The desirability of creative objects

In 2022, our house met with unprecedented success. All over the world, our customers both loyal and new showed their appreciation for our collections.

In these uncertain times, they were no doubt seeking colour, fantasy and spirit. They no doubt felt the urge to surround themselves with beautiful materials, objects made with exceptional know-how, and new creations. In the complex economic, health and geopolitical context of 2022, Hermès was more than ever synonymous with confidence.

These results support our business model: Hermès is a house of creation offering objects for every day that are both durable and functional, objects of assertive style and uncompromising quality. Commended for its responsible approach, which places people at its heart, Hermès remains in tune with the times. We are pleased to have been able to continue to invest in our production capacities, creating jobs, mainly in France, to have maintained our work in training and passing on artisanal skills, and in the research and development of fine materials, and to have continued to support our long-standing partners.

Hermès is upholding and renewing its environmental and social commitments in order to maintain a virtuous circle of growth, for both its employees and its partners, and more broadly for all of its communities and ecosystems.

In 2022, the House launched Hermès Plein Air, its complexion line, and received two major watchmaking awards for Arceau, Le temps voyageur. We will also never forget the opening of the new Maison Hermès at 706 Madison Avenue in New York and the Kelly en désordre bag! But 2022 will also and above all remain the year of our first cohort of trainees at the École Hermès des savoir-faire, which awards the French certificate of professional aptitude in leatherworking; the year the Company was named in the list of SBF 120 companies feminising their governing bodies; and the year in which Hermès employed nearly 20,000 people.

Our successes belong to the teams who work with enthusiasm and discernment every day to make Hermès a house full of life, a house of its time, with a rich history that encourages us to look further. I thank them for their confidence and entrepreneurial spirit.

The group’s consolidated revenue amounted to €11,602 million in 2022, up 29% at current exchange rates and 23% at constant exchange rates compared to 2021. Recurring operating income amounted to €4,697 million, i.e. 40.5% of sales. Net profit (group share) reached €3,367 million, representing net profitability of 29%.

In the fourth quarter 2022, the great sales momentum recorded at the end of September continued, with sales reaching €2,991 million, an increase of 26% at current exchanges rates and 23% at constant exchange rates.

Axel Dumas, Executive Chairman of Hermès, said: “In 2022, Hermès had an exceptional year thanks notably to the good performance of its international markets. This success reinforces our approach as an artisanal and highly integrated company, mainly in France: a design house that offers objects conceived to be functional, with an assertive style and uncompromising quality. The year underpins the relevance of our responsible and sustainable model.”

Over the last three years, Hermès created 4,300 jobs, including 2,900 in France, and reinforced its operating investments by €1.5 billion, including c. 60% in France.

(at constant exchange rates, unless otherwise indicated)

At the end of December, sales growth was remarkable across geographical areas. Sales increased considerably both in group stores (+23% at constant exchange rates) and in wholesale activities (+26%), which benefited from the recovery in travel retail. Hermès continued to develop its exclusive distribution network, while online sales pursued their upward trend worldwide.

Asia excluding Japan (+22%) remained very dynamic throughout the geographical area. Sales performance in Greater China was sustained. In October, a fourth store opened in the Qiantan district in Shanghai, Mainland China, and Hermès inaugurated a store in Pangyo, in South Korea. Several stores reopened after renovation and extension work, such as the Hyundai Coex store in Seoul in December and the Hong Kong international airport store in November. 

Japan (+20%) recorded a steady, sustained increase in sales. In November, the Takashimaya store in Nagoya reopened after renovation and extension in a new location, and the Hermès in the Making exhibition showcased the house’s know-how in Kyoto.

The Americas (+32%) saw an exceptional year in 2022. After the April opening of a new store in Austin, a new maison was inaugurated at 706 Madison Avenue in New York in September. This store offers clients an unprecedented experience of the creativity of Hermès and confirms the house’s attachment to the sustainability of objects with a whole floor dedicated to repairs. In Mexico, the store in Guadalajara reopened in October after renovation.

Europe excluding France (+18%) recorded sustained growth, thanks to the loyalty of local clients and the resumption of tourist traffic. The Paseo de Gracia store in Barcelona was inaugurated in November, after being renovated and extended.

France (+27%) improved strongly, with an acceleration at year-end thanks to high demand from both national and international clients. The store in Strasbourg reopened in November, after renovation and extension, in a new location in the city’s historical centre. 

The Hermès adventure began in 1837 when the harness-maker Thierry Hermès opened a workshop in rue Basse-du-Rempart in Paris. Gradually, generation after generation, the House followed a dual thread – on the one hand the painstaking work of the craftspeople in his workshop, and on the other the active lifestyles of its customers. Carried by an enduring spirit of freedom and creativity, Hermès remains highly sensitive and attentive to the changing nature and needs of society.

In 1880, Charles-Émile Hermès, the founder’s son, moved the workshops to 24, rue du Faubourg Saint-Honoré, and set up an adjoining store. At this now-emblematic address, harnesses and saddles were made to measure. The business was already standing out for the excellence of its creations.

During the interwar period, lifestyles changed and the House broke new ground under the management of Thierry’s grandson, Émile Hermès. He decisively influenced the family firm’s destiny when, while travelling in Canada, he discovered the opening and closing system of an automobile hood. In 1922 he obtained exclusive rights to this American “universal fastener” – known today as the zip – which was used extensively in the House’s luggage and other designs. Under the impetus of Émile Hermès, the House opened up to other métiers, while retaining a close connection with the equestrian world, drawing on its mastery of raw materials and its artisanal culture to create its first ready-to-wear collections. In 1937, the famous silk scarf was born with the Jeu des omnibus et dames blanches design, the first in a long series.

Robert Dumas – one of Émile Hermès’ sons-in-law, who took the helm of the House in 1951 – was a regular visitor to the workshops and designed objects whose details (buckles, fasteners, saddle nails and anchor chains) exuded an elegance that in no way diminished their practicality. Hermès objects stand out for their noble materials, their mastery of savoir-faire, and their bold creativity, stimulated by the House’s keen vision of the world. The Silk métier now invites artists to create unique designs.

The Executive Management ensures the management of Hermès International. The role of Executive Chairman is to manage the Group and act in its general interest, within the scope of the corporate purpose and subject to those powers expressly granted by law or by the Articles of Association to the Supervisory Board, to the Active Partner and to Shareholders’ General Meetings.

The Executive Chairmen’s roles are distributed as follows: Axel Dumas is in charge of strategy and operational management, and Émile Hermès SAS, through its Executive Management Board, is responsible for vision and strategic priority areas.

The Executive Chairmen are supported in their management of the Group by the Executive Committee. This consists of Executive Vice-Presidents, each of whom has well-defined areas of responsibility. The role of the Executive Committee is to oversee the Group’s strategic and operational management. Its composition reflects the Group’s main areas of expertise.

The Operations Committee, which reports to the Executive Management, is made up of the Executive Committee and the Senior Executives of the main métiers and geographical areas of the Group.

Its duties are:

• •to involve Senior Executives in the Group’s major issues and strategic orientations;
• •to promote communication, sharing and reasonable exchanges amongst its members in their area of responsibility;
• •to enable the Executive Committee to take certain decisions.

Detailed information on the administrative and management bodies is provided in chapter 3 “Corporate governance”, § 3.2 and § 3.3.

Hermès is an independent company backed by family shareholders. Its strategy is based on three pillars: creation, craftsmanship and an exclusive distribution network. 

Since 1837, the Group has remained true to its values of freedom, demanding craftsmanship savoir-faire, authenticity and responsible growth. Its integrated craftsmanship business model places quality and sustainability at the centre.

Hermès creates and manufactures quality objects designed to last, to be passed on from one generation to the next, and to be repaired. This approach requires these issues to be taken into account at every stage, from design to sales.

Hermès’ strategy is based on creative freedom. Each year, a theme inspires creators and Artistic Directors. Driven by a history spanning nearly 200 years, during which the House has continued to develop with audacity and ingenuity, Hermès paid homage to the theme of lightness in 2022. Never lacking depth, it is a source of creative vitality and nurtures Hermès’ positive and resilient mindset.

High standards in design and manufacturing encourage the creation of objects that aim to surprise and amaze customers. This creativity, revolving around traditional savoir-faire, is coupled with innovative processes to revisit timeless models and create exceptional pieces, without departing from Hermès’ trademark humour and imaginative flair. The unbridled creativity flourishes in each métier, as reflected in the numerous scarf designs printed every year. It is then expressed through over 50,000 references, developed around a unique identity and a style blending exceptional quality, innovation, surprise, elegance and simplicity. In 2022, it was expressed in particular with the fourth chapter of the Beauty story, Hermès Plein Air, the new Haute Bijouterie collection, Les Jeux de l’ombre, and the Home universe, with the new Soleil d’Hermès tableware.

Hermès’ mission is to create unique and original objects to elegantly satisfy the needs and desires of its customers.

Its goal is the pursuit of excellence, in each of its métiers and services.

1.4.1Summary description of the group as at 31 december 2022

The main consolidated companies as at 31 December 2022 (distribution subsidiaries and holding companies of the divisions) are listed in note 16 of the consolidated financial statements.

The Hermès Group operates 68 fully owned production and training sites, including 54 in France.

Leather Goods & Saddlery, Hermès’ original métier, encompasses bags for men and women, travel articles, small leather goods and accessories, saddles, bridles, and a full range of equestrian products and clothing.

The Leather Goods & Saddlery métier represents 43% of consolidated sales. In 2022, it generated revenue of €4 963 million.

Hermès saddlery and leather goods are the result of a very special alchemy. It is based on a constant dialogue between designers and craftspeople, and the use of the finest materials, selected with great care. The craftspeople use traditional savoir-faire, passed down from generation to generation. The care taken by the craftspeople each day patiently crafting and fashioning the leather gives these unique objects a distinctive additional measure of personality.

They are made by more than 4,700 saddler-leather craftspeople, spread across nine centres of expertise that bring together production units, workshops and training centres in Paris, Pantin and six regions of France. To meet continued strong demand, Hermès is expanding its network of manufacturing sites each year in order to strengthen its production divisions. Five new site projects are thus underway for the next five years. Following the inauguration in 2021 of two leather goods workshops, in Gironde and Seine-et-Marne, the Alpes division was strengthened in 2022 with the integration of the Thierry leather goods workshop (Haute-Savoie), a long-standing partner. Two new leather goods workshops are under construction, one in the Eure region, which is scheduled to open in April 2023, and the other in the Ardennes, which will come on stream in May 2023. A new building is also being built at the Saint-Junien glove and leather goods workshop (Haute-Vienne), with a view to doubling its workforce from June 2023. Lastly, work on the new production unit in Riom (Puy-de-Dôme) began in September 2022, and is scheduled to open in 2024. Hermès is also preparing the start of work on two future production units planned for 2025 in L'Isle-d'Espagnac (Charente) and 2026 in Loupes (Gironde). All these establishments are set up in close collaboration with the various local stakeholders and regional administrative and economic development bodies. In this way, Hermès reaffirms its commitment to regions with a strong manufacturing savoir-faire and its will to provide high-quality jobs.

The House is also continuing to perfect the skills and savoir-faire of its craftspeople through a range of training and professional qualification programmes. These programmes are delivered within the École Hermès des savoir-faire and through a range of partnerships with training structures in the regions concerned.

Once again this year, women’s bags unfurl with a focus on the latest habits, to create resolutely modern companions. Like the Hermès Geta bag, which can be worn over the shoulder, a supple model with a “sport-chic” satchel spirit and a compact format, designed around a clever clasp. The unlined In the Loop bucket bags, beautifully signed with the Chaîne d’ancre link, enrich the family of everyday companions with two formats in just the right proportions. As for the Boucle Sellier bag, this brand new item, with its assertive “rock” feel, is adorned with a chiselled metal part borrowed from the jewellery range.

This year celebrates the return of the Constance 24 bag in a pure and refined version. With its single gusset, harking back to the origins of the model, this slim format is embellished with a pocket on the back and an interior mirror.

The evening universe is enriched with dedicated creations and its refined signature is inscribed on the clasps and materials. Thus, the new Cadenas clutch bag, which introduces a novel hands-free way to carry it, highlights the savoir-faire of its leather casing.

The reinterpretation of the great classics is expressed through exceptional versions, designed in an Arts & Crafts spirit: daring and surprising stories that constantly push the boundaries of creation and savoir-faire. With its double-sided construction and its interplay of perspectives where asymmetry creates a new balance, the “En désordre” story shakes up the traditional references on the Kelly II Sellier 20, the Birkin 30 and the Bolide 1923-25. The Kellydole bag, with its anthropomorphic allure, is back with a pixelated spirit, enhanced with a shoulder strap and a satchel that can hold a phone. The ultimate piece, and a triumph of the skill of the silversmith, the Kelly Midas bag emerges from the unprecedented fusion between metal and leather, with the matching of Box calfskin and a solid 18-carat gold handle. In a playful spirit, the “Colormatic” animation is a play on contrasting colours and gives the bags an additional functionality with a new zipped front pocket as well as a back pocket.

Natural materials are also enriched with, for example, the highlighting of the mane on the Toupet bag, a small bucket bag full of imagination.

The men’s collections have multiplied the offering in response to contemporary uses and revisit the identity codes of the great classics. A new timeless model available in two formats, the HAC à dos is designed for mobility with its hands-free carrying mode. It sports the iconic details of the Haut à courroies, the House’s very first bag. The emblematic Sac à Dépêches continues to reinvent itself in a new, smaller, compact size to carry the essentials close to hand. The Hermès Allback model, the first men's backpack in canvas and leather, boasts an adventurous spirit thanks to its Toile Bivouac, a new resistant and light technical material, and its multiple functional features.

Lastly, the Arts & Crafts odyssey continues with the major essentials of the men's universe: the Haut à Courroies bag dresses with a perfecto for a “rock” attitude in an exceptional version with singular details.

Introduced at the end of 2021 in France and China, the R.M.S. case is continuing its rollout and is expanding its presence to more than 15 stores worldwide. Resolutely innovative and customisable through the play of handles and wheels, it offers a wide variety of materials and colours. The printed versions make it even more unique, like the very latest drawing, the mischievous Traffic Jam.

A land of experimentation, the small leather goods collections are enriched each season to offer a multiplicity of uses in a joyful and colourful spirit, while continuing to cultivate timelessness.

With their compact format and their hands-free carrying mode perfectly adapted to today’s uses, objects such as the Constance Slim and the Roulis Slim confirm their success, alongside the small leather goods To Go.

Very much a contemporary item, the Hermèsway line is an all-in-one that carries the everyday essentials close to hand: phone, cards and lipstick. Its side case, signed with two stripes, echoes the world of Beauty.

Small leather goods for men are also enhanced with a new timeless line, H sellier. Stylish and discreetly signed with a hand-sewn H, it is available in two classic formats, essential for everyday life: a card holder and a glasses case.

Lastly, charms, those playful and colourful accessories, continue their rollout: Wink is a glasses case to take everywhere with you or hang on your bag; Ulysse Nano is a functional miniature of the emblematic diary cover, and Hermès Budy, a very soft small dog, adorns the bag of the urban rider.

What better language than that of materials to tell the story of Hermès objects? Through their supple hand, their touch, their shades, their shine, their drape, leathers and woven cloths appeal to the senses, reassure, flatter, and sublime them. This dialogue enriches the collections over time, in a constant quest for excellence.

Beauty and sensuality are the key words of the collection of materials. Around the base of Heritage leathers (Box, Barénia, Vache naturelle, etc.), in the purest tradition of excellence, some 40 leathers illustrate this unique profusion of softness, sheen, relief and allure. 

Textile is continuing to explore new identities with the Toile Bivouac, designed for travel and roaming, with its highly resistant ripstop weave. Exceptionally lightweight, it results from a weave that is both sensual and technical, distinguished by a small square with a gentle relief, the result of the skilful interweaving of threads. It combines the sensuality of organic cotton with the strength of recycled polyester, for a firm and supportive hand.

In 2022, the Hermès saddle shone at the highest sporting level thanks to the performance of the House’s partner riders. In dressage, the German rider, Jessica von Bredow-Werndl, world number one in this discipline, won the World Cup final with a Hermès Arpège saddle in April. In show jumping, the Belgian Jérôme Guéry was crowned vice-world champion at Herning with a Hermès Cavale saddle.

It is from the collaboration between Jérôme Guéry, the Hermès' craftspeople and saddlery experts – and from this triple expertise – that the Selle Rouge was born, presented at the 12th edition of the Saut Hermès at the Grand Palais Éphémère. Depth of the seat, a slim tree fork, recessed knee rolls and a small skirt integrated into the flap: the Selle Rouge is at one with the horse and reveals, at first glance, its technical and aesthetic innovations.

In addition, the métier confirmed its commercial momentum, both in saddles and across all its universes with, for example, the launch of the Hermès Fit line, a wardrobe that accompanies riders throughout the day, or the collection of objects for dogs that continue to surprise customers and offer fun and unique experiences in stores.

In France, Hermès opened a new store in Strasbourg in November. Located on Place Broglie – formerly Place du Marché-aux-Chevaux, a name that echoes the House’s roots – this store is located in the heart of the historic city centre close to the former premises occupied since 1988. All the métiers are presented in a warm and bright 300 m2 space, with an architectural style inspired by the geometry of the circle. On the ground floor, three large glass screens designed as contemporary stained-glass windows evoke the cive, a blown glass crown, in homage to the Alsatian glassmaking tradition.

Numerous events punctuated this year at a steady rhythm. The men's ready-to-wear collection launched the year in January with the presentation of the fall-winter 2022 collection. Held at the Mobilier National in front of 200 guests, this keenly awaited return to a traditional catwalk show was broadcast live on the Internet and simultaneously screened to the Chinese and American press. At the end of January, the new Soleil d'Hermès tableware service came to illuminate the Gaîté Lyrique with its rich shades of yellow, for its unveiling to the press and buyers.

In March, a breath of fresh air heralded spring, with the launch of the fourth chapter of Hermès Beauty: Hermès Plein Air, dedicated to the complexion. Invited to discover it in the unspoiled natural setting of the Somme Bay, journalists and influencers from around the world were able to share a moment of sporty relaxation by the sea. Spring was just as dynamic in Paris with the fall-winter 2022 women’s ready-to-wear catwalk show at the Garde Républicaine, the presentation of the new collections of objects at the rue d’Anjou showroom, and the return of the Saut Hermès, whose 12th edition took place under the wooden dome of the Grand Palais Éphémère, opposite the Eiffel Tower. At the end of March, more than 150 journalists and influencers were welcomed to Paris to celebrate the annual theme at La Fabrique de la Légèreté, a poetic show featuring the legendary figure of Pegasus in tales mixing dance, the theatre of objects, music and film. In early May, the launch of Terre d’Hermès Eau Givrée caused a new thrill.

Summer, placed under the sign of light and freedom, began with the spring-summer 2023 men's ready-to-wear catwalk show in the Manufacture des Gobelins, before the new haute bijouterie collection, Les Jeux de l’ombre, unveiled its contrasting pieces in the Faubourg Saint-Honoré store in the month of July.

The final quarter saw women’s ready-to-wear take over the Paris Tennis Club during Fashion Week, to reveal its spring-summer 2023 collection. La Fabrique de la Légèreté returned to Paris at the end of October for a seven-day stopover in La Villette. Open to the public, it welcomed 6,000 visitors and reserved a session for students from design schools.

In Europe, several highlights marked the year. In February, a special evening was organised in London around the spring-summer 2022 women's ready-to-wear collection, transforming the illustrious Old Sessions House into a playful and flamboyant summer universe.

In March, Hermès took advantage of its presence at the Watches & Wonders trade show in Geneva to present its new Arceau Le temps voyageur, an ode to the exploration of space, time and imagination.

In May, the travelling exhibition Hermès in the Making stopped in Turin for ten days. It invited visitors to learn more about Hermès’ sustainable craftsmanship model through demonstrations, meetings, films, workshops and events. Also in Italy, the Milan Design Week hosted the House’s latest textile creations in June, in a light and transparent setting. In addition, Hermès took part, through its interior design subsidiary Métaphores, in the renovation of the café of the historic Circolo Filologico Milanese, one of the oldest cultural institutions in the city.

In Spain, a new store opened in Barcelona at the end of November. Located on rue Paseo de Gracia, very close to the previous address, in a late 19th century building whose façade has been restored, its 350 m2 stretch over two high-ceilinged storeys and opens onto a delightful patio planted with Mediterranean species. The walls, with their natural curves, evoke the modernist architecture of Gaudi, and the colour palette of marine tones enhanced with touches of pink and orange illustrates the communicative eccentricity of the Catalan capital. The House’s 16 métiers are on display in a warm atmosphere bathed in natural light.

Lastly, the Le Monde d’Hermès kiosk continued to roam the world. It stopped off in Barcelona, Knokke-Le-Zoute, Rotterdam and London to introduce the magazine to a new audience, while offering thousands of passers-by colourful moments of lightness, in a spirit of curiosity and fantasy.

In 2022, the Group’s consolidated revenue amounted to €11.6 billion, up 23% at constant exchange rates and 29% at current exchange rates compared to 2021.

The gross margin rate was 71%, down slightly by 0.5 points compared to 2021. This change is due to a dilutive conversion effect, partially offset by a leverage effect on fixed production costs and by exceptional collection flow rates.

Sales and administrative expenses, which represented €2,680 million, compared with €2,137 million in 2021, notably included €525 million in communication expenses, compared with €421 million in 2021. Other sales and administrative expenses, which include mainly the salaries of sales and support staff as well as variable rents, amounted to €2,155 million compared to €1,715 million in 2021.

Other income and expenses amounted to €836 million, compared with €734 million in 2021. They include depreciation and amortisation of €552 million (€512 million in 2021), half of which relates to property, plant and equipment and intangible assets and the other half to right-of-use assets. The steady increase in depreciation and amortisation reflects continued investments in the extension and renovation of the distribution network, digital technology and information systems. Other expenses also include €65 million related to free share plans and €61 million related to the new five-year commitment to the Fondation d’entreprise Hermès (2023-2027).

Recurring operating income amounted to €4.7 billion, up by 33% compared to 2021. Thanks to the leverage effect generated by the strong growth in sales and the exceptional performance of the collections, annual recurring operating profitability reached its highest level ever at 40.5%, compared with 39.3% in 2021.

Net financial income, which includes, in particular, interest on lease liabilities, financial income from cash investments and the cost of foreign exchange hedges, represented a net expense of €62 million, compared with €96 million in 2021.

The income tax expense amounted to €1.3 billion and represents an effective tax rate of 28.2%. The decrease of 1.3 points compared to the rate published for 2021 (29.5%) is mainly due to the decrease in the corporate tax rate in France.

After taking into account the net income from associates (income of €50 million) and non-controlling interests, the consolidated net income attributable to owners of the parent amounted to €3.4 billion compared with €2.4 billion in 2021, i.e. an increase of 38%. Net profitability also reached a record level of 29.0% and gained nearly 2 points compared to 2021.

No such events have occurred since the end of the financial year.

On the strength of its unique business model, based on its values of independence, entrepreneurial spirit, craftsmanship and creativity, Hermès has shown its solidity, with particularly robust results in 2022. Sales growth was remarkable in all geographical areas, with strong performance by the House in international markets. Leather Goods continued to grow, while all métiers grew strongly, reflecting the desirability of the creations among its customers. Hermès, firmly rooted and inspired by its heritage, is enriched by its creative freedom and innovation, and its attachment to savoir-faire. Firmly believing that there can be no creation of economic value and long-term development without creation of social and societal value and without environmental responsibility, Hermès is committed to leaving a positive footprint on the world. 

Strengthened by the ongoing dialogue between creation and excellence in savoir-faire, the House will continue to blossom, affirming the uniqueness of its style. The year 2023 will be marked by the development of new collections based on the most beautiful materials and an abundant creativity. Among the new products, the Perfume and Beauty métier will launch Un Jardin à Cythère, the House’s seventh garden fragrance, as well as unveiling the fifth chapter of the Beauty story, highlighting the eyes, in the fall. Watches will continue to roll out its H08 line, flourishing since its launch in 2021, as well as its latest complication, Arceau Le temps voyageur, and will present its new products at the Watches & Wonders trade show in Geneva. As part of Milan Design Week, Hermès will unveil the new collections of the Home universe with a focus on furniture items, such as the Contour d'Hermès sofa or the Ancelle d'Hermès chair. The Saut Hermès service will be launched this year. Bags with equestrian origins, the Arçon, in Barénia Faubourg calfskin, and Petite Course, in box leather, concentrating the House’s craftsmanship savoir-faire, will enrich the leather goods collections. This year, Jewellery will highlight the emblematic Chaîne d'Ancre in an event revealing new creations using this link.

The integrated and exclusive distribution network will continue to strengthen its omnichannel offer, with particular attention on accelerating the digitisation of uses and developing services to continue to nurture ties with its particularly loyal local customers. The qualitative development of the store network will continue in 2023, with plans to open, expand or renovate stores in Chengdu and Beijing Peninsula (mainland China), Naples, Aspen and Chicago (United States), and Bordeaux (France). Priority will be given to expansions and renovations, in some 20 branches around the world. The House will continue its digital strategy, via an increasingly broad range of online products and services, with the aim of increasing traffic and attracting new customers.

In view of the House’s particularly strong momentum, the development of production capacities will continue across all métiers, and in particular in Silk, with the planned new printing line at the Pierre-Bénite textile site near Lyon, in Jewellery and in Home. The strong demand in Leather Goods & Saddlery will be supported by the ramp-up of the new sites in the nine centres of expertise spread across the country, with their manufacturing facilities, workshops and training centres. With more than 4,700 leather goods craftspeople in France today, the Group will continue its objective of opening an average of one new production unit per year, representing around 300 new employees. Hermès will inaugurate two new leather goods workshops in 2023, one in Louviers in the Eure region, and the other in Sormonne in the Ardennes. The leather goods workshop projects in Riom (Puy-de-Dôme), L'Isle-d'Espagnac (Charente) and Loupes (Gironde) will continue. Hermès will strengthen its integration in France in regions with high manufacturing savoir-faire and develop employment and training. The House’s other métiers will continue to use their extensive savoir-faire to design and create exceptional objects.

True to its commitment as a responsible employer, with the creation of 4,300 jobs over three years, of which more than 60% in France, Hermès will continue its multi-local and multi-métier job creation dynamic in 2023. The Group will step up its efforts in terms of social, societal and environmental performance. Hermès will pursue its commitment to the development of its employees, inclusion and diversity. The enhancement and transmission of savoir-faire will remain at the heart of the priorities of the métiers, with, in particular, the opening of the in-house apprentice training centre (CFA) dedicated to the leather goods métiers. Following the opening of the Ardennes division, the École Hermès des savoir-faire will be gradually introduced to all the regional Leather Goods divisions. The control of supply chains, which ensures the quality of our materials, will be strengthened by the continued implementation of “CSR briefs”, distributed to all our partners. They bring together in one place the Group’s requirements in terms of traceability, certification, carbon trajectory, reduction of water consumption and respect for human rights.

The House’s commitments to fighting climate change and the preservation of biodiversity will remain at the forefront. With the development of eco-design strategies for all métiers and the construction of an internal tool to make life cycle analyses systematic, the Group will continue its efforts to encourage the sparing use of resources and waste management. More broadly, the Group’s actions in favour of biodiversity will be strengthened with the launch of projects promoting local regeneration, more in-depth impact analyses using the GBS (Global Biodiversity Score) method, and with the launch of specific studies and technical partnerships. 

In line with its climate change commitments, the Hermès Group will continue its actions in accordance with its objectives, approved by the Science Based Target initiative (SBTi), to reduce scopes 1 and 2 emissions by 50.4% in absolute value and scope 3 emissions by 58.1% in intensity, over the 2018-2030 period. The particularly demanding responsible construction framework will continue to be rolled out for new real estate projects. At the same time, Hermès will increase its contribution to the implementation of carbon offset systems consistent with a net zero carbon target in 2050, supported by Livelihoods’ long-term projects. Hermès will strengthen its role as a socially responsible company alongside its suppliers, which it will continue to support and with the communities in which it operates, whether through site openings, job creation, the development of vocational training centres for its craftsmanship métiers, and contributions to the social and cultural life of the regions. 

The Group is looking forward to 2023 with confidence, thanks to its highly integrated craftsmanship model, its balanced distribution network and the loyalty of its customers. 

In the medium term, despite the economic, geopolitical and monetary uncertainties around the world, the Group confirms an ambitious goal for revenue growth at constant exchange rates. Thanks to its unique business model, Hermès is pursuing its long-term development strategy based on creativity, maintaining control over savoir-faire and singular communication.

While the creation of a better and sustainable world has guided the actions of the Fondation d’entreprise Hermès since its creation in 2008, this general interest objective became even more prominent in 2022, as its third five-year term ended. It is in this direction that the four main areas structuring the programmes it sets up, and which it oversees, all converge. Artistic creation, the transmission of savoir-faire, the protection of biodiversity, and solidarity make a concrete contribution to shaping a more humanist society where everyone can flourish, fulfil themselves and, in turn, take action to preserve the planet and pass it on to future generations.

Concerning the transmission of knowledge and training the talents of tomorrow, the Fondation has carried out several large-scale projects. The Artists in the Community programme, which supports many young performing artists, culminated in the itinerant PANORAMA performance presented in September at the Théâtre de la Cité Internationale in Paris. Bringing together the 22 beneficiaries of the first class of artists, this event highlighted performers who will be on tomorrow's stages. In parallel with this achievement, the scholarships awarded by the Fondation in the fall will enable 42 new financially vulnerable theatre, circus and dance students to devote themselves fully to their training over the next three years. In addition, as part of the Skills Academy, the Fondation shared with the public two extensions to the programme dedicated to glass, initiated in 2021: on the one hand, the publication of an encyclopaedic work, “Glass", co-published with Actes Sud and, on the other hand, an exhibition in Marseille bringing together the objects made during the final workshop. The Skills Academy also announced its next programme, dedicated to “Stone”, and new academics were selected from among the craftspeople, designers, engineers and – exceptionally – architects who applied. Lastly, the “Manufacto” programme continued to be rolled out nationwide at the start of the 2022 school year: nearly 1,900 students in 78 classes in 14 partner academies are now learning about craftsmanship savoir-faire during school time.

On the same principle, the “Manuterra” programme, featuring educational content designed to teach children in schools about the living world through an introduction to permaculture, was officially launched after a successful pilot year. At a time when the Fondation is strengthening its commitments to the protection of biodiversity, this component is a strong and forward-looking gesture to raise awareness of environmental issues among younger generations. In four academies, 11 classes already participate in the programme during school hours, i.e. around 280 students. The Fondation also continues to support various targeted initiatives (La Massane forest, Atelier Paysan, Africa-TWIX, Vigie-Nature École, “Agir pour le vivant” festival and La Villette) which employ a variety of methods to respond to ecological challenges and ensure the sustainability of the planet.

The creative field also contributes to making a better world, through the production of works of art intended for a wide audience. This year, the Fondation has scheduled 10 exhibitions of unique artistic universes, in four spaces in Asia (Seoul and Tokyo) and Europe (Brussels and Saint-Louis-lès-Bitche). As part of the New Settings programme, which supports artists creating new forms of performing arts, 15 daring shows supported by the Fondation were presented in 2022 in Île-de-France and Lyon, in partnership with other institutions. The Artists' Residencies also encourage hybrid practices and cross-functionality by enabling visual artists to exercise their creativity within Hermès’ production units and to experience the House’s exceptional savoir-faire along with the bonds formed between craftspeople. In 2022, two residencies took place, resulting in the creation of unique works. The “Immersion” programme, which invites photographers to explore new territories, had two winners in 2022: the American photographer Raymond Meeks worked in France, while his French counterpart Vasantha Yogananthan produced a series of works on American soil. Their perspectives on the current world will be shared with the public from spring 2023.

Lastly, the Fondation supported several general interest projects as part of the “H3 – Heart, Head, Hand” programme. All these solidarity projects are identified by the House’s employees, who also become their ambassadors. Each initiative is rolled out in the territory of the Hermès entity where the reference teams are located, in order to ensure concrete and local action that contributes, at its own level, to building a fairer world.

Through these four main areas of intervention, the Fondation d’entreprise Hermès remains committed on the ground, accompanying the many beneficiaries and supporting the craftsmanship, creative, sustainable and solidarity-based actions that contribute to transforming society. Across the world, these project leaders embody the humanist values of the Fondation d’entreprise Hermès and form a dynamic community aspiring to the common good.

The full report on the activities of the Fondation d’entreprise Hermès is available at: www.fondationdentreprisehermes.org, in the section entitled “The Fondation”.

Through its sustainable development approaches, Hermès implements practices that reconcile economic and social progress with preservation of the planet’s natural equilibrium, in a long-term vision. These societal and environmental challenges, linked to the 17 sustainable development goals defined by the United Nations for 2030, provide the framework for the House’s action in this area.

Hermès, a family business, has been able to adapt to changes while favouring a long-term approach. The Group, relying on the strength of its craftsmanship savoir-faire, its exclusive distribution network and its creative heritage, is continuing its sustainable growth.

The Group’s craftsmanship manufacturing model is based mainly on the creativity and savoir-faire of men and women working in France. It draws on the House’s four essential heritages: creation, exceptional raw materials, savoir-faire, and the retail universe. It is based on the geographical and cultural proximity between designers and craftspeople. Supported by a network of regional manufacturing sites, Hermès enhances the regions with a desire to ensure the transmission of this exceptional savoir-faire. Finally, it operates with moderation and sobriety in the use of raw materials and with a desire for a low environmental footprint. The promotion of these four heritages has contributed to the sustainability of the Hermès craftsmanship model since 1837.

The Hermès Group’s ambition in terms of sustainable development is to ensure virtuous economic and social development, not only for employees and shareholders, but more broadly for its stakeholders, by thinking about the future of the next generations. This objective will also be achieved by reducing its impacts, however moderate, on the planet. This goal is accompanied by a deep humanist desire to give back to the world some of what the world gives to Hermès. This vision feeds into the House’s strategy and makes it possible to define the priorities, as illustrated below in the materiality analysis conducted along two axes: impacts on the sustainability of the business model and impacts from the Group’s entire supply chain on the world.

The scope of this Non-Financial Performance Statement (NFPS) covers all of the Hermès Group subsidiaries and sites, including all métiers and all regions, the scope of which is detailed in chapter 1 “Presentation of the Group and its results”, § 1.4.

Methodological note

This NFPS is based on the qualitative and quantitative contributions of the métiers (production), subsidiaries (distribution), central departments, and the following Group corporate departments: human resources, industrial affairs, direct and indirect purchasing, real estate, logistics, legal, finance and sustainable development. From the end of the first half-year, the various contributors came together to rank the subjects they wished to prioritise and prepare a schedule extending to the end of the year. Given the time frames, certain annual data is reported at the end of October, in particular for the industrial affairs department. Each department uses tools to consolidate the information related to their activities. These main contributors rely on their respective networks in order to summarise and highlight the most significant progress and the work carried out on the major strategic sustainable development challenges. This operating mode enables a fairer reflection of operating reality, in an environment in which the activities of the House are very diversified.

More specifically, the “Sustainability Information” in chapter 2 has been prepared, in all material respects, in accordance with the reporting guidelines of the industrial affairs and human resources departments, in force as at 31 December 2022, consisting of i. a reporting procedure, ii. a glossary specifying the definitions of Sustainability Information, and iii. other underlying information for the internal reporting tools (hereinafter “the Guidelines”). These guidelines are available on request from the Hermès International headquarters for the financial year ended 31 December 2022.

This work is compiled, standardised and controlled by the sustainable development department, in particular through the implementation of a dedicated digital tool.

Verification work is carried out by an independent third party (PricewaterhouseCoopers), which is also one of the Company’s Statutory Auditors, with audits carried out before publication. Their work enables the issuance of a reasonable assurance report, a higher level of certification than the limited assurance provided for by law in France, on a selection of indicators detailed in § 2.9 and 2.10.

As stated in chapter 3 “Corporate governance”, § 3.6.3.4, the assignment was approved as a “service other than certification of the financial statements” by the Audit and Risk Committee, using the delegation granted to it, and is compliant with the French rules on independence.

The Hermès Group presents its value creation model using graphics (see the following pages) in order to put the distinctive features of its highly integrated French craftsmanship manufacturing model into perspective. This approach is designed to help explain the activities of the House, its footprint and contribution to a more sustainable world, in their economic, social, societal and environmental dimensions.

The Hermès Group’s model is unique in many ways:

• •a family-run business rooted in a tradition of craftsmanship, the foundations of an eagerness to ensure transmission of skills and sustainability;
• •fundamental heritages, sources of sustainability, that are continuously reinvented: creation, materials, savoir-faire and retail;
• •objects designed to last: rigor and responsibility that are the life force of the House’s 16 métiers (see chapter 1 “Presentation of the Group and its results”, § 1.6);
• •a French House with an international reach: 76% of production is made in France;
• •an integrated model, from the manufacturing of objects made in its in-house and exclusive workshops (55%) to distribution throughout the world, tailored to local situations;
• •controlled development and solid results;
• •a contribution to a more sustainable world through its operating model, through a humanist vision of its activity, the harmonious sharing of value created and a desire to give back to the world some of what the world gives it.

Hermès sets very high standards in terms of working conditions and these are essential to enable employees to thrive, to give meaning to their actions and to help them constantly evolve by renewing knowledge and practices throughout their career.

Beyond the fundamental issues of health and safety at work, this also involves putting in place the best management practices and working environments conducive to the well-being of each and every person on the manufacturing sites, in the stores and offices, to “create beauty in beauty”, as Mr Jean-Louis Dumas used to say.

Harmonious labour relations in France are based on the Group agreement on renewing social dialogue, renewed in 2021 and regularly conducted at both local and central levels. They are also rolled out in all other regions with a humanist mindset that often goes beyond legal obligations.

Hermès' economic successes are regularly shared in different forms and the contribution made by employees to the House’s development, whatever their role, is acknowledged through various profit-sharing mechanisms in order to involve them in the corporate project over the long term. The inclusion in 2019 of a CSR criterion in the variable compensation of the Executive Chairmen makes it possible to assess on an annual basis the achievement of the three indices comprising it, including a criterion relating to gender equality (see § 3.8.1.2.4 and 3.8.2.1.2). The level of achievement is assessed by the CAG-CSR Committee.

In a context of sustained growth in the workforce, it is increasingly important to create links between employees and maintain the House’s culture; this is the reason behind the networking operations that were strengthened in 2022.

Diversity, equity and inclusion are also key factors in the Group’s success. Given the variety of métiers, the profiles of its employees and the various geographical locations, these subjects are treated as Hermès' fundamentals. They therefore need to be addressed daily, and the Group’s ambitions relating to diversity and inclusion issues were strengthened in 2022.

Hermès contributes to the preservation and sustainability of craftsmanship savoir-faire through its École Hermès des Savoir-Faire and its training centres as well as its partnerships with vocational schools throughout France (whose expertise is also used by other economic players). Promoting its métiers externally and with younger generations in particular is a key aspect of its actions. By bringing the wealth and excellence of craftsmanship to the attention of a large number of stakeholders, and by expressing future needs, particularly in the manufacturing sector, Hermès is helping to create rewarding careers and professional prospects.

The advantage and appeal of the Hermès model is its ability to expand its wealth of internal talents to complement the needs of the different types of jobs with very diversified activities within the House. Its ability to recruit, and then train its employees using an internal method of transmission of savoir-faire, guarantees the sustainability of its business model.

To continue to develop its model, its culture and its unique savoir-faire, the House continually invests in training initiatives that enable employees to acquire new skills. This commitment to employee training is reflected in all métiers and in a multimodal approach with the creation of digital pathways. For production and distribution activities, training programmes are tailor-made and rolled out locally or by the Group in Paris. This can be seen, in particular, in the acquisition of savoir-faire in an employee’s first job as a leather worker, in the engineering incubator within the École des Tanneurs and the École du Textile, and the qualifications gained through certification or diplomas.

Hermès’ flagship materials – leather, silk, cashmere and wood – are all natural, renewable and obtained in such a way as to minimise their footprint. The model and values of craftsmanship guiding the House have always promoted the careful and respectful use of these rare and precious materials. Craftspeople take great care not to waste resources, to use only what they need and to optimise the use of materials. Naturally, the Hermès Group does not use materials or species that are threatened with extinction or are sold illegally. Recycled materials are increasingly used in manufacturing. In all métiers, channels are also identified to recover and recycle manufacturing offcuts, in addition to the emblematic activities of petit h, a pioneer in this area since 2010.

The materials are selected and supplied in each of the métiers within the framework of a rigorous process set out in the “supply chain brief” and detailed in technical specifications, complying with regulations, respecting biodiversity and best practices, in the constant quest for the highest quality and ethical integrity. These supply chain briefs are intended for all suppliers and manufacturers involved in supplying Hermès métiers. They are also accessible on the Group’s corporate website. For decades, the House’s approach has been to ensure it has in-depth knowledge of its supply chains, to share its requirements with its suppliers (often long-standing partners) and to develop them to achieve the highest quality and thus prepare for future growth. 

The creation of Hermès objects depends on a quality ecosystem, able to provide it with exceptional materials. It is therefore fundamental for the sustainability of Hermès’ business model to respect and protect biodiversity, and to implement science-based objectives in its direct and extended sphere of responsibility. For the Group, this involves voluntarily engaging beyond the sphere of influence and aligning its action plans with international standards such as SBTN (Science-Based Targets for Nature) or TNFD (Taskforce on Nature-Related Financial Disclosures).

Respect for nature, the source of its exceptional raw materials and the living environment surrounding its sites, is one of the Group’s strong and unwavering values. In 2002, the Group drafted an environmental policy, last updated in 2020, aimed at limiting the impact of its activity across all areas. Pragmatic but ambitious solutions preserving the environment in the long-term are systematically sought, trying to go further than regulatory requirements wherever possible. The priority is to control the impact across the entire value chain, from upstream agricultural production to distribution, and from purchases to internal operations.

Water and energy consumption in 2022 were back to their pre-Covid crisis 2019 level in a context of strong growth in activity. The industrial energy mix is changing, with gas consumption down by just over 6% compared to 2021, reflecting the initial effects of the programme to “phase out fossil fuels” at industrial sites.

This mindset in favour of the environment requires the involvement of everyone, from investment decisions to everyday eco-actions, together with a robust Environment, Health and Safety (EHS) culture on all sites. It is structured around policies, procedures, tools and major commitments:

In line with its strategy of preserving unique savoir-faire and securing supplies, most of Hermès’ production is integrated: 55% of our objects are made in Hermès exclusive and in-house workshops. Our ability to grow is however also linked to the retention and development of our suppliers and subcontractors, whose exceptional savoir-faire and future success will contribute to that of the Hermès Group and whose social and environmental practices must be irreproachable.

These subcontractors and suppliers of the House are, for the most part, historical partners. As such, for direct purchasing (production purchases), the average length of trading relationships with the Hermès Group’s 50 largest suppliers in 2022 was 19 years. They operate mainly in the Leather Goods division (tanneries and manufacturers) but also in Textiles (HTH division) and other métiers (Jewellery and Shoes, notably). This stability is also true for smaller suppliers, some of which have been working with the House for more than 60 years.

The Hermès Group has also been working with socially supported organisations in France for many years for its direct and indirect purchases, and this practice is growing steadily every year. The approach is now being extended to other players located, for example, in economically disadvantaged areas, whether urban or rural.

Aware of its responsibility in terms of contribution to regional development, Hermès locates its production activities in France. With 68 own production and training sites worldwide, including 54 in France, Hermès contributes to the sustainable development of the regions through employment (6,203 new employees over the past five years) and promotes the creation of sustainable value (recruitment in the local area, employee training, etc.).

Diverse initiatives enable Hermès to express its uniqueness, as well as extend its outreach into numerous regions, and create constructive ties with local economic players. These harmonious relationships with stakeholders contribute to its local integration and its contribution to having a positive impact. They reinforce employees’ pride in belonging.

Moreover, the House’s subsidiaries and sites organise local charitable operations. They encourage employees to become more involved in the various issues, each in their own way. Giving time, sharing one’s skills, opening oneself up to others, giving back to the world part of what they have received. Throughout the world, numerous local interest projects are alive and active thanks to Hermès.

The founding values of Hermès are also expressed through the Fondation d’entreprise Hermès, created in 2008, which sets up the necessary conditions for the creation of works of art, transmission of savoir-faire, protection of the environment and encouragement of solidarity actions(43). 

Driven by its humanist values, the Hermès Group’s ethics and compliance policy aligns with the universal framework set down by the major principles, standards and international agreements. The Group has several requirements: zero tolerance for breaches of probity, a determined commitment to a culture of ethics, an anti-corruption policy and, lastly, a structured approach to protecting personal data.

Specific governance, carried out at the highest level of the organisation, guarantees the commitments, policies, control and alert systems that are the foundation of the approach. To ensure that each employee adheres to the rules of good conduct adopted by Hermès, numerous training sessions help them to understand the importance of this in the performance of their activities.

For the year ended 31 December 2022

This is a free translation into English of the Statutory Auditor’s report issued in French and is provided solely for the convenience of English-speaking readers. This report should be read in conjunction with, and construed in accordance with, French law and professional standards applicable in France.

To Hermès International’s general assembly,

In our capacity as Statutory Auditor of the company Hermès International (hereinafter the “Entity”)], appointed as independent third party (“third party”) and accredited by the French Accreditation Committee (Cofrac), (Cofrac Inspection Accreditation, n°3-1862,scope available at www.cofrac.fr)), we have undertaken a limited assurance engagement on the historical information (observed or extrapolated) in the consolidated non-financial statement, prepared in accordance with the Entity’s procedures (hereinafter the “Guidelines”), for the year ended December 31, 2022 (hereinafter the “Information” and the “Statement”, respectively), presented in the group management report pursuant to the legal and regulatory provisions of Articles L. 225-102-1, R. 225-105 and R. 225-105-1 of the French Commercial Code (code de commerce).

Based on the procedures we have performed as described under the “Nature and scope of procedures” and the evidence we have obtained, nothing has come to our attention that cause us to believe that the consolidated non-financial statement is not prepared in accordance with the applicable regulatory provisions and that the Information, taken as a whole, is not presented fairly in accordance with the Guidelines.

To the General Assembly of Hermès International,

In our capacity as Statutory Auditor of Hermès International (hereinafter the “Company”) and in accordance with your request, we have undertaken a reasonable assurance engagement on the selected key sustainability performance indicators as at/for the year ended December 31st, 2022 (the “Identified Sustainability Information”) presented below and included in the document Extra-financial Performance Declaration presented in the 2022 Universal Registration Document (hereinafter “URD 2022”):

• ◆KPI 1 - [Group Headcount]
• ◆KPI 2 - [Number of training hours worldwide]
• ◆KPI 3 - [Absenteeism rate France]
• ◆KPI 4 - [Severity rate worldwide]
• ◆KPI 5 - [Number of occupational illnesses worldwide]
• ◆KPI 6 - [Total energy consumption of industrial sites and livestock farms]
• ◆KPI 7 - [Total water consumption of industrial sites and livestock farms]
• ◆KPI 8 - [Consumption of renewable energy of industrial sites and livestock farms]
• ◆KPI 10 - [Change in overall tonnage of industrial waste]
• ◆KPI 11 - [Mass of non-hazardous waste and hazardous waste for industrial sites and livestock farms]
• ◆KPI 12 - [Scope 1 carbon dioxide emissions for industrial sites and livestock farms location-based and market-based]
• ◆KPI 13 - [Scope 3 carbon dioxide emissions location-based and market-based]

Our assurance does not extend to information in respect of earlier periods or to any other information included in the 2022 URD.

Our Reasonable Assurance Opinion

In our opinion, the Identified Sustainability Information set out in the 2022 URD presented in Chapter 2 for the year ended December 31st, 2022 is prepared, in all material respects, in accordance with the 2022 reporting protocols of the Industrial Affairs and Human Resources Directions composed of i. a reporting procedure, ii. a glossary and iii. additional information embedded in the internal reporting tools as for the year ended December 31st, 2022.

We do not express an assurance opinion on information in respect of earlier periods or on any other information included in the 2022 URD.

Understanding how Hermès International has Prepared the Identified Sustainability Information

The absence of a commonly used generally accepted reporting framework or a significant body of established practice on which to draw to evaluate and measure Identified Sustainability Information allows for different, but acceptable, measurement techniques that can affect comparability between entities and over time.

Consequently, the Identified Sustainability Information needs to be read and understood together with the reporting framework defined by the Company in the 2022 reporting protocols of the Industrial Affairs and Human Resources Directions composed of i. a reporting procedure, ii. a glossary and iii. additional information embedded in the internal reporting tools, available at the Company’s headquarter on request set out in the methodological note of Chapter 2 of the 2022 URD as for the year ended December 31st, 2022, which Hermès International has used to prepare the Identified Sustainability Information.

Inherent Limitations in Preparing the Identified Sustainability Information

As indicated in Chapter 2 of the 2022 URD, the Identified Sustainability Information may be subject to inherent uncertainty because of incomplete scientific and economic knowledge and the quality of external data used. Moreover, some information is sensitive to the choice of methodology and the assumptions and/or estimates used for its preparation and presented in the company’s reporting protocols.

In addition, greenhouse gas quantification is subject to inherent uncertainty because of incomplete scientific knowledge used to determine emissions factors and the values needed to combine emissions of different gases.

Hermès International’s Responsibilities

Management of the Company is responsible for:

• ◆selecting or establishing suitable criteria for preparing the Identified Sustainability Information, taking into account applicable law and regulations related to reporting the Identified Sustainability Information;
• ◆the preparation of the Identified Sustainability Information in accordance with the Reporting Criteria;
• ◆designing, implementing and maintaining internal control over information relevant to the preparation of the Identified Sustainability Information that is free from material misstatement, whether due to fraud or error.

Our Responsibilities

We are responsible for:

• ◆planning and performing the engagement to obtain reasonable assurance about whether the Identified Sustainability Information is free from material misstatement, whether due to fraud or error;
• ◆forming an independent opinion, based on the evidence we have obtained; and
• ◆reporting our opinion to the Head of the Company.

As we are engaged to form an independent opinion on the Identified Sustainability Information as prepared by management, we are not permitted to be involved in the preparation of the Identified Sustainability Information as doing so may compromise our independence.

Professional Standards Applied

We performed our reasonable assurance engagement in accordance with the professional guidance issued by the French Institute of Statutory Auditors (Compagnie Nationale des Commissaires aux Comptes) applicable to such engagement and the International Standard on Assurance Engagements 3000 (Revised), and, in respect of greenhouse gas emissions included in the Identified sustainability information, in accordance with the International Standard on Assurance Engagements 3410, Assurance Engagements on Greenhouse Gas Statements, issued by the International Auditing and Assurance Standards Board.

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the French Code of Ethics for Statutory Auditors (Code de Déontologie) as well as the provisions set forth in Article L.822-11 of the French Commercial Code (Code de Commerce) and the International Code of Ethics for Professional Accountants (including International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code) which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies International Standard on Quality Management 1, which requires the firm to design, implement and operate a system of quality management including policies or procedures regarding compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements.

Our work was carried out by an independent and multidisciplinary team with experience in sustainability reporting and assurance.

Summary of the Work we Performed as the Basis for our Assurance Opinion

A reasonable assurance engagement involves performing procedures to obtain evidence about the Identified Sustainability Information. The nature, timing and extent of procedures selected depend on professional judgment, including the assessment of risks of material misstatement, whether due to fraud or error, in the Identified Sustainability Information. In making those risk assessments, we considered internal control relevant to the Company’s preparation of the Identified Sustainability Information. A reasonable assurance engagement also includes:

• ◆evaluating the suitability in the circumstances of the Company’s use of the Reporting Criteria;
• ◆evaluating the appropriateness of measurement and evaluation methods, reporting policies used and the reasonableness of estimates made by the Company; and
• ◆evaluating the disclosures in, and overall presentation of, the Identified Sustainability Information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
 

Neuilly-sur-Seine, 8 March 2023

One of the Statutory Auditors

PricewaterhouseCoopers Audit

Supervisory Board corporate governance report AFR

It was jointly prepared by the Chairman of the Supervisory Board, the CAG-CSR Committee, the Board secretary and with assistance from the functional departments concerned. It was approved by the Supervisory Board at its meeting of 16 February 2023.

The Supervisory Board officially adopted the Afep-Medef recommendations on corporate governance in 2009, as it deemed these recommendations to be entirely in keeping with the Group’s corporate governance policy. This framework includes the Afep-Medef Corporate Governance Code for listed companies, updated in December 2022, available on the Afep website (www.afep.com) or the Medef website (www.medef.com), and the application guide of the High Committee on Corporate Governance (HCGE), revised in June 2022, which explains the recommendations of this code.

The recommendations issued by the French Financial Markets Authority (AMF) are also taken into account in its annual report on corporate governance and senior executive compensation of listed companies.

With each revision of the Afep-Medef Code, the CAG-CSR Committee performs an exhaustive comparative analysis of the Company’s application of the Afep-Medef Code’s recommendations, and reports to the Supervisory Board.

These periodic reviews, as well as monitoring of market practices and analyses, make it possible to adapt the systems in force each year with the aim of constant improvement.

Émile Hermès SAS is a société par actions simplifiée à capital variable (simplified joint stock company with variable capital), incorporated under French law and formed on 2 November 1989, whose partners are the direct descendants of Mr Émile-Maurice Hermès (see chapter 1 “Presentation of the Group and its results”, § 1.1) and his wife. It is registered with the Trade and Companies Register under number 352 258 115 RCS Paris. Its registered office is located at 23, rue Boissy-d’Anglas, 75008 Paris, France.

Its sole purpose is:

• •to serve as Active Partner and, if applicable, as Executive Chairman of Hermès International;
• •potentially, to hold direct or indirect equity interests in Hermès International; and
• •to carry out all transactions in view of pursuing and accomplishing these activities and to ascertain that any liquid assets it may hold are appropriately managed.

The role and powers of the Active Partner are described in § 3.2.2.

The control exercised by Émile Hermès SAS over Hermès International is described in chapter 7 “Information on the Company and its share capital”, § 7.2.2.3.

The company Émile Hermès SAS, incorporated as a SARL (société à responsabilité limitée, or limited liability company), was transformed in 2021 into a SAS (société par actions simplifiée, or simplified joint-stock company). This transformation took effect on 4 May 2021. The aim is to allow a number of partners that may exceed 100, the limit provided for in Article L. 223-3 of the French Commercial Code (Code de commerce) for SARLs.

The economy and the essential characteristics of the company, such as its operations, the organisation of its governance and the powers of its various corporate bodies, remain unchanged.

Only the following may be partners in Émile Hermès SAS:

• •the descendants of Mr Émile-Maurice Hermès and his wife, born Julie Hollande; and
• •their spouses, but only as usufructuaries of shares.

All partners of Émile Hermès SAS must have, for each share they hold on to deposit with the social funds:

• •either a number of Hermès International shares, undivided and free from any encumbrance or other commitment to third parties, equal to 2,250; or
• •the beneficial or legal ownership of a number of Hermès International shares, free from any encumbrance or commitment to third parties, equal to 4,500.

Any transaction that would result in a change of owner, even for the benefit of a spouse, ascendant or descendant of a partner, of wholly-owned shares, shares in bare ownership or usufruct, immediately, in the future or on option, is subject to the approval of the group of partners of Émile Hermès SAS. Nevertheless, transfers between partners may be freely made. The subscription of shares, other than by persons who are already partners, is also subject to this approval.

Émile Hermès SAS is chaired by Mr Henri-Louis Bauer, a direct descendant of Mr Émile-Maurice Hermès.

He has been a legal representative since 1 July 2012, first as Executive Chairman and then as Chairman since the transformation of the company into a simplified joint-stock company (société par actions simplifiée) on 4 May 2021.

Émile Hermès SAS has an Executive Management Board with 10 members, including the Chairman, who is an ex-officio member and chairs the Board.

The Executive Management Board appoints two Vice-Chairmen from among its members.

The members of the Executive Management Board are all natural persons chosen from among the shareholders of Émile Hermès SAS.

The Executive Management Board of Émile Hermès SAS exercises the powers attached to being an Active Partner of the Company.

1. The members of the Supervisory Board representing employees are not taken into account for the calculation of these proportions.

2. Average calculated on the basis of ages and lengths of service of members of the Supervisory Board, determined on a full-year basis as at 31 December 2022.

3. 12 members are appointed by the Shareholders' General Meeting and two members, representing employees, are appointed by the Group Works Council.

4. Supervisory Board members representing employees

5. Excluding Supervisory Board members representing employees.

The confidentiality of the Board’s work and the principle of collegiality prevent any individual public position being taken by members of the Supervisory Board.

The Supervisory Board describes the due diligence procedures it carried out during the financial year ended 31 December 2022 in a report presented to the General Meeting called to approve the financial statements (see chapter 8 “Combined General Meeting of 20 April 2023”, § 8.3).

In accordance with Article L. 22-10-78 of the French Commercial Code (Code de commerce), the Supervisory Board also presents this corporate governance report.

The rules of procedure (Article 1.1.3) provide, in respect of governance assignments not covered by the Articles of Association, that the Supervisory Board:

• •approves or refuses the acceptance by an Executive Chairman of any new office in a listed company;
• •is informed about market developments, the competitive environment and the most important issues facing the Company, including in the area of social and environmental responsibility and non-financial performance;
• •regularly reviews, via the Audit and Risk Committee, the opportunities and risks, such as financial, legal, operational, social and environmental risks, as well as the measures taken accordingly;
• •is regularly informed of the Company’s financial position, cash position and commitments;
• •ensures the establishment of a system for preventing and detecting corruption and influence-peddling;
• •ensures that the Executive Corporate Officers implement a policy of non-discrimination and diversity, notably with regard to the balanced representation of men and women on the Governing bodies;
• •examines the desired balance between its composition and that of its committees, and defines its diversity policy (see § 3.4.3).
• •Certain decisions of the Supervisory Board are prepared by specialised committees (see § 3.6).

Details of the subjects dealt with by the Supervisory Board in 2022 are provided in § 3.5.4.

In relations with the other bodies of the Company and vis-à-vis third parties, the Chairman is the sole person authorised to speak and act on behalf of the Board, other than in exceptional circumstances.

The Chairman ensures the proper functioning of the Supervisory Board.

In this respect:

• •with the support of the CAG-CSR Committee, the approval of the Board and of the Shareholders’ General Meeting where appropriate, he or she strives to create an effective and balanced Board, and to manage the replacement and succession planning processes concerning the Board and the appointments for which it is responsible;
• •he or she may attend all the committees and may add to the agenda any subject he or she considers relevant;
• •he or she ensures that the members of the Board have the documentation and information they need to carry out their duties in a timely manner, in a clear and appropriate form.

As in previous years, the Chairman of the Supervisory Board was invited to attend all meetings of the Executive Management Board of Émile Hermès SAS.

Since 20 March 2018, the Chairman of the Supervisory Board has been responsible for communicating with shareholders, on behalf of the Supervisory Board, with a view to:

• •explaining the positions taken by the Supervisory Board in its areas of competence (particularly with regard to governance and Senior Executive compensation), which were previously the subject of a communication;
• •ensuring that shareholders receive the information they expect from the Company.

The Chairman may seek the assistance of internal experts in these areas (in particular the Director of Financial Communications and Investor Relations or the Director of Corporate Law and Stock Exchange Regulations, Supervisory Board secretary and Compliance Officer).

The Chairman must report annually to the Supervisory Board on the execution of his or her duties.

No additional compensation is allocated to the Chairman for executing these duties.

In early 2023, the Chairman reported to the Supervisory Board on the performance of his duties in 2022.

In particular, he stated:

• •having answered questions from institutional shareholders;
• •having responded to questionnaires from stakeholders.

Hermès International did not receive any questions from individual shareholders in 2022.

It is specified that the answer to the written questions addressed to the Company on the occasion of the General Meeting is the responsibility of the Executive Management.

In 2022, the Board did not entrust any other duties to the Chairman of the Supervisory Board.

Two Vice-Chairs are appointed by the Supervisory Board from among its members.

In practice, the Vice-Chairs are the Chairmen of one of the two committees.

In accordance with the Articles of Association, in the absence of the Chairman, the oldest Vice-Chair shall perform his duties.

The Company’s CAG-CSR Committee is not tasked with setting the compensation of the Executive Chairmen, a task governed by the provisions of the Articles of Association and which falls within the remit of the Active Partner and not the Supervisory Board. It was therefore not relevant to create separate Compensation and Appointments Committees.

The Supervisory Board decides on the composition of the specialised committees, taking into account the skills of the Board members in the areas in question and their availability, as well as the legal requirements (Article L. 823-19 of the French Commercial Code (Code de commerce)) and the recommendations of the Afep-Medef Code updated in December 2022 (see § 3.1.2).

The skills of the members of a committee must correspond to the missions entrusted to this committee (see § 3.6.2.4 and §  3.6.3.4).

The current composition of each committee is in line with this objective.

The skills and experience matrix presented in § 3.4.5.2 lists the skills of the members of each committee.

The Supervisory Board meeting of 20 April 2022:

• •reappointed Mses Monique Cohen (Chairwoman) and Estelle Brachlianoff and Messrs Charles-Éric Bauer, Renaud Momméja and Alexandre Viros as members of the Audit and Risk Committee;
• •reappointed Mses Dominique Senequier (Chairwoman) and Estelle Brachlianoff and Mr Matthieu Dumas as members of the CAG-CSR Committee.

The terms of office as members of the Supervisory Board of Ms Monique Cohen and Mr Renaud Momméja expire in 2023.

No changes are currently planned in the composition of the committees, subject to the renewal of their terms as members of the Supervisory Board by the General Meeting of 20 April 2023.

During the formal 2022 evaluation, the CAG-CSR Committee considered, as it had done in 2019, that it was undesirable to call on an outside firm to conduct the formal evaluation of the Supervisory Board. The reasons for this decision are as follows:

• •confidentiality issues raised by giving information on the Supervisory Board to a third party;
• •the relative absence of weak signals raised by previous evaluations;
• •the steady progress made in terms of governance;
• •the small amount of added value expected from an external firm, particularly given the specific nature of a société en commandite par actions (partnership limited by shares), which offers few comparable.

The evaluation is carried out, in accordance with the recommendations of the Afep-Medef Code revised in 2022 (Article 11.3), as follows:

• •once a year, the Supervisory Board discusses its operation;
• •a formal evaluation is carried out every three years. It is implemented, under the direction of the CAG-CSR Committee, with the help of the secretary of the Board;
• •the shareholders are informed each year in the corporate governance report of the performance of the assessments and, where applicable, the follow-up given to them.

The evaluation shall have three objectives (Article 11.2 of the Afep-Medef Code updated in December 2022):

• •review the Board’s operating procedures;
• •check that key issues are properly prepared and discussed;
• •measure the effective contribution of each Board member to the work of the Board by virtue of his or her skills and involvement in discussions.

Order no. 2019-1234 of 27 November 2019 established a mechanism applicable to sociétés en commandite par actions (partnerships limited by shares) as regards Corporate Officers compensation.

This text came into force for the Company from the date of the Combined General Meeting of 24 April 2020.

The new system is based on a dual vote by the Ordinary General Meeting and the Active Partner:

• •an initial annual ex-ante vote will be taken on the compensation policy for Corporate Officers (i.e. the Executive Chairmen and members of the Supervisory Board). This policy must set out the principles and criteria, aligned with the interests of the Company, determining the compensation of Corporate Officers. The policy is binding, which means that compensation paid to Corporate Officers is confined to that set out in a previously approved compensation policy;
• •if a new compensation policy is rejected, the most recent approved policy continues to apply and a revised compensation policy is submitted to the Company’s next Ordinary General Meeting. In the absence of a previously approved compensation policy, compensation is determined in accordance with the compensation granted for the previous financial year or, in the absence of compensation granted for the previous financial year, in accordance with existing practices within the Company;
• •in exceptional circumstances, it is possible to depart from the application of the compensation policy if this departure is temporary, aligned with the corporate interest and necessary to guarantee the Company’s sustainability or viability;
• •a second ex-post vote is taken on the content of the corporate governance report setting out the compensation paid or awarded to Corporate Officers during the prior financial year, as well as certain additional information, in particular equity ratios.
• Several resolutions must therefore be presented:
  • ●a resolution (global ex-post vote) relating to the information referred to in Article L. 22-10-9, I of the French Commercial Code (Code de commerce), for all Corporate Officers (i.e. the Executive Chairmen, the Chairman of the Supervisory Board and the other members of the Supervisory Board). This information reflects, for each of these officers, the actual application of the compensation policy for the past financial year, including details of the compensation and benefits paid or awarded.
  • If rejected, a revised compensation policy is submitted to the Company’s next Ordinary General Meeting. The payment of compensation to Supervisory Board members for the current financial year is suspended until a revised compensation policy is approved. If the revised compensation policy is rejected, the suspended amounts are not paid and the compensation of the members of the Supervisory Board for the current financial year is suspended;
  • ●a resolution (individual ex-post vote) for each Executive Chairman and a resolution for the Chairman of the Supervisory Board concerning the total compensation and benefits of any kind paid during or awarded in respect of the prior financial year (Supervisory Board members are not subject to individual votes). The payment of the variable and exceptional portion of the compensation of the relevant person is subject to the prior approval of the resolution concerning him/her.

Pursuant to paragraph 4 of Article L. 22-10-76, I of the French Commercial Code (Code de commerce), resulting from the aforementioned order, the compensation policy for Corporate Officers (Executive Chairmen and members of the Supervisory Board) is presented below.

This policy describes all components of fixed and variable compensation and explains the decision-making process applied for its determination, review and implementation.

After outlining the general principles applicable to all Corporate Officers, the specific principles of the compensation policy for the Executive Chairmen will be outlined, followed by the specific principles of the compensation policy for the members of the Supervisory Board.

In application of Article L. 22-10-77, II of the French Commercial Code (Code de commerce), the compensation policy for Corporate Officers will be the subject of two separate resolutions at the General Meeting of 20 April 2023: the first will deal with the compensation policy for the Executive Chairmen and the second with the compensation policy for the members of the Supervisory Board.

The compensation policies for the Executive Chairmen and Supervisory Board members are aligned with the corporate interest and contribute to the Company’s commercial strategy and sustainability for the following reasons:

As regards the Executive Chairmen:

• •since the Company’s transformation into a société en commandite par actions (partnership limited by shares), the maximum amount of variable compensation set by the Articles of Association (“statutory compensation”) of the Executive Chairmen has been determined by the Articles of Association (Article 17);
• •the maximum amount of fixed (“additional”) compensation of the Executive Chairmen and its indexation were determined by the Ordinary General Meeting of 31 May 2001;

•  
• •the variable compensation is subject in part (10%) to a CSR criterion reflecting the Group’s firm and ongoing commitments to sustainable development (for the composition of the CSR criterion, see § 3.8.1.2.4);
• •the composition of compensation is simple and clear – fixed and variable compensation, without resorting to complex deferred compensation mechanisms and without guaranteeing a minimum variable compensation in the event of a poor economic performance by the Company;
• •the Executive Management Board of Émile Hermès SAS, Active Partner, sets the actual amount of each Executive Chairman’s annual compensation set by the Articles of Association (“statutory compensation”). To this end, it uses the recommendations of the CAG-CSR Committee and in particular, in addition to the level of achievement of CSR criteria, takes into account in its decision the performance achieved by the Group in respect of the previous financial year, the strategic challenges in respect of the Group’s medium- and long-term development and the competitive environment in which it operates.

As regards the members of the Supervisory Board:

• •the principles governing allocation set out in the compensation policy for members of the Supervisory Board result in amounts being awarded on the basis of the tasks entrusted to them and their attendance at meetings;
• •these principles are periodically reviewed in line with market practices.

The conditions of compensation and employment of the Group’s employees are described in chapter 2 “Corporate social responsibility and non-financial performance”, § 2.2.

The Group’s policy is to allow its employees to benefit from its long-term growth prospects through various mechanisms:

• sin general, in all the countries where the Company operates, its employees are paid in line with market standards in terms of their total compensation;
• sthe Company also offers its employees:
  • ●employee shareholding plans: such plans have been in place for many years (the first plan dates back to 1993) and acknowledge the contribution made by employees to the House’s development, regardless of their role or geographical location, by providing a single component of compensation in order to share the benefits of our growth, enabling employees to identify more closely with decisions having an impact on Hermès’ long-term growth,
  • ●incentive schemes involving employees with the development of locally determined indicators that are relevant with regard to the activity and environment of each of the French subsidiaries, notably quality, safety and productivity,
  • ●a Group profit-sharing agreement giving all employees of companies in France a share of the Group’s profits in a harmonised manner,
  • ●other mechanisms enabling employees of foreign subsidiaries to benefit from additional compensation adapted to local performance and practices,
  • ●lastly, voluntary and supra-legal social protection and pension plans, set up by the subsidiaries in order to supplement the employer offer in a comprehensive and competitive manner and to offer compensation and social protection schemes in the short, medium and long term.

The Group’s employee compensation policy is ambitious and comprehensive; it incorporates a wide range of compensation tools.

The budget guidelines for wage increases during the annual salary review take account of inflation and changes in local wage markets. Particular attention is paid to gender equality and gaps in relation to the market (internal and external). Specific budgets may be provided if adjustments are necessary.

The desire to reward both collective and individual performance can also be seen in the development of variable compensation at both individual and collective levels in recent years.

A number of measures have been implemented to prevent possible conflicts of interest:

• •the maximum amount of variable compensation set by the Articles of Association (“statutory compensation”) of the Executive Chairmen is determined by the Articles of Association (Article 17);
• •the maximum amount of fixed (“additional”) compensation of the Executive Chairmen and its indexation were determined by the Ordinary General Meeting of 31 May 2001;
• •since its creation on 24 March 2010, the CAG-CSR Committee of the Supervisory Board of Hermès International has been tasked each year with ensuring that compensation paid to the Executive Chairmen complies with the provisions of the Articles of Association and the decisions made by the Active Partner;
• •changes to the two components of the compensation of Executive Chairmen depend on objective and comprehensible quantifiable qualitative criteria unaltered for many years, that are public and predefined by nature, as described in § 3.8.1.2;
• •when setting the actual amount of each Executive Chairman’s compensation set by the Articles of Association (“statutory compensation”), the Executive Management Board of Émile Hermès SAS uses the recommendations of the CAG-CSR Committee and takes into account in its decision the performance achieved by the Group in respect of the prior financial year, the strategic challenges in respect of the Group’s medium- and long-term development and the competitive environment in which it operates;
• •since 2020, the compensation policy for the Executive Chairmen has been subject to the advisory opinion of the Supervisory Board and the approval of the General Meeting, and the actual compensation of the Executive Chairmen is subject to a decision by the Supervisory Board.

Pursuant to Article R. 22-10-40, V of the French Commercial Code (Code de commerce), the compensation policy for Corporate Officers, together with the date and result of the last ex-ante vote in the General Meeting, is disclosed on the Company’s financial website on the business day following the date of the vote.

Pursuant to Article 27.1 of the Afep-Medef Code updated in December 2022, all potential or vested compensation of the Executive Chairmen is disclosed on the Company’s financial website https://finance.hermes.com/en/corporate-officers immediately after the meeting of the Executive Management Board of Émile Hermès SAS, Active Partner, that approved it.

Decision-making process followed for its determination, review and implementation applicable since the 2020 General Meeting

The components of the Executive Chairmen’s compensation policy are established by Émile Hermès SAS, Active Partner. The decision is made by taking into account the principles and conditions provided for in Article 17 of the Articles of Association with respect to the variable compensation set by the Articles of Association (“statutory compensation”) and, by reference to the Articles of Association, the decision of the Ordinary General Meeting of 31 May 2001 with respect to fixed (“additional”) compensation.

It is submitted to the Supervisory Board for an advisory opinion.

Since 2020, the compensation policy for the Executive Chairmen is submitted each year to the Ordinary General Meeting for approval (ex-ante vote).

The actual amount of the Executive Chairmen’s compensation is determined each year by Émile Hermès SAS, Active Partner, in accordance with the approved compensation policy, which is then submitted to the Supervisory Board for approval.

The CAG-CSR Committee of the Supervisory Board:

• •evaluates the achievement of the indicators comprising the CSR criterion for Executive Chairmen’s variable compensation;
• •checks that the actual compensation of the Executive Chairmen complies with the Articles of Association and the compensation policy.

Since 2020, the actual overall compensation of Corporate Officers (including that of the Executive Chairmen) and the actual individual compensation of each Executive Chairman will be subject, each year, to approval by the Ordinary General Meeting (ex-post votes).

The General Meeting of 20 April 2022 approved, at 92.34% and without reservation, the compensation policy for the Executive Chairmen (see § 3.8.5).

Since then, no changes have been made to the compensation policy for the Executive Chairmen.

The term of office of the Executive Chairmen is indefinite under the terms of the Articles of Association, and is therefore not subject to renewal.

The compensation policy would apply to newly appointed Executive Chairmen on a pro rata basis in accordance with their presence during the first year of their term.

In the event that exceptional circumstances should arise, the Executive Management Board of Émile Hermès SAS is authorised, under the conditions provided for by law, to waive the application of the compensation policy used to set the variable compensation of the Executive Chairmen, within the limit authorised by the Articles of Association, and after the favourable opinion of the Supervisory Board.

Pursuant to Articles L. 22-10-76 and R. 22-10-40, II of the French Commercial Code (Code de commerce), the specific components comprising the compensation policy for the Executive Chairmen are set out below.

No such commitment exists.

The term of office of the Executive Chairmen is open-ended. The Executive Chairmen may be dismissed by a decision of the Active Partner.

Annual fixed and variable compensation and respective importance – CSR criterion for variable compensation

In accordance with the principles set out in Article 17 of the Articles of Association, each Executive Chairman is entitled to fixed compensation (referred to as “additional” in the Articles of Association) for which the maximum amount is determined by the Ordinary General Meeting with the unanimous approval of the Active Partners and, potentially, variable compensation set by the Articles of Association (“statutory compensation”):

• fixed compensation (referred to as “additional compensation” in the Articles of Association) was introduced by the Ordinary General Meeting of 31 May 2001, which set a limit of €457,347.05, and provided for it to be indexed upwards only, in accordance with any increase in consolidated revenue for the previous financial year over the year prior to that, at constant scope and exchange rates. Fixed compensation is, therefore, set on an annual basis. In accordance with this principle and to facilitate understanding of how the additional compensation of Executive Chairmen is calculated before indexing, it is referred to as “fixed compensation” by analogy with market practices;
• the calculation of the variable compensation (referred to as “compensation set by the Articles of Association (“statutory compensation”)”) – set by Article 17 of the Articles of Association – has remained constant since the IPO on 3 June 1993. This compensation is capped at 0.20% of the consolidated net income before tax generated in the previous financial year. This mode of determination naturally leads to a strict variability in the compensation set by the Articles of Association (“statutory compensation”) of Executive Chairmen, in a transparent way and without any guarantee of a minimum amount. With the aim of clarity, the compensation set by the Articles of Association (“statutory compensation”) of the Executive Chairmen is referred to as “variable compensation”, by analogy with market practices.

The variable compensation of the two Executive Chairmen is partially conditioned (10%) on a “CSR” criterion reflecting the Group’s stated and constant commitments in respect of sustainable development. The CSR criterion contributes to the objectives of the Executive Chairmen’s compensation policy.

This way of structuring the variable component of compensation was applied for the first time when evaluating variable compensation owing for 2019, which was measured and paid in 2020.

The indicators making up the CSR criterion relate to the following:

• •decoupling between business growth at constant scope and exchange rates and the evolution of industrial energy consumption (quantifiable environmental criterion);
• •actions implemented in favour of the Group’s local integration in France and throughout the world, excluding major cities (qualitative societal criterion);
• •Group initiatives in favour of gender balance (qualitative social criterion).

The Executive Management Board of Émile Hermès SAS, Active Partner, sets the actual amount of the annual compensation of each Executive Chairman, not exceeding the maximum amount of the approved compensation policy defined herein, and in accordance with the criteria and targets set out in § 3.8.1.1 and § 3.8.1.2, as follows:

• •target variable compensation as set by the Articles of Association (“statutory compensation”) is set by applying the strict variability of the consolidated net income before tax, 10% of which is conditional on the achievement of the targets making up the CSR criterion (see above);
• •fixed (“additional”) compensation is set by applying the strict variability, upwards only, of revenue to the compensation of the previous financial year;
• •the other components of compensation are set in strict application of the compensation policy for the Executive Chairmen.

Thus, no minimum variable compensation set by the Articles of Association (“statutory compensation”) is guaranteed for the Executive Chairmen.

The quantifiable criteria are paramount in the calculation of the variable compensation of the Executive Chairmen.

The Executive Management Board of Émile Hermès SAS, Active Partner, relies on the recommendations of the CAG-CSR Committee.

Mr Henri-Louis Bauer, the Legal Representative of Émile Hermès SAS (Executive Chairman), does not personally receive any compensation from Hermès International. He receives compensation from Émile Hermès SAS for his functions as Executive Chairman of this company, which is unrelated to the appointment of Émile Hermès SAS as Executive Chairman of Hermès International.

The Executive Chairmen do not receive any compensation or benefits of any kind from the subsidiaries of Hermès International.

The breakdown of the actual compensation of the Executive Chairmen for the last two financial years is shown in § 3.8.4.2.

Each year, the CAG-CSR Committee of the Supervisory Board of Hermès International is tasked with ensuring that the Executive Chairmen’s compensation is compliant with the Articles of Association and the compensation policy.

No predetermined weighting is applied with respect to fixed and variable compensation, which depend on the components described above.

Methods for assessing the achievement of performance criteria for variable compensation or share-based compensation (Article R. 22-10-40, I-4° of the French Commercial Code (Code de commerce))

The variable compensation set by the Articles of Association (“statutory compensation”) of the Executive Chairmen is evaluated in accordance with the change in consolidated net income before tax for the prior financial year compared with the preceding financial year, and conditioned in the proportion of 10% on the achievement of the CSR criterion.

The evaluation of the amount of compensation subject to the CSR criterion is limited to a target of 100%, with no possibility of exceeding that limit.

Each of the three indices mentioned in § 3.8.1.2.4 “Annual fixed and variable compensation and respective importance – CSR criterion for variable compensation”:

• •shall count as one-third of the CSR criterion;
• •has an annual reference period;
• •is subject to an annual evaluation of their achievement by the CAG-CSR Committee.

Deferred or multi-year variable compensation

The allocation to Executive Chairmen of deferred or multi-year variable compensation is not provided for.

Exceptional compensation

The allocation of exceptional compensation to the Executive Chairmen is not provided for.

Share-based compensation (Article R. 22-10-40, II-2° of the French Commercial Code (Code de commerce))

The current compensation policy does not provide that the Executive Chairmen are entitled to share-based compensation.

In accordance with Article 25.3.3 of the Afep-Medef Code, Executive Chairmen who are natural persons and who are beneficiaries of stock options and/or performance-based shares must make a formal commitment not to hedge their risk on options or on shares resulting from the exercise of options or on performance-based shares, until the end of the share retention period.

Mr Axel Dumas, the only eligible Executive Chairman, has not received any stock options or performance-based shares since he was appointed Executive Chairman.

Émile Hermès SAS, a legal entity, is not eligible for the stock option or performance-based share plans.

Employment contract

In order to comply with the Afep-Medef Code, Mr Axel Dumas decided on 5 June 2013 to end his employment contract with immediate effect when he was appointed Executive Chairman of Hermès International.

Service agreements

No Executive Chairman directly or indirectly invoices services to the Company.

Compensation of Board members in the Company and the Group’s subsidiaries

The Executive Chairmen do not receive any compensation as Board members paid by the Company or by the Group's subsidiaries.

Similarly, note that the Group’s allocation rules specify that the members of the Executive Committee of Hermès International who are directors in subsidiaries do not receive compensation in that capacity.

Death and disability plan

Mr Axel Dumas is eligible for the mandatory collective death and disability plan established by the Group for the benefit of all staff of French entities that have joined this plan (decision taken by the Supervisory Board on 19 March 2014).

It provides, as is the case for all employees, the following gross lifetime benefits:

• a disability pension at 51% of reference compensation in the case of Category 1 disability and 85% of reference compensation in the case of Category 2 or 3 disability. The reference compensation (gross annual compensation) is capped at 8x the annual social security ceiling (PASS). The payment of the disability pension is discontinued when the recipient in question is no longer categorised as having the disability or permanent impairment and, at the latest, on the day of the normal or early liquidation of an old age insurance pension from the mandatory retirement plan, for any reason whatsoever;
• a death benefit equal to a maximum of 380% of the reference compensation, capped at 8x PASS, depending on the family situation;
•  contributions paid to the insurer are split between the Company (1.54% for tranche A, and 1.64% for tranches B and C) and the beneficiary (1.06% for tranche A and 1.16% for tranches B and C);
•  these contributions are deductible from the corporation tax base, subject to corporate social contributions at the rate of 8%, and excluded from the base for social security contributions, within the limit of an amount equal to the sum of 6% of PASS and 1.5% of compensation retained within the limit of 12x PASS.

Benefits of any kind

Mr Axel Dumas has a company car constituting his only benefit in kind.

Mr Axel Dumas benefits from the mandatory collective healthcare plan implemented by the Group for the benefit of all staff of French entities that have joined this plan (decision made by the Supervisory Board on 19 March 2014).

Émile Hermès SAS does not receive any benefits in kind.

Severance payment

The Company made a commitment to pay Mr Axel Dumas compensation in an amount equal to 24 months of total compensation (“statutory” variable compensation set by the Articles of Association and “additional” fixed compensation) in the event of the termination of his duties as Executive Chairman (decision of the Supervisory Board of 4 June 2013 approved by the General Meeting of 3 June 2014 – 10th resolution “Approval of the commitments owed to Mr Axel Dumas in respect of the termination of his duties as Executive Chairman” – in accordance with Article L. 225-42-1 of the French Commercial Code (Code de commerce) applicable at that date).

The payment of a severance payment is subject to the termination of duties as Executive Chairman resulting:

• •either from a decision taken by Mr Axel Dumas by reason of a change of control over the Company, a change in the Chairman of Émile Hermès SAS, which is an Executive Chairman of the Company, or a change in the Company’s strategy; or
• •from a decision taken by the Company.

Given the importance of the role of the Active Partner in a société en commandite par actions (partnership limited by shares) – which has the power to appoint and dismiss any Executive Chairman, and in the case of a legal entity, its legal representative, it was considered that the termination of duties as Executive Chairman of Mr Axel Dumas that may result from the replacement of the Chairman of Émile Hermès SAS, should be treated as a forced departure.

The criteria for granting severance payments are therefore strictly confined to cases of forced departure.

Moreover, the payment of such compensation is subject to the following performance conditions, such that the conditions of his departure are in equilibrium with the situation of the Company: achieving budget targets in at least four out of the five previous years (with revenue and operating income growth measured at constant rates), without deterioration in the Hermès brand image.

The Supervisory Board therefore considered that the deferred compensation commitment made to Mr Axel Dumas complied with the requirements of the Afep-Medef Corporate Governance Code.

No such agreement has been entered into with Émile Hermès SAS.

Non-compete indemnity

Mr Axel Dumas is not subject to any non-competition agreement, therefore no compensation is provided for in this respect.

No such agreement has been entered into with Émile Hermès SAS.

Supplemental pension plan

Mr Axel Dumas is eligible for the supplementary defined-contribution pension plan established for all employees of the Group’s French companies that have joined it (decision by the Supervisory Board on 4 June 2013 approved by the General Meeting of 3 June 2014 – 5th resolution “Approval of related-party agreements and commitments”).

As with all employees of the Group:

• •the defined-contribution pension plan is funded as follows: 1.1% for the reference compensation for an amount of 1x the annual social security ceiling (hereunder PASS), 3.3% for the reference compensation between 1x and 2x PASS, and 5.5% on the reference compensation between 2x and 6x PASS. Reference compensation means the gross annual compensation in accordance with Article L. 242-1 of the French Social Security Code (Code de la Sécurité sociale);
• •these premiums are shared between the Company (90.91%) and the beneficiary (9.09%);
• •the employer contributions are deductible from the corporation tax base, subject to corporate social contributions at the rate of 20% and excluded from the base for social security contributions within the limit of the higher of the following two values: 5% of the PASS or 5% of the compensation retained within the limit of 5x PASS (€205,680 in 2022).

Mr Axel Dumas is also eligible for the supplemental pension plan established in 1991 for Company Senior Executives (decision by the Supervisory Board on 4 June 2013, approved by the General Meeting of 3 June 2014 – 5th resolution “Approval of related-party agreements and commitments”).

This provision is not limited solely to the Executive Chairmen but also encompasses a wider group of Senior Executives. It may be terminated, in the case of Mr Axel Dumas, by deliberation of the Supervisory Board.

In accordance with Order no. 2019-697 of 3 July 2019 relating to defined-benefit occupational plans, no new members may join this scheme from 4 July 2019 and no new conditional right to benefits may be awarded for periods of employment after 31 December 2019.

As a fundamental condition of the pension regulations, in order to be eligible for the scheme, beneficiaries must have reached the end of their professional career with the Company, have at least ten years of seniority as evaluated at 4 July 2019 given the provisions of the aforementioned order of 3 July 2019, and be eligible to draw pension benefits under the statutory French social security regime.

Each participant gradually acquires potential rights, calculated each year on the basis of his or her annual reference compensation, it being specified that 2019 is the last year taken into account when calculating such rights (in application of Order no. 2019-697 of 3 July 2019). These potential rights represent, depending on the seniority and for each year, a percentage of the reference compensation ranging between 0.9% and 1.5%.

If all the eligibility conditions are met, the annual pension under this scheme would be based on:

• •the average yearly compensation for the last three years;
• •a percentage of the reference compensation, ranging from 0.9% to 1.5% per year of service (as at 31 December 2019). In accordance with the regulations, as Mr Axel Dumas has seniority exceeding 16 years, this percentage is set at 1.50%. It is in any event, below the legal limit of 3%.

In addition, the regulation provides for the application of two ceilings to the final amount of the annual pension:

• •the amount of the annual pension is capped at 8x PASS, i.e. €329,088 in 2022; and
• •the sum of (i) pensions accrued in respect of statutory and collective agreement plans (excluding increases for children raised) including rights accrued in overseas pension plans, pensions resulting from any supplementary plan that may be put in place within the Hermès Group and (ii) the amount of the top-up pension resulting from the regulations is capped at 70% of the last reference compensation.

For information, subject to fulfilling the conditions of the plan at the time of the liquidation of his pension, the maximum amount of the future pension, limited by the plan’s regulations to eight times the annual social security limit, compared with the compensation for financial year 2022 of the natural person Executive Chairman would represent a replacement rate (excluding mandatory plans) of 5.41%.

The plan is financed by the Company through a contract taken out with an external insurance company, and, if necessary, additional provisions are recorded in the financial statements.

The following income tax and social security charges are currently applicable to the plan:

• •with regard to social security contributions, using an irrevocable option, the Company has chosen to apply the fixed contribution set out in Article L. 137-11 of the French Social Security Code concerning the premiums paid to the external insurance firm at the rate of 24%. The beneficiary must pay – as for all replacement income – CSG (social security tax) and CRDS (social security debt repayment tax), in addition to healthcare contributions and an additional solidarity contribution for autonomy (CASA) on the amount of the pension. In the specific case of pensions resulting from defined-benefit pension plans, the beneficiary of the pension must also pay a social security contribution, at a rate that varies depending on the amount of the pension and its liquidation date;
• •with regard to taxation, the premiums paid to the external insurance firm may be deducted from the tax base for corporation tax.

Following the freeze on the scheme initially put in place in 1991 and from which the Executive Chairman potentially benefits, the Group has not decided on the scheme that could replace this supplemental pension plan. In the absence of any instructions to date concerning the terms of transfer of the conditional rights frozen on a vested rights plan, the Company reserves the right to subsequently assess which pension plan would be most relevant and most appropriate (including or not a possible transfer of pension rights set up in 1991).

Émile Hermès SAS, a legal entity, is not eligible for a supplemental pension plan.

Decision-making process followed for its determination, review and implementation applicable since the 2020 General Meeting

The General Meeting sets the maximum annual total amount of compensation for the Supervisory Board.

The components of the compensation policy for Supervisory Board members are established by the Supervisory Board.

Since 2020, the compensation policy for members of the Supervisory Board has been submitted to the Ordinary General Meeting each year for approval (ex-ante vote).

The actual annual amount of compensation paid to the members of the Supervisory Board is determined by the Supervisory Board at the start of the year in respect of the previous year by applying the compensation policy and taking into account the individual attendance of each member during the previous financial year.

The Supervisory Board’s CAG-CSR Committee checks that the actual compensation of Supervisory Board members complies with the total amount set by the General Meeting and the compensation policy for the members of the Supervisory Board.

Since 2020, the actual application of the compensation policy (including the overall actual compensation paid, and/or awarded) of the Corporate Officers (including that of Supervisory Board members) and the actual individual compensation of the Chairman of the Supervisory Board will be submitted each year to the approval of the Ordinary General Meeting (ex-post vote).

The General Meeting of 20 April 2022 approved, at 99.97% and without reservation, the compensation policy for the members of the Supervisory Board (see § 3.8.5).

A review of the total annual amount of compensation attributable to the members of the Supervisory Board is proposed to the Combined General Meeting of 20 April 2023. This proposal was approved by the Executive Management Board of Émile Hermès SAS, Active Partner, and the Supervisory Board of Hermès International at their Joint Council meeting on 16 February 2023.

In accordance with the decision-making process described in § 3.8.1.3, the Supervisory Board therefore also proposes to review the criteria for distributing the compensation of the current members of the Board and of the committees (see § 3.8.1.3.4). These criteria, which remained unchanged since 2017, constitute the Board’s compensation policy.

It is therefore proposed (see chapter 8 “Combined General Meeting of 20 April 2023”, § 8.2.1 “Explanatory statement to the 12th resolution”):

• to increase the total annual amount from €600,000 to €900,000;
• to review the current allocation criteria accordingly (see § 3.8.1.3.4).

The objectives of these proposals are:

• •to maintain the appeal of the Board;
• •to remain competitive in the search for profiles in line with the Board’s diversity policy (see § 3.4.3);
• •to offer the Supervisory Board the necessary flexibility to anticipate any change in its composition and/or its functioning;
• •to take into consideration the development of the activities and the heterogeneity of the subjects that the Board and its committees discuss.

This revaluation would remain lower than the market practices of CAC 40 companies. (according to the AFEP study “Compensation of directors and members of the Supervisory Board of SBF 120 companies for the 2021 financial year” of July 2022).

Subject to the approval of the 12th resolution (“Setting of the total annual amount of compensation attributable to members of the Supervisory Board – Approval of the compensation policy for members of the Supervisory Board (ex-ante vote)”) by the Combined General Meeting of 20 April 2023, this new compensation policy will apply to the amounts awarded at the beginning of 2024 in respect of the 2023 financial year, and until a further decision by the General Meeting.

If a member is appointed during the year, the fixed component is shared between the outgoing member and his or her replacement, and the variable component is allocated according to attendance at meetings.

The compensation policy applies without interruption to members whose term of office is renewed.

There are currently no temporary exceptions from the application of the compensation policy for the Supervisory Board members subject to the occurrence of exceptional circumstances.

Supervisory Board members receive compensation in a total amount that is approved by the General Meeting and for which the allocation criteria are laid down in the Supervisory Board’s compensation policy.

Compensation paid to members of the Audit and Risk Committee and the CAG-CSR Committee is deducted from the total amount of compensation of Supervisory Board members.

The General Meeting of 6 June 2017 set the maximum annual amount of compensation allocated to the Supervisory Board and its committees at €600,000.

The allocation criteria (on a full-year basis) approved by the Board on 6 June 2017 and set out in Article 5.1 of the Board’s rules of procedure are as follows:

• •the maximum amounts that may be allocated to each member are set out in the table below;
• •the variable component proportional to the actual attendance at meetings is preponderant;
• •employee representatives on the Supervisory Board do not receive compensation as members of the Supervisory Board;
• •the variable component proportional to a member’s attendance at meetings is calculated by applying to the maximum amount of the variable component the ratio between the number of meetings attended (in the numerator) and the total number of meetings held during the last financial year (in the denominator);
• •no variable component is allocated to the Chairman of the Supervisory Board or the Chairs of the committees, since they must chair all meetings, unless they are prevented from doing so;
• •the fixed and variable components are determined by the Board at its first meeting of the year following the year for which the compensation is paid.

The allocation principles include a fixed component (35.46% for the Board and 40.00% for the committees) and a variable component proportional to actual attendance at meetings (64.54% for the Board and 60.00% for the specialised committees).

No additional compensation is paid to Board members who are not resident in France.

As indicated in § 3.8.1.3.1 above, it is proposed that the next General Meeting revise the total annual amount of compensation attributable to the members of the Supervisory Board and modify the allocation criteria (full year) as follows:

The allocation criteria would still include a majority variable component proportional to actual attendance at meetings (66.66% for the Board and 60.00% for the specialised committees).

The other allocation criteria would remain unchanged.

The attendance record and the corresponding allocation of annual compensation for a financial year are prepared by the CAG-CSR Committee and then approved by the Supervisory Board in the first quarter of the following financial year.

The members of the Supervisory Board of a société en commandite par actions (partnership limited by shares) may be bound to the Company by an employment contract with no condition other than that resulting from the existence of a relationship of subordination with the Company and the recognition of effective employment.

• •Ms Pureza Cardoso (craftsperson/trainer – Maroquinerie de Sayat), and
• •Mr Rémy Kroll (Director of Special Sales and Recycling – Hermès International),

employee representative members of the Supervisory Board from 12 November 2019 to 12 November 2022,

• •Ms Anne-Lise Muhlmeyer (Preparation Manager – Ateliers d’Ennoblissement d'Irigny), and
• •Mr Prescience Assoh (Sales associate – Hermès Sellier),

employee representative members of the Supervisory Board since 15 November 2022, hold employment contracts within the Hermès Group and receive compensation in this respect that was not granted by virtue of their offices. Consequently, and for reasons of confidentiality, their salaries are not disclosed.

No other members of the Supervisory Board, and in particular Mr Éric de Seynes, Chairman, are bound to the Company by an employment contract.

No options to subscribe for or purchase shares were granted to Supervisory Board members in financial year 2022, nor were any such options exercised by them.

No free shares were allocated to members of the Supervisory Board during financial year 2022.

In application of Articles L. 226-10 and L. 225-38 to L. 225-43 of the French Commercial Code (Code de commerce), any agreement entered into directly or through an intermediary between the Company and:

• •one of its Executive Chairmen;
• •one of the members of the Supervisory Board; or
• •one of its shareholders holding a fraction of the voting rights greater than 10% or, in the case of a shareholder company, the company controlling it within the meaning of Article L. 233-3 of the French Commercial Code (Code de commerce),

must be subject to the prior authorisation of the Board.

These provisions are applicable to agreements in which one of these persons has an indirect interest.

Agreements entered into directly or through an intermediary between the Company and a company are also subject to prior authorisation by the Supervisory Board if:

• •one of its Executive Chairmen; or
• •one of the members of the Supervisory Board,

is an owner, partner with unlimited liability, Executive Chairman, Director, Chief Executive Officer, member of the Management Board or member of the Supervisory Board of the company.

The foregoing provisions are not applicable either to agreements on current transactions entered into on an arm’s length basis or to agreements concluded between two companies in which one holds, directly or indirectly, the entire share capital of the other, where applicable, after deduction of the minimum number of shares required by law. These agreements are communicated by the person concerned to the Chairman of the Supervisory Board, who communicates the list to the members of the Board and to the Statutory Auditors.

In accordance with the provisions of Article L. 225-38 of the French Commercial Code (Code de commerce), authorisation decisions of the Supervisory Board since 1 August 2014 are all supported by justification.

A review of the related-party agreements entered into during previous financial years and whose execution has continued over time is carried out by the Supervisory Board each year in accordance with the provisions of Article L. 225-40-1 of the French Commercial Code (Code de commerce).

Following the review of 2022, the Board had no comments to make.

None of these agreements changed significantly with respect to amounts or financial terms in 2022.

Related-party transactions are shown in chapter 5 “Consolidated financial statements”, § 5.6 (note 13).

Pursuant to the provisions of Article L. 225-37-4 of the French Commercial Code (Code de commerce), this report must disclose any agreements entered into, directly or through an intermediary, between, on the one hand, an Executive Chairman, a member of the Supervisory Board or one of the shareholders holding more than 10% of the voting rights of the Company and, on the other hand, another company controlled by said other party within the meaning of Article L. 233-3 of the French Commercial Code (Code de commerce).

These are not related-party agreements subject to prior approval by the Supervisory Board, as Hermès International is not a party to the agreement. Agreements entered into with a wholly owned subsidiary are not excluded (Order no. 2014-863 of 31 July 2014 relating to company law).

You are advised that no such agreements were entered into during the financial year ended 31 December 2022.

This procedure, which applies only to Hermès International and not to its subsidiaries, was approved by the Supervisory Board on 25 February 2020.

Its purpose is to enable Hermès International to periodically assess the appropriateness of the classification used for ongoing agreements entered into during the financial year, those that continue over several years, and any agreements that may have been modified.

A “Current Agreements Committee” tasked with conducting the evaluation has been established; it comprises the following members as a minimum:

• •a representative of the legal, corporate law and securities law department;
• •a representative of the finance department.

The procedure first entails the presentation of:

• •the notion of agreements bearing on ongoing transactions entered into on an arm’s length basis and transactions deemed to be ongoing and entered into on an arm’s length basis within the Hermès Group;
• •the notions of related-party agreement and prohibited agreement;
• •the roles and responsibilities related to the identification of related-party agreements and the control and disclosure procedure applicable to them.

The procedures for the regular evaluation of agreements relating to ongoing transactions concluded on an arm’s length basis are then described:

• •periodicity of the assessment: annual;
• •nature of the work required to carry out the evaluation:
  • ●determining each year the scope of the agreements to be assessed, for example by selecting a category of agreement taking into account, for example, duration, maturity, importance (in particular, financial), nature or by adopting a risk-based approach,
  • ●assessing the relevance of the criteria used to distinguish between ongoing transactions concluded on an arm’s length basis and related-party agreements, and their correct application in the Company,
  • ●carrying out a review of the terms and conditions applicable to these agreements in order to ensure, for those that may be revised or renewed in the coming year, that they still qualify as ongoing transactions concluded on an arm’s length basis, in particular in view of the criteria used,
  • ●detecting any anomalies that could make it necessary to supplement existing internal control procedures;
• •consequences of the evaluation;
• •report to the Supervisory Board and follow-up.

In 2022, the Current Agreements Committee conducted a full review of the agreements relating to ongoing transactions and entered into on an arm’s length basis and concluded that all these agreements continue to meet these two conditions. A report was presented to the Supervisory Board, which took note of it.

An in-depth annual review will be carried out on significant agreements to ensure that they continue to meet the criteria for ongoing and normal agreements.

In accordance with point 16.1 of Annex 1 to European Commission Delegated Regulation (EU) 2019/980, the direct interests of Senior Executives in the Company’s share capital as at 31 December 2022, as reported to the Company, were as follows.

In accordance with European regulation (EU) no. 2017/1129 of 14 June 2017 (Prospectus) and the ESMA guidelines, the risk factors presented in this chapter are, as at the date of this universal registration document, those that the Hermès Group believes could have a material adverse effect on its activity, results, financial position or prospects.

In general, the Group has put in place a system to anticipate and control the risks identified. It is periodically updated to take into account regulatory, legislative, economic, societal, geopolitical and competitive developments. A detailed description of the management of these risks is presented in this chapter.

Risk factors are presented in five main categories according to their nature, the most material risks being presented first. The mapping below classifies these risk factors according to their potential impact and probability of occurrence and therefore reflects the Group’s exposure, after taking into account the control measures implemented. The impact of the risks identified is assessed using a multi-criteria grid defined at Group level and shared with the subsidiaries. The analysis criteria include, as an inseparable whole, financial, reputational and legal criteria, as well as criteria relating to social, societal and environmental responsibility. This methodology makes it possible to address a concept of double materiality by taking into account the impacts on the Group itself and on its stakeholders.

The Audit and Risk Committee was involved in drawing up this matrix.

Since January 2020, the prevention and insurance department joined the audit and risk management department, demonstrating the desire to further strengthen synergies between risk and insurance.

In line with the Group risk analysis, the Hermès Group’s policy regarding insurance is to transfer any exposure that is liable to produce a material impact on profits to the insurance market. The Group insurance programmes represent most of the insurance coverage for the subsidiaries. They are placed via the intermediary of brokers who are amongst the 10 largest French brokers and with first-rate insurance companies. The main international insurance programmes cover: