaped like an earbud, targeting a younger audience that doesn’t find traditional hearing aids appealing. But innovation is more than products and features, aesthetics and design. We also innovate in the consumer journey space offering online hearing diagnostics and remote fitting – an area catapulted by COVID-19, and through digital connectivity with wireless charging and phone connectivity making people’s lives easier. At the same time we work on realizing leadership in high growth areas. We aim to leverage our presence across sales channels to build strong market positions in the fastest growing segments of our global industry. Among our focus points are online fitting and testing, managed care in the US, emerging markets and working with fast-moving retailers. In May 2021, hear.com N.V., part of the WSA Group, announced that it had postponed plans for its initial public offering in the US due to challenging equity market conditions. The company will continue to monitor the market for more stable conditions. In July 2021, we acquired Auralcare, a US retail chain with 110 locations under the My Hearing Centers brand. We also acquired Koalys during the financial year, a start-up offering a range of digital, cloud-based, and portable audiometry solutions. This acquisition helps to further strengthen the company’s leadership in tele-audiology. Purpose Wonderful Sound for All Sustainability Our responsibility, social impact, and compliance People Strategy Our goals, must-win battles, and focus areas Culture Our values, behaviors, and ways of working Ambition Become a market leader Business model The foundation that enables our strategic efforts is our reinforcing ecosystem of multiple brands that support both the hearing impaired and hearing care providers. We are leveraging multiple sales channels and a broad range of brands to cover all segments of our industry. Our innovative hearing devices and solutions are developed on two separate audiology platforms to provide consumers with true choices. We sell our solutions through wholesale, retail, online and managed care in the US – as well as innovative diagnostics that increase awareness. Innovation and R&D WS Audiology is a global leader and pioneer in hearing aid innovation with one of the industry’s largest R&D organizations. More than 900 employees work across three main R&D centers in Denmark, Germany and Singapore to continuously develop new solutions. Innovation is the fuel for our five major brands – Signia, Widex, Rexton, Vibe and AudioService. In 2020/21, we increased our investments in innovation by 12% with R&D expenses of EUR 142 million, corresponding to an R&D to sales ratio of 7%. The continued investments contributed to the successful launches of several new products, including iF Design Award winner Signia Active Pro and the new two-processor Signia Augmented Xperience platform. There were also leading artificial intelligence innovations in the My Sound Application from Widex. As part of the merger integration, WS Audiology launched a program in 2019 to build the strongest R&D powerhouse in the industry, with unified processes and improved performance and output. Despite the disruption from COVID-19, these efforts continued in 2020/21. WS Audiology strengthened the specific competencies and capabilities in each of the three R&D centers and the utilization of these skills across the Group. WS Audiology’s long-term commitment to innovation and its position as a pioneer in the industry was further underlined in April 2021 when we were ranked as the top patent applicant for conventional hearing assistive technology by the World Intellectual Property Organization (WIPO) in its assistive technology trends report. It uses patent and other data from 1998 to 2019 to provide factual evidence on innovation in the global assistive tech landscape. Innovating for five brands WSA is unique by having two distinct audiology platforms: Widex and Signia. Each platform has its own exclusive features, resulting in hearing aids that are truly differentiated. Thanks to PureSound Technology, Widex is delivering the most natural sound. Signia launched an unparalleled new platform in May 2021 called Signia AX. It uses two separate processors for the first time: one for sounds in focus, like a conversation partner’s voice, the other for surroundings. Widex and Signia each have dedicated teams of engineers constantly working on improving products and platforms. On top of that we have a common dedicated R&D team focused on cre- ating features and add-ons, which can be leveraged by all our brands. Here we have a fine-tuned, multi-stage design process, where new ideas are sourced from all over the organization, rated and developed. Innovations are categorized within Audiology Apps, Fitting Software, Embedded Software, Hardware or Mechanics. Some innovations require implementation in multiple fields, and Systems Engineering is used to ensure coherence in this process. WS Audiology adheres to a platform development approach to reduce the development time per product and distribute costs on several products. When a new platform is developed – such as Signia Augmented Xperience launched in May 2021 – a range of 10-20 products with varying features are typically derived from it. 900 More than 900 employees work in our three main R&D centers Our brands WS Audiology has a strong brand portfolio with five distinct brands. Rooted in unparalleled innovation and decades of experience, our brands are managed independently and built on different platforms with their own unique technology inside. We take a dialogue-based approach and engage closely with our stakeholders to ensure continued development and refinement. We conduct research, surveys, and interviews to establish valuable and actionable insights into the needs, wants and aspirations of consumers and customers. Through strong local retail brands, we offer the most differentiated choice of brands to consumers. “To deliver sound so natural, people forget about their hearing loss.” Widex As an industry leader in sound quality, it is natural that Widex continues to leverage decades of heritage in all solutions and innovations. Widex Moment is the embodiment of ultimate sound. Through leading audiological research and quality craftsmanship, customers are served with the most natural sound in the industry alongside cutting edge AI personalization. Widex Moment’s lead feature, PureSound, delivers unparalleled signal quality and excites both professionals and end users alike around the globe, most recently in China and Latin America. Widex shares its passion for sound not only through its products but also via the Sound Ambassador program that engages with inspirational musicians and composers. During the financial year the positive feedback from customers, consumers and media continued to grow. Moment has become the new industry-wide benchmark for superiority in sound. The rechargeable mRIC has become the most popular Widex Moment form factor. And the Widex My Sound App was added to the rich portfolio, using AI to fine-tune Widex hearing aids to individual needs. Signia This year saw the birth of Signia’s new brand identity. The brand took on the challenge of transforming a low engagement category, strongly stigmatized, with a low penetration rate and a long purchase decision time, into a likeable category. To achieve this ambitious goal, the brand seeks to motivate people, and empower them with information that is easy to understand and act on, to turn hearing loss into an advantage. Signia supports consumers whose expectations are higher than ever as they face the challenges of modern life and strive to perform at their best while working longer and playing harder. The iconic innovations of Signia lift hearing performance to ensure that consumers do not simply regain hearing – but hear better than ever. At the core of the brand are consumer driven innovations. In 2021 Signia introduced four game changing “firsts” in the industry: • Active Pro, the first fully fledged medically graded hearing aid in the shape of an earbud. • Motion Charge & Go, the first rechargeable Super Power device with motion sensors and more than 60 hours of battery life. • Augmented Xperience, the first audiology platform with dual processors that provides outstanding speech clarity while being fully immersed in the surroundings. • Insio AX, the first contactless, rechargeable custom hearing aid with motion sensor and streaming capability from Apple and Android. MISSION: “Enhancing human performance through iconic innovations that shape the prescription audio category.” Rexton During the financial year, Rexton was relaunched, based on a unique brand positioning that underlines the reliability of the brand. Rexton hearing aids are built to be worn wherever people work and play. They go where wearers need to go, and never let them down. They’re built to perform in all conditions, using proven hearing technology that is tested to the highest standards. We successfully introduced Rexton’s M-Core platform, resulting in a Share of Wallet of 28% at key customer Costco. Throughout the year, the brand expanded to new markets: Poland, South Africa, and the Netherlands. During EUHA, the European Hearing Aid Association’s exhibition, Rexton introduced its new BiCore platform and welcomed Germany as a new market. At the same event the Lifeproof Campaign was kicked off to drive the brand positioning “Rely on Rexton”. Other products that we introduced during the financial year were Rexton Assist, to optimize user experience, and Rexton Telecare, enabling remote fitting of new and existing hearing aids. MISSION: “To deliver proven hearing technology in the most reliable way.” Audio Service Audio Service partners with diverse companies, from independent audiologists to retail brands, to build successful private label hearing businesses. Demand for hearing aids is growing, and consumers are looking for solutions in a wider range of retail channels from brands they trust. The Audio Service business under WSA-owned brands (AS, Coselgi and A&M labels) had a robust double-digit growth, driven mainly by the key continuation of the new G6 platform for the AS label, plus other launches like the Coselgi Mojo range. The Coselgi and A&M brands both went through a brand revitalization process, getting a new brand image and specific new campaigns, resulting in additional rollouts of these brands in a few new markets. The private label business of Audio Service also had a solid performance thanks to strong customer demand, resulting in several additional labels added to the existing portfolio in key markets. MISSION: “Partnering to build successful hearing brands and businesses.” Vibe In China and Japan, Vibe hearing aids are sold online through eCommerce marketplaces such as Tmall and Amazon. Vibe’s unique online software tools help customers have access to online hearing screenings and hearing aid fittings. The introduction of Vibe perfectly fits the digital customer journey in both markets and no doubt creates a new segment of its own kind. Both markets keep double-digit strong unit growth compared to the last financial year. MISSION: “Making better hearing as easy as it can be.” Sustainable business Goal 1: Awareness We make people aware of hearing health targets and hearing solutions that fit personal needs. Goal 2: Accessibility We make it easy to get hearing solutions wherever people are. Goal 3: Affordability We bring relevant hearing solutions to all people, through technology and commercial innovation. Goal 4: Diversity & inclusion We foster the inclusion of people with diverse views, opinions, and backgrounds. Goal 5: Environment We take care of the planet we live on, and we therefore evolve towards circular business models. Employee engagement We ensure high workplace satisfaction and actively engaged employees, while reducing employee turnover. Talent attraction, development, and retention We attract, develop, and retain the talents who are the key drivers to deliver on our purpose. Human rights & labor rights We respect human and labor rights. This is fundamental to our way of doing business. Suppliers code of conduct and due diligence We ensure our suppliers live up to our expectations related to environment, human rights, labor rights and business ethics. Business ethics & anti-corruption We are committed to working against corruption in all its forms, by always acting professionally, fairly and with integrity. Governance & accountability We set up a strong sustainability governance to ensure the sustainability programs are anchored in the organization. Raising awareness and breaking barriers Many people are not aware of their hearing loss. Through our retail network and online platforms, we make hearing tests available to people, wherever they are. At WSA one of our goals is to raise awareness of hearing loss and the difference good hearing health can make to people’s lives. Shoebox, offering portable cloud-based solutions, allows people to take tests virtually anywhere. This solution was originally designed to serve remote areas and has proven invaluable in enabling hearing testing during the COVID-19 pandemic. In May, we also welcomed Koalys to WSA. Koalys offers a range of digital, cloud-based, and portable audiometry solutions. We will provide professional remote audiological assistance that enables consumer engagement using our digital touchpoints, and hence further enhance awareness and accessibility of hearing care. "Improving awareness is key to improving hearing health. At WSA our ambition is to reach 500 million people through Shoebox online and offline testing by 2030. Vibe makes hearing easy and accessible Through technology and commercial innovation, we bring complete and affordable hearing solutions to new markets. In China, Vibe hearing aids are directly available for sale online through eCommerce marketplaces such as Tmall and JD.com. Customers can receive remote hearing care through online hearing screenings and hearing aid fittings. Our Vibe customer service employees are carefully trained to provide the highest quality of service. Vibe’s unique online software tools are also made available to distribution partners to provide their customers with the same high quality of remote hearing care. Vibe makes hearing aids that can be customized to individual hearing needs. This is especially important for people who do not have easy access to professional audiological care in China where the number of hearing care professionals is much lower per capita than in more developed markets such as the US and Germany. Moving towards our purpose: Wonderful Sound for All 2.3 million people served with hearing aids in China, India, Southeast Asia, South America, Eastern Europe, Middle East, and Africa, since the inception of WSA in March 2019. 30% more people served with Vibe hearing aids in China this year compared to last year. People Our employees are paramount to the success of WS Audiology, and we strive to provide them with a great place to work and grow. We recognize that we are also responsible for the impact of our business activities on our partners and the people in the communities in which we operate. Values and behaviors In March 2021, we introduced a new set of values and behaviors based on input from more than 1,000 employees. The new values and behaviors play a crucial role in the culture journey we embarked on in late 2020 while navigating the COVID-19 pandemic. Employee engagement We want to ensure high workplace satisfaction and actively engaged employees, while reducing employee turnover. We therefore strive to make WS Audiology a great place to work and grow. In pursuit of this ambition, we launched WSA Heartbeat in 2021 as a frequent employee survey, which replaces our annual engagement survey. In June 2021, we completed our first WSA Heartbeat pulse where we saw a significant increase in engagement levels, indicating that our culture journey is on the right track. We will continue to monitor engagement levels on a regular basis. Our new set of values and behaviors represents what we believe in and how we strive to think and act everyday Values What we believe in Going beyond together We value the inclusion of diverse views, opinions and backgrounds. We collaborate to reach shared goals, we celebrate together and we all take responsibility for creating a cool place to work. Pioneering for better solutions With an entrepreneurial mindset, we challenge the status quo to improve people’s lives around the world, and we always aspire to be at the forefront of innovation in every sense. Passion for impact We always want to make a positive, sustainable difference for our customers, colleagues and company. We take pride in our work, and when we do something, we do it right. Behaviors How we think and act every day We proactively strive to create a trustful work environment, where everyone’s input is valued. We work together as one team, across functions and borders, helping each other to be successful. We engage with diversity and inclusion in everything we do. We care for each other and contribute to having fun at work. We anticipate customer and consumer needs and desires. We take calculated risks, and we learn from our mistakes. We prioritize time and resources for the most impactful ideas, and we work with speed and agility to realize them. We innovate beyond the product. We are results-oriented and trust each other to take ownership of work and decisions. We empower each other and set clear expectations at individual and team level. We enable personal growth with clear development plans, stretch opportunities and provide fair and respectful feedback. We act with integrity, transparency and high ethical standards. Our responsibility Our Code of Conduct reflects our belief that respecting human rights is fundamental to doing business. We support the 10 principles of the United Nations (UN) Global Compact, the UN Guiding Principles on Business and Human Rights (UNGP), and the principles defined within the International Labor Organization Core Conventions. We are aware of the risks of human rights violations across our value chain and act on this responsibility by exercising our influence to promote and protect the human rights of all those we work with. We continue to monitor and mitigate any labor rights risks through complying with national legislation, having open and honest relationships with employees, and respecting their right to be informed, heard and to voice their concerns in an open and transparent manner. 15% of employees are covered by collective bargaining agreements. Child labor and forced labor The risk of child labor and forced labor in our own operation is low, as we deploy thorough hiring procedures, ensuring that we have no child labor or any forms of forced or compulsory labor in WSA. Relative to our own operation, the risk of child labor and forced labor in our external supply chain is higher but strictly managed through our supply chain due diligence. Freedom of association and collective bargaining We respect our employees’ freedom of association and their rights to collective bargaining, also in countries of operation where these rights are not inherent. The employee representatives on workers councils in selected countries continue to facilitate the dialogue between the company and employees regarding employment conditions. Human rights impact assessment We completed a human rights impact assessment of WS Audiology in 2021, with the support of external human rights experts from BSR. The assessment covers the full scope of WSA’s corporate operations and value chain, from supply chain to sales, marketing, and distribution. Through this assessment, we get a more comprehensive picture of the salient issues relating to human rights, we review our corporate policies related to human rights, and identify gaps in our human rights due diligence approach. This serves as an important input for us to become fully aligned with UNGP. Health and safety WS Audiology is committed to providing safe and healthy working conditions for our employees, contractors, and visitors, and systematically eliminating hazards and reducing risks as emphasized in our Environmental, Health & Safety Policy. We have established a management system in accordance with OHSAS 18001 at our manufacturing sites in Singapore, China, Poland, and Denmark, covering the design and production of hearing aids and their components. Local community engagement Helping others fully participate in life again is a great motivation for many of the employees who work for us. We adhere to an “every-step-counts” approach and encourage all employees to participate in any activity that makes a positive difference. We have a broad scope of engagement that has been driven by the passion of our people. Taking care of the planet Our environmental and climate impact is mainly related to material consumption waste from our operations and packaging, electronic waste generated when our products are replaced, as well as from overall greenhouse gas emissions. Even though our products are small and energy consumption is limited, we still endeavor to improve resource efficiency and minimize our impact. Our Environmental, Health & Safety Policy underlines our commitment to ensuring that our product life cycle contributes to a sustainable future by continuously reducing our impact on the environment and climate. Clean production Our main production sites in Singapore, China, Poland, and the Philippines have implemented environmental management systems according to ISO standards. Our production site in Denmark will be certified in the financial year 2021/2022. We monitor relevant laws and regulations to ensure compliance and work to continuously reduce water and energy consumption as well as waste generation. The effectiveness of our environmental management system is reviewed by management and through internal and external audits. We ensure that hazardous waste is collected and disposed of in accordance with applicable regulation, and we continuously improve the data quality pertaining to non-hazardous waste and work to increase the recycling rate. The production of hearing aids is not intensive in terms of energy or water consumption. However, we are committed to reducing energy consumption and increasing the use of renewable energy. One of our two headquarters, just outside Copenhagen in Lynge, was designed to impact the surrounding environment as little as possible. The building has a geothermal system that uses groundwater as a heat reservoir to store heating and cooling for an entire year’s consumption. A wind turbine rises above the headquarters, delivering excess energy to the electricity grid. The building is carbon neutral. Rechargeable hearing aids are not only more convenient, but also better for the environment WS Audiology has always been a pioneer in hearing aid technology and the inventor of many world firsts – especially in the field of rechargeable hearing solutions, which saves hundreds of disposable batteries per hearing aid user. We have performed a thorough lifecycle assessment to compare the environmental impacts of rechargeable and non-rechargeable hearing aids. The lifecycle assessment is carried out according to the ISO 14040/44 standards. The environmental advantage of rechargeable hearing aids is clear and applies to all 18 environmental categories, including climate change, fossil depletion, and human and eco-toxicity. Lifecycle assessment Cradle-to-gate Raw materials, parts and components supply Production Production of hearing aids, accessories, and batteries Dispatch packaging Packaging of hearing aids for customers and consumers Transport Transport hearing aids to customers Usage phase Consumers use hearing aids for an average of 5.5 years End-of-life treatment Disposal of hearing aids, accessories, and batteries Non-rechargeable 2 hearing aids, 670 Zn-air batteries 65% Rechargeable hearing aids have 65% less environmental impact compared to non-rechargeable hearing aids 1,2,3,4 Rechargeable 2 hearing aids, 1 charging unit 2.3 Li-ion batteries electricity used for charging the batteries 1 Comparing functionally equivalent devices. 2 Based on functional unit of Life Cycle Assessment: Use of two hearing aid devices for 12 hours per day with an average use profile over a period of 5.5 years in the EU-28. 3 Average savings across impact categories for Life Cycle Assessment. 4 Life Cycle Assessment includes 18 impact categories. Assessment based on data from Signia. Circular business model We are committed to transitioning to a circular business model re-using materials to the widest extent possible. Over 60% of the returned hearing aids components are reused to repair hearing aids, where all reused parts have been thoroughly tested in accordance with applicable standards and permissible regulatory frameworks. As far as possible, the remaining parts of returned hearing aids are sent for recycling to close the circular loop, avoiding waste. Greenhouse gas emissions We are working to improve our energy efficiency and reduce our greenhouse gas emissions, even though the emissions of our own operation (scope 1 and 2) are limited. Most of the emissions are in the value chain (scope 3). 100% of the electronic waste from our repair center in Philippines is sent for recycling. Science-based targets We have committed to setting science-based climate targets in line with limiting the global temperature rise to 1.5° C. Our ambition is that 100% of the electricity directly consumed by WSA should come from renewable sources and we aim to be carbon neutral in our own operations by 2025. Since June 2021, our Singapore headquarters has been powered by 100% renewable electricity. This means the share of renewable electricity used by WSA as a whole will increase from 16% last year to 23%, bringing us closer to our commitment of using 100% renewable electricity by 2025. Business ethics We are building true global leadership in our industry on a foundation of healthy business ethics and a well-structured approach to compliance across our Group. Anti-corruption We are committed to working against corruption in all its forms, by always acting professionally, fairly and with integrity. We take a zero-tolerance approach to bribery, corruption and fraud. This is entrenched in our Code of Conduct (“Code”), which guides the organization and employees in conducting their day-to-day business. Anti-corruption considerations are integral to our business partner handling process, and we continue to ensure that our partners acknowledge and respect their responsibility when doing business with us. The main risks related to our activities include employees’ and business partners’ violation of our anti-corruption commitment and the resulting potential legal and financial consequences. We have established multiple measures, such as vetting of all suppliers and ad hoc evaluations, to ensure that there is zero tolerance of any corrupt behavior in our business. In addition, all WS Audiology employees must read and become familiar with our Code, as its principles need to be part of their daily work. We take a zero-tolerance approach to bribery, corruption and fraud. Anti-competitive behavior We adhere to anti-trust laws and ensure fair competition, achieving our market position through the outstanding quality of our products as well as our performance. We do not discuss any anti-trust relevant information with competitors, suppliers, or customers. Further, we do not participate in any discussions or enter into agreements with competitors that could result in a restriction of competition, or use our position in the market to discriminate against others through unfair business practices. In addition, our ethical guidelines in competitive intelligence govern us when collecting information about competitors in an ethical manner. Our approach is aligned with SCIP*. * Strategic & Competitive Intelligence Professionals (SCIP) Whistle-blower mechanism We foster an environment where our employees can ask questions and raise issues or concerns about business ethics and other topics without fear of retaliation. Employees can raise concerns to their managers, Legal Compliance Advisor, Regional Compliance Officer and Human Resources Department. Employees and third parties can raise concerns anonymously to tell-us@wsa.com and/or through the WSA Compliance Portal. The WSA Compliance Portal is available in 15 languages. Reports in the WSA Compliance Portal are done through an externally hosted internet portal by an independent third party service provider. We follow up on every reported violation with internal compliance investigations when justified by supporting evidence. Upon completion of an investigation, we propose solutions for any identified issue and ensure all are carried out. We also respond to incidents of employee misconduct with appropriate disciplinary action. All emails and reporting are always kept confidential to the extent permitted by law and will only be shared on a need-to-know basis with the required person(s) who shall investigate and/or decide on the reported potential violation. Suppliers code of conduct and due diligence Our supply chain Our supply chain consists of direct material suppliers and indirect suppliers. The direct material suppliers provide us with batteries, plastics, packaging, components, etc. Indirect suppliers include real estate, facility management, and other service providers. Our main suppliers are located in Europe, North America, and Asia. Our Code of Conduct for Suppliers As reflected in our Code of Conduct, we recognize a range of operational and reputational risks in our supply chain, and we refrain from working with third parties that do not share our commitment to integrity. The WS Audiology Code of Conduct for Suppliers reflects our internal values and the expectations of external stakeholders, such as customers, regulators, investors, and the public. Risk assessment and supplier due diligence As part of our sourcing procedure, all potential suppliers that enter tenders must sign the Code of Conduct for Suppliers. Based on the environmental, social, and governance risks of the countries in which we do business, we identified 25 high-risk suppliers. We conduct due diligence procedures to evaluate the qualifications and reputation of suppliers and avoid working with suppliers whose standards are incompatible with our Code. Due to COVID travel restrictions, we conducted five Code of Conduct audits, instead of 11 as originally planned. Since the audit is only effective if it is carried out in person, we must postpone the audits of the remaining suppliers to next year. This year, we invited third party auditors to conduct the audits. The audit result shows that most suppliers have major non-compliances related to working hours and safety management. We will follow up closely with these suppliers. Product safety, marketing, and labeling As a medical device company, we understand that product safety and information must never be compromised as quality issues and unsafe use of our hearing aids or other devices could lead to damages to consumers. Product safety Our quality policy outlines our commitment to high quality and safe hearing solutions. WS Audiology’s product risk management procedure is certified according to ISO 14971. We are committed to minimizing the residual risks as far as reasonably possible to avoid serious injuries. Our ISO 13485 certified multi-site Quality Management System (QMS) allows global governance and local adaptations to ensure efficient quality management throughout the WS Audiology Group. In addition, by implementing our Product Related Environmental Protection (PREP) procedure, we comply with all legal environmental obligations such as ROHS and REACH, and safeguard consumer health. Our products are registered according to local regulations. We continuously survey requirements and take them into consideration when we develop new products. • Our manufacturing sites in China, Denmark, Germany, the US, and Singapore have all successfully passed the US Food and Drug Administration (FDA) audit inspections since 2018. • WS Audiology was the first hearing aid manufacturing company that was successfully audited under the EU’s new Medical Device Regulation (MDR) and received the new certificates in Q1/2020. Our post market surveillance system enables us to follow and manage complaints. In case of safety issues, we have a procedure to report to authorities, and if necessary, recall products. Health and safety impacts are assessed for improvement for all our product categories. Marketing and labeling To ensure the veracity of marketing claims, we maintain a claim management practice that establishes the claim type and required data substantiation. Each claim and supporting substantiation is listed in a platform evidence document. Furthermore, each product launch is documented with a clinical evaluation. We ensure that the product safety manual for each product is included in the package to every consumer who purchases our hearing devices. We have zero incidents of non-compliance with regulations and/or voluntary codes concerning product and service information and labeling. Our quality management systems in main manufacturing sites are ISO 13485 certified. Data privacy and cyber security Data privacy We strive to foster a corporate culture of responsibility, respect and trust for personal data and the privacy rights of individuals by complying with all applicable laws wherever we do business. WS Audiology ensures through routinely reviewed processes and policies that personal data are collected, stored, processed, disclosed, protected, secured, and destroyed properly and according to good data protection practices. Individuals exercising their rights to rectify, change or be informed about what data WS Audiology processes from and about them, can exercise those rights in compliance with relevant legal requirements. Cyber security Safe, reliable and precise handling of information is essential to the success of our business. Risk management and IT security are therefore an integral part of WSA IT strategy. Key objectives are: • To safeguard Group and customers’ data and to protect and guarantee the integrity of the digital assets. • To achieve our business goals while reducing IT risks and potential impact through technical measures and controls. • To keep our employees and management aware and educated about security risks and best practices. • To ensure the availability of IT services and infrastructure according to business needs. Materiality assessment and stakeholder engagement We value the input and expectations from stakeholders about WS Audiology’s sustainability performance. In addition to an ongoing dialogue with our stakeholders, we conduct materiality assessments every second year to ensure that stakeholder expectations are considered as part of our sustainability approach. Step 1 – Identify and group sustainability topics based on: • Sustainable Development Goals. • Topics and future challenges for the sector reported by peers, competitors, and NGOs. • Relevant laws and regulations. • Reporting standards, incl. Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB). Materiality assessment steps Step 2 – Assess importance of each sustainability topic Each sustainability topic is evaluated according to the importance for our business and our stakeholders. A topic is considered important to WS Audiology if it has a direct impact on the financial performance of the Group; if it represents risks or opportunities for WS Audiology; or if our business has a significant effect on the topic. A topic is important to stakeholders if WS Audiology’s performance on the topic has a significant impact on the stakeholders. Step 3 – Prioritize material topics Group Management, selected employees, customers, and suppliers are engaged and provide their input to the materiality assessment. The result reflects the collective input. WSA’s Board of Directors reviews the results of the materiality assessment. Sustainability topics that are important to WSA and its stakeholders Our materiality assessment results guide the sustainability topics we disclose. Customers’ main concerns are product safety, access to hearing care, awareness of hearing health, human rights, the supply chain code of conduct, and due diligence. Areas of high priority to our own employees include development and retention, innovation and product design, diversity and inclusion, employee engagement, and talent attraction. Our suppliers focus on product safety and the supply chain code of conduct, and due diligence. Our Group Management’s view is aligned with our customers, employees, and suppliers. Concerns and priorities raised by stakeholders are addressed and progress is disclosed. We keep monitoring the topics that are not defined as material but may become more important going forward. Material topics Create positive impact Awareness of hearing health Affordability Access to hearing care People Diversity & Inclusion Employee engagement Talent attraction, development and retention Human rights & labor rights Planet Circular economy and clean production Climate action Environment – innovation & product design Business ethics and compliance Business ethics and anti-corruption Suppliers code of conduct and due diligence Product safety Ethical marketing Anti-trust/anti-competition Data privacy and cyber security Governance Governance and accountabilityManagement structure WS Audiology operates a two-tier management structure under which the company’s shareholders elect the Board of Directors. The Board of Directors is responsible for outlining the overall vision, strategy and objectives of the WS Audiology Group. The Board of Directors appoints and supervises an Executive Board consisting of the Group CEO and the Group CFO. The members of the Executive Board are part of the Group Management comprising 13 executives and headed by the Group CEO. The Group Management is responsible for pursuing the strategic direction set out by the Board of Directors and day-to-day management of the WS Audiology Group. Our product portfolio strategy, remuneration and sustainability committees have been established by, and report to, the Board of Directors. Board of Directors The Board of Directors is comprised of 10 directors who are all elected by the shareholders in accordance with the company’s Articles of Association. The directors are elected based on an overall assessment of their individual professional experience and competencies, as well as their contribution to ensuring an appropriate and diverse composition of the combined competencies of the Board of Directors. The competencies required of the Board of Directors currently include knowledge of the global hearing healthcare sector and technological innovation, international commercial and management experience as well as strategy, M&A, risk management, IT, human resources, finance and accounting. The Board of Directors holds regular board meetings to review strategic, financial, organizational and sustainability topics and their impacts, risks, and opportunities. The Board of Directors was expanded on 1 March 2021 with the appointments of Malou Aamund and Adam Westermann. Fostering a diverse and inclusive workforce We strive to create a work environment where diverse ideas, views, opinions and backgrounds are valued. Our differences give broader perspectives and better equip us to solve challenges, increase innovation and create industry-leading customer experiences. Underlining our commitment to Diversity & Inclusion (‘D&I’), we welcomed a Global Head of Diversity & Inclusion in September 2021 to further strengthen WS Audiology’s global efforts in driving an inclusive work environment. D&I communities across WSA In 2020, we launched our first volunteer network – Team for Inclusion, Diversity, and Equality (TIDE) – focusing on our D&I goals in the US and serving as a feedback loop between our people and executive leadership. In 2021, we launched several employee resource groups consisting of a total of 43 passionate colleagues around the globe. Each group has a specific focus within diversity and inclusion, thus bringing to life our commitment to ensure equal opportunities and foster a diverse workforce. Safe and inclusive workforce for all We promote everyone’s equal value and opportunities and condemn all forms of discrimination. We expect our people to be responsible for treating others with dignity and respect. In September 2020, we made a clear commitment to equality and to a culture that is free from discrimination and harassment by launching our Group Harassment Free Policy. Gender balance at WSA Our diversity and inclusion agenda aims at a more balanced gender representation at all managerial levels. At a WSA overall employee level we have a fairly balanced gender representation, consisting in 2021 of 57% women and 43% men. As of 30 September 2021, our Group Management Team was comprised of 13 members representing nine nationalities and 15% made up by women. The Board of Directors currently consists of 10 members, including two female members after Malou Aamund was appointed in 2021. Our goal is to reach a 30% share of women in the Group Management Team by 2025, 35-40% female representation in the Global Leadership Team and a 45-50% share of women in other managerial roles. To reach our goals and ensure account- ability, we have defined clear 2025 targets for increasing the share of female leaders across WSA. Furthermore, we continuously focus on ensuring that gender diversity is promoted in candidate selection, especially for leadership positions. In addition, we ensure that the composition of gender and nationality at leadership courses is monitored and calibrated.

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