Annual Report 2024

Impact with care



PDF/printed version

This document is the PDF/printed version of the 2024 Annual Report of Royal Philips and has been prepared for ease of use. The 2024 Annual Report was made publicly available pursuant to section 5:25c of the Dutch Financial Supervision Act (Wet op het financieel toezicht), and was filed with Netherlands Authority for the Financial Markets in European single electronic reporting format (the ESEF package) on February 21, 2025. The ESEF package is available on the company’s website at https://www.results.philips.com/downloadcenter#ar24 and includes a human readable XHTML version of the 2024 Annual Report. In any case of discrepancies between this PDF version and the ESEF package, the latter prevails.

IFRS basis of presentation

The financial information included in this document is based on IFRS, as explained in General information to the Consolidated financial statements, unless otherwise indicated. 

Forward-looking statements

This document contains certain forward-looking statements. By their nature, these statements involve risk and uncertainty. For more information, please refer to Forward-looking statements and other information.

References to Philips

References to the company, to Philips or the (Philips) Group or group, relate to Koninklijke Philips N.V. and its subsidiaries, as the context requires. Royal Philips refers to Koninklijke Philips N.V.

Dutch Financial Markets Supervision Act

This document comprises regulated information within the meaning of the Dutch Financial Markets Supervision Act (Wet op het financieel toezicht).

Statutory financial statements and management report

The chapters Group financial statements and Company financial statements contain the statutory financial statements of the company. Under ’Management report’ in section References to the content of this Annual Report we set out which parts of this Annual Report form the Management report within the meaning of Section 2:391 of the Dutch Civil Code.

Due to rounding, amounts may not add up precisely to the totals provided in this report.

Contents

2024 at a glance

4

1    Our Management

5

1.1    Message from the CEO

6

1.2    Members of the Board of Management and Executive Committee

8

2    Strategy

10

2.1    Strategic focus

11

2.2    Business

13

3    Financial performance

24

3.1    Performance summary

25

3.2    Results of operations

27

3.3    Financial position

31

3.4    Cashflow and liquidity

33

4    Environmental, Social and Governance

37

4.1    Environmental

40

4.2    Social

46

4.3    Governance

48

5    Supervisory Board

59

5.1    Letter from the Chairman of the Supervisory Board

60

5.2    Members of the Supervisory Board

61

5.3    Supervisory Board report

63

5.4    Remuneration report 2024

71

6    Group financial statements

87

6.1    Consolidated statements of income

88

6.2    Consolidated statements of comprehensive income

89

6.3    Consolidated balance sheets

90

6.4    Consolidated statements of cash flows

91

6.5    Consolidated statements of changes in equity

92

6.6    Notes to the Consolidated financial statements

93

    

7    Company financial statements

155

7.1    Statements of income

156

7.2    Balance sheets before appropriation of results

157

7.3    Statements of changes in equity

158

7.4    Notes to the Company financial statements 

159

8    Sustainability statement

165

8.1    Tracking our 2025 ESG program

166

8.2    General basis for preparation

169

8.3    Double Materiality Assessment

171

8.4    Environmental information

183

8.5    Social information

215

8.6    Governance information

237

8.7    ESRS cross-reference table

243

9    Further information

250

9.1    References to the content of this Annual Report

251

9.2    Management’s statements and report

251

9.3    Independent auditor’s reports

252

9.4    Corporate governance report

264

9.5    Risk factors and responses

272

9.6    ESG reporting frameworks

283

9.7    How we create value

284

9.8    Appropriation of profits

285

9.9    Reconciliation of non-IFRS information

285

9.10    Other Key Performance Indicators

293

9.11    Forward-looking statements and other information

294

9.12    Investor information

296

9.13    Definitions and abbreviations

298

2024 at a glance

Patient safety and quality

Patient safety and quality is further strengthened, and the work continues it is at the heart of everything we do

83% of employees rate our culture of patient safety and quality favorably, a five-point increase since 2023

Social impact

1.96 billion lives improved, of which 242 million are in underserved communities

Customer highlights

New strategic collaboration with Bon Secours Mercy Health (US) to improve patient monitoring and help transform care delivery

Specialized interventional suites are bringing care closer to patients in partnership with Carilion Clinic’s Cardiovascular Institute (US)

Sustainability effort with Champalimaud Foundation (Portugal) achieves a 24% emissions reduction in its first year

Innovation

Next-generation helium-free MRI creates potential to expand MR access sustainably

AI-enabled cardiovascular ultrasound platform helps speed up analysis and reduces burden on labs with simplified workflow

OneBlade Intimate is designed for everyone, to protect the most sensitive skin

Operations

In second year of our plan, the drive continues for focused growth, people- and patient-centric innovation at scale, and improved execution

Significant progress is made to fully resolve the effects of the Respironics recall, with clarity on the way forward

More regionalized supply chain is re-shaped for reliable delivery in line with industry lead times

Environmental sustainability

Circular revenues at 24% of sales

Supplier sustainability approach secures finalist position in Fortune’s ‘Change the World’ rankings

CDP ‘A List’ rating for 13th year in a row

People and culture

Cultural transformation by bringing in impact with care, centered on patient safety, quality and integrity

Employee Engagement Index of 78, a five-point increase since 2023

Recognized as one of the World’s Best Employers by Forbes for sixth consecutive year

Financials

EUR 18.0 billion sales

Adjusted EBITA1 margin: 11.5%

Free cash flow1: EUR 906 million

Credit rating outlook improved to stable


1    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

1    Our Management

We are focused on executing our plan, improving fundamentals and simplifying how we work – ensuring we are more competitive and agile, and delivering growth and margin expansion, with patient safety and quality as priority.

Roy Jakobs CEO Royal Philips

1.1    Message from the CEO



Dear Stakeholder,

Around the world, patients are facing longer waiting times, and we continue to see rising costs and staff shortages, among other issues. I have seen the immense pressure healthcare professionals are under and feel a deep sense of responsibility to help address the challenges and to support them to care for more patients in a better way. In parallel, we see that people everywhere want to be empowered to take care of their own health and well-being.

At Philips, we want to contribute to healthcare professionals feeling supported and energized, instead of overloaded and overworked, and to help people lead healthier lives. As an innovation company, we are committed to improving healthcare and driving impact with care for patients, people and the planet through our deep technological insight and our meaningful innovations.

Strong partnerships and advances in AI*-enabled innovation are helping to drive real change – freeing up space and time for healthcare professionals to focus on their patients and empowering people to take care of their health and well-being. With our next-generation BlueSeal helium-free MRI system, for example, we are helping to expand access to quality imaging and improve care delivery across multiple settings, with SmartSpeed AI powering up to three-times faster scanning and up to 65% higher resolution images. In the home, our AI-powered Philips Avent Premium Connected Baby Monitor gives parents peace of mind by allowing them to keep a closer eye on their children.

We want to help deliver better care for more people across the world. But we know that some people are facing barriers to better health; in parts of the world the devastating consequences of ongoing war and conflict are impacting millions of lives every day. It makes me even more determined to do what we can so people everywhere can access the care they need.

Making progress on our three-year plan

In 2024, we made solid progress on our 2023-2025 operating plan. We believe we are on the right path, executing our focused strategy to improve people’s health and well-being through meaningful innovation, with patient safety and quality as our number one priority.

Reflecting our new operating model, Businesses are in the lead, driving quality and making impact through innovation, design and sustainability. We remain committed to scaling our AI-enabled innovations through excellence in execution and delivery, focusing on fewer, better-resourced initiatives. While we have made good progress, we have more to do.

Our results were negatively impacted in 2024 by deteriorated demand in China, due to subdued consumer confidence, leading to more cautious spending behavior. In addition, ongoing industry-wide anti-corruption initiatives have contributed to extended hospital procurement cycles. Given these factors, we adjusted our growth expectations for the year. Managing developments in China will remain a priority in 2025. Despite global uncertainties and slower growth, we delivered strong profitability improvement and cash flow, and further strengthened our balance sheet. We also made important progress on resolving the Philips Respironics recall. As an indication of the progress we are making, we returned to comparable order intake growth. And, some of our largest investors further expanded their investment in Philips, showing confidence in our future.

Focusing on our priorities

Our focus on patient safety is at the center of strengthening our fundamentals and fostering a culture that upholds quality. In our latest engagement survey, colleagues shared that they feel empowered to speak up and take action to support our commitment to patient safety and quality. While we acknowledge this progress, we remain diligent in continuing this work.

Looking at other areas of progress in 2024, Philips Respironics signed a consent decree, which, coupled with other significant milestones, such as the economic loss settlement and the settlement of personal injury and medical monitoring claims in the US, provided clarity on the way forward. We remain committed to rebuilding our position in Sleep & Respiratory Care while resolving the effects of the recall. We continue to work closely with the US Food and Drug Administration (FDA) and other regulators around the world.

We are concentrating on accelerating momentum, building on our industry-leading innovations, and continuing to improve execution. In our supply chain, we have made significant progress – addressing the components shortage and related risks, and reducing our lead times, in support of our drive to increase customer satisfaction. In addition, we are building in greater agility in our supply chain so we can respond, for example, to the potential impact of geopolitical tension or tariffs. We are also further simplifying our catalogs and products, and regionalizing to win locally.

In making sure we become a leaner, more agile and simpler organization – and therefore more competitive and resilient – we have made important strides with our move to an end-to-end Business-led model. We reduced approximately 10,000 roles from 2022 through the end of 2024. We focused on enhancing our team and culture with deep medtech experience and new leadership. This included the strengthening of our experienced and diverse Executive Committee by welcoming, among others, our new Chief Financial Officer, Charlotte Hanneman, and bringing in other proven leaders across Businesses, Regions and Functions.

We are reinvigorating our culture of impact with care. We have shifted back to the workplace following a couple of years when some colleagues worked partly from home, with teams coming back together to build a stronger social fabric and support our thriving innovation culture. We believe we drive greater impact when we work together. In 2024, engagement across the company, as measured in our People Engagement Survey, increased 5 percentage points.

Our plans build on our strong heritage in social and environmental responsibility. In 2024, we improved the lives of 1.96 billion people and contributed to more sustainable healthcare, while ensuring a more sustainable consumer experience. This included, among other things, partnering with hospitals to support them with their own sustainability plans and expanding access to care in and outside the hospital. We have an enhanced and fully integrated approach to doing business responsibly and sustainably, for Philips and for our customers. And this is recognized. For example, our supplier sustainability approach featured in Fortune’s 2024 ‘Change the World’ rankings. In addition, Forbes recognized Philips as one of the world’s best employers. Our ESG commitments help drive our business results and our global impact, and create long-term value for our stakeholders.

Looking ahead

We remain focused on successfully executing our three-year plan and are determined to further build on our industry-leading innovations, improve our fundamentals, simplify how we work, and ensure we are more competitive and more agile. We continue to deepen our culture of impact with care with patient safety, quality and integrity at the heart.

We want to win and deliver better care for more people in a fast-moving, competitive world, where care provision is under pressure. By doing so, we aim to deliver profitable growth, expand our margins, and fulfill our cash and ESG commitments.


I would like to thank all our stakeholders for their ongoing trust, support, collaboration, and confidence. I also want to share special thanks to our employees, who show their passion and commitment every day, and to their families.

Reflecting the progress we have made in executing our plan, reducing risk and strengthening our balance sheet, along with the importance we attach to dividend stability, we propose to maintain the dividend at EUR 0.85 per share, to be in shares or cash at the option of the shareholder.

As I look ahead, I am excited about the opportunity to deliver better care for more people, working with our many partners for the benefit of patients, customers and consumers.


Roy Jakobs

Chief Executive Officer


1.2    Members of the Board of Management and Executive Committee

Royal Philips has a two-tier board structure consisting of a Board of Management and a Supervisory Board, each of which is accountable to the General Meeting of Shareholders for the fulfillment of its respective duties. The Board of Management is entrusted with the management of the company. The other members of the Executive Committee have been appointed to support the Board of Management in the fulfillment of its managerial duties. Please also refer to Board of Management and Executive Committee within the company's Corporate governance report.



Members of the Board of Management


Roy Jakobs

Born 1974, Dutch and German

Chief Executive Officer (CEO)

Chairman of the Board of Management and the Executive Committee (since October 2022)

Roy joined Philips in 2010 and has held various global leadership positions across the company, starting as Chief Marketing & Strategy Officer for Philips Lighting. In 2012, he became Market Leader for Philips Middle East & Turkey, leading the Healthcare, Consumer, and Lighting businesses out of Dubai. Subsequently, he became global Business Leader of Domestic Appliances, based in Shanghai, in 2015. In 2018, Roy joined the Executive Committee as Chief Business Leader of the Personal Health businesses and in early 2020 he started as Chief Business Leader of Connected Care. As Chief Executive Officer and Chairman of the Board of Management and the Executive Committee, he also holds direct responsibility for Patient Safety and Quality, Medical Office, Internal Audit and Brand & Communications. Prior to his career at Philips, he held various management positions at Royal Dutch Shell and Reed Elsevier.


Charlotte Hanneman

Born 1978, Dutch

Executive Vice President

Member of the Board of Management (since October 2024)

Chief Financial Officer

Charlotte joined Philips in 2024 and is responsible for Finance, including Investor Relations and M&A, as well as Real Estate and Security. Before joining Philips, Charlotte worked as Controller and Head of Financial Planning & Analysis at global medical technology company Stryker. Prior to this, Charlotte held international finance leadership roles at several multinational healthcare companies.

Marnix van Ginneken

Born 1973, Dutch

Executive Vice President

Member of the Board of Management (since November 2017)

Chief ESG & Legal Officer

Marnix joined Philips in 2007 and became Chief Legal Officer of Royal Philips and member of the Executive Committee in 2014. In 2017 he was appointed to the Board of Management. He is responsible for driving ESG efforts across the company, including Group Sustainability. He is also responsible for Legal, Intellectual Property & Standards and Government and Public Affairs. Since January 1, 2024, he is Chairman of the Board of the Philips Foundation. In 2011, he was appointed Professor of International Corporate Governance at the Erasmus School of Law in Rotterdam. Before joining Philips, Marnix worked for Akzo Nobel and as an attorney in a private practice.

This page reflects the composition of the Executive Committee as per December 31, 2024. For a current overview of the Executive Committee members, see also https://www.philips.com/a-w/about/executive-committee.html


Other members of the Executive Committee

Willem Appelo

Born 1964, Dutch

Executive Vice President

Chief Operations Officer

Wim joined Philips in 2022, bringing over 30 years of experience in technology and the medical device technology industry in finance and supply chain management.

Steve C de Baca

Born 1968, American

Executive Vice President

Chief Patient Safety and Quality Officer

Steve joined Philips in 2023 and brings over 30 years of quality and regulatory affairs experience in the medical technology industry.

Jeff DiLullo

Born 1969, American

Executive Vice President

Chief Region Leader of Philips North America

Jeff joined Philips in 2019, drawing on more than 30 years of leadership experience in the US Army and the information technology industry.


Deeptha Khanna

Born 1976, Singaporean

Executive Vice President

Chief Business Leader Personal Health

Deeptha joined Philips in 2020. She has over 25 years of leadership experience working across Europe, US and Asia, on major global brands and across personal care and the consumer health industry.

Ling Liu

Born 1974, Chinese

Executive Vice President

Chief Region Leader of Philips Greater China

Ling joined Philips in 1998 and has more than 26 years’ experience in leadership roles in Greater China, the Netherlands and North America.

Bert van Meurs

Born 1961, Dutch

Executive Vice President

Chief Business Leader responsible for Diagnosis & Treatment

Bert joined Philips in 1985 and has more than 39 years of experience in the medical imaging and healthcare business.

Edwin Paalvast

Born 1963, Dutch

Executive Vice President

Chief of International Region

Edwin joined Philips in 2020 and brings more than 30 years of leadership experience in the technology industry.

Shez Partovi

Born 1967, Canadian

Executive Vice President

Chief Innovation & Strategy Officer

Shez joined Philips in 2021 and has more than 30 years of experience leading large health systems, cloud transformation, and artificial intelligence and machine learning initiatives in the healthcare, life sciences and genomics industries.

Heidi Sichien

Born 1974, Belgian

Executive Vice President

Chief People Officer

Heidi joined Philips in 2006 and brings over 18 years of experience in leadership roles in HR across many parts of the company.

Julia Strandberg

Born 1974, American

Executive Vice President

Chief Business Leader Connected Care

Julia joined Philips in 2023 and has 20 years of leadership experience in the medical technology industry.


This page reflects the composition of the Executive Committee as per December 31, 2024. For a current overview of the Executive Committee members, see also https://www.philips.com/a-w/about/executive-committee.html

2    Strategy

A clear roadmap to help deliver better care for more people and deliver value for our stakeholders

Culture of impact with care, centered on patient safety, quality and integrity, enabling better collaboration to achieve our goals and create impact

Focused growth and value creation strategy, with 70% of revenue from accelerating growth in attractive industry leadership segments, and 30% from capturing value upside

Innovating as close as possible to customers and consumers with a unique,  needs-driven approach for scalable, breakthrough advancements and incremental progress

Leveraging differentiating software capabilities and AI-enabled innovations to help care providers and consumers do more with less

Strengthened supply chain and simplified operating model, enabling agility and cost-efficiency to better deliver in volatile market conditions

2.1    Strategic focus

Today, most healthcare systems are struggling to keep up with the ever-rising need for, and cost of, healthcare, while systemic staff shortages and financial resource constraints increase the pressure. Climate change is impacting both environmental and human health, compounding the stress on our healthcare systems and influencing consumer behavior. At the same time, in both the hospital and the home, emerging technologies and artificial intelligence are affecting our lives like never before.

At Philips, our purpose is to improve people’s health and well-being through meaningful innovation. As such, we see huge opportunities to make a difference through innovation, design, and sustainability – partnering with our healthcare customers to increase productivity and deliver better care for more people through our innovation platforms of monitoring, imaging, interventional and enterprise informatics. And, empowering more people to take care of their health and well-being through our personal health propositions.

Our plan: create value with sustainable impact

As a health technology company, Philips is committed to driving progressive value creation through a strategy of focused growth, scalable patient- and people-centric innovation, and reliable execution supported by our culture of impact with care.

Philips has significant strengths to build on. We have a portfolio of innovations in hardware, software, AI and services, supporting care in the hospital and in the home. We are the preferred strategic and innovation partner for many customers (including governmental entities) across the globe. And our strong heritage in environmental sustainability and social impact helps us make a difference globally and create long-term value for our stakeholders.

A strategy of focused growth

We operate in growing market segments, where attractive margins provide a foundation for sustainable value creation. To deliver on our strategy, we make clear business choices. We are concentrating our resources on 70% of our businesses where we have strong positions and believe we can accelerate growth and expand margins more quickly – Image Guided Therapy, Monitoring, Ultrasound, and Personal Health. In doing so, we focus on supporting clinical workflows in areas where we have domain leadership, such as cardiology, and that build on our deep strength in the intensive care unit and cath lab.

The focus for the remaining 30% of the businesses, such as Diagnostic Imaging and Enterprise Informatics, is achieving margin expansion by increasing productivity and scale, and by delivering operational excellence. Additionally, we aim to rebuild our position in Sleep & Respiratory Care after the progress made to resolve the effects of the Respironics recall.



Scalable patient- and people-centric innovation

At Philips, we’ve been innovating to improve lives for over 130 years. People’s needs are at the very heart of how we innovate and design for sustainable impact with a ‘safety and quality first’ mindset.

Innovation is our strength and will continue to be our core differentiator. Recent challenges in the healthcare industry have accelerated the adoption of technology. We are embracing these trends and have shifted our innovation closer to our customers. This starts with asking: What do people – in our case, patients and clinicians, nurses and technicians, consumers – really need? And how can we best support healthcare professionals with their workflow?

Emerging AI innovations have the potential to address pain points across operational and clinical workflows in healthcare. Philips has AI embedded across our portfolio, and we see significant opportunities to further leverage this technology to deliver more and better care.

In our Businesses, we focus our efforts and resources on fewer projects offering greater impact on patient outcomes and care providers’ clinical, operational and sustainability challenges. We take a long-term view, seeking to ensure the customer has the best experience with Philips throughout time. We do this by balancing new, breakthrough innovations and continuous optimized life cycle management, through upgrades and services, of Philips products and systems already deployed in care settings. With Research & Development mostly led by the Businesses, we bring together expertise across the product life cycle, from research through serviceability, with the aim of ensuring our innovations scale to drive maximum impact for our customers and consumers – delivering a superior experience and value, with minimum environmental impact.

Execution priorities

Enabled by a culture of patient- and people-centricity, accountability and impact, supported by strong health technology capabilities, we see effective execution as the key value driver of our plan. We are focusing on:

patient safety and quality – our highest priority

end-to-end supply chain resilience

a simplified operating model with an agile way of working

First, patient safety, quality and integrity is at the heart of our culture of impact with care. All employees have dedicated patient safety and quality objectives, and the Patient Safety and Quality organization champions stronger processes and more effective early warning systems in the Businesses. The topic has high visibility at the Executive Committee level with the leadership of the Chief Patient Safety & Quality Officer and Chief Medical Officer. We invest in systems, capabilities and training to facilitate identification of potential patient safety or quality issues. We listen to patients through our advisory boards. And we are taking the learnings from the Respironics recall to improve our ability to correctly assess patient safety and provide quality of the highest standard across Philips and in delivery to patients, customers and consumers.

Second, alignment of procurement and supply chain to our Businesses has enabled us to improve the reliability of the delivery of our products, services and orders. A more regionalized supply chain ecosystem combined with dual sourcing can work effectively even when volatile conditions emerge in different parts of the world. We are paring down our product portfolio and making our platforms fit for the future, which includes pruning a long tail of smaller product lines and older generations of our products. We also have a dedicated team redesigning products and components to increase our resilience.

Finally, we are in the second year of implementing our simplified operating model to enable us to better serve patients, customers and consumers, as well as ensuring that our cost of organization remains competitive in an inflationary and cost-driven environment, and that we are more agile in responding to changes in the market. Prime accountability has been assigned to the Businesses, supported by lean Functions and Regions following tailored models, all guided by fewer KPIs and more focused targets. We will continue to simplify our operating model to adapt to the dynamic environment.

Driving impact for people and planet

We have operationalized our purpose by adopting a fully integrated approach to doing business responsibly and sustainably. We partner with stakeholders to drive environmental, social and governance (ESG) priorities and aim to make a global impact while focusing on three UN Sustainable Development Goals (SDGs):

SDG 3 - Ensure healthy lives and promote well-being for all at all ages

SDG 12 - Ensure sustainable consumption and production patterns

SDG 13 - Take urgent action to combat climate change and its impacts

Acting responsibly toward the planet and society is part of our DNA. We believe that this is the best way for us to meet our business goals and create superior, long-term value for Philips’ stakeholders. Our 2021-2025 ESG program includes key ESG commitments that guide execution of the company strategy, setting challenging environmental and social targets, as well as the highest standards of governance. As an example, we aim to positively impact 2.5 billion lives per year by 2030, including 400 million in underserved communities.

Please refer to Environmental, Social and Governance for an overview of all our key ESG commitments, and for information on how we act and perform in the environmental and social dimensions and on the main elements of our governance framework.

Our approach to risk management

We approach risk management as a value-creating activity that is integral to innovation and entrepreneurship. It allows us to analyze the relationship between strategy and risk profile, to identify the specific risks that we face in executing our strategic plan to create value with sustainable impact, to analyze these risks, to set our risk appetite, and to implement balanced risk responses and monitor their effectiveness as an integral part of the Philips business planning and performance review cycle.

Refer to Risk management and internal control for more information, including our risk appetite and our risk management governance and process, and to Risk factors and responses for a description of the material risk factors we have identified.


Delivering on our plan

With our global reach, market leadership positions, deep clinical and technological insights, and patient- and people-focused innovation, we believe Philips is well-positioned to help deliver real change across healthcare and personal health. Fueled by our purpose and supported by our culture of impact with care, we are empowered and hold ourselves accountable – to create value with sustainable impact.

2.2    Business


2.2.1    Our business structure

Koninklijke Philips N.V. (Royal Philips) is the parent company of the Philips Group. Philips' operating model grants end-to-end Businesses with single accountability in order to make the company more agile in its drive to create value with sustainable impact. The segments Diagnosis & Treatment, Connected Care and Personal Health are each responsible for the management of their business activity worldwide, and are made up of the six Businesses shown below. Additionally, Royal Philips identifies the segment Other.

Philips Group

Segments

Diagnosis &

Treatment

Connected Care

Personal Health

Other

Businesses

Precision Diagnosis

Image Guided Therapy

Monitoring

Enterprise Informatics

Sleep & Respiratory Care

Personal Health

Philips Group

Total sales by reportable segment

2024

Diagnosis & Treatment

49%

Connected Care

29%

Personal Health

19%

Other

3%


Diagnosis & Treatment segment

Our Diagnosis & Treatment Businesses create value through their portfolio of innovative AI-enabled solutions that support precision diagnosis and minimally invasive treatment in therapeutic areas such as cardiology, peripheral vascular, neurology, surgery, and oncology. With these solutions, we enable our customers to enhance care delivery, optimize workflow to improve productivity, and work toward their sustainability goals.

Serving diagnostic imaging markets globally, our strategy is to focus on more precise and predictive diagnoses, integrating our intelligent imaging systems with our industry-leading informatics solutions to optimize workflow efficiency, improve productivity and maximize lifetime value. We do this through smart diagnostic systems, connected workflow solutions, and integrated AI-supported diagnostics and pathway informatics that enable clinicians to select tailored care pathways with predictable outcomes for every patient, both inside and outside the hospital.

We also provide integrated solutions that combine imaging systems and advanced clinical software, as well as diagnostic and therapeutic devices and services to optimize minimally invasive interventional procedures with more effective treatment, better outcomes and higher productivity. Building upon our leading-edge Azurion platform, we address a range of interventional clinical segments with high procedural growth rates, such as coronary artery disease, peripheral artery and venous disease, electrophysiology, structural heart disease, interventional neuroradiology, and interventional oncology. We are driving further innovation to treat new and more complex patient pools, using clinical and economic evidence to foster the adoption of these solutions, and that translates into guidelines and reimbursement.

In 2024, we took action to address key optimization and expansion challenges faced by our Diagnosis & Treatment Business Units. In Diagnostic Imaging, with renewed leadership, we embarked on a clear strategy with a focus on those customers who are looking to optimize care delivery in the mid- and high-end segments. Significant progress was made in the execution of our plans to drive margin expansion in line with the company's strategy. We also streamlined and focused our portfolio with one cloud-enabled hardware stack.

In Image Guided Therapy (IGT), we continued to take actions to deliver on our ambition to accelerate growth and expand margins more quickly. The IGT Business Units focused on creating customer preference for our integrated interventional platform, with Systems, Devices and Software seamlessly joined in one simple workflow to innovate the procedure.

The Diagnosis & Treatment segment consists of the following Businesses.

Precision Diagnosis – This Business offers a range of diagnostic imaging products and solutions to address some of providers’ biggest challenges, from staff shortages and burnout to workflow, and ultimately delivering better care for their patients.

Diagnostic X-ray Business Unit – X-ray and fluoroscopy systems with associated software to optimize diagnostic imaging quality and improve efficiency and productivity for the hospital.

Magnetic Resonance Imaging (MRI) Business Unit – comprehensive BlueSeal portfolio with helium-free-for-life operations, bundled with AI-enabled software to streamline workflows, optimize diagnostic quality, and improve patient experience.

Computed Tomography (CT) Business Unit – advanced and efficient systems and software, including detector-based Spectral CT and systems equipped with advanced AI capabilities, for diagnosis, interventional procedures and screening, to help expand the standard of care.

Ultrasound Business Unit – imaging solutions focused on supporting diagnosis, treatment planning and guidance for cardiac, general imaging, obstetrics/gynecology, and point-of-care applications enabled by proprietary AI software, advanced imaging technology and tele-ultrasound to efficiently and confidently deliver diagnostic images for even the most complex conditions.

Image Guided Therapy – This Business includes a market-leading portfolio of integrated interventional imaging systems, smart devices, and disease-specific software as well as services and consulting.

Image Guided Therapy Systems Business Unit – integrated interventional X-ray systems (fixed and mobile surgery) and software solutions, supported by AI, to perform a wide range of routine and complex interventional procedures, easily and confidently.

Image Guided Therapy Devices Business Unit – interventional specialty devices and software to aid in the diagnosis, navigation, treatment and confirmation in minimally invasive interventional coronary, peripheral vascular and hearth rhythm management procedures. Complemented by seamless integration with Image Guided Therapy Systems.

Diagnosis & Treatment

Total sales by Business

2024

Precision Diagnosis1

59%

Image Guided Therapy

41%

1of which Diagnostic Imaging 40%, Ultrasound 19%


Revenue is predominantly earned through the sale of products, leasing, customer services fees, recurring per-procedure fees for disposable devices, and software license fees. For certain offerings, per-study fees or outcome-based fees are earned over the contract term.

Sales channels are a mix of direct sales, especially in the larger markets, third-party distributors and online sales. This varies by product, market and price segment. Our sales organizations have an intimate knowledge of technologies and clinical applications, as well as the solutions necessary to meet the needs of our customers.

Sales in the Diagnosis & Treatment Businesses are generally higher in the second half of the year, largely due to the timing of customer spending patterns.

At year-end 2024, Diagnosis & Treatment had 24,544 employees worldwide.

2024 highlights


Precision Diagnosis

Philips introduced helium-free operations in MRI, and since its launch in 2018, we have installed more than 1,500 BlueSeal systems globally in wide-ranging settings, including the world’s first helium-free mobile MRI units. Our next-generation BlueSeal with Smart Reading, launched at Radiological Society of North America annual meeting in 2024, boosts performance, saves time, and supports better patient outcomes, all while caring for the planet. With AI applications seamlessly integrated into our latest 1.5T BlueSeal scanner, we have applied AI to every aspect of the MRI workflow. BlueSeal magnets are lighter than others, allowing them to be installed in more places – or even transported in mobile units – creating the potential to expand quality access to MRI exams for patients in a more sustainable way.

The next-generation AI-enabled cardiovascular ultrasound platform helps speed up cardiac ultrasound analysis with proven AI technology and reduces the burden on echocardiography labs, integrated into EPIQ CVx and Affiniti CVx ultrasound systems. With the latest transesophageal echocardiography (TEE) transducer, it is designed to serve more patients with improved overall comfort, with FDA 510(k) clearance. Philips has developed the smaller X11- 4t Mini 3D TEE transducer to serve more patients with this valuable imaging tool, helping physicians serve a wider range of patients, from small children to fragile adults.

In General Imaging Ultrasound we launched the Elevate Release featuring the EPIQ Elite Elevate and Affiniti Elevate. More than 100 optimized pre-sets across multiple clinical applications deliver greater precision imaging and intuitive workflows to help boost clinical confidence. These innovative features also help to deliver an improved user and patient experience by automating image brightness and uniformity, and reducing button pushes by up to 54% with Next Gen Auto Scan.

Diagnosis & Treatment – Precision Diagnosis  Philips CT 5300

Philips launched a series of leading AI-driven innovations across the diagnostic imaging portfolio.

MR SmartSpeed is AI-based imaging technology that can increase imaging speed by up to a factor of three while providing up to 65% greater resolution to deliver outstanding image quality. It is compatible with 97% of clinical protocols to address the needs of a broad range of patients in various conditions.

AI-powered quantitative reporting software from our partner icometrix was seamlessly integrated into the latest BlueSeal MR scanners through new Smart Reading capability, providing consistent and more accurate diagnoses.

Fully AI-enabled CT 5300 with Precise Image reconstruction software results in reduced reading time and 80% lower radiation while delivering better image quality. Philips collaborates with Annalise.ai to evaluate streamlining workflows to prioritize time-sensitive cases.

Powered with Smart Workflow, AI-enabled productivity features of DXR 7300 C reduce X-ray retakes with the Eleva Tube Head and enhance confident diagnosis with Philips UNIQUE 2 image processing.

Image Guided Therapy

Major enhancements to Azurion, our Image Guided Therapy System, were designed to speed up and improve minimally invasive diagnosis and treatment of neurovascular patients. The new Azurion neuro biplane system features enhanced 2D and 3D imaging and X-ray detector positioning flexibility, building on the system’s capabilities to streamline neurovascular procedures to help care teams make the right decisions faster, treat more patients, and achieve better outcomes. It has been widely adopted at major healthcare institutions around the world, such as the Miami Cardiac & Vascular Institute in the United States (US), Osaka Police Hospital in Japan, and Leiden University Medical Center in the Netherlands.

Our real-time 3D Intracardiac Echocardiography (ICE) Catheter – VeriSight Pro – is designed to give physicians more confidence and control during a variety of minimally invasive procedures in

structural heart disease and electrophysiology. In 2024 we launched the first rollout of this technology outside the US, in Hong Kong, and it is expected to be an innovation to watch.

Intravascular ultrasound (IVUS) and instantaneous wave-free ratio (iFR) technologies received top-level recognition in new European Society of Cardiology guidelines, reinforcing their role in optimizing coronary interventions and patient outcomes. The robust clinical evidence supporting the use of these technologies shows improved patient outcomes through numerous large-scale randomized trials like DEFINE FLAIR and iFR SWEDEHEART.

Philips secured FDA approval for its new LumiGuide Navigation Wire, which uses fiber optic technology to reduce radiation for both patients and physicians during minimally invasive surgery. The company’s breakthrough Fiber Optic RealShape (FORS) technology marked the milestone of more than 1,000 patients treated using FORS technology since the first clinical use in 2020.

The Zenition 90 Motorized, designed to deliver state-of-the-art image quality for complex vascular needs and clinical procedures, was launched. It has intuitive motorization for greater control and high power, as well as automated workflows for greater clinical efficiency.

Diagnosis & Treatment – Philips Image Guided Therapy System  Azurion 7 B20/12

Diagnosis & Treatment partnerships

Philips continues to work with health systems to adopt solutions that can improve workflow and ease the technology burden on staff, as well as improve patients’ experiences and outcomes and advance sustainability.

Carilion Clinic’s Cardiovascular Institute in the US committed to adopt 11 specialized Philips interventional suites, allowing physicians to treat patients with complex conditions closer to where they live. Equipped with these new Philips solutions, the highly skilled medical staff will be able to continue handling complex cases or procedures that may not be available at surrounding healthcare facilities.

A 2024 analysis confirmed that the collaboration with Champalimaud Foundation (Portugal) achieved a 24% emissions reduction in its first year. This is equivalent to 40 tonnes CO2e, a strong start to a strategic partnership aimed at halving the carbon footprint of Champalimaud’s diagnostic and interventional imaging equipment use by 2028.

For the Japanese market, where cerebrovascular diseases are on the rise and place a heavy social burden on society, Philips has launched SmartCT 3.0, an application powered by AI and specialized for endovascular treatment with high image quality. Additionally, the first MR 7700 with clinical 3.0T scanner has been installed at Hamamatsu University Hospital. With high image quality and reduced scan time, it provides high accuracy, power, and endurance to support confident diagnosis for every patient.

Connected Care segment

With technology constantly advancing and becoming increasingly pervasive in healthcare, the Connected Care Businesses aim to connect and elevate care for all. Philips connects patients and caregivers across care settings, delivering clinical, operational and therapeutic solutions that help our customers deliver better health outcomes, improve the patient and staff experience, and lower the cost of care. In 2024, the global economic situation continued to put additional pressure on customer budgets, worsened staff shortages, and increased the need for solutions that enable more effective, sustainable and convenient care in hospital, clinics and the home – especially those enabled by strong informatics and AI.

With clinical depth and discovery, Philips Connected Care technologies help to cultivate a more accurate and complete view of the patient that drives better care for more people. The combination of advanced technological solutions and a co-creation approach allows Philips to be the clinical technology partner to its customers in their digital transformation, across the enterprise and at the level of the individual clinician, nurse and patient. As a clinical technology partner, we help our customers to unlock actionable insights from pools of medical imaging and patient monitoring data, through the use of advanced AI, to improve outcomes and drive productivity.

Philips’ open, interoperable platforms aggregate and leverage information from clinical devices, as well as patient and historical data, to support care providers in patient engagement, diagnostics, and patient monitoring in diverse settings.

The Connected Care segment consists of the following Businesses.

Monitoring – This Business spans in-hospital, ambulatory and home-based monitoring and diagnosis solutions and services supporting the patient journey, as well as continuous monitoring and workflow solutions fueled by advanced interoperability and patient insights.

Hospital Patient Monitoring Business Unit – delivers acute patient management solutions to improve clinical and patient outcomes and achieve operational and economic efficiencies. Leveraging a strong presence in the operating theater and intensive care unit, Hospital Patient Monitoring offers vendor-neutral solutions to enhance customers’ experiences and improve patient outcomes with seamless patient data – generated from admission to discharge – that is turned into clinical insights, actionable at the right time and specific to targeted care settings.

Ambulatory Monitoring & Diagnostics Business Unit – provides patient care management in ambulatory and home care settings through a suite of cardiac diagnostic and monitoring solutions to identify heart rhythm disorders, plus other disease states, supported by AI algorithms that orchestrate workflows and services across care settings to provide care virtually anywhere.

Emergency Care Business Unit – plays a critical role in connected acute care management, both inside and outside the hospital, including cardiac resuscitation (e.g., automated external defibrillators) and emergency care solutions (devices, services, and digital/data solutions) for professional and consumer applications. On January 28, 2025, Philips announced an agreement to sell the Emergency Care Business Unit.

Enterprise Informatics – By combining our informatics propositions into one end-to-end Business, we can scale our software business, providing vendor-agnostic, integrated workflow solutions that convert data from our imaging and monitoring systems into clinical and operational insights.

Radiology Informatics Business Unit – enables enterprise imaging across sites, specialties and technologies to simplify medical image management, facilitate effective collaboration and enhance patient care.

Clinical Integration & Insights Business Unit – offers solutions that are seamlessly integrated into the customer workflow. These solutions enable vendor-neutral data capture from more than 1,000 device models and make sense of disparate data, providing insights at scale across the care pathway.

Clinical Informatics Business Unit – delivers solutions for productivity, diagnostic confidence, and clinical decision support in the domains of digital pathology, advanced visualization and disease management solutions, specifically in radiology, cardiology, pathology and urology.

Patient Care Informatics – aims to extend the reach of virtual care, support evidence-based practices, and provide actionable insights for continuous improvement, ensuring better health outcomes for patients globally. In 2024, we brought together EMR & Care Management and Cardiovascular Informatics to reflect shifts in the industry to drive not only data, but also to manage the entire patient journey. This combined portfolio consists of cardiovascular care, virtual care, electronic medical records, and acute care solutions.

Sleep & Respiratory Care – Working closely with clinical partners and Durable/Home Medical Equipment providers, Philips Respironics provides sleep and respiratory solutions to customers, clinicians and patients. This extends from ambulatory patient care solutions for obstructive sleep apnea, to solutions encompassing diagnostics, people-centric therapy, cloud-based connected propositions and care management services for patients with Chronic Obstructive Pulmonary Disease and respiratory conditions. Hospital Respiratory Care provides invasive and non-invasive ventilators for acute and sub-acute hospital environments; Home Respiratory Care supports chronic care management in the home.

Final agreement was reached on the terms of the Philips Respironics consent decree with the US Department of Justice and the US Food and Drug Administration (FDA), primarily focusing on Philips Respironics’ business operations in the US, including its manufacturing facilities in Murrysville and New Kensington, its service center in Mount Pleasant and its Sleep & Respiratory Care headquarters in the Greater Pittsburgh, Pennsylvania region.

The consent decree provides a clear path forward for the Sleep & Respiratory Care Business with defined actions, milestones and deliverables to demonstrate compliance with regulatory requirements and to restore the Business. As part of the agreement, the Business will prioritize completing the remediation of the sleep and respiratory care devices under Respironics’ voluntary June 2021 recall. More than 99% of the actionable registered CPAP and BiPAP sleep therapy devices have been remediated globally, while the remediation of the ventilators is ongoing in coordination with the relevant competent authorities. The Sleep & Respiratory Care Business must demonstrate continued compliance with the FDA’s Quality System Regulation. In the US, Philips Respironics will continue to service sleep and respiratory care devices already with healthcare providers and patients, and supply accessories, consumables, and replacement parts. Until the relevant requirements of the consent decree are met, Philips Respironics will not sell new CPAP or BiPAP sleep therapy devices or other respiratory care devices in the US. Outside the US, Philips Respironics will continue to provide new sleep and respiratory care devices, accessories, consumables, replacement parts, and services, subject to certain requirements.

Connected Care – Sleep & Respiratory Care  Philips DreamWear mask system

Connected Care

Total sales by Business

2024

Monitoring

58%

Enterprise Informatics

23%

Sleep & Respiratory Care

19%

In 2024, we took action to address the key challenges faced by the Connected Care Business Units. We took steps to deploy a global expansion of channel sales and delivery to scale Enterprise Informatics solutions with partners, and are assessing our approach in areas where this has proven difficult, particularly in China, and in the Growth geographies in the International Region. We also worked on implementing the terms of the Philips Respironics consent decree, which includes defined actions, milestones and deliverables.

In most of the Connected Care Businesses, revenue is earned through the sale of products and solutions, as well as services and software licenses. Where bundled offerings result in solutions for our customers, or offerings are based on the number of people being monitored, we see more usage-based earnings models. In the area of patient care management (Ambulatory Monitoring & Diagnostics Business Unit and Sleep & Respiratory Care Business), revenue is generated through clinical services, product sales and through rental models, whereby revenue is generated over time.

Sales channels include a mix of direct sales, partly paired with an online sales portal and distributors (varying by product, market and price segment). Our sales organizations have an intimate knowledge of clinical settings and patient-specific diagnosis and treatment. Philips collaborates with customers and partners to co-create solutions, drive commercial innovation and adapt to new models such as monitoring-as-a-service and software-as-a-service.

Sales in the Connected Care Businesses are generally higher in the second half of the year, largely due to customer spending patterns.

At year-end 2024, Connected Care had 16,829 employees worldwide.

2024 highlights


Monitoring

Philips and Bon Secours Mercy Health (BSMH), one of the largest Catholic health systems in the US, announced a multi-year strategic collaboration for patient monitoring. Putting BSMH clinicians in control, the collaboration aims to reduce the digital burden on staff and give them more time to spend with patients. This 10-year journey is designed to bring innovations that will transform care delivery. BSMH provides patients care more than 11 million times annually through its network of more than 1,200 care sites, 60,000 associates and 49 hospitals serving communities in Florida, Kentucky, Maryland, New York, Ohio, South Carolina and Virginia, as well as Ireland.

Philips signed multi-year partnerships for monitoring with several university hospitals in the Netherlands and will provide patient monitors for the new Grand Hôpital de Charleroi in Belgium, as well as roll out its ePatch and AI-driven analytics platform across 14 hospitals in Spain.

Jackson Health System, one of the largest public health systems in the US, announced results of a collaborative Life Cycle Assessment measuring the sustainability impact of transitioning to Philips’ next-generation monitoring solutions, which can help reduce carbon emissions by 685 tons of CO2e, or 47%, compared with previous systems. This significant reduction can allow the health system to save USD 1.2 million over a 10-year device lifetime. These findings suggest that patient monitoring can become part of an overall carbon reduction strategy for health systems.

Connected Care – Monitoring  Philips Patient Monitor IntelliVue MX750

Enterprise Informatics

In 2024, we expanded our strategic collaboration with Amazon Web Services (AWS) to offer Philips’ integrated diagnostics portfolio in the cloud, improving access to critical insights and driving better outcomes across clinical specialties. With more than 150 sites across North America and Latin America successfully transitioned to Philips HealthSuite Imaging on AWS, Philips and AWS are accelerating the migration of health systems to the cloud and expanding customer cloud migrations in Europe.

Also powered by AWS in 2024, Philips announced the launch of the Tasy EMR AI Virtual Assistant, designed to improve the efficiency and quality of healthcare delivery in Latin America by simplifying administrative tasks and improving the EMR experience so healthcare professionals can focus on what really matters – their patients. As part of a five-year partnership with ABC Medical Center in Mexico, Philips Tasy EMR software is being deployed as part of an interoperability solution, integrating more than 45 functionalities and 700 licenses and establishing a standardized, unified point between clinical and enterprise information systems.

Durham and Darlington NHS Foundation Trust, one of the largest integrated care providers in the United Kingdom, advanced its radiology and cardiology care with Philips PACS. This technology will provide a single view of patient records, providing more connected and coordinated care across not just the hospital sites but the entire North East and Cumbria region. This commitment marks yet another milestone in the 14-year partnership with the Trust, just one year after Durham became the first NHS Trust to co-develop a sustainability blueprint with Philips.

NYU Langone Health in the US launched a digital pathology program, offering unprecedented clarity for viewing tissue samples, enhancing collaboration and reducing diagnosis time while laying the foundation for advanced AI algorithms. This integrated, collaborative approach will serve as part of a drive to further enhance the patient experience through faster diagnosis and treatment, and improved outcomes.

Patient care and collaboration have been significantly improved in Vienna, Austria, as part of a renewed IT service agreement with Philips that includes solutions that centralize data and deliver insights. The ICCA patient data management system, which integrates patient data from monitors, laboratory data and other sources, has led to significant improvement in workflows and patient care in anesthesia, intensive care and general patient care at General Hospital of Vienna (Allgemeines Krankenhaus der Stadt Wien). At Vienna Health Group (Wiener Gesundheitsverbund), Philips Cardiovascular Workspace, a vendor-neutral system implemented in the adult and pediatric departments, helped improve patient care and internal operations.

Connected Care – Enterprise Informatics  Philips Radiology Operations Command Center (ROCC)


Personal Health segment

Our Personal Health Business plays an important role in enabling healthy individual care routines with technology and solutions that support people’s long-term health and well-being. Through our Personal Health Business, we offer a broad range of solutions in various consumer price segments. Depending on the market, we offer an additional portfolio of locally relevant innovations and adjust our range to increase accessibility.

We aim to drive profitable growth through a focus on innovation across three key areas:

reaching more people through consumer-driven product and solutions innovation

ensuring the highest quality of consumer experience from pre-purchase consideration through to purchase and unboxing, all the way to end-of-use recycling

expanding our ecosystem through partnerships with leading retailers and scaling new business models, such as try-and-buy and subscription services

A notable aspect of our commercial strategy is driving direct-to-consumer relationships and sales through consumer communities and our online store. We are also leveraging connectivity to enable new business models, and partnering with key players in the health ecosystem, such as insurance companies and healthcare professionals, to create more opportunities to support the health and well-being of consumers across the world. Through social media and digital innovation, we are engaging consumers in their health journey in new and impactful ways.

In Personal Health, improving lives also means caring for the planet, with a key focus on environmental sustainability. In 2024, we expanded our Philips Refurb Editions across select

European markets to give products a second life, complete with the same two-year guarantee as new products. A flagship activation of this initiative took place during Black Friday in the Benelux region, where the team flipped the Philips.com online storefront to prioritize Refurb Editions products, only offering new product supply after refurbished items sold out. This effort reflects Personal Health’s commitment to driving a circular economy and exploring innovative ways to provide consumers with greater choices to live sustainably.

We offer mobile solutions to support parents and parents-to-be on a more informed, connected, and healthier journey to parenthood. The Philips Avent Pregnancy+ and Baby+ apps provide parents with supportive content through the critical first 1,000 days of their child’s life. Pregnancy+ features photo-realistic, interactive 3D fetal models and personalized daily content to enhance the pregnancy experience. It is the No. 1 worldwide pregnancy app, with more than 6.5 million monthly active users, available in 22 languages, and offering premium subscription options.


In 2024, we took action to address the key challenges faced by the Personal Health Business Units, including the external context of a volatile macro environment, especially in China. The Personal Health strategy focused on driving innovation at the core; improving agility in responding to market, retail customer and consumer needs; and more integrated planning with its top customers and in-demand items. In China in particular, Personal Health is not a typical mass consumer business, as our products offer a more personalized experience for customers, and we are also impacted by cautious spending behavior. Consumer sentiment in China is unlikely to change in the near-term. We intend to address the challenging macro-economic environment by building on our brands that have a strong position with locally relevant accelerators and customer partnerships, and we aim to complement this effort by expanding our growth outside of China.

The Personal Health segment consists of the following units.

Personal Health – To help people take greater control of their personal health and well-being we deliver sustainable, meaningful solutions that help them to take care of themselves and their families, for happier, healthier lives, today and tomorrow.

Oral Healthcare Business Unit – power toothbrushes for a range of price segments, from entry-level, battery-operated toothbrushes for a young audience to premium power toothbrushes connected to the Sonicare app with in-app coaching; brush heads, which are also available as a subscription service; and products for interdental cleaning and for in-office and take-home teeth whitening.

Mother and Child Care Business Unit – products to support parents and babies in the first 1,000 days, including infant feeding (breast pumps, baby bottles and sterilizers), connected baby monitors, and digital parental and women’s health solutions (Pregnancy+ and Baby+ apps).

Personal Care Business Unit – grooming and beauty products ranging from entry-level to premium. The grooming portfolio includes shavers, OneBlade, groomers, trimmers and hair clippers, as well as premium solutions with SkinIQ technology, in-app coaching for a personalized shave, and blade subscriptions. The beauty portfolio includes devices to support skin care, hair care and hair removal, including Lumea premium intense pulsed light hair removal devices and solutions with the latest SenseIQ technology that sense and adapt for personalized care; these are also available through subscription models.

Personal Health

Total sales by Business

2024

Personal Health1

100%

1Of which Personal Care 54%, Oral Healthcare 34%, Mother and Child Care 12%


The revenue model is mainly based on product sale at the point in time the products are delivered to retailers and online platforms. We continue to increase revenue model diversity by expanding our business models, including direct-to-consumer, subscriptions, and try-and-buy offerings and services.

The Personal Health Business experiences seasonality, with higher sales around key events and holidays.

At year-end 2024, Personal Health employed 7,991 people worldwide.

2024 highlights

Further expanding the successful OneBlade product range, Philips launched OneBlade Intimate – the first shaving product designed for everyone, to protect the most sensitive skin. Philips also launched its newest On-The-Go Compact Shaver in Greater China, designed to combine portability and ease of use without compromising quality. Highlighting the quality of the innovation, the On-The-Go shaver is accompanying the China Antarctic expedition team on their journey to the South Pole.

Also in the Greater China market, Philips unveiled a series of new locally relevant innovations, which are designed to meet consumer needs across the Region, including the first medical-grade Philips Lumea 8000 Series IPL hair removal device with cooling technology, the limited edition

Transformers-themed 5000, 7000 and 9000 series shavers, and the new Sonicare 5300 power toothbrush.

In North America, we launched the Philips Sonicare brand’s first at-home teeth whitening kit, a clinically proven solution developed by dentists, and debuted the new Philips One for Kids rechargeable toothbrush, helping children between 3 and 12 years old with healthier oral care routines. In Western Europe, Philips introduced its next-generation Sonicare technology in its new mid-range Sonicare Series 5000-7000, providing consumers with a superior, gentle and effective cleaning experience. The new range gives users a choice of features at different price points, encouraging them to make the switch from a manual toothbrush to achieve improved oral healthcare results.

The AI-powered Avent Premium Connected Baby Monitor – which offers scientifically proven cry translation as well as SenseIQ technology to track sleep, breathing and movements to support parents and give them peace of mind – had its global debut. And, in an effort to support parents in North America, we partnered with March of Dimes on Mom & Baby Mobile Health Centers, bringing care to underserved communities, and It Starts with Mom, an educational platform providing families with pregnancy resources.

Personal Health – Mother and Child Care 
Philips Avent Premium Connected Baby Monitor

Segment Other

In Other we report on the items Innovation & Strategy, IP Royalties, Central costs, and other small items. At year-end 2024, 18,459 people worldwide were working in these areas.

Innovation & Strategy

At Philips, we have set up our innovation teams to be as close to our customers and consumers as possible. The majority (90%) of our Research & Development (R&D) resources are embedded in our Business Units, where innovation teams can directly hear customer and consumer needs and work closely with other stakeholders to turn innovations into actual products. Innovation at Philips is organized to encourage innovation anywhere along the value chain – not just at the product ideation stage.

The remaining R&D resources (10%) are part of our central Innovation & Strategy organization. Within I&S, innovation teams focus on breakthrough ideas that are industry-shifting, and can advance a core product to fulfill the needs of a broad new customer segment. We do that from our four main innovation sites – Eindhoven (the Netherlands), Cambridge (US), Bangalore (India) and Shanghai (China) – and smaller innovation and research sites in the Regions. Our global footprint enables us to understand, anticipate and react to local markets and needs.

IP royalties

Philips Intellectual Property & Standards (IP&S) proactively pursues the creation of new intellectual property (IP) in close cooperation with Philips’ operating Businesses and Innovation & Strategy. IP&S is a leading industrial IP organization providing world-class IP solutions to Philips Businesses to support their growth, competitiveness and profitability.

Royal Philips’ IP portfolio currently consists of approximately 50,500 patent rights, 30,500 trademarks, 150,000 design rights and 3,200 domain names. Philips filed 700 new patents in 2024, with a strong focus on the growth areas in health technology services and solutions.

Philips earns substantial annual income from license fees and royalties.

Philips believes its business as a whole is not materially dependent on any particular third-party patent or license, or any particular group of third-party patents and licenses.

Central costs

Philips is present in 71 countries globally and has its corporate headquarters in Amsterdam, the Netherlands. Our real estate locations are spread around the globe, with key manufacturing and R&D sites in Europe, the Americas and Asia. The project to move the Philips headquarters to a new location in Amsterdam in 2025 progressed as planned.

We recharge the directly attributable part of the Functional costs to the Businesses. The remaining part is accounted for as ’central costs’, and includes costs related to the Executive Committee and Group Functions such as Strategy, Real Estate, Legal and Audit.

Other small items

Other small items refer to remaining items for intra-group services and legacy items relating to previously disposed businesses.


2.2.2    Our geographic structure


Our Regions

Geographically, our business is organized in three Regions: North America, Greater China and International Region (the latter consisting of Europe and Growth areas). Within our Regions, we further organize by Zones and Countries. The Regions' primary accountability is to manage customer intimacy, build and maintain relationships, and cultivate an understanding of customer needs, as well as carry out (strategic) account management, service delivery, and indirect partner management. They are also accountable for government relations and for providing local infrastructure needed to support Philips’ presence in a country (license to operate).

For financial reporting purposes, we report in four geographic areas based on similar economic characteristics: Western Europe, North America, Other mature geographies, and Growth geographies. Western Europe, North America and Other mature geographies are collectively grouped as Mature geographies in reporting on sales.

2024 highlights from our Regions

North America

In the biggest healthcare market in the world, our North America team focuses on developing strategic relationships with major health systems that provide care to hundreds of millions of people across the Region. We’re working with customers to solve some of the biggest challenges in healthcare, including the crisis around clinician burnout and improving access to care in rural and underserved communities. Bon Secours Mercy Health, NYU Langone Health, Northwell Health and Nicklaus Children’s Hospital are among the customers using solutions from across our industry-leading portfolio in 2024 to bring better care to more people in the Region.

Our work in 2024 built on our more than 50-year innovation relationship with the US Veteran’s Administration (VA), which serves 16 million veterans and leads the largest integrated healthcare delivery network in the country. More than 9 million veterans receive its healthcare services – and almost one-third of them live in rural areas with limited access to care. Our focus with the VA expanded the largest tele-critical care network in the US and accelerated the adoption of digital pathology to speed cancer care. We also continued our longstanding support of healthcare provided by the Department of Defense, deploying the Rapid Analysis of Threat Exposure algorithm (RATE), an early detector of pre-symptomatic infection, part of an effort to improve the readiness monitoring of active-duty military personnel.

Philips brings innovative business models and partnerships to solve specific challenges for customers, including programs to improve access to maternal care in partnership with federal and state government agencies and philanthropic organizations such as the March of Dimes. Philips North America is consistently recognized in third-party surveys as a great place to work.

Greater China

In Greater China Region, we’re committed to the strategy ‘in China, for China’, putting the focus on local innovation, manufacturing, services and partnership. This enables us to continue to deliver industry-leading innovations in our home and hospital portfolio. While demand from hospitals and consumers in China deteriorated in 2024 due to a challenging economic environment, China is a fundamentally attractive growth market for Philips with strong underlying demand. While in the long run China is expected to remain an important market and growth driver, we expect the level of sales in China to take time to recover. With this in mind, new leadership in the Region is putting emphasis on the strategy to create value to the local healthcare system while also empowering consumers to manage their health and well-being with locally relevant solutions.

In health systems, Philips advanced efforts in 2024 to deliver benefits to providers and patients, aligning with the national agenda of improving access and quality of care. With our latest innovations, we serve the needs identified by the Chinese government to further develop local hospitals and clinics. Among the offerings introduced in the China market: Spectral CT Plus, which provides physiology insights for precise diagnosis in cardiology and oncology, and the MR Elition AI, which triples patient throughput through AI-powered workflow optimization.

Leveraging our clinical insights and research capability in cardiology and neurology, we cemented partnerships with several hospitals – including Beijing Fuwai (China’s top cardiology hospital) and Zhangzhou Jiulongjiang Hospital (a top-tier private hospital) – with cross-modality solutions.

International

In 2024, we continued to pursue our global vision while addressing the distinct local needs and circumstances of our diverse customer base across International Region. We put renewed emphasis on building sustainable partnerships as we develop value propositions that attract more partners whose capacity can help better serve our customers. These strategic partnerships drive value creation and efficiency, as well as enable us to expand our reach into previously untouched customer territories, ensuring we deliver better care for more people across our Region.

For example, Philips signed a Memorandum of Understanding with Siloam Hospitals Group in Indonesia to advance AI capabilities and development in the healthcare sector in Indonesia. The strategic collaboration, in partnership with the Universitas Pelita Harapan (UPH) Medical Sciences Group, will focus on capacity building, knowledge sharing, and implementing advanced AI solutions. Leveraging Philips’ AI innovations, the collaboration will help transform clinical care and digital health, enhance healthcare delivery and make the healthcare infrastructure more sustainable.

We are advancing our go-to-market strategy for health systems by identifying and seizing new opportunities, strengthening our competitive positions, and providing improved support for customers and patients. The Personal Health Business remains vital in empowering individuals to adopt healthier care routines, providing innovative technologies and solutions that promote long-term health.

2.2.3    Supply chain and procurement

Philips runs an integrated supply chain tailored to customer needs, which encompasses supplier selection and management through procurement, manufacturing across all the industrial sites, logistics and warehousing operations, and customer installation, as well as demand/supply orchestration.

Like the rest of the industry, we remain exposed to continued geopolitical tensions around the world, as well as (sudden) changes in tariffs or other trade measures. Labor costs and availability remained a concern due to continued inflation in 2024 and scarcity of a skilled workforce. On the other hand, overall macro-economics showed improved availability of materials. As a result, the cost of key raw materials and energy showed a downward trend compared with 2023. The overall growth rate of inflation is slowing down.

Driving end-to-end supply chain reliability and agility

The supply chain plays an important role in improving our performance and delivering to our customers and consumers as promised. As part of our three-year plan, we initiated multiple interventions and planned longer-term programs to improve our execution capabilities and become more resilient in navigating volatility.

To further increase our responsiveness and our reliability in delivery, we continue to build a robust and efficient, more regionalized supply chain ecosystem, prioritizing service level and customer experience. In this ecosystem we carefully balance our manufacturing capabilities in-house, focusing on our strengths while leveraging suppliers’ specialized capabilities that support Philips' ambitions.

When selecting and evaluating supplier partners, we consider not only business metrics such as quality, on-time delivery performance and cost, but also strategic fit and environmental, social and governance factors. We use supplier classification models to identify critical suppliers, including those supplying materials, components and services that could influence the safety and performance of our products and solutions.

The Philips Supplier Quality Manual outlines Philips’ quality, regulatory, product, process and customer requirements. The standards outlined in this manual underpin agreements between suppliers and Philips, and guide compliance with Philips’ quality standards.

In 2024, we continued with our technology re-design, such as the redesign of printed circuit board assemblies, and dual sourcing efforts to further increase reliability of our supply chain, including safeguarding material flows and de-risking in a sustainable manner. We aim to maintain close relationships with our suppliers and conduct an ongoing dialogue with respect to our forecast.

Philips Group

Supplier spend analysis per geographic area in %

2024

Western Europe

33%

North America

33%

Other mature geographies

5%

Mature geographies

71%

Growth geographies

29%

Philips Group

100%

3    Financial performance

Group sales

18.0 bn  EUR in 2024

(1% increase on a comparable basis*)


2023  18.2 billion EUR

Income from operations

529 m  EUR



2023  (115) million EUR

Adjusted EBITA*

2,077 m  EUR

(12% of sales)


2023  1,921 million EUR (11% of sales)

Operating cash flow

1.6 bn  EUR



2023  2.1 billion EUR

3.1    Performance summary


The year 2024*

Sales amounted to EUR 18.0 billion, a decrease of 1% on a nominal basis. On a comparable basis*, sales increased 1%, on the back of solid growth in 2023. Growth in Mature Geographies was partly offset by the decline in China. Comparable sales* showed 1% growth in the Diagnosis & Treatment segment, 2% growth in the Connected Care segment, and 1% decline in the Personal Health segment due to the decline in China.

Income from operations improved to EUR 529 million, mainly driven by higher gross margin and lower Respironics related items, partially offset by higher impairment charges.

Net income amounted to a loss of EUR 698 million, mainly due to Respironics litigation provision charges of EUR 984 million, partly offset by Respironics insurance income of EUR 538 million, and tax expenses including deferred tax asset derecognition of EUR 941 million, compared to a loss of EUR 463 million in 2023.

Adjusted EBITA* amounted to EUR 2,077 million, or 11.5% of sales, compared to 10.6% of sales in 2023. Connected Care and Personal Health segments showed an increase in Adjusted EBITA* margin, mainly driven by operational improvements and productivity actions, partly offset by cost inflation. Diagnosis & Treatment segment remained flat year over year.

Net cash flows from operating activities amounted to EUR 1,569 million; free cash flow* amounted to EUR 906 million.

Philips cancelled approximately 4.4 million shares acquired under its 2021 share repurchase program for capital reduction purposes.

Philips Group

Key data in millions of EUR unless otherwise stated

2023

2024

Sales

18,169

18,021

Nominal sales growth

2%

(1%)

Comparable sales growth¹

6%

1%

Impairment of goodwill

(8)

Income from operations

(115)

529

as a % of sales

(1%)

3%

Financial expenses, net

(314)

(282)

Investments in associates, net of income taxes

(98)

(124)

Income tax (expense) benefit

73

(963)

Income from continuing operations

(454)

(840)

Discontinued operations, net of income taxes

(10)

142

Net income

(463)

(698)

Adjusted EBITA¹

1,921

2,077

as a % of sales

10.6%

11.5%

Income from continuing operations attributable to shareholders² per common share (in EUR) - diluted

(0.48)

(0.90)

Adjusted income from continuing operations attributable to shareholders² per common share (in EUR) - diluted¹

1.21

1.39

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

2Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2023.


In 2024, we expanded our adjusted EBITA margin and delivered on our cash targets within a challenging growth environment. 
This was driven by our industry-leading innovations, as well as progress on our execution priorities and productivity measures
.”

Charlotte Hanneman  CFO Royal Philips

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

3.1.1    Factors impacting performance

The factors below are believed to have had a significant impact on Philips’ performance during the year.

Macro-economic landscape

In 2024, global economic growth is estimated to have improved marginally compared to 2023, but the economic situation in China weighed down growth across 2024. Global real GDP is estimated to have grown by 3.2% in 2024, compared with 2.8% in 2023. Oxford Economics expects world real GDP growth of 3.3% in 2025 excluding any impact of tariffs.

Simplified operating model

On January 30, 2023, Philips announced its plan to create value with sustainable impact, which is based on focused organic growth to deliver patient- and people-driven innovation at scale, with improved execution as a key value driver, prioritizing patient safety and quality, supply chain reliability and a simplified operating model. The introduction of a simplified operating model to increase agility and structurally lower the cost base by giving end-to-end accountability to the segments has continued to contribute positively to the results of operations.

Workforce reduction

By year-end 2024 Philips completed its previously announced plans to reduce its workforce by 10,000 roles globally by 2025. These reductions were focused on Corporate and Functions optimization and non-core activities. Workforce-related restructuring charges were EUR 106 million in 2024 and EUR 196 million in 2023.

Supply chain resilience

Limited availability and delays in the supply of certain components and products internationally – partly a consequence of the COVID pandemic and the Russia-Ukraine war – impacted the company's results in recent years. These supply chain constraints resulted in an increase in overall working capital, in particular inventories. In 2023, following significant actions to increase supply chain resilience and mitigate the impact of disruptions, our sales benefited from improved material availability and resolved shortages in components.

In 2024 the company stepped up efforts to make its supply chain more agile in order to increase speed of execution. In addition, the company is increasingly sourcing products in the market in which they are being sold to make the supply chain more agile, which we believe is an important part of the company's ability to cater to the demands in the healthcare market and minimize the impact of potential tariffs and retaliatory trade measures.


Geopolitical environment

The Russia-Ukraine war continues to put pressure on the global commodity landscape and supply chains, and contribute to higher levels of inflation. Philips’ operations in Russia and Ukraine on a combined basis represented less than 1% of group sales in both 2023 and 2024. Having substantially reduced its operations in Russia in 2022, the remaining activities were focused on the delivery of medical systems, devices, and spare parts to healthcare providers as well as delivery of a limited range of mother and baby products.

The ongoing situation in the Middle East further increases economic and political uncertainty. Philips is present in Israel with several subsidiaries, mainly in Diagnosis & Treatment and Connected Care, that are primarily involved in manufacturing and research and development activities.


3.1.2    Outlook

Philips remains focused on successfully executing its three-year plan to drive operational improvements and create value with sustainable impact, within a challenging macro environment. For 2025, Philips expects:

1%-3% comparable sales growth, including a mid- to high-single-digit decline in China

Adjusted EBITA margin increasing 30-80 bps to 11.8%-12.3%

Free cash flow before payment of the USD 1.1 billion cash-out relating to the US medical monitoring and personal injury settlements will be at the lower end of the range of EUR 1.4 billion to EUR 1.6 billion. Net of this cash-out, free cash flow will be EUR 0.4 billion to EUR 0.6 billion.

We anticipate comparable sales growth to be back-end-loaded in the year, with a mid-single-digit decline in Q1 mainly due to lower demand in China and royalties phasing, with correspondingly lower Adjusted EBITA margin.


The outlook includes the impact of the recently announced US-China tariffs. It excludes ongoing Philips Respironics-related legal proceedings, including the investigation by the US Department of Justice.












*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

3.2    Results of operations


Sales


Philips Group

Sales in millions of EUR unless otherwise stated

2023

2024

Sales

Nominal

sales

growth

Comparable

sales

growth¹

Sales

Nominal

sales

growth

Comparable

sales

growth¹

Diagnosis & Treatment

8,825

6%

11%

8,790

0%

1%

Connected Care

5,138

(2%)

1%

5,134

0%

2%

Personal Health

3,602

(1%)

3%

3,486

(3%)

(1%)

Other

604

611

Philips Group

18,169

2%

6%

18,021

(1%)

1%

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


Group sales in 2024 amounted to EUR 18,021 million, 1% lower than in 2023 on a nominal basis. Considering a 2% negative currency effect and consolidation impact, comparable sales growth* was 1%The negative currency effect was mainly due to depreciation of currencies against the euro, and affected all segments. In addition, Group sales were negatively impacted by China, mainly as a result of adverse market developments.

Comparable order intake increased to 1% in 2024, compared to a 6% decline in 2023. Comparable order intake is not a financial measure, but is presented when discussing the Philips Group's performance. For further details, refer to the Other Key Performance indicators section.

Diagnosis & Treatment

In 2024, sales amounted to EUR 8,790 million, in line with the nominal sales in 2023. Considering a 2% negative currency effect and consolidation impact, comparable sales* increased by 1%. This was driven by mid-single-digit growth in Image-Guided Therapy, partly offset by a decline in Precision Diagnosis mainly due to the extended hospital procurement cycles as a result of the ongoing industry wide anti-corruption campaign in China.

Connected Care

In 2024, sales amounted to EUR 5,134 million, in line with the nominal sales in 2023. Considering a 2% negative currency effect and consolidation impact, comparable sales* increased by 2%. This growth was mainly driven by mid-single-digit growth in Enterprise Informatics, double-digit growth in Sleep & Respiratory Care, partly offset by a low-single-digit decline in Monitoring on the back of double-digit growth in 2023.

Personal Health

In 2024, sales amounted to EUR 3,486 million, 3% lower than in 2023 on a nominal basis. Considering a 2% negative currency effect and consolidation impact, growth in comparable sales was (1)%. This was mainly due to deteriorated demand in China due to cautious spending behavior, which offset growth in other geographies.

Other

In 2024, sales amounted to EUR 611 million, compared to EUR 604 million in 2023, mainly driven by higher royalty income.

Sales by geographic area


Philips Group

Sales by geographic area in millions of EUR unless otherwise stated

2023

2024

Sales

Nominal

sales

growth

Comparable

sales

growth¹

Sales

Nominal

sales

growth

Comparable

sales

growth¹

Western Europe

3,819

6%

7%

3,978

4%

5%

North America

7,562

0%

3%

7,655

1%

2%

Other mature geographies

1,626

(1%)

7%

1,526

(6%)

(1%)

Mature geographies

13,007

1%

4%

13,159

1%

2%

Growth geographies

5,162

3%

10%

4,863

(6%)

(2%)

Philips Group

18,169

2%

6%

18,021

(1%)

1%

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


Sales in Western Europe increased year-on-year on a nominal and comparable basis* with double-digit growth in the Connected Care segment and low-single-digit growth in the Diagnosis & Treatment and the Personal Health segments. Sales in North America increased year-on-year on a nominal and comparable basis* with mid-single-digit growth in the Diagnosis & Treatment segment and low-single-digit growth in Connected Care segment, which was partly offset by a low-single-digit decline in the Personal Health segment. Sales in Other mature geographies decreased year-on-year, mainly due to lower sales in segment Other which was partly offset by low-single-digit comparable sales growth* in the Diagnosis & Treatment and the Personal Health segments. Connected Care segment sales growth in Other mature geographies was flat.

In Growth geographies in 2024 comparable sales growth* was negative in all segments mainly due to lower demand from consumers and health systems in China.

Cost of sales


Philips Group

Cost of sales components in millions of EUR unless otherwise stated

2023

As a % of sales

2024

As a % of sales

Costs of materials used

4,626

25%

4,213

23%

Salaries and wages

2,381

13%

2,313

13%

Depreciation and amortization

461

3%

609

3%

Other manufacturing costs

3,252

18%

3,113

17%

Cost of sales

10,721

59%

10,248

57%

Philips’ cost of sales decreased by EUR 473 million to EUR 10,248 million in 2024 compared to EUR 10,721 million in 2023, and decreased as a percentage of sales, mainly due to decreased Cost of materials used by EUR 413 million in 2024, which was driven by productivity actions, lower restructuring, acquisition-related and other items and a favorable foreign currency impact.

Other key factors influencing cost of sales were as follows:

Salaries and wages decreased by EUR 68 million, mainly driven by productivity actions, lower restructuring charges and a favorable foreign currency impact, partly offset by cost inflation;    

Depreciation and amortization increased by EUR 148 million in 2024, mainly due to an intangible asset impairment charge;

Other manufacturing costs decreased by EUR 139 million in 2024, driven by productivity actions and a favorable foreign currency impact, partly offset by cost inflation.

Gross margin

In 2024, Philips’ gross margin was EUR 7,773 million, or 43% of sales, compared to EUR 7,448 million, or 41% of sales, in 2023. The gross margin increased by EUR 325 million year-on-year, driven by operational improvements, productivity measures and lower restructuring, acquisition-related and other items, and a favorable foreign currency impact, partly offset by cost inflation. 

Selling expenses

Selling expenses amounted to EUR 4,486 million, or 25% of sales, in 2024, compared to EUR 4,524 million, or 25% of sales, in 2023. Year-on-year selling expenses decreased by EUR 38 million, mainly driven by productivity actions, lower restructuring, acquisition-related and other items and a favorable foreign currency impact, partly offset by cost inflation. 

General and administrative expenses

General and administrative expenses amounted to EUR 582 million, or 3% of sales, in 2024, compared to EUR 608 million, or 3% of sales, in 2023. Expenditure decreased year-on-year by EUR 26 million, mainly driven by productivity actions, lower restructuring, acquisition-related and other items and a favorable foreign currency impact, partly offset by cost inflation.

Research and development expenses

Research and development costs were EUR 1,747 million, or 10% of sales, in 2024, compared to EUR 1,890 million, or 10% of sales, in 2023. The costs decreased by EUR 143 million year-on-year, mainly driven by productivity actions, lower restructuring, acquisition-related and other charges and a favorable foreign currency impact, partly offset by cost inflation.

Philips Group

Research and development expenses in millions of EUR unless otherwise stated

2023

2024

Diagnosis & Treatment

828

899

Connected Care

663

599

Personal Health

197

190

Other

202

59

Philips Group

1,890

1,747

As a % of sales

10%

10%

Restructuring, acquisition-related charges and other items

Restructuring, acquisition-related charges and other items were EUR 1,156 million in 2024, compared to EUR 1,739 million in 2023. Respironics related charges were EUR 691 million in 2024 compared to EUR 1,162 million in 2023. 2024 includes Respironics litigation provision charges of EUR 984 million, partly offset by Respironics insurance income of EUR 538 million.


Philips Group

Restructuring charges in millions of EUR

2023

2024

Restructuring charges per segment:

Diagnosis & Treatment

73

122

Connected Care

64

29

Personal Health

9

25

Other

139

91

Philips Group

285

268

Cost breakdown of restructuring charges:

Provision for personnel lay-off costs

196

106

Restructuring-related asset impairment

56

134

Other restructuring-related costs

33

29

Philips Group

285

268

In 2024, Philips continued general productivity actions aimed at simplifying the organization to streamline ways of working and reduce operating expenses. This included the further reduction of 2,000 roles, thereby completing the planned reduction of 10,000 roles globally across the organization by 2025 ahead of schedule. In addition, other restructuring projects were executed during the year, of which the most significant impacted the segments Other and Connected Care and mainly took place in the US and Netherlands.

For further information on restructuring, refer to Provisions.

Philips Group

Acquisition-related charges in millions of EUR

2023

2024

Diagnosis & Treatment

45

34

Connected Care

51

24

Philips Group

96

58

In 2024, acquisition-related charges in the Diagnosis & Treatment segment mainly related to the acquisition of Spectranetics, due to post-acquisition integration costs. The Connected Care segment recorded charges mainly related to the acquisition of BioTelemetry, due to post-acquisition integration costs. In 2023, acquisition-related charges in the Diagnosis & Treatment segment mainly related to the acquisition of Spectranetics, and in the Connected Care segment mainly related to the acquisition of BioTelemetry and Capsule Technologies, due to post-acquisition integration costs.

Philips Group

Other items in millions of EUR

2023

2024

Diagnosis & Treatment

92

45

Connected Care

1,275

765

Personal Health

22

Other

(32)

20

Philips Group

1,358

830

Consisting of:

Respironics litigation provision

575

984

Respironics insurance income

(538)

Respironics consent decree charges

363

113

Respironics field-action running costs

224

133

Respironics-related charges

1,162

691

Quality actions

175

123

Provision for a legal matter

31

Investment re-measurement loss

23

Gain on divestment of business

(35)

Remaining items

2

16

Philips Group

1,358

830

In 2024 Respironics-related charges totaled EUR 691 million as the impact of the Respironics litigation provision was partly offset by Respironics insurance income in the Connected Care segment. In 2023 Respironics-related charges totaled EUR 1,162 million.

Income from operations (EBIT) and Adjusted EBITA*

The following overview shows Income from operations and Adjusted EBITA* by segment.

Philips Group

Income from operations and Adjusted EBITA1 in millions of EUR unless otherwise stated

Income from operations

As a % of sales

Adjusted EBITA¹

As a % of sales

2024

Diagnosis & Treatment

592

7%

1,018

11.6%

Connected Care

(466)

(9%)

494

9.6%

Personal Health

544

16%

584

16.8%

Other

(142)

(18)

Philips Group

529

3%

2,077

11.5%

2023

Diagnosis & Treatment

721

8%

1,028

11.6%

Connected Care

(1,199)

(23%)

369

7.2%

Personal Health

552

15%

597

16.6%

Other

(190)

(73)

Philips Group

(115)

(1%)

1,921

10.6%

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


Income from operations amounted to EUR 529 million, or 3% of sales, in 2024, compared to a loss of EUR 115 million, or (1)% of sales, in 2023, mainly driven by higher and lower charges in restructuring, acquisition-related and other items in 2024. Adjusted EBITA* increased to EUR 2,077 million and the margin improved to 11.5%, compared to EUR 1,921 million and a margin of 10.6% in 2023, mainly driven by operational improvements and productivity actions. Amortization of acquired intangible assets was EUR 392 million in 2024 compared to EUR 298 million in 2023, which also included goodwill impairment charges of EUR 8 million.

Diagnosis & Treatment

Income from operations decreased to EUR 592 million in 2024, compared to EUR 721 million in 2023. This was mainly due to a value adjustment on current assets, and partly offset by an increase from pricing & productivity actions. Adjusted EBITA* remained stable at 11.6% of sales in 2024.

Connected Care

Income from operations improved to EUR (466) million in 2024, compared to EUR (1,199) million in 2023. 2024 was mainly driven by lower charges in relation to Respironics, operational improvements and pricing & productivity actions. Adjusted EBITA* improved to 10% of sales in 2024.

Personal Health

Income from operations decreased to EUR 544 million in 2024, compared to EUR 552 million in 2023. This was mainly due to lower sales as a result of the decline in China, partly offset by operational improvements and productivity actions. Adjusted EBITA* remained stable at 17% of sales in 2024.

Other

In Other we report on the items Innovation & Strategy, IP Royalties, Central costs and Other.

Income from operations amounted to a loss of EUR (142) million in 2024, compared to a loss of EUR (190) million in 2023. Adjusted EBITA* amounted to a loss of EUR (18) million, compared to a loss of EUR (73) million in 2023. The increase in Income from operations and Adjusted EBITA* was mainly driven by higher royalty income and lower costs.

Financial income and expenses

Financial income and expenses resulted in a net expense of EUR 282 million in 2024, compared to a net expense of EUR 314 million in 2023, mainly driven by higher interest income on cash and cash equivalents and higher net foreign exchange losses in 2023, partly offset by higher interest expenses and provision-related accretion costs.

Income taxes

Income tax expense increased to EUR 963 million in 2024, compared to an income tax benefit of EUR 73 million in 2023. The income tax expense increased by EUR 1,036 million year-on-year, mainly due to the de-recognition of deferred tax assets in the US and higher income before tax in 2024, as well as recognition of historical tax credits in 2023.

Investments in associates

Results related to investments in associates declined from a loss of EUR 98 million in 2023 to a loss of EUR 124 million in 2024. 2024 includes impairments of EUR 103 million and share of results of associates of EUR 20 million. 2023 includes impairments of EUR 58 million and share of results of associates of EUR 40 million.

Discontinued operations

In 2024 and 2023, Discontinued operations consisted primarily of the Domestic Appliances business and certain other divestments that were reported as discontinued operations. In 2024, Discontinued operations included a tax benefit of EUR 140 million relating to tax audit settlements of prior years. For further information, refer to Discontinued operations and assets classified as held for sale.

Net income and earnings per share

Net income amounted to a loss of EUR 698 million in 2024, a decrease of EUR 235 million compared to 2023, mainly due to higher tax expenses partly offset by higher gross margin and lower Respironics related items. Net income is not allocated to segments, as certain income and expense line items are monitored on a centralized basis, resulting in them being shown on a Philips Group level only.

Income from continuing operations attributable to shareholders per common share (in EUR) - diluted, was EUR (0.90) in 2024, compared to EUR (0.48) in 2023. Adjusted income from continuing operations attributable to shareholders per common share (in EUR) - diluted* was EUR 1.39 in 2024, compared to EUR 1.21 in 2023.

Non-controlling interests

Net income attributable to non-controlling interests increased from EUR 2 million in 2023 to EUR 3 million in 2024.


*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


3.3    Financial position


3.3.1    Acquisitions and divestments

In 2024, Philips did not make any acquisitions.

In 2024, Philips completed four divestments for net cash consideration of EUR 118 million. The divestments were not individually material.

In 2023, Philips completed one acquisition involving a total net cash outflow of EUR 53 million (total equity price and settlement of debt). The purchase price allocation was finalized in the second quarter of 2024.

In 2023, Philips completed six divestments for a cash consideration of EUR 80 million notably Philips Pharma Solutions in the US.

For details, please refer to Acquisitions and divestments.

3.3.2    Financing

Summary balance sheet information as of December 31, 2023 and 2024 is presented in the following table. For details refer to Consolidated balance sheets.

Philips Group

Summary balance sheet information in millions of EUR

2023

2024

Property, plant and equipment

2,483

2,452

Intangible assets

13,067

13,365

Investments and financial assets

1,050

968

Deferred tax assets

2,627

1,916

Inventories

3,491

3,198

Receivables

4,146

3,974

Other assets

672

704

Payables

(3,886)

(3,531)

Provisions

(2,498)

(2,972)

Contract liabilities

(2,278)

(2,130)

Other liabilities

(993)

(661)

Net assets to be financed

17,881

17,280

Cash and cash equivalents

1,869

2,401

Debt

(7,689)

(7,639)

Net debt¹

(5,820)

(5,238)

Non-controlling interests

(33)

(37)

Shareholders’ equity

(12,028)

(12,006)

Financing

(17,881)

(17,280)

1Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


3.3.3    Debt position

Total debt outstanding at the end of 2024 was EUR 7,639 million, compared with EUR 7,689 million at the end of 2023.

Philips Group

Total debt outstanding in millions of EUR

2023

2024

Long-term debt

7,035

7,113

Short-term debt

654

526

Debt

7,689

7,639

Philips Group

Balance sheet changes in debt in millions of EUR 

2023

2024

New lease liabilities

233

167

New borrowings long-term debt

544

710

Repayments long-term debt incl. leases

(754)

(763)

New borrowings (repayments) short-term debt

29

(30)

Forward contracts entered (matured)

(462)

(248)

Currency effects, consolidation changes and other

(102)

114

Changes in debt

(512)

(50)

In 2024, total debt decreased by EUR 50 million compared to 2023. The decrease was primarily the result of repayment of existing debt and leases as well as the maturity of forward contracts related to the share buyback program and long-term incentive and employee stock purchase plans, partly offset by the issuance of principal amount of EUR 700 million fixed rate notes maturing in 2032. The remainder of proceeds from the new issuance will be used for the repayment of USD bond maturities in 2025. Changes in payment obligations from forward contracts relate to the maturity of EUR 167 million of share buyback forwards and EUR 146 million of forwards relating to long-term incentive and employee stock purchase plans. This was partially offset by new forwards for long-term incentive and employee stock purchase plans of EUR 65 million (as announced in August 2024).

In 2023, total debt decreased by EUR 512 million compared to 2022. The decrease mainly comes from maturing forward contracts related to the share buyback program and long-term incentive and employee stock purchase plans, and repayments of long-term debt including leases, partly offset by the issuance of EUR 500 million of fixed rate notes that mature in 2031.

At the end of 2024, long-term debt as a proportion of the total debt stood at 93% with an average remaining term (including current portion) of 5.9 years, compared to 91% and 6 years, respectively at the end of 2023. For further information, please refer to Debt.

3.3.4    Shareholders’ equity

In 2024, shareholders’ equity decreased by EUR 23 million to EUR 12,006 million at year-end. The decrease was mainly due to the net loss attributable to shareholders of EUR 702 million and currency translation gains in equity of EUR 751 million, primarily due to the appreciation of the US dollar against the euro in 2024.

In 2023, shareholders’ equity decreased by EUR 1,220 million to EUR 12,028 million at year-end. The decrease was mainly due to the net loss attributable to shareholders of EUR 466 million and currency translation reductions in equity of EUR 604 million, primarily due to the depreciation of the US dollar against the euro in 2023.

Share capital structure

The number of issued common shares of Royal Philips as of December 31, 2024 was 939,939,384. At year-end 2024, the company held 14.9 million shares in treasury to cover obligations under long-term incentive plans. In 2024 (and earlier years), the company entered into several forward contracts to acquire its own shares, and as of December 31, 2024, the outstanding forward contracts related to 6.5 million shares. Philips issued 30.9 million shares in May 2024 in order to distribute the 2023 dividend. The company cancelled 4.4 million shares in June 2024.

The number of issued common shares of Royal Philips as of December 31, 2023 was 913,515,966. At year-end 2023, the company held 7.1 million shares in treasury to cover obligations under long-term incentive plans. In 2016, Philips purchased call options on its own shares to hedge options granted to employees up to 2013, and as of December 31, 2023, no such options remained outstanding. In 2023 (and earlier years), the company entered into several forward contracts to acquire its own shares, and as of December 31, 2023, the outstanding forward contracts related to 15.5 million shares. Philips issued 39.3 million shares in May 2023 in order to distribute the 2022 dividend. The company cancelled 15.1 million shares in December 2023.

Share repurchase methods for long-term incentive plans and capital reduction purposes

Historically, Philips uses different methods to repurchase shares in its own capital: (i) share buyback repurchases in the open market via an intermediary; (ii) repurchase of shares via forward contracts for future delivery of shares; and (iii) the unwinding of call options on own shares. During 2024, Philips used methods (i) and (ii) to repurchase shares for share-based compensation plans and method (ii) to repurchase shares for capital reduction purposes.

The open market transactions via an intermediary allow for buybacks during both open and closed periods.

For more information on share repurchase transactions entered into 2022, 2023, and 2024, refer to Equity.

Philips Group

Impact of share acquisitions and cancellations on share count
in thousands of shares as of December 31

2020

2021

2022

2023

2024

Shares issued

911,053

883,899

889,315

913,516

939,939

Shares in treasury

5,925

13,717

7,835

7,113

14,930

Shares outstanding

905,128

870,182

881,481

906,403

925,009

Shares acquired

8,670

45,486

5,081

15,964

13,718

Shares cancelled

3,810

33,500

8,758

15,134

4,437





3.4    Cashflow and liquidity


3.4.1    Cash flows

The movements in cash and cash equivalents balance for the years ended December 31, 2023 and 2024 are presented and explained in the following table

Philips Group

Condensed consolidated cash flows in millions of EUR

2023

2024

Beginning cash and cash equivalents balance

1,172

1,869

Net cash flows from operating activities

2,136

1,569

Net cash flows from investing activities

Net capital expenditures

(554)

(663)

Other cash flows from investing activities

(82)

90

Net cash flows from financing activities

Treasury shares transactions

(662)

(410)

Changes in debt

(181)

(83)

Dividend paid to shareholders of the company

(2)

(1)

Other cash flow items

(81)

43

Net cash flows from discontinued operations

123

(13)

Ending cash and cash equivalents balance

1,869

2,401

Net cash flows from operating activities

Net cash flows from operating activities amounted to an inflow of EUR 1,569 million in 2024, compared to an inflow of EUR 2,136 million in 2023. This decrease is mainly due to the payments in connection with the Respironics economic loss settlement in the US and working capital outflows, partly offset by the Respironics insurance receipt. Free cash flow* amounted to a cash inflow of EUR 906 million in 2024, compared to an inflow of EUR 1,582 million in 2023.

Net cash flows from operating activities amounted to an inflow of EUR 2,136 million in 2023, compared to an outflow of EUR 173 million in 2022. This increase is mainly due to higher cash earnings and lower working capital, and includes a EUR 141 million payment related to the previously announced resolution of the economic loss class action in the US. Free cash flow* amounted to a cash inflow of EUR 1,582 million in 2023, compared to an outflow of EUR 961 million in 2022.

Net cash flows from investing activities

Net cash flows from investing activities consist of net capital expenditures and other cash flows from investing activities. In 2024, other cash flows from investing activities amounted to a cash inflow of EUR 90 million, mainly due to proceeds from divested businesses and cash receipt with respect to foreign exchange derivative contracts.

In 2023, other cash flows from investing activities amounted to a cash outflow of EUR 82 million, mainly due to a new business acquisition and minority investments, partly offset by divestment proceeds.

Net cash flows from financing activities

Net cash flows from financing activities consist of treasury shares transactions, changes in debt, dividend paid and other cash flow items.

In 2024, treasury shares transactions mainly includes share repurchases as part of the EUR 1.5 billion share repurchase program for capital reduction purposes that were announced on July 26, 2021 and completed on April 12, 2024 as well as related withholding taxes, and share repurchases for long-term incentive plans, which resulted in EUR 410 million net cash outflow. Changes in debt mainly includes the new bond issuance of EUR 700 million and bond redemption of EUR 547 million, partly offset by debt repayments.

In 2023, treasury shares transactions mainly included the share buyback activities, which resulted in EUR 662 million net cash outflow. Changes in debt mainly includes new bonds issued of EUR 500 million and loan repayments amounting to EUR 500 million. The dividend was distributed fully in shares.

Other cash flow items

In 2024, Other cash flow item amounted to a inflow of 43 million, is due to foreign currency impact on the cash balance

In 2023, Other cash flow item amounted to a outflow of 81 million, is due to foreign currency impact on the cash balance

Net cash flows from discontinued operations

In 2024, net cash provided to discontinued operations was EUR 13 million, mainly related to the tax claims from the previously divested business.

In 2023, net cash provided by discontinued operations was EUR 123 million, mainly related to a refund received of advance tax payments of a previously disposed business.


*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

3.4.2    Liquidity position

As of December 31, 2024, the Philips Group had access to available liquidity of EUR 3,405 million (2023: EUR 2,883 million) including cash and cash equivalents and a EUR 1 billion committed revolving credit facility, compared to gross debt of EUR 7,639 million (2023: EUR 7,689 million).

Philips Group

Liquidity position in millions of EUR

2023

2024

Cash and cash equivalents

1,869

2,401

Listed equity investments at fair value¹

14

4

Committed revolving credit facility

1,000

1,000

Credit facility

Liquidity

2,883

3,405

Short-term debt

(654)

(526)

Long-term debt

(7,035)

(7,113)

Debt

(7,689)

(7,639)

Net available liquidity resources

(4,806)

(4,233)

1Philips holds listed equity investments at fair value (level 1) in common shares of companies in various industries. Refer to Other financial assets and Fair value of financial assets and liabilities.


In 2024, Philips extended the maturity of its EUR 1 billion committed revolving credit facility to 2029. The facility can be used for general group purposes, such as a backstop for its Commercial Paper Program.

Philips’ Commercial Paper Program amounts to USD 2.5 billion, under which commercial paper can be issued up to 364 days in tenor, both in the US and in Europe, in any major freely convertible currency. As of December 31, 2024, Philips had no commercial paper outstanding.

Philips established a Euro Medium Term Note (EMTN) program which facilitates the issuance of notes for a total amount of up to EUR 10 billion. In 2024, Philips issued EUR 700 million fixed rate notes due 2032 under the program for general corporate purposes, including the repayment of existing debt.

The company’s liquidity risk management procedures have not changed significantly during 2024. The access to existing lines of credit remains intact. These lines of credit, along with other financial risks to which Philips is exposed, are disclosed in Details of treasury and other financial risks. Further, with respect to potential claims related to the Respironics recall, please refer to Contingencies. Management continues to monitor the risks associated with such potential claims and its impact on liquidity position, if any.

Philips’ existing long-term debt is rated BBB+ (with stable outlook) by Fitch, Baa1 (changed from negative to stable outlook in 2024) by Moody’s, and BBB+ (changed from negative to stable outlook in 2024) by Standard & Poor’s. As part of our capital allocation policy, our net debt position is managed with the intention of retaining our strong investment grade credit rating. Ratings are subject to change at any time and there is no assurance that Philips will be able to achieve this goal. Philips’ aim when managing the net debt position is dividend stability and a pay-out ratio of 40% to 50% of adjusted income from continuing operations attributable to shareholders. Philips’ outstanding long-term debt and credit facilities do not contain financial covenants. Adverse changes in the company’s ratings will not trigger automatic withdrawal of committed credit facilities or any acceleration in the outstanding long-term debt (provided that the USD-denominated bonds issued by Philips in March 2008 and 2012 contain a ‘Change of Control Triggering Event’ and the EUR-denominated bonds contain a ‘Change of Control Put Event’). A description of Philips’ credit facilities can be found in Debt.

Philips Group

Credit rating summary

Long-term

Short-term

Outlook

Fitch

BBB+

Stable

Moody’s

Baa1

P-2

Stable

Standard & Poor’s

BBB+

A-2

Stable

Philips pools cash from subsidiaries to the extent legally and economically feasible. Cash not pooled remains available for local operational needs or general purposes. The company faces cross-border foreign exchange controls and/or other legal restrictions in a few countries, which could limit its ability to make these balances available on short notice for general use by the group.

Philips believes its current liquidity and direct access to capital markets is sufficient to meet its present financing needs.

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

3.4.3    Cash obligations 

Contractual cash obligations

The following table presents a summary of the Group’s fixed contractual cash obligations and commitments as of December 31, 2024. These amounts are an estimate of future payments, which could change as a result of various factors such as a change in interest rates, foreign exchange, contractual provisions, as well as changes in our business strategy and needs. Therefore, the actual payments made in future periods may differ from those presented in the following table:


Philips Group

Contractual cash obligations1 2 in millions of EUR

Payments due by period

Total

Less than 1 year

1-3 years

3-5 years

After 5 years

Long-term debt

7,168

2,006

1,338

3,824

Short-term debt

525

525

Interest on debt

1,792

197

368

325

902

Derivative liabilities

72

64

8

Purchase obligations³

1,161

300

307

210

344

Trade and other payables

1,830

1,830

Contractual cash obligations

12,548

2,916

2,689

1,873

5,070

1Amounts in this table are undiscounted

2This table excludes post-employment benefit plan contribution commitments and income tax liabilities in respect of tax risks because it is not possible to make a reasonably reliable estimate of the actual period of cash settlement.

3Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding for the Group. They specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. They do not include open purchase orders or other commitments which do not specify all significant terms.


Debt includes forward contracts of EUR 142 million (nominal value) relating to the repurchase of shares to cover long-term incentive and employee stock purchase plans. In 2024, Philips entered into a forward contract for EUR 65 million that matures in 2026 relating to the repurchase of up to 2.5 million shares for long-term incentive and employee stock purchase plans.

Philips offers voluntary supply chain finance programs with third parties, which provide participating suppliers with the opportunity to factor their trade receivables at the sole discretion of both the suppliers and the third parties. Philips continues to recognize these liabilities as trade payables and settles them accordingly on the invoice maturity date based on the terms and conditions of these arrangements. As of December 31, 2024, approximately EUR 97 million (2023: EUR 114 million) of the Philips accounts payable were transferred under these arrangements.

Other cash commitments

The company and its subsidiaries sponsor post-employment benefit plans in many countries in accordance with legal requirements, customs and the local situation in the countries involved. For a discussion of the plans and expected cash outflows, please refer to Post-employment benefits.

The company had various provisions by the end of 2024 which are expected to result in cash outflows in 2025. Refer to Provisions.

Philips has contracts with investment funds where it committed itself to make, under certain conditions, capital contributions to these funds of an aggregated remaining amount of EUR 130 million (2023: EUR 153 million). Capital contributions already made to these investment funds are recorded as non-current financial assets.

Please refer to Dividend for information on the proposed dividend distribution.

Please refer to Equity for information on other Long-term incentive and employee stock purchase plans.

Guarantees

Philips’ policy is to provide guarantees and other letters of support only in writing. Philips does not provide other forms of support. The total fair value of guarantees recognized on the balance sheet amounts to EUR nil million for both 2024 and 2023. Remaining off-balance-sheet business-related guarantees on behalf of third parties and associates amount to EUR 343 million as of December 31, 2024 (December 31, 2023: EUR 2 million). These mainly include bank guarantees secured for insurance companies to cover product liability-related cash flows related to the Respironics recall.


3.4.4    Dividend


Dividend policy

Philips’ dividend policy is aimed at dividend stability and a pay-out ratio of 40% to 50% of adjusted income from continuing operations attributable to shareholders*.

Proposed distribution

A proposal will be submitted to the Annual General Meeting of Shareholders, to be held on May 8, 2025, to declare a distribution of EUR 0.85 per common share, in shares or cash at the option of the shareholder, against retained earnings.

If the above dividend proposal is adopted, the shares will be traded ex-dividend at the Euronext Amsterdam as of May 12, 2025, and at the New York Stock Exchange as of May 13, 2025. In compliance with the listing requirements of Euronext Amsterdam and the New York Stock Exchange, the dividend record date will be May 13, 2025.

Shareholders will be given the opportunity to make their choice between shares and cash between May 14 and June 2, 2025, for shares traded at the New York Stock Exchange, and between May 14 and June 3, 2025, for shares traded at Euronext Amsterdam. If no choice is made during this election period, the dividend will be distributed in shares.

Of the total dividend distribution to all shareholders (up to EUR 786 million), a maximum of 50% will be available for payment in cash. If shareholders in total elect to receive an aggregate amount of cash dividend that exceeds the maximum percentage of the total dividend amount, those shareholders who elected to receive their dividend in cash will receive their cash dividend on a pro-rata basis, the remainder being distributed in shares.

The number of share dividend rights entitled to one new common share will be determined based on the volume weighted average price of all traded common shares of Koninklijke Philips N.V. at Euronext Amsterdam on May 30, June 2 and June 3, 2025. The company will calculate the number of share dividend rights entitled to one new common share (the ratio), such that the gross dividend in shares will be approximately equal to EUR 0.85. The ratio and the number of shares to be issued will be announced on June 5, 2025. Delivery of new common shares and payment of the dividend, with settlement of fractions in cash, if required, will take place from June 6, 2025.

Ex-dividend date

Record date

Distribution from

Euronext Amsterdam

May 12, 2025

May 13, 2025

June 6, 2025

New York Stock Exchange

May 13, 2025

May 13, 2025

June 6, 2025

Further details will be given in the agenda with explanatory notes for the 2025 Annual General Meeting of Shareholders. The proposed distribution and all dates mentioned remain provisional until then.

Dividend in shares distributed out of retained earnings is subject to 15% dividend withholding tax, but only in respect of the par value of the shares (EUR 0.20 per share). Shareholders are advised to consult their tax advisor on the applicable situation with respect to taxes on the dividend received.

Dividends and distributions per common share

The following table sets forth in euros the gross dividends on the common shares in the fiscal years indicated (from prior-year profit distribution) and such amounts as converted into US dollars and paid to holders of shares of the New York Registry:

Philips Group

Gross dividends on the common shares (per share)

2020 ¹

2021 ¹

2022 ²

2023 ²

2024 ¹

in EUR

0.85

0.85

0.85

0.85

0.85

in USD

0.95

1.03

0.90

0.93

0.92

1    In cash or shares at the election of shareholder.

2    In shares only.

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

4    Environmental, Social and Governance

1.96 billion lives improved by our products and solutions, including 242 million in underserved communities

First edition of annual disclosures under the Corporate Sustainability Reporting Directive in the EU

Driving toward supplier sustainability targets, and recognized as a Supplier Engagement Leader

New culture framework, impact with care, with patient safety, quality, and integrity at the heart of everything we do

Clear management and independent oversight responsibilities, and actively engaging stakeholders to foster meaningful dialogues


Philips has a long history of doing business sustainably, both in the environmental as well as the social dimension. This is not only a matter of responsible business, it also drives our company success and innovation. We have been recognized as a front-runner in the area of sustainability and for leading the way in, for example, climate action, tax transparency, supplier sustainability and sustainability reporting.

Our first environmental programs go back to the 1980s and were focused on reducing the environmental impact of our sites. This was later enhanced by our EcoDesign program, through which we aimed to reduce the environmental impact of our products. After that, we included the impact of our value chain, first through our supplier sustainability program, followed by engagements with our customers. This culminated in our Science Based Targets, and we are proud that we were the first healthcare company to have its value chain emission reduction plan validated and approved by the Science Based Target initiative, and to have been included in the Carbon Disclosure Project's ‘A-list’ for 12 years in a row.

Philips also has a strong social track record, having been a pioneer with its pension plan and health insurance for its employees in the previous century, paying at least a living wage to its employees, and being recognized as an employer of choice. Like our environmental programs, we expanded our programs to include employees in our supply chain more than 10 years ago.

In addition, we can build on a tradition of sustainability reporting, beginning with our first Environmental Annual Report published in 1999. In 2003, we expanded the Environmental Annual Report with the launch of our first Sustainability Annual Report. This report provided details of our social and economic performance in addition to our environmental results. Next, in 2008, we published our first integrated financial, social and environmental report. Since then, our sustainability reporting has developed further from year to year, now covering the Environmental, Social and Governance (ESG) dimensions.

This Annual Report is our 17th annual integrated financial and sustainability report. Although the Corporate Sustainability Reporting Directive ((EU) 2022/2464) has not been implemented into Dutch law yet, the sustainability report included herein has been written to comply with disclosure requirements of the underlying European Sustainability Reporting Standards (ESRS). Refer to General basis for preparation to see which chapters and sections together constitute our sustainability statement.

In this chapter, we explain how we act and perform in the environmental and social dimensions, and we describe the main elements of our governance framework. The ESG information in this chapter is further explained and underpinned in greater detail in Sustainability statement.

Following our Double Materiality Assessment, we report in this chapter on these material topics on which ESRS have been published:

Climate change (ESRS E1)

Resource use and circular economy (ESRS E5)

Own workforce (ESRS S1)

Workers in the value chain (ESRS S2)

Consumers and end-users (ESRS S4)

Business conduct (ESRS G1)


Our reporting is aligned with the comprehensive and integrated Environmental, Social and Governance (ESG) commitments we have adopted for the period 2020-2025.

 



We are proud of the progress we made in 2024 on our ambition to be a responsible and sustainable company. Our integrated approach to ESG enables Philips to deliver better care for more people and create sustainable long-term value for our stakeholders.”

Marnix van Ginneken  Chief ESG & Legal Officer Royal Philips

Our key ESG commitments

Environmental

We act responsibly toward our planet in line with UN SDGs 12 and 13.

 

Social

Our purpose is to improve people’s health and well-being through meaningful innovation, in line with UN SDG 3. We act responsibly toward society and partner with our stakeholders.

Governance

We aim to deliver superior long-term value for our customers and shareholders, and seek to live up to the highest standards of ethics and governance in our culture and practices.

We will maintain carbon neutrality and use 75% renewable energy in our operations by 2025. We have set ambitious targets to reduce CO₂ emissions in our entire value chain in line with a 1.5 °C global warming scenario (based on Science Based Targets).

We will generate 25% of our revenue from products, services and solutions contributing to circularity, and offer responsible take-back on all professional medical equipment by 2025.

We will embed circular practices at our sites and put zero waste to landfill by 2025.

We will design all new product introductions in line with our EcoDesign requirements by 2025, with ‘EcoHeroes’ accounting for 25% of hardware revenues.

We work with our suppliers to reduce the environmental footprint of our supply chain in line with a 1.5 °C global warming scenario (based on Science Based Targets).

We engage with our stakeholders and other companies to drive sustainability efforts addressing the United Nations Sustainable Development Goals.

We aim to improve the health and well-being of 2.5 billion people per year by 2030, including 400 million people in underserved communities.

It is our strategy to lead with innovative solutions to deliver real change – helping our customers achieve better health outcomes, a better experience for patients and staff, and lower cost of care, as well as helping people take better care of their health.

We aim to be the best place to work for our employees, providing opportunities for learning and development, promoting an inclusive workplace that reflects the diversity of our community through fair hiring and promotion practices, and assuring a safe and healthy work environment. We pay at least a living wage and aim for employee engagement above the high-performance norm.

Through our supplier development program we will improve the lives of 1 million workers in our supply chain by 2025.

We actively engage with and support the communities in which we operate, e.g., through volunteering, internships, and STEM (Science, Technology, Engineering, Mathematics) initiatives.

We contribute to the Philips Foundation, an independent foundation (stichting) organized under Dutch law, which aims to provide access to quality healthcare for disadvantaged communities.

We consider our tax payments as a contribution to the communities in which we operate, as part of our social value creation.

Our management structure and governance combine responsible leadership and independent supervision.

Our integrated operating model defines how we work together to delight our customers and achieve our company goals, leveraging our global scale and capabilities.

Enabling the delivery of patient-centric, safe, and high-quality care – the essence of patient safety and quality – is foundational to Philips’ purpose to improve the health and well-being of people through meaningful innovation.

Our remuneration policy is designed to focus employees throughout the Philips Group on pursuing our purpose and delivering on our strategy, and to motivate them to create superior, long-term stakeholder value. Our executive annual incentives and long-term incentive plan are partly based on ESG objectives.

Our General Business Principles set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and serve as a reference for the business conduct we expect from all our business partners.

Our risk management is designed to provide an appropriate level of assurance that strategic and operational objectives are met, legal requirements complied with, and the integrity of the company’s reporting and related disclosures are safeguarded.

We are transparent about our plans, activities, results and contributions to society (e.g., tax reporting, and engaging with shareholders, customers, business partners, governments and regulators through a variety of platforms).

ESG governance

The above is an overview of our current key ESG commitments. Through these commitments and the underlying ESG programs, metrics, road maps, goals and targets we specify and operationalize the ambitions in our 2020-2025 ESG plan. The Board of Management, including the Chief ESG & Legal Officer, is responsible for the design and management of our 2020-2025 ESG plan and typically convenes the Group Sustainability team and (where relevant) Business, Region or Function leaders four times per year on ESG matters. During these meetings, the Board of Management defines Philips’ ESG strategy, commitments, programs, action plans and policies, as well as oversees major transactions, monitors progress on ESG priorities, and takes corrective action where needed. Progress on ESG is communicated internally and externally on our results website on a quarterly basis and at least annually to the Executive Committee and the Supervisory Board. The ultimate oversight of the ESG dimensions, and their integration into the company’s overarching strategy, is a responsibility of the Supervisory Board as a whole because of the significance of ESG matters. While retaining this overall responsibility, the Supervisory Board is supported by the Audit Committee, which meets quarterly to discuss significant developments in impacts, risks and opportunities, developments in ESG reporting, and other relevant topics. Please refer to the Supervisory Board report for the Supervisory Board members with specific ESG and sustainability expertise, and the Supervisory Board's ESG-related activities during the year. The Supervisory Board as a whole has sufficient ESG and sustainability-related expertise relevant to the sector in which the company is operating, also considering the way we address impacts, risks and opportunities with respect to the material topics identified through our Double Materiality Assessment. Furthermore, both our Board of Management and our Supervisory Board leverage all relevant expertise through their direct access to the Group Sustainability team and (where relevant) external experts.

In our sustainability statement we explain the progress made in the execution of our ESG plan. However, nothing in our statement should be read or construed to represent or imply a guarantee or any other legally enforceable obligation vis-à-vis our stakeholders. We do what is reasonable and practical, and we actively partner with our stakeholders to achieve our aspirational goals and targets, while acknowledging and weighing economic and practical constraints and other external factors that may limit our ability to control environmental and social impacts, in particular beyond our own operations. It is furthermore noted that our ESG efforts and our globally applying aspirational goals and targets, including but not limited to those related to diversity, inclusion and well-being, are subject to our compliance with local rules and regulations, some of which may conflict across jurisdictions.

4.1    Environmental

Our global operations and supply chain impact the environment, yet our greatest potential impact is in our downstream value chain through the sustainable design of our products and solutions. Through this work, we contribute to UN Sustainable Development Goals (SDG) 12 and 13.

This section provides an overview of key environmental indicators relevant to our ESG commitments. Our focus is on the material topics identified through our Double Materiality Assessment – climate change and resource use and circular economy – but we also address Biodiversity and Ecosystem Services as some rating agencies expect us to provide information on this. Further details are available in Sustainability statement.

4.1.1    Measuring our environmental impact

Philips has been performing Life Cycle Assessments (LCAs) since 1990. These LCAs provide insight into the lifetime environmental impact of our products. They are used to steer our EcoDesign efforts by reducing the environmental impact during the lifetime of our products and to grow our Green/EcoDesigned/EcoHero and Circular portfolio. Beyond that, for the eighth year, we have measured our environmental impact on society at large via an Environmental Profit & Loss (EP&L) statement, which includes the hidden environmental costs associated with our activities and products. It provides insights into the main environmental hotspots and innovation areas to reduce the environmental impact of our products and solutions.

The EP&L statement is based on LCA methodology, in which the environmental impacts are expressed in monetary terms using conversion factors developed by CE Delft. As we gain new insights and retrieve more and better data in the future, we will be able to enhance the methodology, use-cases and accuracy of results. For more information and details refer to our methodology document.

Environmental Profit & Loss statement 2024

Philips reduced its EP&L impact in 2024 to EUR 3.82 billion, compared with the EP&L impact of EUR 4.21 billion in 2023. This is mainly due to differences in sales mix.

The most significant environmental impact, 48% of the total, is related to the use of sold products, which is due to electricity consumption. Human toxicity (mainly linked to electricity generation), particulate matter formation, and climate change are the key environmental impact categories contributing to this result. The environmental costs include the environmental impact of the lifetime of the products that we put on the market in 2024, e.g., 10 years in the case of an MRI machine or five years in the case of a Sonicare toothbrush. Products identified as rentals are the only exception, with an energy consumption of one year. As we expand our EcoDesign activities, with the aim to have all our new product introductions in line with our EcoDesign requirements by 2025, we expect to better report on the environmental impact in the years to come.

Of the total 2024 impact, just EUR 272 million (7%) is directly related to Philips’ own operations, mainly driven by outbound logistics, followed by business travel. This impact is similar to 2023 (EUR 261 million) with the slight increase due to increased business travel.

Our materials and components supply chain, including raw materials supply, processing, waste, volatile organic compounds, and water, as well as packaging, has an environmental impact of some EUR 1.71 billion, which is 45% of our total environmental impact. The main contributors are the electronic components (including printed circuit boards), cables and metals used in our products. Through our Circular Economy and Supplier Sustainability programs we continue to focus on reducing the environmental impact caused by the materials we source and apply in our products. With the insights gained through the EP&L, we aim to optimize our climate impact by providing our Businesses with actionable insights.

Philips Group

Environmental Profit & Loss statement in EUR
2024

Notes on the EP&L statement

The definition of the use-case scenarios has a significant impact on the result, especially for consumer products, which have large sales volumes, long lifetimes and typically high energy consumption.

The current EP&L statement only includes the hidden environmental costs. It does not yet include the benefits to society that Philips generates by improving people’s health and well-being through our products and solutions. We have a well-established methodology to calculate the number of lives we positively touch with our products and solutions. We aim to look into valuing these societal benefits in monetary terms in the future.

The EcoInvent 3.9.1 data set was used for 2023 and 2024 reporting.


4.1.2    Climate change

Climate change has been a material topic for Philips for many years. Research from the Potsdam Institute for Climate Impact Research shows that over 4% of global Greenhouse Gas (GHG) emissions are caused by the healthcare sector. Therefore, we are taking action to rethink our business models and decouple economic growth from the impact we have on the environment. We believe large corporations should lead the transition to a low-carbon economy. This will not only reduce the impact on the environment but will also positively impact social and economic aspects. For example, transitioning from air to ocean freight frequently leads to cost savings, and designing energy efficient products can help hospitals reduce their operational expenditure.

Carbon neutral operations since 2020

During the COP21 United Nations Climate Conference in Paris in 2015, we committed to become carbon-neutral in our own operations, pursue all efforts to reduce our operational emissions, source all our electricity from 100% renewable sources, and offset all unavoidable emissions by year-end 2020. We delivered on a comprehensive program that included energy-efficiency improvements, on-site renewables, and Power Purchase Agreements, as well as transport mode shifts to low-carbon-emitting alternatives. As a result, we have significantly reduced our operational carbon footprint compared to the baseline 2020.

Since 2020, Philips has been carbon-neutral in its own operations (Scope 1, Scope 2, and Scope 3 - business travel and transportation & distribution). Although we prioritize carbon reduction, our comprehensive carbon offsetting program is still necessary to ensure carbon neutrality in our own operations.

Philips Group

Net operational carbon footprint in kilotonnes CO2-equivalent

Metric

2020

2021

2022

2023

2024

Gross operational carbon footprint

518

519

438

418

474

Carbon credits cancelled

518

519

438

418

474

Net operational carbon footprint

-

-

-

-

-


In 2024, we experienced an increase in our operational carbon footprint compared with 2023. This has primarily been driven by increased air travel of our employees, for example to meet with customers, as well as a significant uplift of the air freight emission factors. This is further explained in Climate change. We have introduced key performance indicators with the aim to reverse this development.

Reducing our value chain emissions

The majority of our environmental impact either resides downstream during the use phase or upstream as part of our purchased goods and services. Therefore, we are teaming up with both internal and external stakeholders to ensure we reduce our climate impact, not only in our operations, but throughout our value chain.

In 2024 we reduced our value chain emissions by 596,769 tonnes CO2-equivalent (CO2-e) compared with 2023 and 2,994,720 tonnes CO2-e compared with our 2020 Scope 3 baseline. This is primarily driven by differences in sales mix (reduction in sales of impactful products), energy efficiency improvements and reduction in purchased goods emissions.


Philips Group

Carbon emissions across Philips value chain in kilotonnes CO2-equivalent
2024

To continue to drive down our emissions across our value chain we remain focused on the following objectives:

designing energy-efficient products and collaborating with our customers to reduce emissions during the use-phase

minimizing our purchased goods emissions by adopting circular economy practices and transitioning to more sustainable materials

collaborating with our suppliers to reduce emissions in our supply chain

reducing emissions from logistics by optimizing route planning and exploring sustainable alternatives

transitioning to lower carbon energy at our sites

Emissions are monitored and managed on at least a quarterly basis and reviewed on a Business-by-Business basis through key performance indicators.

Philips reports all its emissions in line with the Greenhouse Gas Protocol.

Recognition

Our efforts are acknowledged by CDP (formerly known as the Carbon Disclosure Project), a global NGO that assesses the greenhouse gas emission performance and management of reporting companies. In 2024, we were ranked on the CDP Climate Change ’A’ List for our continued climate performance and transparency for the 13th consecutive year.

Actions related to the achievement of our targets are governed by our Environmental policy, which incorporates input from Philips' regulatory, design, sustainability, supply chain, and operations stakeholders, as well as the voice of our customers.

For more information on our Climate Action progress in 2024, please refer to Climate change.

4.1.3    Resource use and circular economy

A circular economy aims to decouple economic growth from the consumption of natural resources and ecosystems by optimizing their use, eliminating waste and pollution, and circulating products and materials for as long as possible, while giving natural systems the opportunity to regenerate themselves. The way we take, make and use materials not only impacts resource scarcity, but also has a significant impact on both climate and nature, as 45% of global GHG emissions come from the way products are made and used, and more than 90% of biodiversity loss stems from extraction and processing. Electronic waste is one of the fastest growing waste streams in the world. At the same time, the healthcare industry is also a resource-intense industry which, according to the Circularity Gap Report 2020, uses 10% of materials extracted globally, every year. Bringing this back to Philips’ impact on the planet, our use of materials accounts for 40% of our total environmental impact based on our EP&L methodology, which includes raw material supply, manufacturing, waste and packaging. Therefore, in addition to the use of renewable energy and energy efficiency, the transition to a circular economy will be essential to meet our global climate goals and to protect nature.

The Circular Economy program at Philips ran for the 12th year in 2024, building on more than 30 years’ experience of applying resource efficiency through our sustainability programs. Our ambition is to help our customers and consumers to ‘do more with less’ and drive the circular transformation across the value chain together with our partners. We apply Philips’ circularity principles ‘use less, use longer and use again’ across five strategic areas.

Circular Economy program: five strategic areas

Across these strategic areas for circularity, we have set ambitious targets to help us deliver on our commitments to generate 25% of our revenue from products, services and solutions contributing to circularity; design all new product introductions in line with our EcoDesign requirements; embed circular practices at our sites and put zero waste to landfill; and offer responsible take-back on all professional medical equipment by 2025.

In 2024, Philips increased its circular revenues to 24%, a step-up of 4 percentage points compared with the previous year, mainly driven by contributions from circular design. Philips also achieved 100% EcoDesigned new product introductions (NPIs). This is the first year of disclosing the results of this target.

In 2024, Philips achieved 94% circular materials management, compared with 91% in 2023. This is because of improved operational waste management, for instance through reuse of materials and through establishing new partnerships for previously non-recycled materials. We achieved our zero waste to landfill commitment in 2024 as we did in 2023, with 0.0% waste to landfill.

In 2024, Philips continued to ‘close the loop’ on large medical equipment while also extending the commitment to small medical equipment. As a result, Philips has reclaimed more than 8,600 systems and pieces of equipment in 2024. This is a decrease compared with 2023, mainly affected by fewer Philips systems and equipment made available, influenced also by market conditions.

Beyond Philips' 2025 circularity targets, we also look at the impact of the targets on our material flows. There, we do not only look at the total weight of materials from products, parts and packaging that we deliver to customers and consumers, but also how we help to optimize products while in use and what happens to them at end-of-use (see accompanying visual).Philips leverages partnerships to help scale the circular economy globally. For example, we are a key member of the Global Circularity Protocol (GCP) led by the World Business Council for Sustainable Development. Together with UN Environment Program One Planet Network, we use a global business framework to set targets, measure and disclose progress on circularity. We are also a long-standing partner of the Ellen MacArthur Foundation.

Philips’ circular journey is furthermore closely connected with the developments around regulations, metrics and reporting. Together with other companies, Philips is actively supporting global and national governments in creating impactful and practical laws, regulations, and guidelines. For instance, we have a leading role in the Dutch Circular Economy Agenda.

EcoDesign

We see a growing demand from our customers, including hospitals and retailers, to help them reduce the environmental impact of their own operations and beyond. To support their environmental ambitions, we are working to reduce the environmental impact of our products over the total life cycle. As a product’s environmental impact is influenced by decisions made at the design stage, embedding EcoDesign in our product development cycle is essential.

The EcoDesign program focuses on four areas energy, substances, circularity and packaging aiming to increase energy efficiency, avoid the use of hazardous substances, optimize the use of materials and improve packaging across the product life cycle.

In 2024, 100% of our NPIs were EcoDesigned, driven by full adoption of the EcoDesign requirements for hardware NPIs in our Business Units. Our EcoHero revenues amounted to 21.9% compared with 15.9% in 2023. Historically, most EcoHero contributions relate to improvements in energy use. In 2024, packaging and circularity (weight reduction and sustainable materials) were the fastest growing contributors.

In addition to these target metrics, we also measure Green Innovation Spend and Green Revenues. Investments in Green Innovation in 2024 amounted to EUR 263 million compared with EUR 142 million in 2023, driven by projects that develop new EcoDesigned products and technologies, and by innovation projects that maintain existing EcoDesigned products. Green Revenues amounted to EUR 13.8 billion in 2024, or 76.4% of sales (compared with 70.5% in 2023). The results reflect the growth of our portfolio of Green and EcoDesigned products and services, and reporting improvements.



Please refer to Resource use and circular economy, EcoDesign and Sustainable Operations for more information.

4.1.4    Other environmental information

Biodiversity and ecosystem services

Philips recognizes the importance of healthy ecosystems and biodiversity for our company, our employees, and society, even though we have not identified this as a material topic through our Double Materiality Assessment. Since 2021, Philips has a natural capital program, focusing on reducing our chemicals footprint and water consumption, and on improving biodiversity and ecosystem services. For more details related to our own operations, see Sustainable Operations.

By creating healthy ecosystems, the biodiversity and ecosystem services (BES) program supports the mitigation of nature and climate-related risks for our sites, as assessed in the Task Force on Climate-Related Financial Disclosures (TCFD) report.

In 2024, as part of the (BES) program, Philips evaluated the total area and ecological value of each manufacturing site, establishing a baseline to measure improvements in future years. Together with our partners, we are working to develop more advanced BES metrics suitable for industrial areas.

Philips Group

Biodiversity and ecosystem service improvements

Year

BES improvement

2022

BES Ambassador training at our manufacturing sites

Manufacturing sites delivered some 80 potential measures to enhance biodiversity on-site

Tracked BES performance at our manufacturing sites with a ecosystem services mapping tool to identify ecosystems that provide services to our facilities

2023

Implemented 23 biodiversity improvement measures selected for manufacturing sites

Completed activities, as planting native trees in India, creating flower gardens in China, and creating habitats for endangered bee species in Central America

2024

Established an internal metric to drive biodiversity activities in manufacturing sites based on land-use

Implemented 16 BES improvements on 21,000 m2 in our manufacturing sites

Implemented four BES improvements impacting 35,000 m2

Supporting and engaging with local communities

Activities in and around our manufacturing sites consider the biome, endangered ecosystems, climate risks, local restrictions and needs of the community and employees. For example, in 2024, we re-designed the customer-facing entrance at our Colorado Springs site to only include drought resistant, native plants, as the site is in a water-stressed area. Our site in Zhuhai, China, we unsealed the parking lots to improve water permeation during heavy rains and therefore reduce flood and drought risks and improve soil health. Our site in Batam, Indonesia, engaged its

employees and management in planting trees, which provide fruit to employees, blossoms to pollinators, and shade, and help reduce air pollution. The manufacturing site in Costa Rica supported a sanctuary for endangered wildlife, to combat biodiversity loss in rainforests. Employees around the world also engaged in clean-ups, and biodiversity workshops. Such efforts contribute not only to environmental goals but also to making Philips a 'best place to work', one of our ESG commitments.

Philips considers improving biodiversity on its own land as a important first step toward reducing biodiversity impact in other parts of its value chain.

By systematically quantifying and reducing the environmental impact of our operations, our supply chain and the use-phase of our products, we aim to actively protect and restore biodiversity loss. We will publish our second Taskforce on Nature-related Financial Disclosures (TNFD) report in 2025 following the LEAP approach.

For more information refer to Resource use and circular economy.

4.2    Social

As a leading health technology company, it is our purpose to improve people’s health and well-being through meaningful innovation. Our people are key to delivering on our promise of impact with care – we aim to be the best place to work for people who share our passion.


4.2.1    Improving people’s lives

Lack of access to affordable, quality care is one of the most pressing issues of our time. Climate change is exacerbating this situation and putting the lives of millions of people at risk. At Philips, we are conscious of our responsibilities toward society and the planet. We aim to improve the lives of 2.5 billion people a year by 2030, including 400 million medically underserved individuals.

To ensure we remain on track to achieve this goal, we have developed an integrated approach that tells us how many lives have been improved by our products and solutions in a given year. We call this our lives improved model, and it helps us to track our performance on a country-by-country basis in line with UN SDG 3, allowing us to shape strategies 'to ensure healthy lives and promote well-being for all at all ages'. In 2024, we improved the lives of 1.96 billion people, of which 242 million were in medically underserved communities. The increase in lives improved was mainly driven by our Monitoring, Enterprise Informatics and Image Guided Therapy businesses, as well as efforts by the teams in Greater China, Latin America, the Indian Subcontinent and the Middle East, Türkiye and Africa.

Philips understands that it is necessary to have a deep understanding of the relationship among all stakeholders and their specific needs in order to support underserved communities. By combining the strengths of Philips, Philips Ventures, Philips Foundation, and its partners, we aim to make a positive impact by providing access to effective and affordable healthcare for those in greatest need, and improve health outcomes for all. Philips' reported Lives improved results only include contributions by Philips Group.

For more information, please refer to Lives Improved methodology.

``

Philips Group

Lives improved per Region/Zone

Lives improved (million)

Population (million)

Saturation rate (as % of population)

Asia-Pacific

132

1,036

13%

Belgium, the Netherlands, Luxembourg

25

30

83%

Central Eastern Europe

78

155

50%

Germany, Austria, Switzerland

83

102

81%

France

44

69

64%

Greater China

551

1,441

38%

Iberia

46

58

79%

Italy, Israel, Greece

46

81

57%

Indian Subcontinent

106

1,652

6%

Japan

52

125

42%

Latin America

193

645

30%

Middle East, Türkiye, Africa

120

1,805

7%

Nordics

20

28

71%

North America

367

375

98%

Russia, Central Asia

53

252

21%

UK & Ireland

41

74

55%

4.2.2    Our organization, people and culture

In 2024, we have built upon the foundation laid in 2023. We have made significant strides in refining our operating model, and inspiring and generating commitment among our workforce. Our dedication to patients, customers, consumers and our people has strengthened, and we have evolved our organizational culture and capabilities.

Our People transformation goals for 2024 were threefold: renew our culture, increase leadership and people capabilities, and continue to simplify our ways of working to deliver our purpose and plan to create value with sustainable impact.

Our culture

In 2024, we introduced a new culture framework centered on 'impact with care' for patients, people and the planet. This framework focuses on patient safety, quality, and integrity, supported by four cornerstones: Clarity and Simplicity, Execution and Performance, Accountability and Empowerment, and Learning and Collaboration. We remain committed to our transformation journey. We will continue to refine and strengthen our approach, ensuring that 'impact with care' becomes deeply ingrained in every aspect of our operations.

We recognize that embedding our culture happens by living it, and that small changes catalyze systemic shifts. A key achievement in this process was engaging 3,000 people leaders on our purpose, strategy, and culture, laying a strong foundation for organizational alignment. To support our transformation, we increased the visibility of key performance metrics across the organization, fostering transparency and accountability. We also launched a company-wide performance management system aligned with our new cultural cornerstones, improving goal clarity and accountability.

We attach great importance to the health and well-being of our workforce and to creating an environment of inclusion and belonging, where all employees feel psychologically safe. This is not only a matter of responsible business, it also drives our company success and innovation. When we embrace diverse perspectives and attract and retain engaged employees from a wide range of backgrounds, we create better products, services and solutions for our customers and communities.


We are also committed to being an equal-opportunity employer, ensuring that all hiring, promotions, and pay decisions are based solely on merit, qualifications and performance. We do not discriminate on the basis of factors as race, color, age, gender, religion, or any other status in our recruitment, hiring, training, promotion, compensation or employment practices.

Our People Engagement Survey saw increased participation, with a response rate of 84% (almost 58,000 employees). Despite the ongoing changes within the organization, we observed a positive trend in our Employee Engagement Index, with an increase of 5 percentage points to 78% in 2024. While this improvement is encouraging and indicates that the organization is adapting well to the changes, it is worth noting that this figure is still 2% below the high performance norm.

At Philips, we strive for an injury-free and illness-free work environment. Since 2016, the Total Recordable Cases (TRC) rate and Lost Workday Injury Case (LWIC) rate have been defined as key performance indicators. A recordable case is defined as a case where an injured employee undergoes medical treatment or sustains an occupational illness. LWICs are defined as occupational injury cases where an injured person is unable to work for one or more days after the injury. We set yearly TRC rate targets for the company, Businesses and manufacturing and R&D sites. We recorded 151 TRCs in 2024, a 12% reduction compared with 2023. The TRC rate decreased from

0.24 per 100 FTEs in 2023 to 0.21 in 2024. We also recorded 77 LWIC. This represents a 14% decrease compared with 90 in 2023. The LWIC rate decreased to 0.11 per 100 FTEs in 2024, compared with 0.12 in 2023.

Please refer to Social information for further information.

Leadership and people capabilities

In terms of talent development, we have made significant progress. Internal mobility reached 30%, demonstrating our commitment to developing internal talent. Women now represent 33% of senior leadership positions, where our 2025 target is 35%. Overall employee turnover decreased to 14.8%, down from 17.6% in 2023, indicating improved retention strategies. Notably, we increased retention of top talent, with turnover in this group decreasing from 12.3% in 2023 to 6% in 2024 (see Workforce details). We also increased hiring for medtech and functional expertise to bolster our capabilities in critical areas. From a learning, engagement, and growth perspective, 3,164,129 hours of personal and professional development were formally registered in 2024 (see Workforce of the future).

Simplifying how we work

Nearing the end of the second year of our operating model, we made significant strides in refining our approach and addressing key areas for improvement. We remain focused on successfully executing our three-year plan and are determined to further build on our industry-leading innovations, improve our fundamentals, simplify how we work, and ensure we are more competitive and more agile. Our efforts focused on fine-tuning resources and decision rights, improving portfolio management, implementing integrated and customer-driven product management, advancing commercial excellence, and accelerating our service capabilities.

Innovation and impact remained at the forefront of our efforts. We initiated cross-functional innovation teams focused on patient-centric solutions.

Our focus on patient safety, quality, and integrity, coupled with our commitment to empowering our people and driving innovation, positions us strongly to achieve our goal of improving the lives of 2.5 billion people a year by 2030.


4.2.3    Human rights

Philips believes that companies have both the responsibility to respect human rights and the ability to protect them. Philips’ Human Rights Policy, General Business Principles, Supplier Sustainability Declaration and other relevant policies guide our actions, in line with the International Bill of Human Rights and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work.

Philips also follows the guidance in the UN Guiding Principles on Business and Human Rights and the Organization for Economic Co-operation and Development (OECD) Guidelines for Multinational Enterprises.

The Philips Board of Management is ultimately responsible for setting the human rights strategy and managing human rights. It is supported by a cross-functional project team, composed of a human rights manager and professionals from several Businesses, and it drives initiatives with oversight from the Human Rights Steering Committee, consisting of senior leaders from Integrated Supply Chain, Legal, People, and Group Sustainability.

In 2024, we continued to develop our due diligence strategy by conducting Human Rights Impact Assessments (HRIAs). Philips conducted HRIAs at its sites in China and Indonesia, living up to its commitment of conducting regular HRIAs at 100% of its at-risk sites. Philips intends to monitor the progress and findings from at-risk sites and take them on a continuous improvement journey regarding human rights topics.

Although the HRIA of selected sites is primarily focused on Philips' own operations, a derived deep-dive approach for certain suppliers has been established since 2022. For five suppliers, a focused assessment on human rights was conducted in 2024; this is distinct from the broader supplier sustainability assessment approach, which covers sustainability more holistically as indicated in Supplier sustainability & Workers in the value chain.

Our Human Rights Report contains detailed information regarding our progress, targets, and plans for continuous improvement.


4.2.4    Supplier sustainability

Sustainability is a focus for the Integrated Supply Chain Function, which is actively collaborating with our partners, whether these be component suppliers or energy or logistics providers. Close cooperation with our suppliers not only helps us deliver health technology innovations, but it also supports new approaches that help us minimize our environmental impact and maximize the social and economic value we create.

In 2024, our programs focused specifically on improving supplier sustainability performance, advancing human rights, responsibly sourcing minerals, and reducing the environmental footprint of our supply base by driving the adoption of Science Based Targets.

The sustainability performance of our suppliers is fully embedded in our procurement strategy and ways of working. We have a direct (tier 1) business relationship with approximately 4,400 product and component suppliers and 15,100 service providers. Social and environmental issues deeper in our supply chain also require us to intervene beyond tier 1 suppliers. We want to make a difference through sustainable supply management and responsible sourcing. This is more than just managing compliance – it is about collaborating with our supply partners to make a positive and lasting impact.

Through the Supplier Sustainability Performance program, our maturity-based approach to drive continuous improvement, we improved the lives of approximately 936,000 workers in our supply chain in 2024 (2023: 723,000). Collaborating with our strategic partners, we increased the number of deep-dives at tier 2 suppliers, actively supporting them to become more effective in their own sustainability engagement approaches toward their suppliers.


Detailed information on our supplier sustainability programs is available in Supplier sustainability & Workers in the value chain of this Annual Report.

4.2.5    Philips Foundation

Stichting Philips Foundation, an independent foundation organized under Dutch law, is a registered charity established in 2014. In 2024, Royal Philips supported Philips Foundation with a contribution of EUR 6.7 million and provided the operating staff as well as the expert assistance of skilled volunteers in the execution of the Foundation’s programs.

Philips Foundation’s mission is to reduce healthcare inequality by providing access to quality healthcare for underserved communities through meaningful innovation. It does this through the provision and application of Philips’ healthcare expertise, innovation power, talent and resources, as well as through financial support. Together with key partners around the globe (e.g., nonprofit organizations, academic partners, and entrepreneurs), Philips Foundation seeks to identify challenges where a combination of healthcare technology expertise and partner experience can be used to create meaningful solutions that have a positive impact on people’s lives.

Philips Foundation works in projects (grant-based) and through impact investments (e.g., loans or equity). The instrument depends on the status and self-sustainability of the respective healthcare technology in serving more disadvantaged communities.

For more information on the Philips Foundation, please refer to Philips Foundation. 

4.3    Governance

As reflected through our key commitments in the governance dimension, we aim to deliver superior long-term value for our customers and shareholders, and we seek to live up to the highest standards of ethics and governance in our culture and practices. Building on those commitments, this chapter describes the main elements of our governance framework that enable us to operationalize our purpose by adopting a fully integrated approach to doing business responsibly and sustainably.

4.3.1    Corporate governance

Management and oversight responsibilities and accountability within our company are ultimately guided by the corporate governance of the parent company of the Philips group, Koninklijke Philips N.V. (Royal Philips). Royal Philips is a company organized under Dutch law and its shares have been listed on the Amsterdam stock exchange (Euronext Amsterdam) and on the New York Stock Exchange.

Royal Philips has a two-tier board structure consisting of a Board of Management and a Supervisory Board, each of which is accountable to the General Meeting of Shareholders for the fulfillment of its respective duties. The members of the Board of Management, supported by the other members of the Executive Committee, drive the company’s management agenda and share responsibility for the continuity of the Philips group, focusing on sustainable long-term value creation. Our independent Supervisory Board supervises the Board of Management and the Executive Committee and advises them on general policies related to the activities of the company, including setting and executing the strategy of the Philips Group.

The company is governed by Dutch corporate and securities laws, its Articles of Association, and the Rules of Procedure of the Board of Management and the Executive Committee and of the Supervisory Board, respectively. Its corporate governance framework is also based on the Dutch Corporate Governance Code (dated December 20, 2022) and US laws and regulations applicable to Foreign Private Issuers.

In its Corporate governance report, the company addresses the main elements of its corporate governance structure, reports on how it applies the principles and best practices of the Dutch Corporate Governance Code, and provides the information required by the Dutch governmental Decree on Corporate Governance (Besluit inhoud bestuursverslag) and governmental Decree on Article 10 Takeover Directive (Besluit artikel 10 overnamerichtlijn). When deemed necessary in the interests of the company, the company may deviate from aspects of the company’s corporate governance structure, and any such deviations will be disclosed in the company’s Corporate governance report.


4.3.2    The Philips integrated operating model

Our operating model is designed to enable us to deliver on our purpose, driving impact and creating value for our stakeholders. And to do so responsibly and sustainably, ensuring patient safety, quality, compliance and integrity in everything we do. The model is intended to promote accountability and agility, based on the following fundamentals:

We serve our customers and consumers with patient safety and quality at the core of everything we do.

Our Business Units are in the lead and accountable for value creation through their value streams.

Our Regions and Functions enable value stream execution.

Our leaders and teams are empowered to prioritize and allocate their resources for impact.

Our operating model integrates five organizational elements. We ensure alignment of the elements to deliver on our strategic objectives, with clear accountability to drive flawless execution.

Strategy

Structure & Governance

People & Culture

Performance Management

Policies, Processes, Systems & Data


The main governance aspects of our operating model are further explained below. More information on our strategic focus, as well as our approach to people and culture, can be found in Strategic Focus and Our Organization, people and culture, respectively.

Structure and governance

In order to meet the needs of patients, customers and consumers, our empowered Business Units are supported by the Regions and Functions.

Business Units, Businesses and segments

Our Business Units are in the lead accountable for value creation through their value streams. Our Business Unit leaders have full accountability for meeting customer needs and their end-to-end P&L, including patient safety and quality and supply chain performance. Business Units are broken down into business categories, where relevant.

The Businesses are lean, and their leaders ensure consistent alignment among the Business Units’ strategies and goals. They also execute performance management toward the Business Units, including target setting.

Our segment leaders ensure strategic execution and focus cross-Business, and they are held accountable by the Board of Management for the results of their underlying Businesses/Business Units. The three segments are Diagnosis & Treatment, Connected Care and Personal Health, as also disclosed in our external reporting.

Regions

We are organized in three Regions: North America, Greater China and International Region (the latter consisting of Europe and Growth areas). Within our Regions, we further organize by Zones and countries. The Regions’ primary accountability is to manage customer intimacy, build and maintain relationships, and cultivate understanding of their needs, as well as carry out (strategic) account management, service delivery, and indirect partner management. They are also accountable for government relations and for providing the local infrastructure needed to support Philips’ presence in a country (license to operate).

Functions

Our Functions’ core objective is to drive excellence (for reasons of skill, scope and scale) across the organization. Functions deliver cost-effective services, ensure legal and regulatory requirements are met, and propose enterprise policies, standards, guidance and infrastructure, as well as build and share capabilities and expertise.

Performance management

We set ambitious targets and closely manage performance through a disciplined and focused operating cadence. Our performance management system is based on an annual planning cycle, in which we translate our vision and strategy into objectives and plans. The cycle starts with strategic planning, where we define our long-term ambitions, both financial and non-financial, and set our long-term priorities. Each year, Philips’ strategic plan is translated into an annual operating plan,

underpinned with Business Unit plans. Detailed plans to achieve the company’s targets are cascaded into the organization and, ultimately, people’s personal objectives, making clear what performance and behaviors are expected from them.

Policies, processes, systems and data

The 'freedom within a frame' we offer our Business Units provides a framework of policies, processes, systems and data principles that apply throughout the organization. It allows them flexibility to adapt to specific requirements in order to meet specific Business Unit needs.

Enterprise-wide policies provide high-level mandatory rules that are applicable across the company and apply to all Philips employees. All enterprise-wide policies are maintained through a standard process and approved by the Board of Management. Function leaders can set more specific policies and standards within their mandate.

Philips’ processes are captured in our process framework, where we manage end-to-end connections and define the critical process elements (including the ‘what’ and ‘how’, roles and responsibilities, systems and data, and compliance requirements). The process framework provides the foundation for all our management systems, including quality, environmental, and health and safety, to ensure a compliant approach for processes, systems, data and competencies for a specific management area.

4.3.3    Patient safety, quality and regulatory

Enabling the delivery of patient-centric, safe, and high-quality care – the essence of patient safety and quality – is foundational to Philips’ purpose to improve the health and well-being of people through meaningful innovation. The Patient Safety and Quality organization brings together the quality and regulatory affairs functions as one unified team in close coordination with the Medical Office. This team is positioned to support the Philips organization in fostering the quality culture and implementing the capabilities, processes, and tools required for operating in the highly regulated healthcare technology industry. This structured approach promotes non-conformance management, high standards of product quality, and compliance. The Chief Patient Safety and Quality Officer is a member of the Philips Executive Committee and reports directly to the Chief Executive Officer.

Our processes are designed to address specific or potential negative impacts to patients, customers or consumers and include:

maintaining effective Quality Management Systems

tracking Corrective and Preventive Action (CAPA) performance and supporting those who are accountable for the performance and reporting results ultimately to the Board of Management

performing external audits for compliance and standards certification

performing internal audits

having quarterly reviews by the Quality & Regulatory Committee of the Supervisory Board

As part of the complaint management framework, Philips investigates customer feedback as necessary, utilizing the CAPA approach to help address and resolve complaints. A centralized system collects, manages, addresses and stores feedback from customers.

Teams in all Businesses, Regions, and Functions foster a quality culture and mindset, where all employees are encouraged to speak up and share ideas for improving the safety and efficacy of our products. In October 2024, our employees took part in a dedicated Timeout for Patient Safety and Quality to solidify this personal commitment and planning. We also continued to strengthen the Patient Safety and Quality performance review meetings with each Business individually and in the aggregate. We set Patient Safety and Quality key performance indicators for the company in 2024, and Quality performance metrics are part of the remuneration of all Philips executives. Additionally, every Philips employee has a Patient Safety and Quality goal as part of annual people performance management.

Quality

We strive to continuously raise our performance to deliver safe and high-quality products, services, and solutions, which are compliant with quality and safety standards and all applicable laws. In 2024, we continued to simplify how we work and improve accountability and ownership, and further strengthened our engineering capabilities for product development in areas such as quality systems engineering, reliability and software design.

We further reduced the number of Quality Management Systems (QMS) in which we operate and continued our investment in systems, capabilities and training to reduce complexity and improve execution effectiveness.

Regulatory Affairs

Regulatory Affairs, with representation on the leadership team of each Business and Region, further strengthened internal governance and requirements for engagements with national government regulatory authorities, such as the US Food and Drug Administration (FDA), European Medicines Agency (EMA), China's National Medical Products Administration, notified bodies, and national competent authorities in the European Union (EU).

As a global business in a dynamic regulatory environment, Regulatory Affairs bolsters Philips’ compliance with evolving regulations related to innovations in areas such as artificial intelligence, healthcare informatics, and software design. Sought as strategic partners, the Regulatory Affairs team participated in international consensus standards groups alongside regulators and engaged with international regulators as invited experts and speakers at the International Medical Device Regulators Forum, Global Harmonization Working Party, and other meetings. Regulatory Affairs is working with the National Institutes of Health in the US to establish ethical applications of artificial intelligence in medical devices.

Medical Office

The Medical Office is a global team of medical and scientific experts working within and across Philips Businesses and is led by the Chief Medical Officer, who reports directly to the Chief Executive Officer. The role of the Medical Office is to help drive meaningful innovation through excellence in medical safety, medical affairs, health economics, and clinical research.

The Medical Office focuses on supporting our Businesses, navigating the intricacies of addressing patients’ and customers’ unmet needs across a variety of ecosystems, and looking across the entire product life cycle to help teams develop solutions that are safe, effective, and relevant for patients and healthcare providers.

The team is responsible for the design, generation, and sharing of clinical and economic evidence to show the value of our innovations in terms of enhancing the patient and care provider experience, improving patient outcomes, and increasing healthcare system productivity. The team collaborates with healthcare providers, and medical and scientific communities, as well as with private healthcare payers, governments and policy makers, to expand access to, and ensure widespread use of, our innovations.

In 2024, we expanded the Philips Medical Office, further enhancing our expertise in medical affairs, clinical research, medical safety and health economics and strengthening the voice of the patient and healthcare providers in the company. We implemented the Philips Safety Board as an independent cross-functional forum chaired by the Philips Chief Medical Officer to guide and support the Businesses on pre- and post-market product safety and risk evaluations.

The team continued our advocacy and investment combating non-communicable diseases, including cardiovascular disease and stroke, as well as radiation safety, medical device testing, and improved access to physician and staff training, among others. Our health economics team continued to contribute economic evidence to support innovation and expand access to high-quality care.


4.3.4    General Business Principles (GBP)

While pursuing our business objectives, we aim to be a responsible partner in society, acting with integrity towards our employees, customers, patients, business partners and shareholders, as well as the wider community in which we operate. To that end, our GBP – part of the Philips operating model – and their underlying policies incorporate and represent the fundamental principles by which all Philips Businesses and employees around the globe must abide. They set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and Philips rigorously enforces compliance. Our GBP also serve as a reference for the business conduct we expect from all our business partners. The GBP and underlying policies, including the Financial Code of Ethics and Procurement Code of Ethics, are published on the company website at www.philips.com/gbp.


The GBP were updated in 2024 to include legal developments and input from stakeholders, including internal Functions (e.g., Group Sustainability, People, Legal). The Universal Declaration of Human Rights, the UN Convention against Corruption and other standards served as a reference. The GBP include principles of doing business with integrity at work, integrity in the market, and professional integrity outside work. They set our integrity standard on inside information, aiming to prevent trading on or disclosure of non-public information, the publication of which would likely have a significant influence on the trading price of Philips securities or securities of companies that Philips is seeking to acquire. More specifically, Philips has adopted rules of conduct, governing the

purchase, sale and other dispositions of Philips securities, that we believe are reasonably designed to promote compliance with applicable insider trading and other market abuse laws, rules and regulations (in particular the EU Market Abuse Regulation) and applicable listing standards. The rules of conduct apply to all employees, the members of the Board of Management and the Supervisory Board of Royal Philips. The GBP also include principles on conducting business with honesty and integrity, and they explicitly prohibit corrupt practices, acts of bribery and facilitation payments. More detailed guidance is included in the policy on Anti-Bribery and Anti-Corruption, which is explicitly referenced and forms an integral part of the GBP.

The GBP form an integral part of labor contracts and business partner agreements. Translations of the GBP are available in 30 languages, allowing almost every employee to read the GBP in their native language. Detailed underlying policies, manuals, training, and tools are in place to give employees practical guidance on how to apply and uphold the GBP in their daily work environment. Each year, employees reconfirm their commitment to the code of conduct after completing their GBP e-learning, and there is an additional annual signed commitment for executives. A similar signed commitment is in place for finance and procurement staff for their respective codes of conduct. The Philips Supervisory Board is trained annually on Philips GBP through a dedicated online course.

The Executive Committee is responsible for the effective deployment of the GBP and for promoting a culture of compliance and ethics within the company. At least twice a year, the Executive Committee and Audit Committee of the Supervisory Board are informed on relevant GBP metrics, cases, trends and learnings. Furthermore, each quarter, all of our key Regions convene market compliance committees dealing with GBP-related matters in the local context. They are also responsible for the design and execution of localized compliance plans that are tailored to their risks and organizational set-up, and regularly review the relevant compliance metrics for their respective market through dashboards delivered by the legal compliance monitoring team. The GBP program office, together with a worldwide network of GBP compliance officers, supports the implementation of GBP initiatives.

As part of our continuous effort to raise GBP awareness and foster dialogue throughout the organization, each year a global GBP communications and training plan is deployed, including structured dialogues led by managers where quality, integrity and speaking up are discussed. This is part of a company-wide initiative aimed at reinforcing a culture of dialogue using ethical dilemma case studies that are relevant to our workforce. Almost 54,200 (97%) of our assigned employees completed their yearly GBP e-learning. All Functions at risk (including those with customer-facing roles, such as sales and marketing, clinical and technical consultants and employees that provide customer-facing training) also receive, via tailored case studies, annual training. The training includes content on anti-bribery and anti-corruption practices and healthcare compliance.

The GBP monitoring and reporting program, part of our internal control framework, measures implementation of our GBP. In addition, we continue to expand the capabilities of our legal compliance monitoring team, serving our business customers as well as our compliance networks with actionable data, thus further improving our internal control framework. The results of the monitoring measures in place are given in Philips SpeakUp (Ethics Line).

The GBP are supported by Philips SpeakUp program. Philips SpeakUp program, and its underlying policies and procedures, aligns with relevant legislation on whistleblowing (including but not limited to Directive (EU) 2019/1937) to ensure reporters are protected from (attempted) retaliation. SpeakUp ensures standardized reporting and enables employees and third parties to escalate concerns 24/7. Concerns raised through this SpeakUp program are registered consistently in a single database hosted outside of Philips servers to ensure confidentiality and security of identity and information. Further details on how Philips ensures the protection of reporters of potential GBP violations, and ensures an independent and impartial review of concerns, can be found in the Philips SpeakUp Policy. Encouraging people to speak up through the available channels if they have a concern will continue to be a cornerstone of our GBP training, communications and awareness campaigns.

GBP compliance officers and SpeakUp investigators receive training on following up on SpeakUp concerns in line with Philips SpeakUp Policy and investigation guidelines. Specifically in 2024, we again focused on increasing awareness about integrity and on emphasizing the importance of speaking up. This built on the deployment in 2023 of our biennial Business Integrity Survey, in which more than 22,500 employees trusted us with their views and opinions on integrity within Philips. The results showed 79% of the respondents feel comfortable addressing concerns related to the GBP. The next Business Integrity Survey will be deployed in 2025, along with an updated GBP e-learning.

In 2024, a total of 805 concerns were reported via Philips SpeakUp (Ethics Line) and through our network of GBP compliance officers. This represents an increase of 5% from the total of 764 concerns in the previous reporting period (2023). This is a continuation of a year-on-year upward trend. See Philips SpeakUp (Ethics Line) for further details.

Through the Audit Committee of the Supervisory Board, the company also has procedures in place for the receipt, retention and treatment of complaints specifically relating to accounting, internal accounting controls, or auditing matters, enabling the confidential, anonymous submission of complaints.

4.3.5    Cybersecurity

Failure to meet cybersecurity standards may cause patient harm, negatively impact customer operations and their ability to provide healthcare, or provide unauthorized access to patient records and medical devices. Philips relies on information technology to operate and manage its Businesses, as well as store and process confidential data (relating to patients, employees, customers, intellectual property, suppliers and other partners). For a discussion of cybersecurity risks facing our business, see “Products and services may fail quality or security standards, which could adversely affect patient safety or customer operations" and “Philips could be exposed to a significant enterprise cybersecurity breach” in section Operational risks. As of the date of this Annual Report, we have not identified any breaches of cybersecurity or other related risk threats that have materially affected or are reasonably likely to materially affect our business.

The aim of our security risk management is to protect the confidentiality, integrity, and availability of Philips products and services, and it is part of our broader risk management and internal control framework described in Risk management and internal control. The Board of Management is responsible for the design and management of Philips’ cybersecurity, which is ultimately overseen by the Supervisory Board (and specifically its Audit Committee). Quarterly reports on cybersecurity risks and incidents are prepared by the IT Audit & Risk Committee (consisting of representatives from the Group Security and Group IT Functions, Philips Internal Audit and the external auditor) and submitted to the Board of Management and the Supervisory Board. This reporting includes the overall risk level, relevant changes in the risk environment, challenges in reaching and/or maintaining current risk levels, and actual risk responses in the form of actions and owners.

The Group Security Function maintains a security management framework, which includes processes, requirements and controls for the assessment, identification and management of material risks from, among others, cybersecurity threats. The framework, including cybersecurity policies and procedures, is designed to promote implementation of security requirements in all applicable processes, information processing systems and infrastructure pertaining to our products and services and our supporting and enabling Functions. The framework includes risk, vulnerability and penetration assessments; mandatory yearly security training for all employees (including phishing simulations for all employees multiple times a year); and monitoring and response activities for vulnerabilities identified in products, services and infrastructure.

Our Head of Group Security, reporting to our Chief Financial Officer, leads the Group Security Function in supporting the Board of Management in evaluating and setting the security strategy, issuing security policies, and evaluating the progress and effectiveness of the deployment of the company’s security management framework. Our Chief Information Security Officer, reporting to our Head of Group Security, has nearly 27 years of technology and information security management experience in the industry, including prior roles with the Dutch Government and multinationals in the consumer goods, manufacturing, chemical and food processing industries, in various roles ranging from chief information security officer to IT security officer and security architect. Our Chief Information Security Officer is informed of and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents through the Global Security Operations Center.

Group Security is also responsible for addressing security risks, including monitoring cybersecurity threats and responding to cybersecurity incidents. The Philips Global Security Operations Center, with the leadership of the Chief Information Security Officer, is the hub for the prevention, detection, mitigation and remediation of cybersecurity incidents on global enterprise systems, supported by certain external services and periodic/intermittent assessments. The severity and materiality of incidents are assessed through a dedicated security incident reporting process and, if necessary, incidents are escalated to the major event team that may hand off to central crisis management and (potentially) to the Philips Disclosure Committee, which assesses the need for public disclosure of (material) incidents. When needed, incidents are further escalated to Global Crisis Management.

Additionally, in order to address the security risks associated with our suppliers and the services they provide, security controls are embedded in our procurement and supplier management processes, covering due diligence when engaging with new suppliers; contracting, monitoring and managing existing supplier relationships; and terminating supplier relationships. These security controls include assessing existing security certificates and assurances reports for the services in scope, validating suppliers’ answers to security questionnaires in due diligence, and ensuring that security schedules are part of the signed contracts.

4.3.6    Remuneration framework

Aligned with one of our key ESG commitments, the objectives of our remuneration framework are to focus employees throughout the Philips Group on pursuing our purpose and delivering on our strategy, and to motivate them to create superior, long-term stakeholder value. Thus, our remuneration framework is designed to support the company’s overall performance and our commitment to drive progressive value creation through a strategy of focused organic growth, scalable patient- and people-centric innovation, and reliable execution.

We aim to attract, retain and motivate world-class talent by offering market-competitive and fair compensation. We position ourselves competitively against our peers through external benchmarking, and we offer ranges that enable us to reward exceptional performance. We also set fair and internally consistent pay levels by taking into account internal relativities, and we are committed to equal pay and ensuring that all employees receive at least a living wage.

Employee share ownership is stimulated through our employee share purchase plan, to create alignment with shareholder value and to encourage employees to act as stewards and ambassadors of the company.

A part of remuneration of Philips executives is variable and linked to achieving our strategic imperatives through the criteria and targets included in the Annual and Long-Term Incentives. The achievement/payout of the Annual Incentive is partly based on a financial element (70% weight), with financial performance metrics that are aligned with the strategic priorities for the year. The non-financial element of the Annual Incentive (30% weight) reflects the importance of factors relating to the company’s priorities (patient safety and quality, strengthening supply chain reliability, and the simplification of our operating model), as well as our Environmental, Social and

Governance (ESG) performance. The achievement/vesting of LTI is also partly based (20% weight) on ESG objectives, reflecting the importance of ESG to our company and its increasing relevance to our stakeholders (as a strategic matter and in the context of our risk management), and to incentivize management’s focus on our policy objective to deliver superior, long-term value to our stakeholders, while acting responsibly towards our planet and society.

With respect to variable compensation, our employment contracts include claw back provisions. These allow us to recoup variable remuneration in case of (among others) violations of the Philips General Business Principles. This is one of the means to uphold ethical behavior.

The remuneration and benefit arrangements applicable to the broader executive and/or employee population in the Netherlands largely also apply to the members of the Board of Management. The remuneration of the individual members of the Board of Management is determined by the Supervisory Board, taking into account the Remuneration Policy for the Board of Management adopted by the General Meeting of Shareholders in 2024. A description of the composition of the remuneration paid and owed to the individual members of the Board of Management (and the Supervisory Board) is included in the Remuneration Report 2024.


4.3.7    Tax contribution

To fulfill our company purpose, a responsible tax approach is required. We fully acknowledge our societal role when it comes to paying taxes in the geographies where value is created. We consider our tax payments as a contribution to the communities in which we operate, and part of our social value creation.

Our approach to tax sets the standard for our conduct, by which individual employees, the company and its subsidiaries must abide. We consider tax in the context of the broader society, inspired by our stakeholder dialogues, human rights advocacy, international tax laws and regulations, relevant codes of conduct, and global initiatives of the Organization for Economic Cooperation and Development and the United Nations.

The Chief Financial Officer annually reviews, evaluates, approves and, where necessary, adjusts Philips’ approach to tax. Part of our approach is to acknowledge the importance of transparency in respect of our tax contributions. Philips supports and participates in transparency initiatives such as the Dow Jones Sustainability Index and the Tax Transparency Benchmark of the Dutch Association of Investors for Sustainable Development (VBDO). For the second year in a row, Philips scored full marks and has been awarded the winner of the Tax Transparency Benchmark by VBDO. The team had assessed the tax transparency practices of 51 Dutch companies and 65 EU listed companies from Belgium, Denmark, France, Germany, Italy, Spain, and Sweden. The expert jury appointed by VBDO especially complimented us for publishing a full Country Activity and Tax Report, including a narrative linking Philips’ business and activities to taxation. For example, Philips is one of the only companies in this year’s benchmark that explicitly mentioned the governance aspect of ESG in relation to tax. The jury also noted that in this report we have explicitly linked to the GRI 207 Tax Standard and went beyond to include information on environmental and social factors. Furthermore, the jury commended Philips for the clear description of the role taxes play within its

value creation model. In addition, Philips scored a top score (100 out of 100) in the Tax Strategy section of the 2024 Dow Jones Sustainability Index.

The 2024 Country Activity and Tax Report is published on our website in addition to, and simultaneously with, the disclosures on tax included in this Annual Report.

Philips has a tax control framework that forms part of its standard set of Internal Controls over Financial Reporting (ICFR). Philips' tax position is therefore reflected in its financial statements and covered by the Board of Management's report on ICFR. For more on the board's conclusion regarding the effectiveness of ICFR refer to Risk management and internal control.

Philips also endorses the ambitions expressed in the Tax Governance Code published by the Dutch employers organization VNO-NCW. We comply with the principles prescribed in the code, available at VNO-NCW, and we have touched upon the elements of this code in our Country Activity and Tax Report.

In 2024, Philips contributed to the communities where we operate through taxes paid (e.g., corporate income tax) and taxes collected (e.g., VAT). Philips' total tax contribution in 2024, amounting to EUR 3,263 million, is presented by tax type in the accompanying table. Please refer to our 2024 Country Activity and Tax Report for more details.

Philips Group

Total contribution 2024 per tax type in millions of EUR

Corporate income tax paid

Customs duties

VAT¹

Payroll tax

Other taxes

Total

Western Europe

62

8

176

854

50

1,150

North America

42

39

122

796

9

1,007

Other mature geographies

18

3

69

117

1

208

Growth geographies

63

81

350

387

17

898

Philips Group

186

131

717

2,154

76

3,263

1    Includes VAT, GST and sales tax.

4.3.8    Working with stakeholders and advocacy

Our stakeholder engagement helps us deliver on one of our key ESG commitments: to be transparent about our plans, activities, targets, results and contributions to society, and to engage with shareholders, customers, business partners, employees, academics, governments and regulators through a variety of platforms. Through our engagement efforts we pursue and foster an open, meaningful, effective, and informed dialogue regarding our activities and our internal and external stakeholders’ needs, concerns and expectations. We derive significant value from our

stakeholders across all our activities and engage with, listen to and learn from them. We incorporate feedback on specific areas of our business into our planning, actions, targets, policies and disclosures. Please also refer to the Philips Stakeholder Engagement Policy available at our website.

The purpose of our advocacy efforts is to contribute to policy development and legislative processes and to support business opportunities in the areas relevant to Philips and its Businesses, for example: health system resilience policies and investment plans; ESG, particularly climate, circularity and green procurement; and digital health, such as AI, data protection, interoperability, cybersecurity, and technological sovereignty.

We participate in meetings and task forces as a member of organizations including the World Economic Forum, World Business Council for Sustainable Development (WBCSD), Responsible Business Alliance (RBA), European Financial Reporting Advisory Group (EFRAG), Dutch Sustainable Growth Coalition, the Ellen MacArthur Foundation, European Round Table for Industry, and the European Partnership for Responsible Minerals.

In organizing ourselves around customers and markets, we conduct dialogues to explore common ground for addressing societal challenges, building partnerships and jointly developing supporting ecosystems for our innovations around the world. We engage with the leading Dutch labor union (FNV) and a number of NGOs, including Enough, GoodElectronics, the Chinese Institute of Public and Environmental Affairs, UNICEF, Amnesty International, Greenpeace, Friends of the Earth, and WageIndicator. We also engage with a variety of investors, analysts, rating agencies, institutional advisory and other organizations, such as Eumedion, ISS, Glass Lewis, VEB and VBDO. Please also refer to Investor information. Customers (including consumers and end-users) are able to voice their concerns and indicate their trust during engagement processes.

We invite our stakeholders to engage with us through our website, and we offer dedicated support for consumers and for healthcare professionals. On sustainability matters, including our sustainability reporting in this Annual Report, stakeholders may share their comments and questions via email (philips.sustainability@philips.com). Finally, Philips SpeakUp is available to all stakeholders when they believe their concern relates to a violation of the Philips General Business Principles and underlying policies. More information about Philips SpeakUp, including how Philips protects reporters from retaliation, can be found in General Business Principles (GBP) and Philips SpeakUp (Ethics Line).

For more information on our stakeholder engagement please refer to the Stakeholder engagement overview.


4.3.9    Risk management and internal control


Risks related to our strategy

Philips’ exposure to risks is directly impacted by our strategy, as shown in the accompanying table.




A more detailed description can be found in Risk factors and responses. We do not classify these risk categories in order of importance. It should be noted that although our risk management and internal control systems are designed with the intent to manage risks within our appetite, they cannot provide certainty that this is being achieved.

Risk appetite

We have set different levels of risk appetite, ranging from an averse to a seeking approach.

For more information on our risk appetite, refer to Risk factors and responses.

Key elements of our framework

The purpose of our risk management is to identify and analyze the risks Philips faces in executing its strategy and activities, to set the risk appetite of the company, to take appropriate risk responses, and to monitor the effectiveness of responses. Please refer to Risk factors and responses, for a description of each material risk factor that we have identified in four main categories: strategic, operational, compliance and financial and reporting. The objective of our internal control framework is to maintain integrated management control of the company’s operations and reporting, and to safeguard compliance with applicable laws and regulations. As such, risk management and internal control form an integral part of our strategy-setting, business planning and performance review cycles.

The governance and process that lie at the core of our enterprise risk management are described in more detail in the following sections. Complementary to our enterprise risk management process, Functions and departments (such as Accounting Reporting and Internal Controls, Legal, Sustainability, Patient Safety and Quality, Operations and Integrated Supply Chain, Finance, Tax, and Group Security) support the Executive Committee and management in specific risk areas. These Functions maintain and deploy designated frameworks, to manage, for example, risks related to business continuity, privacy compliance, environmental matters, insurance and tax.

It is important to note that our risk management and internal control framework cannot provide certainty as to the realization of our objectives, nor can they prevent all misstatements, inaccuracies, errors, fraud or non-compliance with rules and regulations. Also, we note that we may not be successful in deploying some or all of our mitigating actions effectively, or these actions may not achieve the anticipated effect.


Risk management governance

The Board of Management is ultimately responsible for identifying, analyzing and managing the risks Philips faces in executing its strategy and activities, for setting the risk appetite of the company, and for the design, implementation and maintenance of a fit-for-purpose risk management and control system. The system balances risk and opportunity in line with risk appetite, including the monitoring of its effectiveness. The Executive Committee, several experts, enterprise Functions and committees support the Board of Management in the discharge of its responsibilities.

The risk appetite is set by the Board of Management, reviewed at least annually and included in the Philips risk management policy. Risk-taking guidance is operationalized through tone from the top, our culture frame, our General Business Principles and our operating model – such as our strategic plans, performance targets, budgets, accountabilities and authority schedules, policies, management systems, process standards, control standards and our performance review cadence. Furthermore, risk appetite is effected through the risk management process described in this chapter.

The Executive Committee is primarily responsible for identifying and mitigating material risks to Philips. The Executive Committee is supported by the Enterprise Risk Management Support Team, consisting of experts on various categories of risk, through regular analysis of the enterprise risk profile and enhancement of the risk management framework. In addition, management across the company is responsible for identifying critical risks and implementing appropriate risk responses within their areas of responsibility.

Functions maintain and deploy frameworks and activities to structurally manage specific risk areas. To ensure clarity and alignment on the status of, and to make recommendations on, key risk areas these Functions have recurring items on the meeting agenda of the Board of Management. The Board of Management discusses the relevant topics with participation from relevant members of the Executive Committee and other senior executives and subject matter experts. Furthermore, dedicated reports on our key risk areas are shared and discussed with the Supervisory Board and external auditors in the relevant Audit & Risk Committees facilitated by Internal Audit.

The Internal Audit Function has an independent role to evaluate and improve the effectiveness of the organization's governance, risk management and internal controls. The Function assesses the quality of risk management and controls through the execution of a risk-based audit plan, as approved by the Board of Management and the Audit Committee of the Supervisory Board. The Board of Management and leadership from Businesses, Regions/Zones and key Functions meet quarterly with Internal Audit in Audit and Risk Committees to discuss strengths and weaknesses of

risk management and controls – as evaluated by internal and external auditors and by means of other (self) assessments – and take corrective action where necessary.

The Disclosure Committee seeks to ensure that the company implements and maintains internal procedures for the timely collection, evaluation, and disclosure of information potentially subject to public disclosure under legal, regulatory and stock exchange requirements.

The Supervisory Board oversees and advises the Board of Management and the Executive Committee with respect to Philips’ risk management, including the identification of material risks in relation to the risk appetite of the company, the maintenance of internal business controls and risk management, and the compliance with applicable laws and regulations. At least once a year, the Supervisory Board discusses the general strategy of the company and the Philips Group, as well as the main risks associated with their business activities, and the results of the assessment by the Board of Management and the Executive Committee of the structure and operation of the systems of internal business controls and any significant changes therein. The Audit Committee and the Quality & Regulatory Committee of the Supervisory Board assist the full Supervisory Board in fulfilling its risk management oversight responsibilities. The Audit Committee reviews the quality of risk management and controls, and the reported findings of internal and external audits. The Quality & Regulatory Committee’s role particularly relates to the compliance of the company’s products (including software), services, and systems throughout their life cycle.


Enterprise risk management process

To develop a comprehensive overview of Philips’ risks, structured risk assessments take place according to the Philips risk management process standard, applying a top-down and bottom-up approach. Our process standard is designed based on Enterprise Risk Management: Integrating with Strategy and Performance (2017) from the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and on ISO 31000 - Risk Management.


Philips enterprise risk management process

At least once a year, senior management from Businesses, Zones/Regions and key Functions perform a risk assessment as part of their strategic plan update. Risk workshops are facilitated by Internal Audit with senior management across the company to further support these risk assessments. Twelve such risk workshops were held in 2024.

At least quarterly, senior management discusses and monitors the risk profile and risk response effectiveness in its performance reviews and during Audit and Risk Committees, which cover all Businesses, Zones/Regions and selected Functions.

During the quarterly Audit and Risk update session, the Board of Management discusses developments in the enterprise risk profile and management’s initiatives to improve risk responses.

Each year the Executive Committee assesses the enterprise risk profile as an integral part of its strategy review and the potential risk impact versus risk appetite. The assessment also covers the effectiveness of the risk management framework and potential improvements thereto.

Once a year, the updated risk profile and the risk management framework, including the outcomes of the annual Executive Committee risk workshop, are presented to the full Supervisory Board. The underlying risks and response plans are discussed at the end of the year with the Audit Committee of the Supervisory Board.

Next to our enterprise risk management, various Functions as referred to earlier in this section support the management of specific risk areas. In alignment with the Philips risk management process standard, these Functions maintain and deploy designated frameworks. Examples include but are not limited to security, privacy compliance, trade compliance, business continuity, occupational health, and safety and quality. Through specialist teams at the global, regional or local level, standards and requirements are defined and continuously improved, deployed, and monitored to ensure our employees are aware of and comply with these requirements.

We continuously seek to improve our risk management. The measures taken during 2024 to further strengthen risk management include:

improved alignment or our risk dialogues with strategy execution and performance review dialogues

further embedding of our governance and process, system and data requirements in the Philips operating model

review of our enterprise policy framework

strengthened our risk management capabilities via upgrades to our risk management tooling and use of data analytics

created additional insights in risk dynamics, e.g., through risk interdependency analysis and risk velocity analysis using statistical scenario modelling

continued efforts to standardize and simplify Philips' process standards, including controls. Additionally, further development of our regulatory landscape intelligence to enhance foresight in, and internal communication on, upcoming regulatory change.

further automation of screening of business partner integrity and of transactions to ensure Export Control compliance

continued analysis of global warming and weather scenarios on the geographical footprint of our facilities as well as suppliers’, in line with the recommendations of the Task Force on Climate-Related Financial Disclosures

Financial reporting and sustainability reporting

As part of its internal control framework, Philips has implemented a standard set of Internal Controls over Financial Reporting (ICFR). Philips has designed its ICFR framework based on the COSO Internal Control-Integrated Framework (2013). Together with Philips' established accounting procedures, this standard control framework is designed to provide reasonable assurance that assets are safeguarded, that the books and records properly reflect transactions necessary to permit preparation of financial statements, that policies and procedures are carried out by qualified personnel, and that published financial statements are properly prepared and do not contain any material misstatements.

A structured monitoring process is deployed company-wide to assess, document, review and monitor compliance within ICFR. In each reporting unit, management is responsible for assessing the controls set for their business, risk profile and operations, and for completing the internal control statement certification statement. Deficiencies noted in the design and/or operating effectiveness of ICFR that were not remediated at year-end are reviewed by the Board of Management and the outcome is reported to the Supervisory Board. The Board of Management’s report on ICFR, including its conclusions regarding the effectiveness thereof, can be found in this report in Management’s statements and report.

Since 2012, Royal Philips engaged an external provider of assurance, currently EY Accountants B.V., with respect to its sustainability reporting. Originally, our sustainability reporting and the audit thereof was referencing GRI Universal Standards and Philips-specific criteria. Over the years, Philips continued to develop its internal framework and included sustainability-related risks in its risk management processes. While preparing for the publication of a sustainability statement complying with the Corporate Sustainability Reporting Directive ((EU) 2022/2464) and related European Sustainability Reporting Standards, we leveraged the established ICFR framework and processes, and new sustainability related controls are being designed for internal and external sustainability reporting. We expect to fully implement such new controls in 2025.

5    Supervisory Board

Focus on Patient Safety and Quality, performance and outlook, long-term value acceleration strategy and succession planning

Charlotte Hanneman appointed as Chief Financial Officer

Changes in Supervisory Board composition

Reports of Supervisory Board committees

5.1    Letter from the Chairman of the Supervisory Board

Dear Stakeholder,

Nearing the end of the second year of the three-year plan to create value with sustainable impact, Philips has made solid progress on its execution priorities, returned to order intake growth, and delivered strong margin and good cash performance, although sales growth was slower than initially expected. We remain confident in the company’s strategy and dedicated to ensuring Philips delivers patient safety and quality.

Within a challenging macro environment, Philips is focused on creating value out of its portfolio of leadership positions by driving operational improvements and scaling innovation leadership. Philips remains a preferred strategic and innovation partner for its customers, and as a result, has closed a number of sizeable innovation and technology partnerships across the world. Significant progress was made in resolving litigation, and Philips continues to be recognized for its ESG leadership.

Strengthening growth remains at the forefront of the agenda, but even as we see positive developments, we are mindful of the geopolitical landscape, and the impact the external environment has on the company’s performance. For this reason, it’s critical that Philips is sufficiently prepared to weather volatile conditions. Simplification efforts to strengthen agility and competitiveness are essential to achieving this.

The Supervisory Board remains fully committed to its responsibilities to supervise and advise management in leading the company toward a future of progressive value creation with sustainable impact. As explained in our Report, in 2024 we focused on patient safety and quality, the company’s performance and outlook, the long-term value acceleration strategy, and succession planning. We spent significant time on the company’s strategic focus on growth out of its portfolio, with leadership positions and scalable innovation, and improved execution as key value driver. China and North America markets received specific attention – China, given the uncertainties there that are expected to continue, and North America, given its size and strategic nature.

We see that Philips has a clear path forward for sustainable value creation, after reaching an important milestone with the agreement in the Respironics litigation. Under the settlement, Philips Respironics has agreed to pay a total of USD 1.1 billion. Philips Respironics also signed a consent decree, which was court-approved, and Philips concluded an agreement with insurers to cover Respironics recall-related product liability claims. This resolves the personal injury litigation and the medical monitoring class action to end the uncertainty associated with litigation in the US.

After welcoming Exor N.V. as a long-term minority investor in 2023, we were pleased to see Exor increase its stake in Philips in 2024, along with some other significant shareholders. As part of the relationship agreement formed in 2023, Philips also welcomed Benoît Ribadeau-Dumas as a new member of the Supervisory Board, with a four-year term beginning at the 2024 Annual General Meeting of Shareholders.

Looking to the future, we believe Philips is well-positioned to capture growth in attractive markets, enabling better care for more people through sustainable innovation. We remain committed to the plan to create value with sustainable impact and have confidence in the abilities of CEO Roy Jakobs and the management team to deliver on the full potential of the Businesses. The new member of the Board of Management, Chief Financial Officer Charlotte Hanneman, as well as the new Executive Committee members – Ling Liu, Chief Region Leader, Philips Greater China; Jie Xue, Chief Business Leader Precision Diagnosis; and Özlem Fidanci, Chief of International Region and Leader Growth Region – are already generating fresh energy and ideas, helping to build upon Philips’ strong foundation.

Together with my fellow members of the Supervisory Board, I look forward to providing continued oversight as Philips delivers on its purpose of improving people’s health and well-being through meaningful innovation. Thank you to our shareholders and key partners for your support, in 2024 and in the years to come.

Feike Sijbesma

Chairman of the Supervisory Board

5.2    Members of the Supervisory Board

In the two-tier corporate structure under Dutch law, the Supervisory Board is a separate body that is independent of the Board of Management and the company. The Supervisory Board supervises the policies, management and general affairs of Philips, and assists the Board of Management and the Executive Committee with advice where required or requested. Please also refer to Supervisory Board within the company's Corporate governance report.


Feike Sijbesma 2 3

Born 1959, Dutch

Chairman of the Supervisory Board since May 2021

Chairman of the Corporate Governance and Nomination & Selection Committee

Member of the Supervisory Board since 2020; second term expires in 2028

Former CEO of Koninklijke DSM NV (Honorary Chairman) and former non-executive Director of Unilever NV. Co-Chair of the Global Climate Adaptation Center and Member of the Board of Trustees of the World Economic Forum.

Chua Sock Koong 1

Born 1957, Singaporean

Member of the Supervisory Board since 2021; first term expires in 2025

Former Group CEO of Singapore Telecommunications Limited and currently member of the Board of Directors of Prudential plc, Bharti Airtel Limited, Bharti Telecom Limited and Ayala Corporation. Member of the Council of Presidential Advisors of Singapore, the Securities Industry Council and the Dubai Financial Services Authority, Deputy Chairman of the Public Service Commission of Singapore.

Liz Doherty 1

Born 1957, British/Irish

Chairwoman of the Audit Committee

Member of the Supervisory Board since 2019; second term expires in 2027

Currently, member of the Supervisory Board and Chairwoman of the audit committee of Novartis AG and of Corbion N.V. Member of the advisory committee of Freya Holdco S.à r.l. Fellow of the Chartered Institute of Management Accountants. Former CFO and board member of Reckitt Benckiser Group PLC, former CFO of Brambles Ltd, former non-executive director and audit committee member at Delhaize Group, Nokia Corp., SABMiller PLC and Dunelm Group PLC. Former non-executive board member of the UK Ministry of Justice and of Her Majesty’s Courts and Tribunals Service (UK) and advisor to GBfoods SA and Affinity Petcare SA (subsidiaries of Agrolimen SA).




1    Member of the Audit Committee

2    Member of the Remuneration Committee

3    Member of the Corporate Governance and Nomination & Selection Committee

4    Member of the Quality & Regulatory Committee

Marc Harrison 4

Born 1964, American

Member of the Supervisory Board since 2018; second term expires in 2026

Former President and Chief Executive Officer of Intermountain Healthcare and former Chief of International Business Development for Cleveland Clinic and Chief Executive Officer of Cleveland Clinic Abu Dhabi. Currently CEO HATCo (Health Assurance Transformation Company) at General Catalyst.

Peter Löscher 1 4

Born 1957, Austrian

Member of the Supervisory Board since 2020; second term expires in 2028

Former President and CEO of Siemens AG, President of Global Human Health and Member of the Executive Board of Merck & Co., President and CEO of GE Healthcare Bio-Sciences and member of GE’s Corporate Executive Council, CEO and Delegate of the Board of Directors of Renova Management AG. Currently member of the Board of Directors of Telefónica S.A. and CaixaBank S.A. and Chairman of the Supervisory Board of Telefónica Deutschland Holding AG, Non-Executive Director of Thyssen-Bornemisza Group AG and Doha Venture Capital LLC.

Indra Nooyi 3

Born 1955, American

Member of the Supervisory Board since 2021; first term expires in 2025

Former CFO, President, Chairman and CEO of PepsiCo. Currently member of the Board of Directors and Chair of the Audit Committee of Amazon, Inc. Member of the International Board of Advisors of Temasek, member of the Board of Trustees of the Memorial Sloan Kettering Hospital, trustee of the national gallery of art.

Sanjay Poonen 2

Born 1969, American

Member of the Supervisory Board since 2022; first term expires in 2026

Former Chief Operating Officer at VMware and President at SAP. Currently CEO and President of Cohesity and member of the Board of Directors of Snyk.

David Pyott 4

Born 1953, British/American

Chairman of the Quality & Regulatory Committee

Member of the Supervisory Board since 2015; third term expires in 2025

Former Chairman and Chief Executive Officer of Allergan, Inc. and former Lead Director of Avery Dennison Corporation. Currently member of the Board of Directors of Alnylam Pharmaceuticals Inc., BioMarin Pharmaceutical Inc. and Pliant Therapeutics. Chairman of the Governing Board of London Business School, member of the Board of Trustees and Executive Committee of the California Institute of Technology, Vice President of the Ophthalmology Foundation and President of the Advisory Board of the Foundation of the American Academy of Ophthalmology.

Benoît Ribadeau-Dumas 3

Born 1972, French

Member of the Supervisory Board since 2024; first term expires in 2028

Former deputy CEO at SCOR, former Chief of Staff to the French Prime Minister, former CEO of Aerosystems, member of the Management Board of Zodiac Aerospace, former SEVP CGG Veritas and former CEO of Thales Underwater Systems. Currently Managing Director at Exor, member of the Board of Directors of Stellantis, Institut Merieux, Merieux Nutrisciences, bioMerieux, TagEnergy and Welltec. Member of the Board of Directors of Galileo Global Education and Cerba Healthcare.

Paul Stoffels 2 3

Born 1962, Belgian

Vice-Chairman and Secretary

Chairman of the Remuneration Committee

Member of the Supervisory Board since 2018; second term expires in 2026

Former CEO of Virco, Chairman of Tibotec, worldwide Chair of Pharmaceuticals at Johnson & Johnson and Chief Scientific Officer & member of the Executive Committee at Johnson & Johnson. Currently CEO and Chairman of the Board of Directors of Galapagos NV.

Herna Verhagen 1 2

Born 1966, Dutch

Member of the Supervisory Board since 2022; first term expires in 2026

CEO of PostNL, member of the Supervisory Board of ING Groep N.V., member of the Supervisory Board of Het Concertgebouw N.V. and member of the Advisory Board of Goldschmeding Foundation.

For a current overview of the Supervisory Board members, see also

https://www.philips.com/a-w/about/supervisory-board.html

1    Member of the Audit Committee

2    Member of the Remuneration Committee

3    Member of the Corporate Governance and Nomination & Selection Committee

4    Member of the Quality & Regulatory Committee


5.3    Supervisory Board report

The Supervisory Board supervises, advises and challenges the Board of Management in performing their management tasks as well as setting and executing the strategy of the Philips Group with a focus on long-term and sustainable value acceleration and securing its business leadership positions. The members of the Supervisory Board act in the interests of Philips, its Businesses and all its stakeholders in accordance with good governance practices. This report includes a description of the Supervisory Board’s activities during the financial year 2024 and other relevant information on its composition and its functioning.

2024 focus areas and activities of the Supervisory Board

In 2024, the Supervisory Board’s focus was on patient safety and quality, the company’s performance and outlook, the long-term value acceleration strategy, and succession planning. The related near-term and longer-term actions were extensively reviewed and discussed with management, against the geopolitical background and the external environment in which the company operates, and the impact that the macro-economic outlook has on the company’s performance.

Patient safety and quality – Compared to 2023, the Supervisory Board gradually expanded its focus from the Respironics recall to the risks and challenges related to patient safety and quality across all Businesses. Patient safety and quality was a recurring agenda item for each of the (regular) meetings. The Supervisory Board challenged management to remain focused on the safety of patients as the main priority and driver, despite operational and supply challenges. In that context, the Supervisory Board reviewed the process framework for product design and production controls in the company (and other mitigation of quality related risks and challenges) and monitored progress on resolving product quality issues, site inspections, ongoing engagements with the US Food & Drug Administration (FDA) and other competent authorities globally, and the execution of the company-wide program to improve and foster a culture, behaviors and a mindset that puts patient safety and quality first.

The Supervisory Board was regularly updated on the management of the consequences of the Respironics recall. This oversight included, among other things, the settlement of personal injury and medical monitoring claims in the US; the agreement with the US Department of Justice (DOJ) and FDA on the Respironics consent decree; the continued execution of the economic loss class action settlement; the ongoing criminal and civil investigation by the DOJ’s Consumer Protection Branch and Civil Fraud Section; and the investigation by more than 30 US state Attorneys General into possible violations to state deceptive practices statutes; as well as the securities claims in the US and the Netherlands, and the SEC investigation.

Performance and outlook – The Supervisory Board reviewed and tracked progress on 2024 performance, including relevant key performance indicators, such as comparable order intake, comparable sales growth*, Adjusted EBITA* and free cash flow*. Despite the challenging geopolitical and macro-economic environment, the company delivered on its commitments regarding profitability, free cash flow and ESG, in line with guidance and consensus. The Supervisory Board engaged with management on the quarterly performance and outlook, in particularly on phasing and predictability of sales, the quality of earnings and margin improvement.

Value acceleration – In the course of 2024, the focus of the Supervisory Board moved from value creation to a strategy of value acceleration. The Supervisory Board reviewed and tracked progress on the execution of this strategy. In parallel, the Supervisory Board and management engaged in multiple deep-dive sessions on the company’s strategic focus on organic growth and scalable innovation with improved execution as key value driver, as well as the main priorities for each of the segments, Regions and Functions. Specific attention was given to the role of North America and China in the strategy moving forward, given the dynamics of these markets.

Succession planning – The Supervisory Board spent time in 2024 considering its composition, as well as the composition of the Board of Management and the Executive Committee. Attracting candidates with expertise in (consumer) health tech and artificial intelligence continues to be part of the Supervisory Board’s succession planning. Our report includes information on the composition of the Supervisory Board.

The Supervisory Board is very pleased with the appointment of Charlotte Hanneman, at the 2024 AGM, as member of the Board of Management, succeeding Abhijit Bhattacharya as Chief Financial Officer from October 1, 2024, and she has deepened the industry expertise of the Board of Management. The Supervisory Board is grateful to Mr Bhattacharya for his long-term service and leadership. Ling Liu (Chief Greater China Region) has been appointed as new member of the Executive Committee, effective July 1, 2024. Also Özlem Fidanci (Chief of International Region and Leader Growth Region) and Jie Xue (Chief Business Leader Precision Diagnosis) were appointed as new members of the Executive Committee, both effective January 1, 2025. Refer to Report of the Corporate Governance and Nomination & Selection Committee for more information.

Other key matters that were reviewed and/or discussed during one or more meetings in the course of 2024 include

Capital allocation, including the dividend policy and pay-out and the M&A framework, and specifically the company’s flexibility under its capital structure and credit ratings to pay dividends and to fund capital investments, including share repurchases and other corporate finance initiatives.

The company’s liquidity position and leverage, including the measures taken to strengthen it in light of the financial performance of the company. These measures include the issue of bonds through the Euro Medium Term Note program in May 2024 with the purpose to repay EUR 700 million in existing debt due in 2024 and 2025.

Geopolitical developments and their impact on Philips’ business, in particular the impact of the Russia-Ukraine war and the situations in Israel and the Middle East, on Philips employees and the (potential) implications on the continuity of Philips’ business in these countries, and the impact of additional tariffs proposed by the new US administration.

The deterioration in market developments in the China consumer and professional health businesses.

Regular review of the key performance indicator dashboard, tracking the performance of the 2024 indicators for the Executive Committee versus target.

Philips’ annual management commitments, including the 2024 key performance indicators for the Executive Committee, the performance on such indicators, and the annual operating plan for 2024.

Patient safety and quality compliance, systems and processes. The Supervisory Board was regularly updated on past and upcoming FDA inspections at various company sites, including the preparations for and outcomes of such inspections.

Oversight of the adequacy of the company’s Internal Control over Financial Reporting.

Enterprise risk management, including updates on and improvements to the relevant processes; the outcome of the annual risk assessment dialogue with the Executive Committee; and an update of the top risks faced by the Philips Group, including the possible impact of such risks, as well as control and mitigation measures. Refer to Risks related to our strategy.

Engagements with shareholders and institutional advisory firms on the revised Remuneration Policy for the Board of Management and the revised Remuneration Policy for the Supervisory Board as adopted at the 2024 Annual General Meeting of Shareholders.

The company’s People strategy and priorities, employee engagement and retention of employees, review of talent management, leadership and talent development, leadership culture, and equal opportunities for all employees.

Evaluation of the Board of Management and the Executive Committee and its members, based on the achievement of specific group and individual targets approved by the Supervisory Board at the beginning of the year, as well as the assessment of the main findings and conclusions of last year’s evaluation and the related follow-up.

Philips’ Environmental, Social and Governance (ESG) approach, including an update on progress made with respect to the 2025 ESG key programs and sustainability commitments. The Supervisory Board was also further educated on requirements related to the company’s sustainability reporting, as well as relevant Dutch and EU regulatory developments. These include but are not limited to the impact on Philips of the EU Corporate Sustainability Reporting Directive (CSRD) and its pending implementation into Dutch law, and the European Corporate Sustainability Due Diligence Directive (CSDDD).Refer also to ESG governance regarding the Supervisory Board's responsibility for the oversight of the ESG dimensions.

The (re-)appointment of the external providers of assurance on the company’s sustainability statements for the years 2024 and 2025, respectively.

Significant civil litigation claims against, and public investigations into, Philips.

The agenda for the 2024 AGM (held on May 7, 2024) and the proposed agenda for the upcoming 2025 AGM (to be held on May 8, 2025).

The market environment for global M&A activities that offered limited opportunities in 2024 driven by growing macro-economic challenges, inflationary pressure and elevated interest rates, as well as the company’s selective approach toward M&A going forward and the (business) performance of companies previously acquired by the company.

The overall Philips IT landscape and related strategy, including IT simplification and experience improvement.

The approach to information security, focused on protecting the company, its research and development, and production.

The updated Tax policy, the expected impact of the OECD pillar One and pillar Two models, and the US Base Erosion and Anti-Abuse Tax (BEAT) liability on the company, as well as the Effective Tax Rate (ETR) over the period 2018-2023.

The innovation and artificial intelligence strategy and roadmap of each Business.

The Supervisory Board reviewed Philips’ annual and interim financial statements, including information related to ESG, prior to publication.

Supervisory Board meetings and attendance

In 2024, the members of the Supervisory Board convened for seven regular meetings and three extraordinary meetings. Moreover, the Supervisory Board members collectively and individually interacted with members of the Board of Management, with members of the Executive Committee and with senior management outside the formal Supervisory Board meetings. The Chairman of the Supervisory Board and the CEO frequently had bilateral discussions about the company’s progress on a variety of matters.

The Supervisory Board meetings held in 2024 were generally very well attended. The committees of the Supervisory Board also convened regularly (see the separate reports of the committees below) and the committees reported back on their activities to the full Supervisory Board. In addition, the Supervisory Board and Committees held private meetings. The members of the Supervisory Board concluded that they devoted sufficient time to engage (proactively, if the circumstances so required) in their supervisory responsibilities.

In March 2024, two Supervisory Board members visited the European Congress of Radiology in Vienna, Austria, and in August 2024, one Supervisory Board member visited the European Society of Cardiology in London, UK. In June 2024, the Supervisory Board members visited Philips’ Personal Health site in Stamford, Connecticut, US. In September 2024, some Supervisory Board members visited Philips’ Diagnosis & Treatment manufacturing site in Best, the Netherlands.

Supervisory Board: composition, diversity and self-evaluation

The Supervisory Board is a separate corporate body that is independent of the Board of Management and the company. Its independent character is also reflected in the requirement that members of the Supervisory Board can be neither a member of the Board of Management nor an employee of the company. The Supervisory Board considers all its members to be independent under the Dutch Corporate Governance Code, except for one member (i.e., 91%), Benoît Ribadeau-Dumas, to whom the independence exception of best practice provision 2.1.7(iii) of the

Dutch Corporate Governance Code is deemed to apply. Furthermore, the members of its Audit Committee are independent under the rules of the US Securities and Exchange Commission applicable to the Audit Committee.

The Supervisory Board currently consists of 11 members and retained critical knowledge and capabilities with the re-appointments of Feike Sijbesma (Chairman) and Peter Löscher, both for a term of four years as per the end of the 2024 AGM. Following a proposal from long-term shareholder Exor N.V., Benoît Ribadeau-Dumas was appointed at the 2024 AGM as a new member of the Supervisory Board, also for a term of four years as per the end of the 2024 AGM.

Anticipating the expiry of the third term of appointment of David Pyott, and his retirement from the Supervisory Board at the end of the 2025 AGM, the Supervisory Board was tasked with identifying a candidate with equivalent medtech and quality and regulatory affairs expertise. As a result, the agenda of the upcoming 2025 AGM will include a proposal to appoint Bob White as new member of the Supervisory Board. The first term of both Indra Nooyi and Chua Sock Koong will expire at the end of the 2025 AGM, and the agenda for that meeting will include proposals to re-appoint them.

The selection of candidates for appointment is always based on merit. The Supervisory Board also attaches value to diversity and has adopted a Diversity Policy to promote diversity at board level. For more information, please refer to Report of the Corporate Governance and Nomination & Selection Committee. The composition of the Supervisory Board furthermore follows its profile as included in the Rules of Procedure of the Supervisory Board. The profile aims for an appropriate combination of knowledge and experience among the members of the Supervisory Board, encompassing general management, international business, ESG and sustainability, (consumer) health and medical technology, patient safety, quality and regulatory, product development, finance and accounting, human resources, manufacturing and supply chain, information technology and digital, marketing, and governmental and public affairs, all in relation to the global character of Philips’ Businesses. The Supervisory Board also aims for having members with different nationalities and (cultural) backgrounds, working experiences or otherwise diverse qualities, as well as one or more members who have held an executive or similar position in business or society no more than five years ago. The composition of the Supervisory Board shall furthermore be in accordance with the Dutch Corporate Governance Code best practice provisions on independence, and each member of the Supervisory Board shall be capable of assessing the broad outline of the overall policy of the company. The size of the Supervisory Board may vary as it considers appropriate to support its profile.

Any (re-)appointments of members of the Supervisory Board must meet the gender quota, as required by Dutch law, requiring that of the Supervisory Board members at least one-third are women and at least one-third are men. (For calculation purposes, a total number of board members that cannot be divided by three must be rounded up to the next number that can be divided by three.) Currently, the statutory quota is met, as out of 11 Supervisory Board members, four members are female and seven members are male. The quota will also be met upon the

proposed re-appointments of Indra Nooyi and Chua Sock Koong, and appointment of Bob White as members of the Supervisory Board at the 2025 AGM.

In 2024, each member of the Supervisory Board completed a questionnaire to verify compliance with the applicable corporate governance rules and the Rules of Procedure of the Supervisory Board. The outcome of this survey was satisfactory. An independent external party facilitated the 2024 self-evaluation process for the Supervisory Board and its committees. This included drafting and submitting relevant questionnaires, interviewing members of the Supervisory Board and aggregating and reporting on the results. The members of the Board of Management also provided their input. The questionnaires covered various topics such as composition, size, skills and experience, geographical coverage and diversity of the Supervisory Board, the effectiveness of the Supervisory Board’s oversight of various aspects such as strategy, business performance, risk management, succession planning and people, and engagement with management. In addition, the questionnaire reflected on the company’s strategy, innovation, digital and AI developments, understanding of the market and stakeholder landscape, and continuous education. All members of the Supervisory Board were invited to share recommendations to improve the Supervisory Board’s functioning and ways of working going forward. Furthermore, the performance of the Chairman, of the other Supervisory Board members individually, and of the Supervisory Board’s committees was evaluated separately.

The reports on the evaluation were discussed in a meeting of the Supervisory Board and resulted in a collection of positive points to maintain as well as priorities for further improvement. The results of the self-evaluation indicated that the Supervisory Board is a well-functioning team of appropriate size that benefits from different expertise, background and international geographical representation. Progress has been made on all domains, in particular in terms of stakeholder understanding, risk and safety, oversight and the proximity to top talent and succession. The Supervisory Board has been bolstered by its relationship with long-term investor Exor N.V. as a strategic investor and the new member of the Supervisory Board that was appointed in 2024 following Exor’s proposal. The Supervisory Board members assessed they have struck the right balance between supporting and challenging management on the company's focus areas, which include setting the foundation and aspirations for the future and execution of the value acceleration strategy, patient safety and quality, culture, and senior executive succession planning. The Chairman of the Supervisory Board had several meetings with individual members of the Supervisory Board to discuss ways to further enhance the functioning of the Supervisory Board and its individual members going forward. The Chairman also discussed the evaluation of his own functioning with the Vice-Chairman.

Supervisory Board composition

 

Feike Sijbesma 

Paul Stoffels

Chua Sock Koong

Liz Doherty

Marc Harrison

Peter Löscher

Indra Nooyi

Sanjay Poonen 

David Pyott

Herna Verhagen

Benoît Ribadeau-Dumas

Year of birth

1959

1962

1957

1957

1964

1957

1955

1969

1953

1966

1972

Gender

Male

Male

Female

Female

Male

Male

Female

Male

Male

Female

Male

Nationality

Dutch

Belgian

Singaporean

British/Irish

American

Austrian

American

American

British/American

Dutch

French

Initial appointment date

2020

2018

2021

2019

2018

2020

2021

2022

2015

2022

2024

Date of (last) (re-)appointment

2024

2022

n/a

2023

2022

2024

n/a

n/a

2023

n/a

n/a

End of current term

2028

2026

2025

2027

2026

2028

2025

2026

2025

2026

2028

Independent

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

No

Committee memberships¹

RC & CGNSC

RC & CGNSC

AC

AC

QRC

AC & QRC

CGNSC

RC

QRC

AC & RC

CGNSC

Attendance at Supervisory Board meetings

10/10 (100%)

10/10 (100%)

10/10 (100%)

10/10 (100%)

10/10 (100%)

9/10 (90%)

9/10 (90%)

9/10 (90%)

7/10 (70%)

9/10 (90%)

5/10** (50%)

Attendance at committee meetings

RC 3/3 CGNSC 6/6 (100%)

RC 3/3 CGNSC 6/6 (100%)

AC 6/6 (100%)

AC 6/6 (100%)

QRC 5/5 (100%)

AC 6/6 QRC 5/5 (100%)

CGNSC 6/6 (100%)

AC 3/6*** (50%) RC 2/3*** (66.67%)

RC 1/3* (33.33%) QRC 5/5 (100%)

RC 3/3 (100%) AC 3/6*** (50%)

CGNSC (4/6)** (66.67%)

General management

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

International business

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

ESG & sustainability

yes

 

 

 

 

yes

yes

 

 

yes

(Consumer) health and medical technology

yes

yes

 

yes

yes

yes

 

 

yes

 

Patient safety, quality & regulatory and product development

 

yes

 

 

yes

yes

 

 

yes

 

Finance and accounting

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

yes

Human Resources

yes

yes

yes

 

yes

yes

yes

yes

yes

yes

yes

Manufacturing and supply chain

yes

yes

 

yes

 

yes

yes

 

 

 

yes

Information technology and digital

yes

yes

yes

yes

yes

yes

yes

yes

 

yes

Marketing

yes

yes

 

 

 

yes

yes

yes

yes

yes

Governmental and public affairs

yes

yes

yes

yes

yes

yes

yes

 

 

yes

yes

1    CGNSC: Corporate Governance & Nomination and Selection Committee; AC: Audit Committee; RC: Remuneration Committee; QRC: Quality & Regulatory Committee

*     Mr Pyott left the RC on June 1, 2024

**     Mr Ribadeau-Dumas joined the Supervisory Board as observer as per March 1, 2024 and was appointed on May 7, 2024

***    Ms Verhagen joined, and Mr Poonen left the AC as per June 1, 2024. Mr Poonen joined the RC as per June 1, 2024


Supervisory Board committees

While retaining overall responsibility, the Supervisory Board has assigned certain tasks to the three long-standing committees, also referred to in the Dutch Corporate Governance Code: the Corporate Governance and Nomination & Selection Committee, the Remuneration Committee and the Audit Committee. In 2015, the Supervisory Board also established the Quality & Regulatory Committee. The separate reports of these committees are part of this Supervisory Board report and are published below. The function of all of the Supervisory Board’s committees is to prepare the decision-making of the full Supervisory Board, and the committees currently have no independent or assigned powers. The full Supervisory Board retains overall responsibility for the activities of its committees.

In light of the significance of the ESG dimensions to Philips and their integration into the company’s overarching strategy, the Supervisory Board as a whole is conducting oversight and advising executive management on the company’s ESG approach.

Financial statements and sustainability report 2024

The financial statements of the company for 2024, as presented by the Board of Management, have been audited by EY Accountants B.V., the independent external auditor appointed by the General Meeting of Shareholders. We have approved these financial statements, and all individual members of the Supervisory Board have signed these documents (as did the members of the Board of Management). We have also approved the company’s sustainability statement for 2024, which has also been audited by EY Accountants B.V.    

Finally, we would like to express our thanks to the members of the Board of Management, the Executive Committee and all other employees for their continued contributions throughout 2024.

The Supervisory Board

Feike Sijbesma

Paul Stoffels

Chua Sock Koong

Liz Doherty

Marc Harrison

Peter Löscher

Indra Nooyi

Sanjay Poonen

David Pyott

Benoît Ribadeau-Dumas

Herna Verhagen



5.3.1    Report of the Corporate Governance and Nomination & Selection Committee

The Corporate Governance and Nomination & Selection Committee is chaired by Feike Sijbesma. Its other members are Paul Stoffels, Indra Nooyi and Benoît Ribadeau-Dumas. The Committee is responsible for the review of the overall corporate governance, and the selection criteria and appointment procedures for the Supervisory Board, Board of Management, the Executive Committee, and certain other key management positions. In 2024, the Committee held six meetings and all Committee members attended these meetings.

The Committee devoted time to the appointment or reappointment of candidates to fill current and future vacancies on the Supervisory Board. Following those consultations, it prepared decisions and advised the Supervisory Board, which resulted in the re-appointments of Feike Sijbesma and Peter Löscher and the appointment (following the proposal from long-term investor Exor N.V.) of Benoît Ribadeau-Dumas as members of the Supervisory Board at the 2024 Annual General Meeting of Shareholders (AGM). This also resulted in the proposal to appoint Bob White as new member of the Supervisory Board, to be included in the agenda for the upcoming 2025 AGM.

Under its responsibility for the selection criteria and appointment procedures for Philips’ senior management, the Committee reviewed the functioning of the Board of Management and its individual members, the Executive Committee succession plans, and emergency candidates for key roles in the company. The review and evaluation consist of periodical performance review meetings with the individual members of the Board of Management and the Executive Committee, and evaluation of the results of these meetings by the Committee. The main findings and conclusions from these reviews were also shared with the Supervisory Board and the Remuneration Committee and were taken into account in the performance evaluation of the Board of Management and Executive Committee members and the selection of succession candidates. Reference is made to 2024 Annual Incentive, setting out the performance review of the Board of Management members by the Remuneration Committee.

The Committee devoted time in 2024 to the selection and/or appointment of candidates to fill other current and future vacancies on the Board of Management and the Executive Committee. This resulted in the appointment of Charlotte Hanneman as incoming Chief Financial Officer and a member of the Executive Committee as per June 1, 2024, and (at the 2024 AGM) her appointment as a member of the Board of Management as per October 1, 2024. This also resulted in the proposal, to be included in the agenda for the upcoming 2025 AGM, to re-appoint Marnix van Ginneken as a member of the Board of Management.

The Committee’s work furthermore resulted in the appointment of Ling Liu as a member of the Executive Committee, succeeding Andy Ho, in the role of Chief Region Leader, Philips Greater China, effective July 1, 2024. And effective January 1, 2025, two other new members of the Executive Committee were appointed. Özlem Fidanci succeeded Edwin Paalvast as Chief of International Region and Leader Growth Region. Jie Xue was appointed Chief Business Leader Precision Diagnosis, which had been under the extended leadership of Bert van Meurs (Chief Business Leader Image Guided Therapy). Bert and Jie are now jointly responsible for the Diagnosis & Treatment segment. The Committee also devoted time in 2024 to the selection and appointment of Filip Koek as the Head of Internal Audit as per September 1, 2024.

With respect to corporate governance matters, the Committee discussed recent developments in the Netherlands, and ESG reporting and due diligence developments in Europe. Finally, the Committee reviewed the Charter of the Corporate Governance and Nomination & Selection Committee and concluded it remains appropriate.

With respect to the productivity initiatives and other actions to improve the company’s performance (including the unfortunate but necessary reduction of roles), the Committee was updated by management on the impact on employees and the phased deployment approach, and members reviewed the simplification of the organization.

Diversity

The Diversity Policy for the Supervisory Board, Board of Management and Executive Committee was adopted in 2017 and revised in February 2023, and it is published on the company website. The Committee periodically assesses the Diversity Policy and the size and composition of the Supervisory Board and makes recommendations, if relevant, relating to the profile for the Supervisory Board.

Pursuant to the Diversity Policy, the selection of candidates for appointment is based on merit and its criteria aim to ensure that the Supervisory Board, the Board of Management and the Executive Committee have a sufficient diversity of views and the expertise needed for a good understanding of current affairs and longer-term risks and opportunities related to the company’s business. The nature and complexity of the company’s business is taken into account when assessing the optimal mix of perspectives, as well as the social and environmental context in which the company operates.

Effective 2022, Dutch law requires listed companies to set appropriate and ambitious gender diversity targets for the Board of Management and for a management level of a seniority to be determined by the company. To this end, the Diversity Policy includes the Supervisory Board’s aim that at least one-third of the members of the Board of Management and of the Executive Committee are women, and at least one-third are men. The composition of the Board of Management and the Executive Committee, respectively, currently meets this aim.


5.3.2    Report of the Remuneration Committee

The Remuneration Committee is chaired by Paul Stoffels. Its other members are Feike Sijbesma, Herna Verhagen and Sanjay Poonen, who replaced David Pyott on June 1, 2024. The Committee is responsible for preparing decisions of the Supervisory Board on the remuneration of individual members of the Board of Management and the Executive Committee, as well as the policies governing this remuneration. The annual cycle of the Remuneration Committee enables it to have an effective decision-making process supporting the determination, review and implementation of the Remuneration Policy. The Committee met three times in 2024. All Committee members were present during these meetings.

In performing its duties and responsibilities, the Remuneration Committee is assisted by an external consultant and an in-house remuneration expert. For a full overview of the responsibilities of the Committee, please refer to the Charter of the Remuneration Committee, as set forth in Chapter 3 of the Rules of Procedure of the Supervisory Board (which are published on the company’s website).

Following preparations that started in May 2023 and stakeholder engagements through a dedicated remuneration roadshow and other interactions, the Remuneration Committee submitted proposals at the AGM 2024 to adopt an amended Remuneration Policy for the Board of Management and an amended Remuneration Policy for the Supervisory Board. The Remuneration Committee was very thankful for the shareholders’ support, as these proposals were approved by a 96.07% and a 98.94% majority, respectively.


Please refer to the Remuneration report 2024 where the Supervisory Board provides a comprehensive overview, as prepared by the Remuneration Committee, of the remuneration paid and owed to the individual members of the Board of Management and the Supervisory Board in the year 2024.


5.3.3    Report of the Audit Committee

The Audit Committee is chaired by Liz Doherty. Its other members are Peter Löscher, Chua Sock Koong and Herna Verhagen, who replaced Sanjay Poonen on June 1, 2024. The Committee assists the Supervisory Board in fulfilling its supervisory responsibilities, including ensuring the integrity of the company’s financial statements, reviewing the company’s internal controls and overseeing the enterprise risk management process.

In 2024, the Audit Committee held five regular meetings and one extraordinary meeting, which were attended by all Audit Committee members and the Chairman of the Supervisory Board. The CEO, CFO, Chief ESG & Legal Officer, Head of Internal Audit, Chief Accounting Officer and external auditor (EY Accountants B.V.) were also invited and attended all regular meetings.

The Committee met separately in private sessions with the CEO, CFO, Head of Internal Audit and external auditor after the regular quarterly meeting of the Committee. Prior to the Committee meetings, the Audit Committee chair met one-on-one with the Group Treasurer as well as with each member of the management who regularly attend the Audit Committee meetings and with the external auditor.

The following overview highlights matters that were reviewed and/or discussed during Committee meetings in the course of, or with respect to, the financial year 2024:

The company’s 2024 annual and interim financial statements and non-financial information (prior to publication), the restructuring provision, the FCO provisions, the goodwill impairment tests, deferred tax assets and legal matters. In each of the regular quarterly meetings of the Committee, the Committee reviewed the draft of the press release on the company’s annual or interim financial statements.

Matters relating to accounting policies, financial risks, reporting, and compliance with accounting standards. Key accounting judgments were discussed in-depth, and treatments were challenged, as were quality of earnings. Compliance with statutory and legal requirements and regulations, particularly in the financial domain, was also reviewed. Furthermore, the Committee reviewed the goodwill impairment tests performed in the fourth quarter, risk management, tax matters, legal compliance, and developments in regulatory investigations, as well as legal proceedings, including antitrust investigations and related provisions. Important findings, Philips’ top and emerging areas of risk (including the internal auditor’s reporting thereon, and the Chief ESG & Legal Officer’s review of litigation and other claims, as well as material investigations, including those related to the Philips Respironics voluntary recall), and follow-up actions and appropriate measures were examined thoroughly.

The company’s policy on business controls, legal compliance and the General Business Principles (including deployment). The Committee reviewed, discussed and monitored closely the company’s internal control certification processes, and in particular, compliance with section 404 of the US Sarbanes-Oxley Act and its requirements regarding assessment, review and monitoring of internal controls. It also discussed on a regular basis the developments in, and findings relating to, conduct resulting from investigations into alleged violations of the General Business Principles and, if required, any measures taken.

The company’s cash flow generation, liquidity and financing headroom, and its ability under its capital structure and credit ratings to pay dividends and to fund capital investments, including share repurchases and other corporate finance initiatives.

Specific finance topics, capital spending and the company’s debt financing strategy (including the issue of bonds through the Euro Medium Term Note program in May 2024 with the purpose to repay the EUR 700 million existing debt due in 2024 and 2025).

A post-investment review of projects in the areas of information technology, Research & Development, real estate, operations and restructuring, and assessment of the actual spend and timing of such projects against the original budget and timing.

The quarterly Internal Audit reports in which the Head of Internal Audit highlighted key findings of internal audits and fraud investigations by the Internal Audit Function in the previous quarter. The Committee discussed the adequacy of the remediation actions agreed with management and accountabilities for executing on these actions. In each meeting the Head of Internal Audit also presented the audit schedule for the upcoming quarter. Review and approval of the revised Internal Audit charter, annual audit plan and budget, audit scope, and its coverage in relation to the scope of the external audit, as well as the staffing, independence, performance and organizational structure of the Internal Audit Function. This includes the succession of the Internal Auditor in September 2024.

The proposed 2024 external audit scope, including key audit areas, approach and fees, and non-audit services provided by the external auditor in conformity with the Philips Auditor Policy. Review and challenge of the independence as well as the professional fitness and good standing of the external auditor and its engagement partners. For information on the fees of the Group auditor, please refer to Audit fees in the note Income from operations. The Committee reviewed the transition plan as proposed by PricewaterhouseCoopers Accountants N.V. (PwC) to take over from EY Accountants B.V. as the company’s new external auditor of the financial report, starting on January 1, 2025, for a term of four years, and the appointment of the company's external assurance provider on the 2025 sustainability statement.

The company’s structure and system for compliance with export controls and international sanctions.

Reviewing the quarterly reports on sustainability-related developments, including EU Corporate Sustainability Reporting Directive and EU Sustainability Reporting Standards, the company's progress on the implementation thereof, and the impact thereof on reporting by the Philips Group. The committee also discussed the level of assurance to be provided through the external audit of the sustainability statement.

Philips’ information security risk approach (including cybersecurity), at an enterprise level as well as at product and service levels, comprising an update on the mitigation of cybersecurity risks and actions taken to comply with relevant laws and regulations including the Cybersecurity Risk Management, Strategy, Governance, and Incident Disclosure requirements issued by the US Securities and Exchange Commission (SEC).

In February 2025, the Committee reviewed, together with the other members of the Supervisory Board, the draft of the Annual Report 2024, as well as the key audit matters and the critical audit matters identified by the external auditor in relation to the 2024 financial statements included in the Annual Report 2024 and the Annual Report on Form 20-F, respectively. In February 2025, the Committee also reviewed the draft of the company’s 2024 Country Activity and Tax Report.

During each regular quarterly Audit Committee meeting, the Committee reviewed the quarterly report from the external auditor, in which the auditor set forth its findings and attention points during the relevant period. The Annual Audit Letter was circulated to the full Supervisory Board, and planned actions to address the items raised were discussed with management in the subsequent Audit Committee meetings as well as in private sessions with management.

Finally, the Committee reviewed and updated the Audit Committee Charter.

5.3.4    Report of the Quality & Regulatory Committee

The Quality & Regulatory Committee was established in view of the importance of patient safety and the quality of the company’s products, systems, services and solutions. The Committee provides broad oversight of compliance with the regulatory requirements that govern the development, manufacturing, marketing and servicing of the company’s products, systems, services and solutions. The Committee assists the Supervisory Board in fulfilling its oversight responsibilities in these areas. It is chaired by David Pyott and its members are Marc Harrison and Peter Löscher. As of June 1, 2024, Paul Stoffels also attended the meetings.

In 2024, the Committee held five meetings, and all Committee members attended these meetings. Quality related matters were a regular item on the agenda of the Supervisory Board meeting. The CEO, the Chief ESG & Legal Officer, the Chief Operations Officer, the Chief Patient Safety & Quality Officer and the Chief Medical Officer were present during these meetings. The following overview indicates some of the matters that were discussed during meetings in the course of 2024.

The progress on the company’s Quality & Regulatory strategy was tracked and reviewed. The Committee focused on the strategy to ensure the safety and efficacy of the company’s products and solutions for patients and customers. In that context, the Committee reviewed the status and progress of the company’s Patient Safety and Quality program, which includes enhancement of the engagement with regulators, ensuring sustainability and predictable performance, and the Patient Safety & Quality Culture Intervention. Specific attention was given to the Quality Management System (QMS) transformation to drive process simplification in a tailored manner and Product Quality Reviews (PQRs) to ensure the installed base meets patient safety and design control standards, as well as compliance requirements. For more information, please refer to Patient safety, quality and regulatory.

The Philips Respironics voluntary recall notification related to the sound abatement foam in certain sleep and respiratory care products (announced on June 14, 2021) in the company’s Sleep & Respiratory Care Business. Management regularly updated the Committee on the trend of the number of devices registered for remediation and on the progress of the repair-and-replace program for the affected devices, as well as actions taken to accelerate the remediation. The Committee reviewed aspects of this issue, such as the program governance to enable effective execution, and ongoing engagements with the FDA and the DOJ, among others, with respect to the 518(a) Notification order issued by the FDA on March 10, 2022, the investigation initiated by the DOJ to which Philips Respironics is subject, and the execution of the agreed consent decree. The Committee reviewed the engagements with other regulatory authorities globally. Furthermore, the Committee reviewed and discussed with management the engagement with and communication efforts to patients, physicians, customers and durable medical equipment providers; the testing program and its outcomes; and health hazard evaluations. The Committee also discussed the level of related field action provisions, as set out in more detail in the report of the Audit Committee above.

Management updated the Committee regularly with respect to other quality issues (other than the Philips Respironics voluntary recall notification mentioned in the previous bullet), and the Committee reviewed the progress made with solving and closing such other issues.

Review of progress in the transformation of the company’s Patient Safety & Quality Function, aimed at further strengthening expertise and capabilities within the Function, including upscaling Patient Safety & Quality talent at mid-level leadership positions.

Review of the progress made with global initiatives around the transformation, standardization and simplification of the company’s structure and organizational processes relating to QMSs (the reduction of the current QMSs to one quarter versus the baseline), management systems, regulated manufacturing sites (legal manufacturers), Corrective and Preventive Action (CAPA) and complaint management.

Review the implementation of a Patient Safety & Quality IT roadmap and ensure adoption of the IT and data enhancements.

The status and outcome of Quality & Regulatory-related investigations and inspections by regulatory authorities and notified bodies globally across the organization. Management also regularly provided the Committee with an overview of upcoming scheduled inspections across company sites by the FDA, other regulatory authorities and notified bodies, and the actions taken to prepare for such inspections.

Review of the product risk per Business based on a product assessment approach and remediation across the company, including findings resulting from internal audits.

Review of the 2024 dashboard of Quality & Regulatory key performance indicators, showing the trend of performance. The Committee also reviewed the Quality & Regulatory key performance indicators for 2025.

5.4    Remuneration report 2024


Letter from the Remuneration Committee Chair


Dear Stakeholder,

On behalf of the Remuneration Committee, I am pleased to present the 2024 Remuneration Report, providing a comprehensive overview of the remuneration paid and owed to the individual members of the Board of Management and the Supervisory Board, respectively, in the financial year 2024. Charlotte Hanneman succeeded Abhijit Bhattacharya as CFO as of October 1, 2024, after having joined Philips on June 1, 2024, as a member of the Executive Committee, to start her introduction into the role. This Remuneration Report includes their respective remunerations in their capacity as members of the Board of Management.

Company performance in 2024 and incentive plan realization

Despite declines in demand in both consumer and health systems in China we returned to positive order growth and continued to drive margin expansion and cash-flow generation. Nearing the end of the second year of the three-year plan to create value with sustainable impact, Philips has made solid progress on its execution priorities, returned to order intake growth, and delivered strong margin and good cash performance, although sales growth was slower. Philips reached important milestones in the Respironics litigation, resolving the personal injury litigation and the medical monitoring class action. We believe this progress is being acknowledged, where long-term investor Exor increased its stake in Philips, along with some other significant investors.

For the awards granted under our Long-Term Incentive Plan in 2022, the company performance resulted in a realization above target for the sustainability objectives. For the relative Total Shareholder Return (TSR) and adjusted Earnings Per Share (EPS) metrics in our Long-Term Incentive Plan, however, there was a below-threshold performance since the start of the performance period in 2022. With respect to the financial metrics of the 2024 Annual Incentive, performance was at target for the Adjusted EBITA metric, below target for the free cash flow* metric, and below threshold for the comparable sales growth* metric. Please refer to our 2024 Remuneration Report for more details.

Other remuneration matters prepared by the Remuneration Committee

In 2024, we successfully introduced new remuneration policies for the Board of Management and the Supervisory Board, respectively. This process commenced in October 2023 with extensive engagement with stakeholders, including shareholders representing approximately 55% of the issued share capital, institutional advisory organizations, employees, and employee representative bodies. Their feedback was carefully incorporated to design policies that are competitive in the market and aligned with our strategic priorities and societal responsibilities. The 2024 Remuneration Policy for the Board of Management enhances the alignment between performance and remuneration, emphasizing both financial and non-financial outcomes, with an increased focus on patient safety and quality.

Looking ahead

The 2024 Remuneration Policy includes a potential increase of the Annual Incentive target to 120% (from 100%) for the CEO, and to 100% (from 80%) for the CFO and CLO enabling to reward at market median level for the Annual Incentive. As noted in the 2024 Remuneration Policy for the Board of Management, the Supervisory Board applied unchanged target levels for 2024, but it could (gradually) increase the Annual Incentive target levels as of 2025, subject to a performance trajectory by 2024 that gives the company a clear outlook to deliver on its 2025 targets. The Supervisory Board notes that in 2024, the company delivered on its commitments regarding profitability, free cash flow and ESG. Nevertheless, the Supervisory Board decided to maintain the current target levels for the Annual Incentives 2025 as well. The Supervisory Board notes that it intends to increase the Annual Incentive target levels towards the policy target maximum as of 2026.

I look forward to presenting our Remuneration report 2024 at our upcoming Annual General Meeting of Shareholders.

On behalf of the Remuneration Committee,

Paul Stoffels

Chairman of the Remuneration Committee

Introduction

In this Remuneration Report, the Supervisory Board provides a comprehensive overview, in accordance with article 2:135b of the Dutch Civil Code, of the remuneration paid and owed to the individual members of the Board of Management and the Supervisory Board, respectively, in the financial year 2024. The report will also be published as a stand-alone document on the company’s website after the 2025 Annual General Meeting of Shareholders, the agenda of which will include an advisory vote on this Remuneration Report.

Board of Management


Summary of the 2024 Remuneration Policy

The Remuneration Policy, which includes a Long-Term Incentive Plan, for the Board of Management (BoM) has been adopted at the Annual General Meeting of Shareholders held on May 7, 2024.

The objectives of the Remuneration Policy for members of the Board of Management are in line with those for Philips Executives throughout the Philips group: to focus them on pursuing our purpose to improve people’s health and well-being through meaningful innovation, and on delivering on our strategy, to motivate and retain them to create superior, long-term stakeholder value.

Main elements of the Remuneration Policy


Compensation element

Purpose and link to strategy

Operation

Policy Level

Total Direct Compensation

To support the Remuneration Policy’s objectives, the Total Direct Compensation includes a significant variable part in the form of an Annual Incentive (cash bonus) and Long-Term Incentive in the form of performance shares. As a result, a significant proportion of pay is ‘at risk’.

The Supervisory Board ensures that a competitive remuneration package for Board-level executive talent is maintained and benchmarked.

The positioning of Total Direct Compensation is reviewed against benchmark data on an annual basis and is recalibrated if and when required. To establish this benchmark, data research is carried out each year on the compensation levels in the Quantum Peer Group.

Total direct remuneration is aimed at or close to, the median of the Quantum Peer Group.

Annual Base Compensation

Fixed cash payments intended to attract and retain executives of the highest caliber and to reflect their experience and scope of responsibilities.

Annual Base Compensation levels and any adjustments made by the Supervisory Board are based on factors including the median of Quantum Peer Group data and performance and experience of the individual member.

The annual review date for the base salary is typically before April 1.

The individual salary levels are shown in this Remuneration Report.

Annual Incentive

Variable cash incentive of which achievement is tied to specific financial and non-financial targets derived from the company’s annual strategic plan.

The payout in any year relates to the achievements of the preceding year. Metrics and their weighting are disclosed ex-ante in the Remuneration Report and there will be no retroactive changes to the selection of metrics used in any given year once approved by the Supervisory Board and disclosed.

Policy (maximum) level:


President & CEO

On-target: 120%

Maximum: 240% of Annual Base Compensation.


Other BoM members

On-target: 100%

Maximum: 200% of Annual Base Compensation.

Long-Term Incentive

Variable equity incentive of achievement is tied to targets reflecting long-term stakeholder value creation and delivered in the form of performance shares.

The annual award size is set by reference to a multiple of base salary.

The actual number of performance shares to be awarded is determined by reference to the average closing price of the Royal Philips share measured over the last month of the quarter preceding the actual grant of performance shares (the day of publication of the relevant quarterly results).

Dependent upon the achievement of the performance conditions, cliff-vesting applies three years after the date of grant.

During the vesting period, the value of dividends will be added to the performance shares in the form of shares. These dividend-equivalent shares will only be delivered to the extent that the award actually vests.

President & CEO

Annual grant size: 200% of Annual Base Compensation.


Other BoM members

Annual grant size: 150% of Annual Base Compensation.

Maximum vesting opportunity is 200% of the number of performance shares granted.

Mandatory share ownership and holding requirement

To further align the interests of executives to those of stakeholders and to motivate the achievement of sustained performance.

The guideline for members of the Board of Management is to hold at least a minimum shareholding in the company.

Until this level has been reached the members of the Board of Management are required to retain all after-tax shares derived from any Long-Term Incentive Plan.

The shares granted under the Long-Term Incentive Plan shall be retained for a period of at least 5 years or until at least the end of their contract period if this period is shorter.

The guideline does not require members of the Board of Management to purchase shares in order to reach the required share ownership level.

The minimum shareholding requirement is 400% of Annual Base Compensation for the CEO and 300% for other members of the Board of Management.

Pension

Participation in the Philips Flex ES pension plan in the Netherlands (applicable for all executives) combined with a fixed pension contribution intended to result into an appropriate level at retirement.

Defined Contribution plan with fixed contribution (applicable to all executives in the Netherlands – capped at EUR 137,800).

Gross allowance of 25% of Annual Base Compensation exceeding EUR 137,800.

Additional arrangements

To aid retention and remain competitive within the marketplace

Additional arrangements include expense and relocation allowances, medical insurance, accident insurance, Philips product arrangements and company car arrangements.

The members of the Board of Management also benefit from coverage under the company’s Directors & Officers (D&O) liability insurance.

The company does not grant personal loans to members of the Board of Management.

Cash value (grossed up) of the benefits received, which are in line with other Philips executives in the Netherlands.


Peer Groups

We use a Quantum Peer Group for remuneration benchmarking purposes, and therefore we aim to ensure that it includes business competitors, with an emphasis on companies in the healthcare, technology-related or consumer products area, and other companies we compete with for executive talent. The Quantum Peer Group consists of predominantly Dutch and other European companies, plus a minority (up to 25%) of US-based global companies, of comparable size, complexity and international scope.

Philips Group

Quantum Peer Group 2024

European companies

Dutch companies

US companies

Alcon

Lonza

Ahold Delhaize

Baxter

BAE Systems

Nokia

AkzoNobel

Becton Dickinson

Dräger

Reckitt Benckiser

ASML

Boston Scientific

Ericsson

Roche

Heineken

GE Healthcare

Fresenius Medical Care

Siemens Healthineers

Medtronic

Getinge

Smith & Nephew

Stryker

GSK

Thales

In addition, we use a TSR Performance Peer Group to benchmark our relative Total Shareholder Return performance for LTI purposes and against our business peers in the health technology market and other markets in which we compete. The companies we have selected for this peer group include predominantly US-based healthcare companies. Given that a substantial number of relevant competitors are US-headquartered, the weighting of US-based healthcare companies is more notable than for the Quantum Peer Group.

Philips Group

TSR Performance Peer Group 2024

US companies

European companies

Japanese companies

Baxter

Alcon

Canon

Becton Dickinson

Elekta

Terumo

Boston Scientific

Fresenius Medical Care

Danaher

Getinge

GE Healthcare

Reckitt Benckiser

Hologic

Siemens Healthineers

Johnson & Johnson

Smith & Nephew

Medtronic

Resmed

Stryker

The Remuneration Policy and the LTI Plan allow changes to the peer groups to be made by the Supervisory Board without further approval from the General Meeting of Shareholders in respect of up to three companies on an annual basis (for instance: following a delisting of a company or a merger of two peer companies), or six companies in total during the four years following adoption and approval of the Remuneration Policy and the LTI Plan respectively (or, if earlier, until the adoption or approval of a revised Remuneration Policy or revised LTI Plan).

Services agreements

The members of the Board of Management are engaged by means of a services agreement (overeenkomst van opdracht). Termination of the contract by either party is subject to six months’ notice period. The severance payment is set at a maximum of one year’s Annual Base Compensation. No severance payment is due if the agreement is terminated early on behalf of the Board of Management member or in the case of urgent cause (dringende reden) as defined in article 7:678 and further of the Dutch Civil Code. The term of the services agreement is aligned with the term for which the relevant member has been appointed by the General Meeting of Shareholders (which is a maximum period of four years, it being understood that this period expires no later than at the end of the Annual General Meeting of Shareholders (AGM) held in the fourth year after the year of appointment).

Philips Group

Contract terms for current members 2024

 

end of term

Roy Jakobs

AGM 2026

Charlotte Hanneman

AGM 2028

Marnix van Ginneken

AGM 2025

Remuneration of the Board of Management in 2024

The Supervisory Board has determined the 2024 pay-outs to the members of the Board of Management, upon the proposal of the Remuneration Committee, in accordance with the 2024 Remuneration Policy.

The Remuneration Committee annually conducts a scenario analysis. This includes the calculation of remuneration under different scenarios, whereby different Philips performance assumptions and corporate actions are examined. The Supervisory Board concluded that the relationship between the strategic objectives and the chosen performance criteria for the 2024 Annual Incentive, as well as for the 2022 LTI grants, were adequate.

Annual Base Compensation

As part of the regular remuneration review, Annual Base Compensation for the members of the Board of Management is being reviewed every year. No increase was applied in 2023. This year, however, the Annual Base Compensation has been increased per April 1, 2024: for Roy Jakobs from EUR 1,200,000 to EUR 1,250,000, for former CFO Abhijit Bhattacharya from EUR 810,000 to EUR 840,000 and for Marnix van Ginneken from EUR 630,000 to EUR 660,000, respectively. This increase was made to move the total compensation level closer to the market median level, as well as to reflect internal relativities. The Annual Base Compensation of Charlotte Hanneman as new CFO was set at EUR 700,000.

2024 Annual Incentive

The Annual Incentive performance has been assessed based on company financial results as well as non-financial results. Details are as follows:

Financial element (70% weighting)

In line with the 2024 Remuneration Policy, the company sets financial performance metrics and targets in advance of the year for all members of the Board of Management. For the year 2024, the financial targets set at Group level cover Comparable Sales Growth*, Adjusted EBITA* and Free Cash Flow*. For the Comparable Sales Growth metric, the realized performance was below threshold performance level, which resulted in a 0% payout for this metric. For the adjusted EBITA metric, the realized performance was at target performance level, which resulted in a 100% payout for this metric. For the Free Cash Flow metric, the realized performance of 906 million EUR results in a 177.0% payout for this metric. The Supervisory Board and Board of Management have jointly decided to adjust for insurance reimbursements received and to lower the payout from 177.0% to 73.6% of target.


Financial performance metric

Weighting as % of target Annual Incentive

Assessment of performance

Weighted pay-out as % of target Annual Incentive

threshold performance

target performance

maximum performance

realized performance

resulting payout as % of target

Comparable Sales Growth¹

25%

2.0%

4.0%

6.0%

1.2%

0.0%

0.0%

Adjusted EBITA margin¹

25%

10.5%

11.5%

13.5%

11.5%

100.0%

25.0%

Free Cash Flow¹

20%

375

675

975

906

73.6%

14.7%

Total

70%

39.7%

1    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


Non-financial element (30% weighting)

The non-financial performance categories and objectives were set at the beginning of the year and disclosed in the 2023 remuneration report. As per remuneration policy, each selected performance category received an equal weighting. The Supervisory Board has assessed performance and granted a pay-out between 0% and 200% per selected category.




Member of Board of Management

Performance category

Performance objective

Assessment of performance

Weighted pay-out as% of target

Annual Incentive

Roy Jakobs

Patient Safety & Quality

Drive Patient Safety & Quality as highest priority in the organization

Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.

34.5%

Customer

Improve customer experience

Customer NPS significantly improved.

Improve supply chain reliability

On-time delivery of orders as per customer expectations significantly improved.

Strategy and Execution

Drive focused strategy to win in the market

Market share gains achieved in some Businesses. Solid progress on execution priorities, with opportunities to accelerate growth strategies.

Establish simplified, more agile operating model

Targets for operating model simplification and the headcount reduction plan were responsibly achieved.

ESG

Deliver on ESG Commitments

ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.

Charlotte Hanneman

Patient Safety & Quality

Drive Patient Safety & Quality as highest priority in the organization

Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.

30.3%

Customer

Improve customer experience

Customer NPS significantly improved.

Improve financial forecasting

n/a

Strategy and Execution

Drive focused strategy to win in the market

Delivered on Cash- and Productivity programs as per plan

Establish simplified, more agile operating model

Targets for operating model simplification and the headcount reduction plan were responsibly achieved.

ESG

Deliver on ESG Commitments

ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.

Abhijit Bhattacharya

Patient Safety & Quality

Drive Patient Safety & Quality as highest priority in the organization

Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.

30.3%

Customer

Improve customer experience

Customer NPS significantly improved.

Improve financial forecasting

Accuracy of sales forecast was insufficient.

Strategy and Execution

Drive focused strategy to win in the market

Delivered on Cash- and Productivity programs as per plan

Establish simplified, more agile operating model

Targets for operating model simplification and the headcount reduction plan were responsibly achieved.

ESG

Deliver on ESG Commitments

ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.

Marnix van Ginneken

Patient Safety & Quality

Drive Patient Safety & Quality as highest priority in the organization

Further strengthened our Patient Safety & Quality culture, capabilities and performance. Significant progress made on managing the recall, and addressing consent decree requirements.

40.3%

Customer

Manage legal issues

Significant milestones achieved, such as the economic loss settlement and the resolution of the personal injury and medical monitoring litigation in the US related to the Respironics recall.

Strategy and Execution

Drive focused strategy to win in the market

Delivery on our value creation plan and legal & compliance commitments ahead of target.

Establish simplified, more agile operating model

Targets for operating model simplification and the headcount reduction plan were responsibly achieved.

ESG

Deliver on ESG Commitments

ESG index realization significantly ahead of target. Employee engagement significantly up ahead of target. Succession plans and talent development as per plan.

Overall, this leads to the following total Annual Incentive realization:

Annual Incentive realization 2024

in EUR unless otherwise stated

Annual incentive opportunity

Realized annual incentive

Target as a % of base compensation

Target Annual Incentive

Financial performance (weighted pay-out %)

Individual performance (weighted pay-out %)

Payout as % of target Annual Incentive¹

Realized annual incentive

Roy Jakobs

100%

1,250,000

39.7%

34.5%

74.2%

927,750

Charlotte Hanneman

80%

140,491

39.7%

30.3%

70.0%

98,372

Abhijit Bhattacharya

80%

502,619

39.7%

30.3%

70.0%

351,934

Marnix van Ginneken

80%

528,000

39.7%

40.3%

80.0%

422,374

1    Note that figures may not add up due to rounding.

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.



2025 Annual Incentive


Financial element (70% weighting):

For the year 2025, the following financial performance metrics are selected to ensure alignment with the key (strategic) priorities in the year:

35% weighting: Comparable Sales Growth*

20% weighting: Adjusted EBITA* margin

15% weighting: Free Cash Flow*


Non-Financial element (30% weighting):

At the start of each year, two to four performance categories are selected from the following list, whereby each selected category receives an equal weighting:

Patient Safety & Quality

Customer

Strategy and Execution

ESG

For each selected category, one or more performance objectives are determined at the start of the year for each of the members of the Board of Management.

For the year 2025, the following categories and objectives were selected to ensure alignment with the key (strategic) priorities in the year:


Performance category

Performance objective

Applicable for

Weighting

Measurement description

Patient Safety & Quality

Drive Patient Safety & Quality as highest priority in the organization

All members of Board of Management

7.50%

This objective measures delivery on our company-wide program to strengthen our Patient Safety & Quality culture, capabilities and performance. Additionally, we measure the progress on the Respironics recall and delivery of the proposed consent decree commitments.

Customer

Improve market share and customer experience

Roy Jakobs

7.50%

This objective is measured by the market share gain and by the on-time delivery of orders as per customer expectations.

Improve market share and customer experience

Charlotte Hanneman

This objective is measured by the market share gain and by a reliable forecast as per plan.

Manage legal issues

Marnix van Ginneken

Develop and manage litigation strategy and potential liabilities.

Strategy and Execution

Drive focused strategy to win in the market and simplify the operating model

All members of Board of Management

7.50%

This objective measures delivery on our value creation plan and delivery on our operating model simplification plan.

ESG

Deliver on ESG Commitments

All members of Board of Management

7.50%

This objective measures:

- Performance on our ESG index (which includes various elements such as emission- and diversity targets)

- Our capacity to grow talent and further improve employee engagement

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


2022 Long-Term Incentive

The 3-year performance period of the 2022 LTI grant, consisting of performance shares, ended on December 31, 2024. The realization of this grant is based on TSR achievement, adjusted EPS growth and sustainability objectives. The following performance achievement and vesting levels have been determined by the Supervisory Board in respect of the 2022 grant of performance shares:

Philips Group

Performance achievement and vesting levels

achievement

weighting

vesting level

TSR

0%

50%

0%

EPS

0%

40%

0%

Sustainability objectives

150%

10%

15%

Total

15%

TSR (50% weighting)

A ranking approach to TSR applies with Philips itself included in the TSR Performance Peer Group. TSR scores are calculated based on a local currency approach and by taking a 3-month averaging period prior to the start and end of the 3-year performance period. The performance incentive pay-out zone is outlined in the following table, which results in zero vesting for performance below the 40th percentile and 200% vesting for performance levels above the 75th percentile. The incentive zone range has been constructed such that the average pay-out over time is expected to be approximately 100%.

Philips Group

Performance-incentive zone for TSR in %

Position

20-14

13

12

11

10

9

8

7

6

5-1

Vesting %

0

60

80

90

100

120

140

160

180

200

The TSR achieved by Philips during the performance period was (18.07%), using a start date of October 2021 and end date of December 2024. This resulted in Philips being positioned at rank 17 in the TSR performance peer group shown in the following table, resulting in a TSR achievement of 0%.

Following Oracle’s acquisition of Cerner (completed June 2022), the Supervisory Board adopted the approach of recognizing Cerner’s performance through the delisting date. As a proxy for future performance, reinvestment in an index of the remaining 19 peer companies was assumed (effectively retaining a peer group of 20 companies).

LTI Plan TSR realization 2022 grant: (18.07%)

total return

rank number

General Electric

188.13%

1

Canon

109.69%

2

Boston Scientific

109.49%

3

Stryker

45.83%

4

Terumo

25.61%

5

Cerner

16.03%

6

Hologic

6.28%

7

Alcon

5.30%

8

Johnson & Johnson

3.09%

9

Becton Dickinson

0.82%

10

ResMed

(4.69%)

11

Danaher

(9.68%)

12

Reckitt Benckiser

(11.29%)

13

Siemens Healthineers

(12.07%)

14

Smith & Nephew

(12.55%)

15

Medtronic

(17.81%)

16

Philips

(18.07%)

17

Fresenius Medical Care

(23.62%)

18

Elekta

(30.87%)

19

Getinge

(49.05%)

20

Adjusted EPS growth (40% weighting)

The LTI Plan EPS payouts and targets set at the beginning of the performance period were as follows:

Philips Group

LTI Plan EPS payouts

Below threshold

Threshold

Target

Maximum

Actual

LTI plan EPS (euro)

<1.19

1.19

1.47

1.69

(0.26)

Vesting %

0%

40%

100%

200%

0%

In respect of the 2022 LTI grant, the LTI plan EPS is calculated based on a reported net income attributable to shareholders divided by the number of common shares outstanding (after deduction of treasury shares) on the day prior to the beginning of the performance period (to eliminate the impact of any share buyback, stock dividend, etc.), resulting in an EPS of EUR (0.97). Furthermore, as per the 2020 LTI Plan, the LTI Plan EPS includes adjustments to account for events that were not planned when targets were set or were outside management’s control such as the profit and loss impact of acquisitions and divestments (balance is neutral), the profit and loss impact of unhedged foreign exchange variations versus plan (positive adjustment), the profit and loss impact of legacy legal proceedings (positive impact) and the profit and loss impact of Respironics related charges (positive impact). Overall, this resulted in an LTI Plan EPS of EUR (0.26) based on adjusted net income from continuing operations, leading to a realization of 0% of target.

Philips Group

LTI Plan EPS realization in millions of EUR unless otherwise stated

Net income

EPS (euro)

Income from continuing operations attributable to shareholders

(843)

(0.97)

Profit and loss impact of:

- Acquisitions and divestitures¹

1

0.00

- Foreign exchange variations versus plan²

108

0.12

- Legacy legal proceedings³

327

0.38

- Respironics related charges⁴

180

0.21

Adjusted net income from continuing operations

(226)

(0.26)

1    Profit and loss impact of acquisitions and divestments made after the start of the performance period is excluded.

2    Impact of variations of unhedged volatile currencies compared to the performance period plan.

3    Impact of Respironics litigation provision and Respironics legal insurance proceeds.

4    Impact of Respironics field-action running costs and consent decree charges.


Sustainability objectives (10% weighting)

In order to further align the remuneration package for the Board of Management with our purpose and our ESG commitment, a sustainability criterion was introduced in the 2020 LTI Plan. Philips believes that ESG performance will improve the company’s performance as a whole and, therefore, that it should be explicitly linked to (long-term) remuneration. The criteria are based on three Sustainable Development Goals (SDGs) as defined by the United Nations that are included in Philips’ strategy on sustainability (no. 3, 12 and 13). These three SDGs are translated in five underlying objectives, which are measured against a specific target range.

At the beginning of the performance period, challenging target ranges are set for each of the five objectives. Based on a point-to-point method, performance achievement is measured at the end of the performance period (i.e., 3 years) versus the beginning of the performance period. The vesting level is determined based on the following scheme:

No. of measures achieved on or above target

Vesting %

1

0%

2

0%

3

50%-100%

4

100%-150%

5

150%-200%

The realized performance is described in the following table. As four out of five objectives are achieved within or better than target range, the vesting % lies between 100% and 150% of target. Based on the outperformance of the four objectives, the Supervisory Board has assessed that a vesting level of 150% would reflect an appropriate position within the vesting range.

For more information on the realized performance on all five objectives please refer to our Environmental, Social and Governance.

Sustainability category

Underlying objective

Target range

Realized performance

Ensure healthy lives and promote well-being for all at all ages (SDG3) Lives Improved

Targeted # of Lives Improved in year 3 1

1.75 – 1.91 million

1.96 million

Better than target range

Ensure sustainable consumption and production patterns (SDG12) Circularity

Targeted circular revenue in year 3 ²

16.0% – 21.0%

24.4%

Better than target range

Targeted waste to landfill in year 3 ³

3.5% – 0.1%

<0.01%

Better than target range

Targeted closing the loop in year 3 ⁴

28.0% – 36.0%

19.5%

Below target range

Take urgent action to combat climate change and its impacts (SDG13) Carbon footprint

Targeted CO2 -equivalent (in kilotonnes) in year 3

612 – 549 kilotonnes CO2

474 kilotonnes CO2

Better than target range

1    Lives Improved by Philips products, solutions and services and care to those in underserved markets.

2    Revenue from products, services and solutions contributing to circularity (e.g. optimizing and re-using materials)

3    Avoiding production of waste materials.

4    Taking back healthcare equipment.


2025 Long-Term Incentive

The 2025 Long-Term Incentive grant consists of 100% performance shares of which vesting is subject to performance over a period of 3 years, whereby performance is measured based on the following performance metrics and weighting:

40% weighting: Relative Total Shareholder Return (‘TSR’)

40% weighting: Adjusted Earnings per Share growth* (‘EPS’)

20% weighting: ESG performance

ESG Performance (20% weighting)

At the start of each performance year, we select four ESG objectives in line with our long-term strategic priorities. There is no exhaustive list of objectives that can be selected. To ensure that all objectives are material, auditable and measurable, we only select objectives which are reported in our Annual Report (in preparation for the Corporate Sustainability Reporting Directive) and therefore are subject to assurance from our external provider of assurance with respect to the company's sustainability reporting. Furthermore, we make sure that in any measurement year, the ESG objectives do not overlap with our non-financial performance objectives for the Annual Incentive.

The objectives selected for the 2025 LTI grant are shown in the following table, including the rationale for selecting these objectives and more details on the measurement approach.

2025-2027

ESG objective

Rationale

Measurement approach

Targeted # of Lives Improved in year 3 1

Ensure healthy lives and promote well-being for all at all ages

(SDG3) Lives Improved

Please refer to section 4.2.1 Improving people’s lives for more details.

Targeted circular revenue in year 3 2

Ensure sustainable consumption and production patterns

(SDG12) Circularity

Please refer to section 4.1.3 Resource use and circular economy for more details.

Targeted full value chain CO2-equivalent (in kilotonnes) in year 3

Take urgent action to combat climate change and its impacts

(SDG13) Carbon footprint

Please refer to section 4.1.2 Climate Change for more details.

Targeted People Engagement Score in year 3

Retain an engaged workforce

People Engagement Score

The People Engagement Score is the single measure of the overall level of employee engagement at Philips, measured on a bi-yearly basis.

1    Lives Improved by Philips products, solutions and services and care to those in underserved markets.

2    Revenue from products, services and solutions contributing to circularity (e.g. optimizing and re-using materials)

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


Pension

The following pension arrangement is in place for the members of the Board of Management working under a services agreement governed by Dutch law:

Flex ES Pension Plan in the Netherlands, which is a Collective Defined Contribution plan with a fixed contribution of (currently) 30.3% (including an own contribution of 2% - this was changed to 8% as of October 1, 2024) of the maximum pensionable salary of EUR 137,800 (effective January 1, 2024) minus the offset. The Flex ES Plan has a target retirement age of 68 and a target accrual rate of 1.85%;

A gross Pension Allowance equal to 25% of the base compensation exceeding EUR 137,800.


Total remuneration costs in 2024

The following table gives an overview of the costs incurred by the company in 2024 and 2023 in relation to the remuneration of the Board of Management. Costs related to performance shares are based on accounting standards (IFRS), which prescribe that costs for each LTI grant are recognized over the full (multi-year) vesting period, proportionate to the relevant fiscal year. Therefore, the costs for any year reflect costs of multiple LTI grants, as opposed to the actual value for the holder of an LTI grant at the vesting date. Please refer to section 2022 Long-Term Incentive for more details on the actual vesting of the performance shares.

Philips Group

Remuneration Board of Management1 in EUR


Accounting costs in the year

reported year

annual base compensation²

base compensation

realized annual incentive

performance shares³

pension allowances⁴

pension scheme costs

other compensation⁵

total cost

Fixed-variable remuneration⁶

R. Jakobs

2024

1,250,000

1,237,500

927,750

1,692,087

274,925

32,218

83,870

4,248,350

38%-62%

2023

1,200,000

1,200,000

2,004,480

968,922

267,798

31,891

109,256

4,582,347

35%-65%

Charlotte Hanneman

2024

700,000

175,545

98,372

104,606

35,247

7,775

23,089

444,633

54%-46%

Abhijit Bhattacharya

2024

840,000

622,500

351,934

1,424,219 ⁶

129,788

25,478

963,596 ⁷

3,517,514

50%-50%

2023

810,000

810,000

1,075,939

793,429

197,133

31,891

94,516

3,002,907

38%-62%

Marnix van Ginneken

2024

660,000

652,500

422,374

740,101

128,675

32,218

74,227

2,050,095

43%-57%

2023

630,000

630,000

846,922

614,840

125,298

31,891

53,446

2,302,397

37%-63%

Total

2024

2,688,045

1,800,429

3,961,013

568,635

97,689

1,144,781

10,260,593

44%-56%

2023

2,640,000

3,927,341

2,377,191

590,228

95,673

257,218

9,887,650

36%-64%

1    Reference date for board membership is December 31, 2024.

2    Annual Base Compensation as incurred in the year, base compensation increases are reflected proportionally.

3    Costs of performance shares are based on accounting standards (IFRS) and do not reflect the value of performance shares at the vesting/release date.

4    The stated amounts mainly concern (share of) allowances to members of the Board of Management that can be considered as remuneration. In a situation where such a share of an allowance can be considered as (indirect) remuneration (for example, private use of the company car), then the share is both valued and accounted for here. The method employed by the fiscal authorities is the starting point for the value stated.

5    Fixed remuneration is determined as the sum of base compensation, pension allowances, pension scheme costs and other compensation. Variable remuneration is determined as the sum of realized annual incentive and performance shares.

6    Accounting costs for 2024 include the additional costs for the accelerated accrual of the 2022 and 2023 LTI grant.

7    Other compensation costs include the one-time severance payment of €840,000, which Abhijit Bhattacharya received in accordance with his employment agreement.


5-year development of CEO and Board of Management versus average employee remuneration costs compared to company performance

Internal pay ratios are a relevant input factor for determining the appropriateness of the implementation of the Remuneration Policy, as recognized in the Dutch Corporate Governance Code. Following the European Sustainability Reporting Standards (ESRS), this disclosure enhances transparency in income distribution and aligns with our commitment to fair remuneration practices. For the 2024 financial year, the ratio between the annual total compensation for the CEO, which is

the highest paid individual, and the average annual total remuneration for an employee was 43:1. The ratio decreased from 46:1 in 2023. Furthermore, the ratio between the CEO and median annual total remuneration for all employees (excluding the highest-paid individual) was 48:1. Further details on the development of these amounts and ratios over time can be found in the following table. Please note that the amounts presented in the table reflect total remuneration costs to the company which differ from the actual payouts to the members of the Board of Management.


Philips Group

Remuneration costs in EUR

2020

2021

2022

2023

2024

Remuneration

CEO Total Remuneration Costs (A)¹

6,153,067

5,452,299

5,133,659

4,582,347

4,248,350

CFO Total Remuneration Costs

3,007,990

2,652,864

1,896,081

3,002,907

3,517,514

CLO Total Remuneration Costs

2,203,160

2,029,054

1,416,837

2,302,397

2,050,095

Average Employee (FTE) Total Remuneration Costs (B)²

91,455

86,853

93,373

99,866

99,091

Ratio A versus B⁴

67:1

63:1

55:1

46:1

43:1

Median Employee Total Remuneration Costs (C)³

89,103

Ratio A versus C⁴

48:1

Company performance

Annual TSR⁵

6.2%

(14.5)%

(60.0)%

42.9%

43.3%

Comparable Sales Growth%⁶

2.9%

(1.2)%

(2.8)%

6.0%

1.2%

Adjusted EBITA%⁶

13.2%

12.0%

7.4%

10.6%

11.5%

Free Cash Flow⁶

1,635

900

(961)

1,582

906

1    For 2022, CEO refers to Frans van Houten for the period up to October 15, 2022, and to Roy Jakobs for the period from October 15, 2022, onwards. For 2020 and 2021, CEO refers to Frans van Houten.

2    Based on Employee benefit expenses (EUR 6.6 billion) divided by the average number of employees (67,014 FTE) as reported in Income from operations. This results in an average annual total compensation cost of EUR 99,091 per employee.

3    Median Employee Total Remuneration Costs are based on the full salary & wage expenses to the company, including base salary, social security, benefits in cash, benefits in kind, Annual Incentive and Long Term Incentives.

4    A consideration when interpreting the ratios between CEO (i.e., highest paid individual) and average- and median employee remuneration is that the remuneration of the CEO is more heavily dependent on variable compensation than the remuneration of the typical employee at Philips. Furthermore, the costs of performance shares are based on accounting standards (IFRS) and the specific allocation of these costs to the year. As such, the total remuneration level and costs applicable to the CEO will vary more with Philips’ financial performance than the remuneration level and costs applicable to the typical employee. As a consequence, the ratio will increase when financial performance is strong and conversely decrease when financial performance is not as strong.

5    Annual TSR was calculated in line with the method used for the LTI plan (i.e., based on reinvested dividends and 3-month averaging)

6    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.


Historical LTI grants and holdings


Number of performance shares (holdings)

Under the LTI Plan the current members of the Board of Management were granted 246,822 performance shares in 2024. The following table provides an overview at end December 2024 of performance share grants.

Philips Group

Number of performance shares (holdings) in number of shares unless otherwise stated

grant date

number of shares originally granted

value at grant date

vesting date

end of holding period

unvested opening balance at Jan. 1, 2024

number of shares awarded in 2024

(dividend) shares awarded

number of shares vested in 2024 ¹

value at vesting date in 2024

unvested closing balance at Dec. 31, 2024

Roy Jakobs

4/30/2021

15,812 ²

750,000

4/30/2024

4/30/2026

17,443

-

0

3,052

77,227

0

4/29/2022

37,630 ²

930,000

4/29/2025

4/29/2027

40,754

-

1,394

-

-

42,148

10/28/2022

24,279

314,137

10/28/2025

10/28/2027

25,365

-

868

-

-

26,233

4/28/2023

124,538

2,400,000

4/28/2026

4/28/2028

130,109

-

4,451

-

-

134,560

7/5/2024

131,443

2,500,000

7/5/2027

7/5/2029

-

131,443

4,496

0

0

135,939

Charlotte Hanneman

7/29/2024

25,346

613,934

7/29/2027

7/29/2029

-

25,346

0

-

0

25,346

7/29/2024

37,982

920,000

7/29/2027

7/29/2029

-

37,982

0

-

0

37,982

Abhijit Bhattacharya

4/30/2021

25,141

1,192,500

4/30/2024

4/30/2026

27,734

0

0

4,853

122,790

-

4/29/2022

49,162

1,215,000

4/29/2025

4/29/2027

53,244

0

1,821

-

-

55,065

4/28/2023

63,047

1,215,000

4/28/2026

4/28/2028

65,867

0

2,253

-

-

68,120

Marnix van Ginneken

4/30/2021

19,448

922,500

4/30/2024

4/30/2026

21,454

0

0

3,754

94,985

-

4/29/2022

38,237

945,000

4/29/2025

4/29/2027

41,412

0

1,417

-

-

42,828

4/28/2023

49,037

945,000

4/28/2026

4/28/2028

51,231

0

1,752

-

-

52,983

7/5/2024

52,051

990,000

7/5/2027

7/5/2029

-

52,051

1,781

0

0

53,832

1    The shares vested in 2024 are subject to a 2-year holding period.

2    Awarded before date of appointment as a member of the Board of Management


Share ownership guidelines

To further align the interests to those of stakeholders and to motivate the achievement of sustained performance, the members of the Board of Management are bound to a minimum shareholding requirement. The following table shows the minimum shareholding requirement, Annual Base Compensation, (vested) shares held and share ownership ratio of each Board of Management member as per December 31, 2024. Until the minimum shareholding requirement is reached, the members of the Board of Management are required to retain all after-tax performance shares that have vested, but they are not required to make additional share purchases.


Philips Group

Share ownership Board of Management

Minimum shareholding requirement¹

Annual Base Compensation

(Vested) shares held

Ownership ratio²

Roy Jakobs

4.0x

1,250,000

134,298

2.6x

Charlotte Hanneman

3.0x

700,000

0

0x

Marnix van Ginneken

3.0x

660,000

137,753

5.1x

1    As ratio of Annual Base Compensation

2    The Ownership ratio is calculated by multiplying the total shares held by the share price of EUR 24.40 (based on the closing share price of December 31, 2024) and dividing this by the base compensation.


Remuneration of the Supervisory Board in 2024


Summary of the 2024 Remuneration Policy

Also the Remuneration Policy for the Supervisory Board has been adopted at the Annual General Meeting of Shareholders held on May 7, 2024.

The overarching objective of the 2024 Remuneration Policy for the Supervisory Board is to enable its members to fulfill their duties, acting independently: supervising the policies and management and the general affairs of Philips, and supporting the Board of Management and the Executive Committee with advice. Also the members of the Supervisory Board are guided by the company’s long-term interests, with due observance of the company’s mission, vision and strategy, taking into account the interests of shareholders and all other stakeholders.

As reflected in the profile of the Supervisory Board (as updated early 2024 and included in the Rules of Procedure of the Supervisory Board), the selection of candidates for appointment to the Supervisory Board will be based on merit. The profile aims for an appropriate combination of knowledge and experience among its members, encompassing a wide range of proficiencies and capabilities, all in relation to the global character of Philips’ Businesses. The Supervisory Board furthermore aims to have members with a diverse set of qualities, including different nationalities and (cultural) backgrounds.

To support the objectives mentioned above, the 2024 Remuneration Policy is aimed at attracting and retaining Supervisory Board members internationally, of the highest caliber and with experience and expertise relevant to our health technology Businesses.

To enable more gradual increases in the future, the 2024 Remuneration Policy includes the Supervisory Board’s intention to review the fee levels in principle every two years to monitor and take account of market developments and manage expectations from our key stakeholders. In these reviews we will in principle apply a consistent approach using the same Quantum Peer Group for our Supervisory Board as is used for the Board of Management.


The following table provides an overview of the current remuneration structure. The fee levels were set below median market levels (and below the 25th percentile market level for the Chairman) paid in the Quantum Peer Group used in the 2024 Remuneration Policy for the Board of Management.

Philips Group

Remuneration Supervisory Board in EUR 

Fee type (amounts in EUR)

Chairman

Vice Chair

Member

2024

As of 2025

2024

As of 2025

2024

As of 2025

Supervisory Board (annual fee)

166,500

175,000

123,500

130,000

107,500

113,000

Audit Committee

29,000

30,500

n.a.

19,250

20,250

Remuneration Committee

22,500

23,750

n.a.

15,000

15,750

Corporate Governance and Nomination & Selection Committee

22,500

23,750

n.a.

15,000

15,750

Quality and Regulatory Committee

22,500

23,750

n.a.

15,000

15,750

In accordance with the Dutch Corporate Governance Code, the remuneration for the members of the Supervisory Board is not dependent on the results of the company and does not include any shares (or rights to shares). Nevertheless, members of the Supervisory Board are encouraged to hold shares in the company for the purpose of long-term investment to reflect their confidence in the future course of the company. The company does not grant personal loans to members of the Supervisory Board.

Attendance fees, entitlement to Philips product arrangements and fixed net expense allowances are as follows:

Fee and reimbursement type (amounts in EUR)

Chairman

All members

Attendance fee per inter-European trip

2,750

2,750

Attendance fee per intercontinental trip

5,500

5,500

Entitlement to Philips product arrangement

2,000

2,000

Annual fixed net expense allowance

11,345

2,269

Other travel expenses

As reasonably incurred

The members of the Supervisory Board benefit from coverage under the company’s Directors and Officers (D&O) liability insurance.


Remuneration of the Supervisory Board in 2024

The individual members of the Supervisory Board received, by virtue of the positions they held, the following remuneration in 2024:

Philips Group

Remuneration of the Supervisory Board in EUR

membership

committees

other compensation¹

total

F. Sijbesma

166,500

37,500

28,945

232,945

P.A. Stoffels

123,500

37,500

13,269

174,269

S.K. Chua

107,500

19,250

26,107

152,857

M.E. Doherty

107,500

29,000

20,289

156,789

A.M. Harrison

107,500

15,000

7,769

130,269

P. Löscher

107,500

34,250

18,769

160,519

I. Nooyi

107,500

15,000

20,154

142,654

S. Poonen

107,500

16,771

19,267

143,538

D. Pyott

107,500

28,750

18,769

155,019

B. Ribadeau-Dumas

70,390

9,822

17,986

98,198

H. Verhagen

107,500

26,229

16,267

149,996

Total

1,220,390

269,072

207,592

1,697,054

1    The amounts mentioned under other compensation relate to the fee for intercontinental travel, inter-European travel, the Philips product arrangement and the annual fixed net expense allowance.

6    Group financial statements

6.1    Consolidated statements of income

88

6.2    Consolidated statements of comprehensive income

89

6.3    Consolidated balance sheets

90

6.4    Consolidated statements of cash flows

91

6.5    Consolidated statements of changes in equity

92

6.6    Notes to the Consolidated financial statements

93

1    General information to the Consolidated financial statements

93

2    Information by segment and main country

95

3    Discontinued operations and assets classified as held for sale

98

4    Acquisitions and divestments

99

5    Interests in entities

100

6    Income from operations

101

7    Financial income and expenses

106

8    Income taxes

106

9    Earnings per share

111

10    Property, plant and equipment

112

11    Goodwill

115

12    Intangible assets excluding goodwill

117

13    Other financial assets

119

14    Other assets

120

15    Inventories

120

16    Receivables

121

17    Equity

122

18    Debt

126

19    Provisions

128

20    Post-employment benefits

131

21    Accrued liabilities

135

22    Other liabilities

136

23    Cash flow statement supplementary information

136

24    Contingencies

137

25    Related-party transactions

140

26    Share-based compensation

141

27    Information on remuneration

143

28    Fair value of financial assets and liabilities

146

29    Details of treasury and other financial risks

150

30    Subsequent events

154

6.1    Consolidated statements of income


Philips Group

Consolidated statements of income in millions of EUR

for the year ended December 31,

2022

2023

2024

Sales

6

17,827

18,169

18,021

Cost of sales

(10,633)

(10,721)

(10,248)

Gross margin

7,194

7,448

7,773

Selling expenses

(4,621)

(4,524)

(4,486)

General and administrative expenses

(671)

(608)

(582)

Research and development expenses

(2,091)

(1,890)

(1,747)

Impairment of goodwill

11

(1,357)

(8)

Other business income

6

127

112

590

Other business expenses

6

(109)

(645)

(1,019)

Income from operations

6

(1,529)

(115)

529

Financial income

7

58

63

105

Financial expenses

7

(258)

(376)

(387)

Investments in associates, net of income taxes

(2)

(98)

(124)

Income before taxes

(1,731)

(526)

123

Income tax (expense) benefit

8

113

73

(963)

Income from continuing operations

(1,618)

(454)

(840)

Discontinued operations, net of income taxes

3

13

(10)

142

Net income

(1,605)

(463)

(698)

Attribution of net income:

Net income attributable to shareholders of Koninklijke Philips N.V.

(1,608)

(466)

(702)

Net income attributable to non-controlling interests

3

2

3



Philips Group

Earnings per common share attributable to shareholders of Koninklijke Philips N.V. in EUR

for the year ended December 31,

2022

2023

2024

Basic earnings per common share attributable to shareholders of Koninklijke Philips N.V.¹

Income from continuing operations

(1.70)

(0.48)

(0.90)

Net income

(1.69)

(0.49)

(0.75)

Diluted earnings per common share attributable to shareholders of Koninklijke Philips N.V.¹

Income from continuing operations

(1.70)

(0.48)

(0.90)

Net income

(1.69)

(0.49)

(0.75)

1    Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2023.

Amounts may not add up due to rounding.

6.2    Consolidated statements of comprehensive income


Philips Group

Consolidated statements of comprehensive income in millions of EUR
for the year ended December 31,

2022

2023

2024

Net income for the period

(1,605)

(463)

(698)

Pensions and other-post employment plans:

20

Remeasurement, before tax

101

(26)

(18)

Income tax effect on remeasurements

8

(20)

3

12

Financial assets fair value through OCI:

Net current-period change, before tax

(32)

(20)

(21)

Income tax effect on net current-period change

1

3

9

Total of items that will not be reclassified to Income Statement

49

(40)

(17)

Currency translation differences:

Net current period change, before tax

748

(579)

768

Income tax effect on net current-period change

8

2

-

(8)

Reclassification adjustment for (gain) loss realized

-

(26)

(7)

Cash flow hedges:

Net current-period change, before tax

(29)

29

21

Income tax effect on net current-period change

8

(10)

(2)

3

Reclassification adjustment for (gain) loss realized

63

(19)

(29)

Total of items that are or may be reclassified to Income Statement

774

(597)

748

Other comprehensive income for the period

823

(637)

731

Total comprehensive income for the period

(782)

(1,100)

33

Total comprehensive income (loss) attributable to:

Shareholders of Koninklijke Philips N.V.

(786)

(1,101)

27

Non-controlling interests

4

1

6

Amounts may not add up due to rounding.

6.3    Consolidated balance sheets


Philips Group

Consolidated balance sheets in millions of EUR
as of December 31,

2023

2024

Non-current assets

Property, plant and equipment

2

10

2,483

2,452

Goodwill

2

11

9,876

10,383

Intangible assets excluding goodwill

2

12

3,190

2,982

Non-current receivables

16

193

208

Investments in associates

5

381

257

Other non-current financial assets

13

619

631

Non-current derivative financial assets

28

3

8

Deferred tax assets

8

2,627

1,916

Other non-current assets

14

93

118

Total non-current assets

19,466

18,955

Current assets

Inventories

3,491

3,198

Other current financial assets

15

3

2

Other current assets

13

500

586

Current derivative financial assets

14

45

69

Income tax receivable

28

220

94

Current receivables

3,733

3,672

Assets classified as held for sale

16

25

79

-

Cash and cash equivalents

3

1,869

2,401

Total current assets

29

9,940

10,022

Total assets

29,406

28,976

2023

2024

Equity

17

Shareholders’ equity

12,028

12,006

Common shares

183

188

Capital in excess of par value

5,827

6,654

Reserves

879

1,925

Other

5,139

3,239

Non-controlling interests

17

33

37

Group equity

12,061

12,043

Non-current liabilities

Long-term debt 

18

7,035

7,113

Non-current derivative financial liabilities

28

3

4

Long-term provisions

19

20

1,035

996

Deferred tax liabilities

8

71

81

Non-current contract liabilities

22

469

431

Non-current tax liabilities

8

390

119

Other non-current liabilities

22

54

45

Total non-current liabilities

9,058

8,787

Current liabilities

18

Short-term debt

28

654

526

Current derivative financial liabilities

40

59

Income tax payable

25

83

71

Accounts payable

21

1,917

1,830

Accrued liabilities

22

1,887

1,630

Current contract liabilities

19

20

1,809

1,699

Short-term provisions

1,463

1,977

Dividend payable

11

-

Liabilities directly associated with assets held for sale

22

9

-

Other current liabilities

414

354

Total current liabilities

8,287

8,146

Total liabilities

17,345

16,933

Total liabilities and group equity

29,406

28,976

Amounts may not add up due to rounding.

6.4    Consolidated statements of cash flows


Philips Group

Consolidated statements of cash flows in millions of EUR
for the year ended December 31,

2022

2023

2024

Cash flows from operating activities

Net income (loss)

(1,605)

(463)

(698)

Results of discontinued operations, net of income tax

(13)

10

(142)

Adjustments to reconcile net income to net cash provided by (used for) operating activities:

Depreciation, amortization, and impairment of assets

1,602

1,261

1,390

Impairment of goodwill

1,357

8

Share-based compensation

95

88

96

Net loss (gain) on sale of assets

(115)

(71)

(19)

Interest income

(25)

(46)

(81)

Interest expense on debt, borrowings, and other liabilities

226

255

270

Investments in associates, net of income taxes

112

107

126

Income tax expense (benefit)

(113)

(71)

964

Decrease (increase) in working capital

(862)

913

(355)

Decrease (increase) in receivables and other current assets

(342)

298

(1)

Decrease (Increase) in inventories

(572)

257

230

Increase (decrease) in accounts payable, accrued and other current liabilities

52

358

(583)

Decrease (increase) in non-current receivables and other assets

1

(33)

(5)

Increase (decrease) in other liabilities

(84)

(38)

(51)

Increase (decrease) in provisions

(199)

422

316

Other items

(39)

129

101

Interest received

15

53

83

Interest paid

(205)

(250)

(261)

Dividends received from investments in associates

12

13

8

Income taxes paid

(333)

(152)

(173)

Net cash provided by (used for) operating activities

(173)

2,136

1,569

2022

2023

2024

Cash flows from investing activities

Net capital expenditures

(788)

(554)

(663)

Purchase of intangible assets

(105)

(96)

(118)

Expenditures on development assets

(257)

(203)

(241)

Capital expenditures on property, plant and equipment

(444)

(345)

(317)

Proceeds from sales of property, plant and equipment

18

90

13

Net proceeds from (cash used for) derivatives and current financial assets

(72)

(46)

38

Purchase of other non-current financial assets

(116)

(92)

(123)

Proceeds from other non-current financial assets

78

48

57

Purchase of businesses, net of cash acquired

(712)

(73)

(8)

Net proceeds from sale of interests in businesses, net of cash disposed

124

80

126

Net cash provided by (used for) for investing activities

(1,487)

(636)

(573)

Cash flows from financing activities

Proceeds from issuance (payments on) short-term debt

47

29

(30)

Principal payments on current portion of long-term debt

(1,472)

(754)

(763)

Proceeds from issuance of long-term debt

2,516

544

710

Re-issuance of treasury shares

12

0

0

Purchase of treasury shares

(187)

(662)

(411)

Dividends paid to shareholders of Koninklijke Philips N.V.

(412)

(2)

(1)

Dividends paid to shareholders of non-controlling interests

(6)

(3)

(2)

Net cash provided by (used for) financing activities

500

(848)

(496)

Net cash provided by (used for) continuing operations

(1,160)

652

500

Net cash provided by (used for) discontinued operations

(12)

123

(13)

Net cash provided by (used for) continuing and discontinued operations

(1,172)

776

487

Effect of changes in exchange rates on cash and cash equivalents

41

(79)

45

Cash and cash equivalents at the beginning of the period

2,303

1,172

1,869

Cash and cash equivalents at the end of the period

1,172

1,869

2,401


Amounts may not add up due to rounding.

6.5    Consolidated statements of changes in equity


Philips Group

Consolidated statements of changes in equity in millions of EUR
for the year ended December 31,

Amounts may not add up due to rounding.

Common shares

Capital in excess of par value

Fair value through OCI

Cash flow hedges

Currency translation differences

Retained earnings

Treasury shares

Total shareholders' equity

Non-controlling interests

Group equity

Reserves

Other

Balance as of January 1, 2022

177

4,646

(344)

(25)

1,117

9,344

(476)

14,438

36

14,475

Total comprehensive income (loss)

(32)

23

749

(1,527)

(786)

4

(782)

Dividend distributed

3

326

(741)

(412)

(6)

(418)

Minority Buy-out

-

-

Transfer of result on disposal of equity investments at FVTOCI to retained earnings

(1)

1

-

-

Purchase of treasury shares

-

(24)

(24)

(24)

Re-issuance of treasury shares

-

(43)

(28)

77

7

7

Forward contracts

76

(140)

(64)

(64)

Share call options

5

(12)

(6)

(6)

Cancellation of treasury shares

(2)

(298)

299

-

Share-based compensation plans

95

95

95

Income tax share-based compensation plans

1

1

1

Balance as of December 31, 2022

178

5,025

(376)

(2)

1,866

6,832

(275)

13,249

34

13,283

Total comprehensive income (loss)

(17)

8

(604)

(488)

(1,101)

1

(1,100)

Dividend distributed

8

741

(816)

(68)

(3)

(70)

Transfer of result on disposal of equity investments at FVTOCI to retained earnings

4

(4)

-

-

Purchase of treasury shares

-

-

-

Re-issuance of treasury shares

(29)

(24)

54

-

-

Forward contracts

465

(608)

(143)

(143)

Cancellation of treasury shares

(3)

(563)

566

-

-

Share-based compensation plans

88

88

88

Income tax share-based compensation plans

2

2

2

Balance as of December 31, 2023

183

5,827

(390)

6

1,263

5,402

(262)

12,028

33

12,061

Total comprehensive income (loss)

(11)

(5)

751

(707)

27

6

33

Dividend distributed

6

762

(799)

(31)

(2)

(32)

Transfer of result on disposal of equity investments at FVTOCI to retained earnings

311

-

(313)

(2)

(2)

Purchase of treasury shares

-

(60)

(60)

(60)

Re-issuance of treasury shares

(36)

(18)

54

-

-

Forward contracts

251

(310)

(59)

(59)

Cancellation of treasury shares

(1)

(166)

167

-

Share-based compensation plans

96

96

96

Income tax share-based compensation plans

5

5

5

Balance as of December 31, 2024

188

6,654

(90)

1

2,014

3,650

(411)

12,006

37

12,043

6.6    Notes to the Consolidated financial statements

 

1    General information to the Consolidated financial statements


Reporting entity and its operations

Koninklijke Philips N.V. (‘Royal Philips’), incorporated and domiciled in the Netherlands, is a public limited liability company organized under Dutch Law. Philips is headquartered in Amsterdam, the Netherlands and has its registered address at High Tech Campus 52, 5656 AG Eindhoven, the Netherlands. The consolidated financial statements of Royal Philips as of December 31, 2024 comprise Royal Philips and its subsidiaries (together referred to as the 'company’ or ‘Philips’ or the 'Group’). Philips is a leading health technology company primarily involved in diagnostic imaging, image-guided therapy, patient monitoring and health informatics, as well as in consumer health and home care.

Basis of preparation

The Consolidated financial statements are:

prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU) and comply with the statutory provisions of Part 9, Book 2 of the Dutch Civil Code. All standards and interpretations issued by the International Accounting Standards Board (IASB) and the IFRS Interpretations Committee effective 2024 have been endorsed by the EU; consequently, the accounting policies applied by Philips also comply with IFRS as issued by the IASB. These accounting policies have been applied by group entities

authorized for issue by the Board of Management of Royal Philips on February 21, 2025

prepared under the historical cost convention, unless otherwise indicated

prepared on a going concern basis

presented in euro, which is the presentation currency

rounded to the nearest million euro unless stated otherwise

subject to rounding, whereby amounts may not add up precisely to the totals provided

Accounting estimates and judgments

The preparation of these financial statements requires management to make a number of estimates and judgments that affect the application of accounting policies and the reported amounts of assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Amounts recognized are based on factors that are by default associated with uncertainty. Actual results may therefore differ from estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to estimates are recognized prospectively. Where applicable, the estimates and judgments of specific financial statement items are described in the respective note to the consolidated financial statements.

The areas involving a higher degree of judgment and complexity in applying accounting principles and for which changes in the assumptions and estimates could result in significantly different results than those recorded in the consolidated financial statements are the following:

judgment applied in determining reportable segments involves evaluating the information reviewed by the Chief Operating Decision-Maker (the Board of Management) to assess performance and allocate resources (Information by segment and main country)

assessment of control (below paragraph Basis of consolidation and Interests in entities)

revenue recognition (Income from operations)

for acquisitions, the identification and valuation of acquired assets and liabilities including contingent considerations provisions (Acquisitions and divestments, Provisions)

determination of deferred tax assets for losses carried forward and uncertain tax positions (Income taxes)

assumptions used for impairment testing (Goodwill, Intangible assets excluding goodwill)

assessments of exposure to credit risk of financial instruments (Other financial assets, Receivables, Debt, Fair value of financial assets and liabilities, Details of treasury and other financial risks)

assumptions used to determine the net realizable value of inventories (Inventories)

actuarial assumptions of future events that are used in calculating post-employment benefit expenses and liabilities (Post-employment benefits)

estimates and assumptions regarding the timing and the amount of outflow of resources, as well as estimating the likelihood of a potential outflow of resources and the ability to make a reliable estimate of the obligation relating to provisions and contingent liabilities (Provisions, Contingencies)

The company regularly updates its significant assumptions and estimates to support the reported amounts of assets, liabilities, income and expenses.

Climate change

In preparing the consolidated financial statements, management has considered the impact of climate change, specifically the financial impact of Philips meeting its internal and external climate-related aims, the potential impact of climate- related risks, and the costs incurred to pro-actively manage such risks. These considerations did not have a material impact on the financial reporting judgments, estimates or assumptions. The financial impacts considered include specific climate mitigation measures, such as the use of lower-carbon energy sources, the cost of developing more sustainable product offerings, and expenses incurred to mitigate against the impact of extreme weather conditions. To meet its long-term Science Based Targets and reduce its full value chain emissions in line with a 1.5 °C global warming scenario, Philips has entered into a number of Power Purchase Agreements. Philips uses 100% electricity from renewable sources, mainly through long-term Power Purchase Agreements, thereby mitigating the impact of carbon taxes. The development of more sustainable products are covered through our EcoDesign program and already included in our R&D expenses. The physical risk related to climate change on our sites resulting from our Task Force on Climate-Related Financial Disclosures assessment is currently considered limited.

Material accounting policies

The material accounting policies as generally applied throughout the financial statements are described below. Material accounting policies relating to specific financial statement items are described in the respective notes to the financial statements.

Basis of consolidation

The Consolidated financial statements comprise the financial statements of Koninklijke Philips N.V. and all subsidiaries that the company controls on a consolidated basis. Control exists when the company is exposed or has rights to variable returns from its involvement with the investee and the company has the ability to affect those returns through its power over the investee. Generally, there is a presumption that a majority of voting rights results in control. To support this presumption and in cases where Philips has less than a majority of the voting or similar rights of an investee, Philips considers all relevant facts and circumstances in assessing whether it has power over an investee, including the contractual arrangement(s) with the other vote holders of the investee, rights arising from other contractual arrangements and the company’s voting rights and potential voting rights. Subsidiaries are fully consolidated from the date that control commences until the date that control ceases. All intercompany balances and transactions have been eliminated in the Consolidated financial statements. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

Foreign currency transactions

The financial statements of all group entities are measured using the currency of the primary economic environment in which the entity operates (functional currency). The euro (EUR) is the functional currency of the company and the presentation currency of the consolidated financial statements. Foreign currency transactions are converted into the functional currency using the exchange rates prevailing at transaction date or the valuation date in cases where items are remeasured. Gains and losses resulting from the settlement of foreign currency transactions and those resulting from the conversion of foreign currency denominated monetary assets and liabilities at period-end exchange rates are recognized in the Consolidated statements of income, except for qualifying cash flow hedges, qualifying net investment hedges and equity investments measured at fair value through OCI which are recognized in other comprehensive income.

All foreign exchange differences are presented as part of Cost of sales, apart from tax items and financial income and expense, which are recognized in the same line item as they relate to in the Consolidated statements of income.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency using the exchange rate at the date the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the transaction date.

Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to euros at the exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated to euros at the exchange rates prevailing at the dates of the transactions.

Foreign currency differences arising upon translation of foreign operations into euros are recognized in Other comprehensive income and presented as part of Currency translation differences in Equity. However, if the operation is not a wholly-owned subsidiary, the proportionate share of the translation difference is allocated to Non-controlling interests.

When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the Currency translation differences related to the foreign operation is reclassified to the Consolidated statements of income as part of the gain or loss on disposal. When the company disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the respective proportion of the cumulative amount is reattributed to Non-controlling interests. When the company disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to the Consolidated statements of income.

New accounting policies effective in 2024

No new IFRS accounting standards or amendments to existing standards, effective in 2024, had a significant impact on the consolidated financial statements.

New accounting policies effective after 2024

The IASB has issued several IFRS accounting standards, or amendments to standards, with an effective date after 2024. Considerations relating to IFRS 18 Presentation and Disclosure in Financial Statements are set out below. The company has not early adopted any standards or amendments to existing standards. The company does not anticipate that the application of any other standards, or amendments to standards, will have a significant impact on the consolidated financial statements upon adoption.

IFRS 18 Presentation and Disclosure in Financial Statements

IFRS 18 was issued in April 2024 and is endorsed by the EU. It will supersede IAS 1 Presentation of Financial Statements. IFRS 18 introduces new requirements for presentation within the Consolidated statement of income, including specified totals and subtotals. Even though the new standard will not impact the recognition and measurement of items in the financial statements, the new standard requires entities to include additional defined subtotals to the Consolidated statement of income, disclosures about management-defined performance measures and is adding new principles for aggregation and disaggregation of information.

IFRS 18 is effective for reporting periods beginning on or after January 1, 2027. Retrospective application is required; therefore, comparative information will be restated in accordance with IFRS 18. Philips is currently assessing the detailed implications of applying the new standard on the group’s Consolidated financial statements.

Changes in presentation from the prior year

Accounting policies have been applied consistently for all periods presented in these consolidated financial statements. Certain prior-year amounts have been reclassified to conform to the current year presentation due to immaterial organizational changes.

Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2023.


2    Information by segment and main country


Accounting policies

Segment accounting policies are the same as the accounting policies applied by the company. Operating segments are components of the company’s business activities about which separate financial information is available that is evaluated regularly by the Chief Operating Decision-Maker (the Board of Management of the company). The Board of Management decides how to allocate resources and assesses performance. Reportable segments comprise the operating segments Diagnosis & Treatment, Connected Care and Personal Health. Besides these reportable segments, segment Other contains Innovation & Strategy, IP Royalties, Central costs, and other small items.

Accounting estimates and judgments

Determining reportable segments requires significant judgment and involves evaluating the information which is reviewed by the Chief Operating Decision-Maker (the Board of Management) to assess performance and allocate resources, in accordance with IFRS 8 'Operating Segments'.

The Philips reportable segments are Diagnosis & Treatment, Connected Care and Personal Health, each being responsible for the management of its Businesses worldwide.

Philips focuses on improving people’s lives through meaningful innovation. The Diagnosis & Treatment segment unites the Businesses related to the goal of precision diagnosis and disease pathway selection, and the Businesses related to image-guided, minimally invasive treatment. The Connected Care segment focuses on patient care solutions, advanced informatics and analytics, and patient and workflow optimization inside and outside the hospital, and aims to unlock synergies from integrating and optimizing patient care pathways, and leveraging provider-payer-patient business models. The Personal Health segment focuses on healthy living and preventative care.

Philips has realigned the composition of its reportable segments effective from April 1, 2023. The most notable change is the shift of the previous Enterprise Diagnostic Informatics Business from the Diagnosis & Treatment segment to the Connected Care segment. This Business, together with other informatics solutions in the Connected Care segment, now forms the Enterprise Informatics Business. Accordingly, the 2022 comparative figures for the affected segments were previously restated. The realignment did not impact the presentation of the reportable segments or the key segmental performance measure, which continues to be Adjusted EBITA*.

Transactions between the segments are mainly related to components and parts included in the product portfolio of the other segments. The pricing of such transactions was at cost or determined on an arm’s length basis. Philips has no single external customer that represents 10% or more of sales. Sales by country is presented based on the country of seller.

Philips Group

Information on income statements in millions of EUR

Sales

Sales including intercompany

Depreciation and amortization¹

Adjusted EBITA

2024

Diagnosis & Treatment

8,790

9,269

(464)

1,018

Connected Care

5,134

5,163

(403)

494

Personal Health

3,486

3,566

(117)

584

Other

611

750

(406)

(18)

Inter-segment eliminations

(726)

Philips Group

18,021

18,021

(1,390)

2,077

2023

Diagnosis & Treatment

8,825

9,269

(306)

1,028

Connected Care

5,138

5,149

(445)

369

Personal Health

3,602

3,685

(115)

597

Other

604

413

(394)

(73)

Inter-segment eliminations

(346)

Philips Group

18,169

18,169

(1,261)

1,921

2022

Diagnosis & Treatment

8,303

8,597

(417)

786

Connected Care

5,268

5,280

(646)

111

Personal Health

3,626

3,684

(132)

538

Other

630

715

(407)

(118)

Inter-segment eliminations

(449)

Philips Group

17,827

17,827

(1,602)

1,318

1    Includes impairments (excluding goodwill impairment); for impairment values please refer to Property, plant and equipment and Intangible assets excluding goodwill

The term Adjusted EBITA* is used to evaluate the performance of Philips and its segments. Adjusted EBITA* represents income from operations excluding amortization and impairment of acquired intangible assets and impairment of goodwill (EBITA) and excluding gains or losses from restructuring costs, acquisition-related charges and other items.

Adjusted EBITA* is not a recognized measure of financial performance under IFRS. Presented in the following tables are the reconciliations of Adjusted EBITA* to the most directly comparable IFRS measure, Net income, for the years indicated. Net income is not allocated to segments as certain income and expense line items are monitored on a centralized basis, resulting in them being shown on a Philips Group level only.


Philips Group

Reconciliation from net income to Adjusted EBITA in millions of EUR

Philips Group

Diagnosis & Treatment

Connected Care

Personal Health

Other

2024

Net Income

(698)

Discontinued operations, net of income taxes

(142)

Income tax expense (benefit)

963

Investments in associates, net of income taxes

124

Financial expenses

387

Financial income

(105)

Income from operations

529

592

(466)

544

(142)

Amortization and impairment of acquired intangible assets

392

225

141

15

12

EBITA

921

817

(324)

559

(130)

Restructuring and acquisition-related charges

326

157

53

25

92

Other items:

830

45

765

-

20

Respironics litigation provision

984

984

Respironics insurance income

(538)

(538)

Respironics field-action running costs

133

133

Respironics consent decree charges

113

113

Quality actions

123

45

78

Remaining items

16

(4)

-

20

Adjusted EBITA*

2,077

1,018

494

584

(18)


Philips Group

Reconciliation from net income to Adjusted EBITA in millions of EUR

Philips Group

Diagnosis & Treatment

Connected Care

Personal Health

Other

2023

Net Income

(463)

Discontinued operations, net of income taxes

10

Income tax expense (benefit)

(73)

Investments in associates, net of income taxes

98

Financial expenses

376

Financial income

(63)

Income from operations

(115)

721

(1,199)

552

(190)

Amortization and impairment of acquired intangible assets

290

89

178

14

9

Impairment of goodwill

8

8

-

EBITA

183

818

(1,020)

567

(181)

Restructuring and acquisition-related charges

381

118

115

9

140

Other items:

1,358

92

1,275

22

(32)

Respironics litigation provision

575

575

Respironics field-action connected to the proposed consent decree

363

363

Respironics field-action running costs

224

224

Quality actions

175

81

94

Provision for a legal matter

31

31

Investment re-measurement loss

23

23

Gain on divestment of business

(35)

(35)

Remaining items

2

11

(12)

(1)

3

Adjusted EBITA*

1,921

1,028

369

597

(73)


Philips Group

Reconciliation from net income to Adjusted EBITA in millions of EUR

Philips Group

Diagnosis & Treatment

Connected Care

Personal Health

Other

2022

Net Income

(1,605)

Discontinued operations, net of income taxes

(13)

Income tax expense (benefit)

(113)

Investments in associates, net of income taxes

2

Financial expenses

258

Financial income

(58)

Income from operations

(1,529)

536

(2,347)

515

(233)

Amortization and impairment of acquired intangible assets

363

115

226

15

8

Impairment of goodwill

1,357

1,357

EBITA

192

650

(764)

531

(225)

Restructuring and acquisition-related charges

202

3

125

11

62

Other items:

925

133

750

(4)

46

Respironics field-action connected to the proposed consent decree

250

250

Respironics field-action running costs

210

210

R&D project impairments

134

73

59

3

Portfolio realignment charges

109

109

Provision for public investigations tender irregularities

60

60

Quality actions

59

59

Impairment of assets in S&RC

39

39

Remaining items

63

-

24

(6)

46

Adjusted EBITA*

1,318

786

111

538

(118)

*    Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.

Philips Group

Main countries in millions of EUR

Sales

Tangible and intangible assets¹

2024

Netherlands

2,506

1,662

United States

7,227

11,607

China

1,153

250

Japan

886

396

Germany

653

392

Other countries

5,596

1,509

Total main countries

18,021

15,816

2023

Netherlands

2,390

1,624

United States

7,178

11,410

China

1,408

234

Japan

941

407

Germany

573

348

Other countries

5,679

1,527

Total main countries

18,169

15,550

2022

Netherlands

2,021

1,746

United States

7,226

12,087

China

1,239

260

Japan

1,011

436

Germany

642

323

Other countries

5,688

1,550

Total main countries

17,827

16,402

1    Consists of Property plant and equipment, Intangible assets excluding goodwill and Goodwill


3    Discontinued operations and assets classified as held for sale


Accounting policies


Assets classified as held-for-sale

Non-current assets (or disposal groups) are classified as held-for-sale if their carrying amounts are expected to be recovered through a sale transaction rather than through continuing use. Non-current assets (or disposal groups) classified as held-for-sale are measured at the lower of their carrying amount or the fair value less costs of disposal. Depreciation or amortization of an asset ceases when it is classified as held-for-sale. When non-current assets (or disposal groups) are classified as held-for-sale, comparative balances prior to such date are not represented in the Consolidated balance sheets.

Discontinued operations

A discontinued operation is a component of the company that has either been disposed of or is classified as held-for-sale and represents a separate major line of business or geographical area of operations or is a part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations. Any gain or loss from disposal, together with the results of these operations until the date of disposal, are reported separately as discontinued operations in the Consolidated statements of income.

The financial information of discontinued operations is excluded from the respective captions in the Consolidated financial statements and related notes for all periods presented. Comparatives are re-presented for presentation of discontinued operations in the Consolidated statements of income and Consolidated statements of cash flows.

Accounting estimates and judgments

The determination of the fair value less costs of disposal involves the use of estimates and assumptions that tend to be uncertain. Circumstances to which these adjustments may relate include resolution of uncertainties that arise from the terms of the disposal transaction, such as the resolution of purchase price adjustments and indemnifications, resolution of uncertainties that arise from and are directly related to the operations of the component before its disposal, such as environmental and assurance-type product warranty obligations retained by the company, and the settlement of employee benefit plan obligations provided that the settlement is directly related to the disposal transaction.

In 2024 discontinued operations consist primarily of the Domestic Appliances business. In 2023 and 2022 discontinued operations consist of certain costs related to other divestments, which were previously reported as discontinued operations.

Philips Group

Discontinued operations, net of income taxes in millions of EUR

2022

2023

2024

Domestic Appliances

3

(2)

140

Other

10

(7)

2

Discontinued operations, net of income taxes

13

(10)

142

Discontinued operations: Domestic Appliances

In 2024, Discontinued operations related to the Domestic Appliances business included a tax benefit of EUR 140 million relating to tax audit settlements of prior years. Discontinued operations related to the Domestic Appliances business resulted in a net loss of EUR 2 million in 2023 and net gain of EUR 3 million in 2022.

Discontinued operations: Other

Certain costs related to other divestments, which were previously reported as discontinued operations, resulted in a net gain of EUR 2 million in 2024, a net loss of EUR 7 million in 2023 and a net gain of EUR 10 million in 2022.

Discontinued operations cash flows

The following table presents the net cash provided by (used for) discontinued operations reported in the Consolidated statements of cash flows.

Philips Group

Net cash provided by (used for) discontinued operations in millions of EUR

2022

2023

2024

Net cash provided by (used for) operating activities

(27)

123

(13)

Net cash provided by (used for) investing activities

15

Net cash provided by (used for) discontinued operations

(12)

123

(13)

In 2024, net cash used for discontinued operations was EUR 13 million and consisted primarily of cash flows related to the tax claims from the previously divested business.

In 2023, net cash provided by discontinued operations was EUR 123 million and consisted primarily of a refund received of advance tax payments related to a previously divested business.

In 2022, net cash used for discontinued operations was EUR 12 million and consisted primarily of cash flows related to the tax claims from the previously divested business.

Assets classified as held for sale

As of December 31, 2024, there were no assets held for sale.

As of December 31, 2023, assets held for sale primarily consisted of assets and liabilities of EUR 69 million, directly associated with a business held for sale.

4    Acquisitions and divestments


Accounting policies

Acquisitions

The company accounts for business combinations using the acquisition method when control is transferred to the group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired and the liabilities assumed. Transaction costs are expensed as incurred. Any contingent consideration is measured at fair value at the acquisition date and is initially presented in Long-term provisions. When the timing and amount of the consideration become more certain, it is reclassified to Accrued liabilities. If the contingent consideration that meets the definition of a financial instrument is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognized in the Consolidated statements of income.

Changes to the initial fair value of the acquired assets and liabilities, based on new information about the circumstances at the acquisition date, can be made up to 12 months after the acquisition date.

Divestments

Upon loss of control, the company derecognizes the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising from the loss of control is recognized in the Consolidated statements of income. If the company retains any interest in the previous subsidiary, such interest is measured at fair value at the date the control is lost. Subsequently it is accounted for as either an equity-accounted investee (associate) or as a financial asset, depending on the level of influence retained. Further information on loss of control can be found in Discontinued operations and assets classified as held for sale.

Accounting estimates and judgments

Intangible assets acquired in a business acquisition and the financial liability related to non-controlling interest are measured at fair value at the date of the acquisition.

To determine the fair value of intangible assets at the acquisition date, estimates and assumptions are required. The valuation of the identifiable intangible assets involves estimates of expected sales, earnings and/or future cash flows and require use of key assumptions such as discount rate, royalty rate and growth rates.

Estimates are also applied when determining the fair value of legal cases and tax positions in the acquired entity. The fair value is based on estimates of the likelihood, the expected timing and the amount of the potential cash outflow. Provisions for legal cases and non-income tax positions are recognized at fair value even if it is not probable that an outflow will be required to settle the obligation. After initial recognition and until the liability is settled, cancelled or expired, the liability is measured at the higher of the amount that would be recognized in accordance with IAS 37 'Provisions, contingent liabilities and contingent assets' and the initial liability amount. For income tax positions, the company applies IAS 12 'Income Taxes', which requires recognition of provisions only when the likelihood of cash outflow is considered probable.

2024

Acquisitions

Philips did not make any acquisitions in 2024.

Divestments

During 2024 Philips completed four divestments for net cash consideration of EUR 118 million, of which EUR 2 million is to be received in 2025. The result of these divestments amounted to a EUR 8 million gain, which is included in Other business income in the Consolidated statements of income. The divestments were not material.

2023

Acquisitions

On May 5, 2023, Philips completed one acquisition within the Ultrasound Business Unit to accelerate the growth of its Diagnosis & Treatment segment. The total equity purchase price and the settlement of debt, net of acquired cash, involved an amount of EUR 53 million. Including final purchase price adjustments processed in the course of 2024, the company recognized a contingent consideration of EUR 6 million at fair value, recognized as a Long-term provision, Goodwill of EUR 24 million, Other intangible assets of EUR 40 million and deferred tax asset and liability of EUR 5 million and EUR 2 million, respectively.

From the acquisition date through December 31, 2023, the contributions to sales to third parties and net income of the acquiree were not material. The sales and net income would not differ materially if the acquisition date had been January 1, 2023. Acquisition-related costs were recognized in General and administrative expenses and were not material.

Divestments

During 2023 Philips completed six divestments for net cash consideration of EUR 80 million and a gain of EUR 50 million, which is included in Other business income of the Consolidated statements of income. The divestments were not material.

5    Interests in entities


Accounting policies

Associates are all entities over which the company has significant influence, but not control or joint control. Significant influence is presumed with a shareholding of between 20% and 50% of the voting rights.

Investments in associates are accounted for using the equity method of accounting and are initially recognized at cost. The carrying amount of an investment in an associate includes the carrying amount of goodwill identified on acquisition. An impairment loss on such investment is allocated to the investment as a whole.

The company’s share of the net income of these associates is included in Investments in associates, net of income taxes, in the Consolidated statements of income, after adjustments to align the accounting policies with those of the company. Dilution gains and losses arising from investments in associates are recognized in the Consolidated statements of income as part of Investments in associates, net of income taxes. Impairment losses and gains or losses on sale of investments are recorded in the Consolidated statements of income, more specifically on the line item ’Investments in associates, net of income taxes’.

When the company’s share of losses exceeds its interest in an associate, the carrying amount of that interest is reduced to zero and recognition of further losses is discontinued except to the extent that the company has an obligation or made payments on behalf of the associate.

The nature of the company’s interests in its consolidated entities and associates, and the effects of those interests on the company’s financial position and financial performance are discussed below.

Group companies

Below is a list of subsidiaries as of December 31, 2024, that individually exceed 5% of either the consolidated group Sales, Income from operations or Income from continuing operations (before any intra-group eliminations) of Group legal entities. All of the entities are fully consolidated in the Group financial statements.


Philips Group

Interests in group companies in alphabetical order by country

December 31, 2024

Legal entity name

Principal country of business

Philips (China) Investment Company, Ltd.

China

Philips Medizin Systeme Böblingen GmbH

Germany¹

Philips Consumer Lifestyle B.V.

Netherlands

Philips Medical Systems (Cleveland), Inc.

United States

Philips North America LLC

United States

Philips RS North America LLC

United States

1    Application of Sec. 264 (3) and Sec. 264b HGB (German Commercial Code) for fully consolidated legal entities: Philips GmbH, Hamburg; Philips Medical Systems DMC GmbH, Hamburg; Respironics Deutschland GmbH & Co.KG, München; Philips Medizin Systeme Hofheim-Wallau GmbH, Hamburg; Philips Medizin Systeme Böblingen GmbH, Böblingen; TomTec Imaging Systems GmbH, Unterschleißheim; PIP Verwaltungsgesellschaft mbH, Hamburg. 


Information related to non-controlling interests

As of December 31, 2024, three consolidated subsidiaries are not wholly owned by Philips (December 31, 2023: four). In 2024, sales to third parties and Net income for these subsidiaries in aggregate are EUR 467 million (December 31, 2023: EUR 492 million) and EUR 10 million (December 31, 2023: EUR 27 million), respectively.

Investments in associates

Philips has investments in a number of associates. During 2024, Philips did not make any new investments in associates.

In 2024 Philips recognized its share of net results from associates, reporting a loss of EUR 20 million and an impairment of EUR 103 million. The most significant impairment was related to B-Soft Co., Ltd. (EUR 63 million), a Chinese IT provider for the medical and health sectors, largely due to adverse economic conditions in China. The net results from associates and impairment losses were recorded as part of Investments in associates, net of income taxes.

Cumulative translation adjustments related to investments in associates were EUR (10) million as of December 31, 2024 (2023: EUR (21) million).

Involvement with unconsolidated structured entities

Philips founded three Philips Medical Capital (PMC) entities, in the US, France and Germany, in which Philips holds a minority interest. Philips Medical Capital, LLC in the US is the most significant entity. PMC entities provide healthcare equipment financing and leasing services to Philips customers for diagnostic imaging equipment, patient monitoring equipment, and clinical IT systems.

The company concluded that it does not control, and therefore should not consolidate, the PMC entities. In the US, PMC operates as a subsidiary of De Lage Landen Financial Services, Inc. The same structure and treatment is applied to the PMC entities in the other countries, with other majority shareholders. Operating agreements are in place for all PMC entities, whereby acceptance of sales and financing transactions resides with the respective majority shareholder. After acceptance of a transaction by PMC, Philips transfers control and does not retain any obligations towards PMC or its customers, from the sales contracts.

As of December 31, 2024, Philips’ shareholding in Philips Medical Capital, LLC had a carrying value of EUR 31 million (December 31, 2023: EUR 27 million).

The company does not have any material exposures to losses from interests in unconsolidated structured entities other than the invested amounts.

6    Income from operations


Accounting policies

Revenue recognition

The company recognizes revenue when it transfers control over a good or service to a customer, in an amount that reflects the consideration (i.e., transaction price) to which the company expects to be entitled in exchange for the good or service. The consideration expected by the company may include fixed and/or variable amounts which can be impacted by sales returns, trade discounts and volume rebates. The company adjusts the consideration for the time value of money if the period between the transfer of the promised goods or services to the customer and payment by the customer exceeds six months.

Transfer of control varies depending on the individual terms of the contract of sale. For consumer-type products in the Personal Health segment, control is transferred when the product is shipped and delivered to the customer and title and risk have passed to the customer (depending on the delivery conditions) and acceptance of the product has been obtained.

Revenues from transactions relating to distinct goods or services are accounted for separately based on their relative stand-alone selling prices. The stand-alone selling price is the price that would be charged for the goods or service in a separate transaction under similar conditions to similar customers. The transaction price is determined (considering variable considerations) and allocated to performance obligations based on their relative stand-alone selling prices. These transactions mainly occur in the segments Diagnosis & Treatment and Connected Care and include arrangements that require subsequent installation and training activities to make distinct goods operable for the customer. As such, the related installation and training activities are part of equipment sales rather than separate performance obligations. Revenue is recognized when the performance obligation is satisfied, i.e., when the installation has been completed and the equipment is ready to be used by the customer in the way contractually agreed.

Variable consideration is included in the transaction price to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognized will not occur once associated uncertainties are resolved. Such assessment is performed on each reporting date to check whether it is constrained. For products for which a right of return exists during a defined period, revenue recognition is determined based on the historical pattern of actual returns, or in cases where such information is not available, revenue recognition is postponed until the return period has lapsed. Return policies are typically based on customary return arrangements in local markets. A provision is recognized for assurance-type product warranty at the time of revenue recognition and reflects the estimated costs of replacement and free-of-charge services that will be incurred by the company with respect to the products sold. For certain products, the customer has the option to purchase the warranty separately, which is considered a separate performance obligation on top of the assurance-type product warranty. For such warranties which provide distinct service, revenue recognition occurs on a straight-line basis over the extended warranty contract period. Occasionally, the company may offer a full or partial refund of consideration previously paid, for example as part of the resolution to warranty related matters. In such instances, a provision is recognized for the amounts expected to be refunded to customers, and remeasured at each reporting date to reflect changes in the estimated refunds, with a corresponding adjustment to revenue.

In the case of loss under a sales agreement, the loss is recognized immediately. Expenses incurred for sales commissions that are considered incremental to the contracts are recognized immediately in the consolidated statements of income as selling expenses as a practical expedient under IFRS 15 Revenue from Contracts with Customers.

Sale of goods

Revenues are recognized at a point in time when control of the goods passes to the buyer, based on the allocation of the transaction price to the performance obligation.

Revenue from services

Revenues are recognized over time as the company transfers control of the services to the customer, which is demonstrated by the customer simultaneously receiving and consuming the benefits provided by the company. The amount of revenues is measured by reference to the progress made toward complete satisfaction of the performance obligation, which in general is evenly over time. Service revenue related to repair and maintenance activities for goods sold is recognized ratably over the service period or as services are rendered.

Income from royalties

Royalty income from brand license arrangements and from intellectual property rights, such as technology licenses or patents, is recognized on an accrual basis in accordance with the substance of the relevant agreement.

Shipping and handling

Expenses incurred for shipping and handling are mainly recorded as cost of sales. When shipping and handling are part of a project and billed to the customer, then the related expenses are recorded as cost of sales. Shipping and handling related to sales to third parties are partly recorded as selling expenses. When shipping and handling billed to customers are considered a distinct and separate performance obligation, the fees are recognized as revenue and costs included in cost of sales.

Other business income (expenses)

Other business income (expenses) includes gains and losses on the sale of property, plant and equipment, gains and losses on the sale of businesses, and other gains and losses not related to the company’s operating activities.

Government grants

Grants from governments are recognized at their fair value when there is a reasonable assurance that the grant will be received and the company will comply with the conditions. Grants related to costs are deferred in the consolidated balance sheet and recognized in the consolidated statement of income as a reduction of the related costs that they are intended to compensate. Grants related to assets are deducted from the cost of the asset and presented net in the consolidated balance sheets.

Accounting estimates and judgments

Sales-related accruals

The company has sales promotions-related agreements with distributors and retailers designed to promote the sale of products. Among the programs are arrangements under which rebates and discounts can be earned by the distributors and retailers by attaining agreed upon sales levels, or for participating in specific marketing programs. Management estimates the sales-related accruals associated with these arrangements based on a combination of historical patterns and future expectations regarding which promotional targets are expected to be met by distributors and retailers. Accrued customer rebates are presented as other current liabilities, unless there is a right to offset against the respective accounts receivable.

A breakdown by nature of the income (loss) from operations is as follows:


Philips Group

Sales and costs by nature in millions of EUR

2022

2023

2024

Sales

17,827

18,169

18,021

Costs of materials used

(4,320)

(4,626)

(4,213)

Employee benefit expenses

(6,952)

(6,903)

(6,641)

Depreciation and amortization¹

(1,602)

(1,261)

(1,390)

Impairment of goodwill

(1,357)

(8)

Shipping and handling

(756)

(668)

(623)

Advertising and promotion

(739)

(700)

(791)

Lease expenses

(39)

(51)

(54)

Other operational costs

(3,609)

(3,535)

(3,351)

Other business income (expenses)

18

(533)

(429)

Income from operations

(1,529)

(115)

529

1    Includes impairments; for impairment values please refer to Property, plant and equipment and Intangible assets excluding goodwill


Sales composition and disaggregation

For information related to sales on a segment and geographical basis, refer to Information by segment and main country.

Philips Group

Sales composition in millions of EUR

2022

2023

2024

Goods

12,139

12,419

12,198

Services

4,878

4,926

5,003

Royalties

419

434

466

Total sales from contracts with customers

17,435

17,779

17,667

Sales from other sources

391

390

354

Total sales

17,827

18,169

18,021

Total sales from other sources mainly relates to operating leases EUR 222 million (2023: EUR 234 million; 2022: EUR 258 million). Sales represent revenue from external customers.

As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations from a sale of goods and services was EUR 15,632 million (2023:15,571 million). The company expects to recognize approximately 56% of the remaining performance obligations within 1 year. Revenue expected to be recognized beyond is mostly related to longer term customer service and software contracts.

Sales over time represent services and Other also includes royalties over time (2024: EUR 277 million; 2023: EUR 283 million; 2022: EUR 292 million).

Sales per geographic area are reported based on country of destination.

Philips Group

Disaggregation of Sales per segment in millions of EUR

2024

Sales at a point in time

Sales over time

Total sales from contracts with customers

Sales from other sources

Total sales

Diagnosis & Treatment

5,655

3,070

8,725

65

8,790

Connected Care

2,959

1,886

4,845

289

5,134

Personal Health

3,471

15

3,486

3,486

Other

300

311

611

611

Philips Group

12,385

5,282

17,667

354

18,021

Philips Group

Disaggregation of Sales per segment in millions of EUR

2023

Sales at a point in time

Sales over time

Total sales from contracts with customers

Sales from other sources

Total sales

Diagnosis & Treatment

5,768

2,980

8,749

76

8,825

Connected Care

2,970

1,854

4,824

314

5,138

Personal Health

3,586

16

3,602

3,602

Other

245

360

604

-

604

Philips Group

12,569

5,210

17,779

390

18,169


Philips Group

Disaggregation of Sales per segment in millions of EUR

2022

Sales at a point in time

Sales over time

Total sales from contracts with customers

Sales from other sources

Total sales

Diagnosis & Treatment

5,295

2,954

8,248

55

8,303

Connected Care

3,079

1,853

4,932

336

5,268

Personal Health

3,615

11

3,626

3,626

Other

274

353

630

630

Philips Group

12,263

5,172

17,435

391

17,827

Philips Group

Disaggregation of Sales per geographic area in millions of EUR

2024

Sales at a point in time

Sales over time

Total sales from contracts with customers

Sales from other sources

Total sales

Western Europe

2,698

1,254

3,951

28

3,978

North America

4,958

2,602

7,560

93

7,655

Other mature geographies

893

401

1,294

231

1,526

Mature geographies

8,549

4,256

12,805

353

13,159

Growth geographies

3,836

1,026

4,861

1

4,863

Sales

12,385

5,282

17,667

354

18,021

Philips Group

Disaggregation of Sales per geographic area in millions of EUR

2023

Sales at a point in time

Sales over time

Total sales from contracts with customers

Sales from other sources

Total sales

Western Europe

2,552

1,221

3,770

49

3,819

North America

4,859

2,608

7,470

92

7,562

Other mature geographies

980

398

1,378

248

1,626

Mature geographies

8,392

4,227

12,618

389

13,007

Growth geographies

4,177

984

5,161

1

5,162

Sales

12,569

5,210

17,779

390

18,169

Philips Group

Disaggregation of Sales per geographic area in millions of EUR

2022

Sales at a point in time

Sales over time

Total sales from contracts with customers

Sales from other sources

Total sales

Western Europe

2,387

1,183

3,572

31

3,603

North America

4,889

2,612

7,502

86

7,588

Other mature geographies

972

399

1,369

274

1,643

Mature geographies

8,248

4,194

12,443

390

12,833

Growth geographies

4,015

978

4,992

1

4,993

Sales

12,263

5,172

17,435

391

17,827

Costs of materials used

Cost of materials used represents the inventory recognized in cost of sales.

Employee benefit expenses


Philips Group

Employee benefit expenses in millions of EUR

2022

2023

2024

Salaries and wages excluding share-based compensation

5,594

5,635

5,356

Share-based compensation

104

97

104

Post-employment benefit costs

439

402

388

Other social security and similar charges:

Required by law

590

567

580

Voluntary

225

202

211

Employee benefit expenses

6,952

6,903

6,641

The employee benefit expenses relate to employees who are working on the payroll of Philips, both with permanent and temporary contracts.

For further information on post-employment benefit costs, refer to Post-employment benefits.

For details on the remuneration of the members of the Board of Management and the Supervisory Board, refer to Information on remuneration.

Employees

The number (full-time equivalents, or FTEs) of employees by category at year-end is summarized as follows:

Philips Group

Employees by category in FTEs as of December 31

2022

2023

2024

Production

30,689

28,640

27,478

Research & development

14,169

12,035

10,843

Other

29,082

26,818

27,795

Employees

73,941

67,493

66,116

Third-party workers

3,292

2,163

1,708

Philips Group

77,233

69,656

67,823

Employees consist of those persons working on the payroll of Philips and whose costs are reflected in employee benefit expenses. Other consists of employees in commercial, general and administrative functions. Third-party workers consist of personnel hired on a per-period basis, via external companies.

Philips Group

Employees by geographical location in average FTEs

2022

2023

2024

Netherlands

11,180

9,794

8,844

Other countries

67,357

62,471

60,113

Philips Group

78,538

72,264

68,956

Depreciation and amortization

Depreciation of property, plant and equipment and amortization of intangible assets, including impairments, are as follows:

Philips Group

Depreciation and amortization1 in millions of EUR

2022

2023

2024

Depreciation of property, plant and equipment

711

689

696

Amortization of software

117

98

102

Amortization of acquired intangible assets

363

290

392

Amortization of development costs

411

184

199

Depreciation and amortization

1,602

1,261

1,390

1    Includes impairments; for impairment values please refer to Property, plant and equipment and Intangible assets excluding goodwill


Depreciation of property, plant and equipment is mainly included in cost of sales. Amortization of software is mainly included in general and administration expenses. Amortization of other intangible assets is included in selling expenses for brand names and customer relationships and is included in cost of sales for technology-based and other intangible assets. Amortization of development costs is included in research and development expenses.

Impairment of goodwill

There were no goodwill impairment charges in 2024. In 2023, a goodwill charge of EUR 8 million was recorded for the partial impairment of goodwill allocated to a business that was classified as held-for-sale as of December 31, 2023. For further information refer to Goodwill.

Shipping and handling

Shipping and handling costs are included in cost of sales and selling expenses in the Consolidated statements of income.

Advertising and promotion

Advertising and promotion costs are included in selling expenses in the Consolidated statements of income.

Lease expense

Lease expense relates to short-term and low value leases.

Other operational costs

Other operational costs contain items which are dissimilar in nature and individually insignificant in amount to disclose separately. These costs contain, among others, expenses for outsourcing services, mainly in Information Technology and Human Resources, third-party workers, consultants, warranty, patents, costs for travelling and external legal services. Government grants of EUR 91 million were recognized as a cost reduction in 2024 (2023: EUR 95 million; 2022: EUR 103 million).The grants mainly relate to research and development activities and business development.

Audit and audit-related fees

The following table shows the fees attributable to the fiscal years 2022, 2023 and 2024 for services rendered by the external auditors.

Philips Group

Audit and audit-related fees in millions of EUR

2022

2023

2024

EY NL¹

EY Network

Total

EY NL¹

EY Network

Total

EY NL¹

EY Network

Total

Audit fees

9.5

5.6

15.2

9.9

5.0

14.9

8.9

5.5

14.4

consolidated financial statements

9.5

3.1

12.6

9.9

2.6

12.5

8.9

3.0

11.9

statutory financial statements

2.5

2.5

2.5

2.5

2.5

2.5

Audit-related fees²

0.8

0.2

1.0

0.9

0.2

1.1

1.9

0.3

2.2

sustainability assurance

0.6

0.6

0.8

0.8

1.6

1.6

other

0.1

0.2

0.3

0.2

0.2

0.3

0.3

0.3

0.6

Tax fees

All other fees

Fees

10.3

5.8

16.2

10.8

5.2

16.1

10.8

5.7

16.6

1    EY Accountants B.V.

2    Also known as Assurance fees

Other business income (expenses)

Other business income (expenses) consists of the following:

Philips Group

Other business income (expenses) in millions of EUR

2022

2023

2024

Result on disposal of businesses:

income

4

50

27

expenses

-

-

(14)

Result on disposal of fixed assets:

income

3

12

3

expenses

(1)

(1)

-

Result on other remaining businesses:

income

121

49

560

expenses

(109)

(643)

(1,005)

Other business income (expenses)

18

(533)

(429)

Total other business income

127

112

590

Total other business expenses

(109)

(645)

(1,019)

The result on disposal of businesses mainly relates to income (expense) in the respective periods for divestments of non-strategic businesses. For more information refer to Acquisitions and divestments.

The result on disposal of fixed assets mainly relates to the sale of real estate assets.

The result on other remaining businesses mainly relates to the revaluation of contingent consideration and various legal matters. In 2024, Philips Respironics recorded a EUR 984 million provision in connection with the settlement of the Respironics personal injury and the medical monitoring claims in the US. Philips Respironics recorded insurance income of EUR 538 million in connection with the agreement with insurers to partially reimburse the Respironics recall-related product liability claims. For more information on contingent consideration, refer to Provisions.


7    Financial income and expenses


Accounting policies

Financial income and expenses are recognized on the accrual basis in the Consolidated statements of income. Interest income and expense are measured using the effective interest method. Dividend income is recognized in the consolidated statements of income on the date that the company’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.


Philips Group

Financial income and expenses in millions of EUR

2022

2023

2024

Interest income

25

46

79

Interest income from loans and receivables

7

13

12

Interest income from cash and cash equivalents

18

33

67

Dividend income from financial assets

3

2

3

Net gains from disposal of financial assets

-

-

2

Net change in fair value of financial assets through profit or loss

9

-

-

Other financial income

20

15

21

Financial income

58

63

105

Interest expense

(235)

(277)

(288)

Interest expense on debt and borrowings

(200)

(229)

(231)

Finance charges under lease contract

(25)

(27)

(37)

Interest expense on pensions

(10)

(21)

(20)

Provision-related accretion expenses

(9)

(29)

(49)

Net foreign exchange gains (losses)

9

(23)

(7)

Net change in fair value of financial assets through profit or loss

(26)

(18)

Net change in fair value of derivatives

-

(5)

Other financial expenses

(24)

(21)

(20)

Financial expenses

(258)

(376)

(387)

Financial income and expenses, net

(200)

(314)

(282)

In 2024, financial income and expenses net decreased by EUR 32 million year-on-year, mainly due to higher interest income on cash and cash equivalents and net foreign exchange losses in 2023, partly offset by higher interest expenses and provision-related accretion costs. Net interest expense in 2024 was EUR 22 million lower than in 2023, mainly due to an increased cash position which was invested in short-term interest-bearing assets, partly offset by higher interest expenses. Interest

expenses increased as a result of debt refinancing in 2024 and higher finance charges on lease contracts.

In 2023, financial income and expenses, net increased by EUR 114 million year-on-year, mainly due to fair value losses and net foreign exchange losses in 2023, compared with gains in 2022. The fair value losses mainly relate to Power Purchase Agreements for renewable energy, limited-life funds (mainly Gilde Healthcare) and other investments recognized at fair value through profit and loss. Furthermore, provision-related accretion expenses and net interest expense were higher in 2023 compared with 2022. Net interest expense in 2023 was EUR 21 million higher than in 2022, mainly due the issuance of new debt in 2022 and 2023 and the impact of increasing interest rates.


8    Income taxes


Accounting policies

Income taxes comprise current, non-current and deferred tax. Income tax is recognized in the Consolidated statements of income except to the extent that it relates to items recognized directly within equity or in other comprehensive income. Current tax is the expected taxes payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

In cases where it is concluded it is not probable that tax authorities will accept a tax treatment, the effect of the uncertainty is reflected in the recognition and measurement of tax assets and liabilities or, alternatively, a provision is made for the amount that is expected to be settled, where this can be reasonably estimated. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the company to change its judgment regarding the adequacy of existing tax assets and liabilities. Such changes to tax assets and liabilities will impact the income tax expense in the period during which such a determination is made.

Deferred tax assets and liabilities are recognized, using the consolidated balance sheet method, for the expected tax consequences of temporary differences between the carrying amounts of assets and liabilities and the amounts used for taxation purposes. Deferred tax is not recognized for the following temporary differences: (a) the initial recognition of goodwill; or (b) the initial recognition of an asset or liability in a transaction which: (i) is not a business combination, (ii) at the time of transaction, affects neither accounting profit nor taxable profit (tax loss), (iii) at the time of the transaction, does not give rise to equal amounts of taxable and deductible differences; or (c) differences relating to investments in subsidiaries, joint ventures and associates where the reversal of the respective temporary difference can be controlled by the company and it is probable that it will not reverse in the foreseeable future. Deferred taxes are measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have

been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity or on different taxable entities, but the company intends to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences to the extent that it is probable that there will be future taxable profits against which they can be utilized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the countries where the deferred tax assets originated and during the periods when the deferred tax assets become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Deferred tax liabilities for withholding taxes are recognized for subsidiaries in situations where the income is to be paid out as dividend in the foreseeable future and for undistributed earnings of unconsolidated companies to the extent that these withholding taxes are not expected to be refundable or deductible. Changes in tax rates and tax laws are reflected in the period when the change was enacted or substantively enacted by the reporting date.

Any subsequent adjustment to a tax asset or liability that originated in discontinued operations and for which no specific arrangements were made at the time of divestment, due to a change in the tax base or its measurement, is allocated to discontinued operations (i.e., backwards tracing). Examples are a tax rate change or change in retained assets or liabilities directly relating to the discontinued operation. Any subsequent change to the recognition of deferred tax assets is allocated to the component in which the taxable gain is or will be recognized. The above principles are applied to the extent the ‘discontinued operations’ are sufficiently separable from continuing operations.

Consistent with the IAS 12 amendment regarding Pillar Two taxation as issued by the IASB and adopted by the EU, Philips does not recognize and disclose deferred taxes arising from tax laws that implement Pillar Two model rules published by the Organization for Economic Co-operation and Development.

Accounting estimates and judgments

Deferred tax recoverability

Deferred tax assets are recognized to the extent that it is probable that there will be future taxable profits against which these can be utilized. Significant judgment is involved in determining whether such profits are probable. Management determines this on the basis of expected taxable profits arising from the reversal of recognized deferred tax liabilities, on appropriate tax planning opportunities to support business goals and on the basis of forecasts.

Uncertain tax positions

Uncertain tax positions are recognized as liabilities if and to the extent it is probable that additional tax will be due and the amount can be reliably measured. Significant judgment is involved in determining these positions.

The income tax expense of continuing operations amounts to EUR 963 million (2023: EUR 73 million tax benefit; 2022: EUR 113 million tax benefit).

The components of income before taxes and income tax expense are as follows:

Philips Group

Income tax expense in millions of EUR

2022

2023

2024

Income before taxes

(1,731)

(526)

123

Investments in associates, net of income taxes

(2)

(98)

(124)

Income before taxes excluding Investment in associates

(1,729)

(429)

247

Current tax (expense) benefit

(97)

(201)

(140)

Deferred tax (expense) benefit

210

274

(823)

Income tax (expense) benefit of continuing operations

113

73

(963)

Income tax expense of continuing operations excludes the tax benefit of the discontinued operations of EUR 143 million (2023: EUR 9 million benefit; 2022: EUR 18 million benefit), mainly related to the tax audit settlements of prior years.

The components of income tax expense of continuing operations are as follows:

Philips Group

Current income tax expense in millions of EUR

2022

2023

2024

Current year tax (expense) benefit

(111)

(211)

(150)

Prior year tax (expense) benefit

14

10

9

Current tax (expense) benefit

(97)

(201)

(140)

Philips Group

Deferred income tax expense in millions of EUR

2022

2023

2024

Recognition of previously unrecognized tax loss and credit carryforwards

2

72

5

Unrecognized tax loss and credit carryforwards

(13)

(41)

(351)

Changes to recognition of temporary differences

(4)

(112)

(602)

Prior year tax (expense) benefit

(1)

(2)

(13)

Tax rate changes

(18)

4

2

Origination and reversal of temporary differences, tax losses and tax credits

244

353

136

Deferred tax (expense) benefit

210

274

(823)

The increase in deferred tax expense in 2024 is mainly due to the de-recognition of deferred tax assets in the US.


Philips’ operations are subject to income taxes in various foreign jurisdictions. The statutory income tax rate varies per country, which results in a difference between the weighted average statutory income tax rate and the Netherlands’ statutory income tax rate of 25.8% (2023: 25.8%; 2022: 25.8%).

A reconciliation of the weighted average statutory income tax rate to the effective income tax rate of continuing operations is as follows:

Philips Group

Effective income tax rate in %

2022

2023

2024

Weighted average statutory income tax rate in %

23.6

22.0

26.6

Recognition of previously unrecognized tax loss and credit carryforwards

0.1

16.8

(1.9)

Unrecognized tax loss and credit carryforwards

(0.7)

(9.6)

141.8

Changes to recognition of temporary differences

(0.2)

(26.2)

243.6

Non-taxable income and tax incentives

5.8

22.8

(30.2)

Non-deductible expenses

(22.9)

(10.7)

10.0

Withholding and other taxes

(1.4)

(5.1)

16.0

Tax rate changes

(1.0)

0.9

(0.9)

Prior year tax

0.7

1.9

1.2

Tax expense (benefit) due to change in uncertain tax treatments

2.8

2.3

(20.4)

Others, net

(0.2)

1.9

3.1

Effective income tax rate

6.5

17.0

389.5

The effective income tax rate in 2024 is higher than the weighted average statutory income tax rate, primarily due to the changes in the recognition of temporary differences and unrecognized tax loss and credit carryforwards. This specifically relates to the de-recognition of deferred tax assets associated with the Respironics litigation provision and carryforward losses along with temporary differences in the United States (EUR 941 million). This increase is partly offset by the release of uncertain tax positions and recurring tax incentives related to the innovation box regime in the Netherlands, R&D investments and export activities.

Global minimum tax (Pillar Two)

In December 2021, the OECD released model rules to introduce a global minimum corporate income tax rate of 15% applicable to multinational enterprise groups with global revenue over EUR 750 million (Pillar Two). The formal adoption of Council Directive (EU) 2022/2523 in December 2022 aims to achieve a coordinated implementation of Pillar Two in the EU Member States. The Dutch Government adopted the Minimum Tax Rate Act 2024 (MTR Act), in December 2023 and the Pillar Two legislation has been applicable in local law with effect from 2024 in the Netherlands, the EU and multiple other countries around the world. Therefore, Pillar Two applies to Philips from the financial year ending December 31, 2024, and onward. Under this legislation, Philips is generally required to pay top-up taxes on profits if the related Pillar Two jurisdictional effective tax rate is less than 15%.

The current tax expense related to Pillar Two is EUR 1 million, resulting in an increase of ETR by 0.4%. This amount has been accounted for within the income taxes of the reporting period.

With reference to the income taxes accounting policy, Philips does not recognize and disclose deferred taxes arising from tax laws that implement Pillar Two model rules published by the Organization for Economic Co-operation and Development.

Deferred tax assets and liabilities

Deferred tax assets are recognized for temporary differences, unused tax losses, and unused tax credits to the extent that realization of the related tax benefits is probable. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the countries where the deferred tax assets originated and during the periods when the deferred tax assets become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment.

Net deferred tax assets relating to the years 2024 and 2023, respectively, are presented in the following tables.

The net deferred tax assets of EUR 1,835 million (2023: EUR 2,556 million) consist of deferred tax assets of EUR 1,916 million (2023: EUR 2,627 million) and deferred tax liabilities of EUR 81 million (2023: EUR 71 million). Of the total deferred tax assets of EUR 1,916 million as of December 31, 2024 (2023: EUR 2,627 million), EUR 1,188 million (2023: EUR 1,676 million) is recognized with respect to entities in various countries where there have been tax losses in the current or preceding period, primarily the US. Based on Philips' assessment of the recoverability of the recognized

deferred tax assets, the net decrease mainly relates to de-recognition of deferred tax assets on carryforward losses, intangible assets and other liabilities, which include provisions for Respironics litigation in the US. The decrease mainly results from updates to the company's long term income projections by jurisdiction, including the US.

Philips recognizes deferred tax assets only to the extent future tax profits are considered probable. For the recoverability assessment, the income projections were determined using similar methodology as used for goodwill impairment testing (for more information refer to note Goodwill). The company evaluated multiple risk-adjusted scenarios that support the assumption that it is probable that the results of future operations will generate sufficient taxable income to utilize the recognized tax losses as well the deductible temporary differences. The projections include forward-looking assumptions whereby the most recent available information was used to determine the expected period of recovery of the deferred tax assets. Relevant developments potentially impacting the period and probability of recovery are monitored closely.

A change in enacted tax rates or a revision to risk-adjusted long term income projections by jurisdiction could have an impact on the measurement of deferred tax assets.

As of December 31, 2024, the temporary differences associated with investments, including potential income tax consequences on dividends, for which no deferred tax liabilities are recognized, aggregate to EUR 340 million (2023: EUR 444 million).

Philips Group

Deferred tax assets and liabilities in millions of EUR

Balance as of January 1, 2024

Recognized in income statement

Other¹

Balance as of December 31, 2024

Assets

Liabilities

Intangible assets

679

(333)

26

373

533

(160)

Property, plant and equipment

(88)

25

(1)

(64)

39

(103)

Inventories

360

(9)

13

364

369

(5)

Other assets

184

(25)

(9)

151

207

(56)

Pensions and other long-term employee benefits

193

(61)

20

152

179

(27)

Other liabilities

496

(198)

20

319

365

(47)

Deferred tax assets on tax loss carryforwards

730

(222)

33

541

541

Set-off deferred tax positions

(317)

317

Net deferred tax assets

2,556

(823)

102

1,835

1,916

(81)

1    Other includes the movements of assets and liabilities recognized in equity and OCI, which includes foreign currency translation differences, acquisitions and divestments.


Philips Group

Deferred tax assets and liabilities in millions of EUR

Balance as of January 1, 2023

Recognized in income statement

Other¹

Balance as of December 31, 2023

Assets

Liabilities

Intangible assets

630

61

(12)

679

826

(147)

Property, plant and equipment

(2)

18

(103)

(88)

44

(132)

Inventories

464

(26)

(78)

360

363

(2)

Other assets

44

20

120

184

233

(48)

Pensions and other employee benefits

153

69

(29)

193

204

(11)

Other liabilities

483

(56)

69

496

521

(25)

Deferred tax assets on tax loss carryforwards

586

188

(44)

730

730

Set-off deferred tax positions

(294)

294

Net deferred tax assets

2,358

274

(77)

2,556

2,627

(71)

1    Other includes the movements of assets and liabilities recognized in equity and OCI, which includes foreign currency translation differences, acquisitions and divestments.


As of December 31, 2024, the amount of deductible temporary differences for which no deferred tax asset has been recognized in the balance sheet was EUR 788 million (2023: EUR 125 million).

The company has available tax loss and credit carryforwards, which expire as follows:

Philips Group

Expiry years of net operating loss and credit carryforwards in millions of EUR

Total balance as of December 31, 2023

Unrecognized balance as of December 31, 2023

Total balance as of December 31, 2024

Unrecognized balance as of December 31, 2024

Within 1 year

17

15

21

21

1 to 2 years

20

16

5

4

2 to 3 years

7

2

6

3

3 to 4 years

9

5

15

6

4 to 5 years

38

16

146

64

Later

808

81

807

771

Unlimited

2,997

1,231

3,342

1,695

Total

3,896

1,366

4,342

2,564

The increase in the unrecognized balance as of December 31, 2024 mainly relates to the US.

Tax risks

Philips is exposed to tax risks and uncertainty over tax treatments. For particular tax treatments that are not expected to be accepted by tax authorities, Philips either recognizes a liability or reflects the uncertainty in the recognition and measurement of its current and deferred tax assets and tax attributes. For the measurement of the uncertainty, Philips uses the most likely amount or the expected value of the tax treatment. The expected liabilities resulting from the uncertain tax treatments are included in non-current tax liabilities (2024: EUR 116 million; 2023: EUR 390 million, and this decrease mainly relates to releases and settlements arising out of the tax audit settlements of prior years, in combination with higher tax losses or similar tax carryforwards that can be used if uncertain tax treatments were settled for the presumed amount at balance sheet date). The positions include, among others, the following:

Transfer pricing risks

Philips has issued transfer pricing directives, which are in accordance with international guidelines such as those of the Organization of Economic Co-operation and Development. In order to reduce the transfer pricing uncertainties, monitoring procedures are carried out by Group Tax to safeguard the correct implementation of the transfer pricing directives. However, tax disputes can arise due to inconsistent transfer pricing regimes and different views on 'at arm's length' pricing.

Tax risks on general and specific service agreements and licensing agreements

Due to the centralization of certain activities (such as research and development, IT and group Functions), costs are also centralized. As a consequence, these costs and/or revenues must be allocated to the beneficiaries, i.e., the various Philips entities. For that purpose, service contracts such as intra-group service agreements and licensing agreements are signed with a large number of group entities. Tax authorities review these intra-group service and licensing agreements, and may reject the implemented intra-group charges. Furthermore, buy in/out situations in the case of (de)mergers could affect the cost allocation resulting from the intra-group service agreements between countries. The same applies to the specific service agreements.

Tax risks due to disentanglements and acquisitions

When a subsidiary of Philips is disentangled, or a new company is acquired, tax risks may arise. Philips creates merger and acquisition (M&A) teams for these disentanglements or acquisitions. In addition to representatives from the involved business, these teams consist of specialists from various group Functions and are formed, among other things, to identify tax risks and to reduce potential tax claims.

Tax risks due to permanent establishments

A permanent establishment may arise when a Philips entity has activities in another country; tax claims could arise in both countries on the same income.

9    Earnings per share


Accounting policies

The company presents basic and diluted earnings per share (EPS) data for its common shares. Basic EPS is calculated by dividing the Net income (loss) attributable to shareholders by the weighted average number of common shares outstanding (after deduction of treasury shares) during the period. Diluted EPS is determined by adjusting the Net income (loss) attributable to shareholders

and the weighted average number of common shares outstanding (after deduction of treasury shares) during the period, for the effects of all dilutive potential common shares, which comprise performance shares, restricted shares and share options granted under share-based compensation plans as well as forward contracts to repurchase shares.

Philips Group

Earnings per share in millions of EUR unless otherwise stated1

2022

2023

2024

Income from continuing operations

(1,618)

(454)

(840)

Income from continuing operations attributable to shareholders

(1,622)

(456)

(843)

Income from continuing operations attributable to non-controlling interests

3

2

3

Income from discontinued operations

13

(10)

142

Income from discontinued operations attributable to shareholders

13

(10)

142

Net income

(1,605)

(463)

(698)

Net income attributable to shareholders

(1,608)

(466)

(702)

Net income attributable to non-controlling interests

3

2

3

Weighted average number of common shares outstanding (after deduction of treasury shares) during the period

951,811,382

948,300,672

933,370,814

Plus incremental shares from assumed conversions of:

Share options

25,506

232,965

Performance shares

1,147,790

2,623,097

4,958,144

Restricted shares

1,986,538

2,574,738

3,898,844

Forward contracts to repurchase shares

17,611,920

15,511,844

1,835,048

Dilutive potential common shares²

20,771,753

20,709,680

10,925,002

Diluted weighted average number of shares outstanding (after deduction of treasury shares) during the period

951,811,382

948,300,672

933,370,814

Basic earnings per common share attributable to shareholders (in EUR)

Income from continuing operations

(1.70)

(0.48)

(0.90)

Income from discontinued operations

0.01

(0.01)

0.15

Net income

(1.69)

(0.49)

(0.75)

Diluted earnings per common share attributable to shareholders (in EUR)²

Income from continuing operations

(1.70)

(0.48)

(0.90)

Income from discontinued operations

0.01

(0.01)

0.15

Net income

(1.69)

(0.49)

(0.75)

Dividend distributed per common share in EUR

0.85

0.85

0.85

1    Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2023.

2    The dilutive potential common shares are not taken into account in the periods for which there is a loss, as the effect would be antidilutive.

Per-share calculations adjusted for share dividend

On May 7, 2024, the General Meeting of Shareholders approved a dividend of EUR 0.85 per common share, in shares only. The dividend was settled in May through the issuance of 30,860,582 new common shares. In accordance with IAS 33 Earnings Per Share, per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend with respect to 2023.

10    Property, plant and equipment


Accounting policies

Owned assets

The cost of property, plant and equipment comprise all directly attributable costs (including the cost of material and direct labor).

Depreciation is generally calculated using the straight-line method over the useful life of the asset. Land and assets under construction are not depreciated. When assets under construction are ready for their intended use, they are transferred to the relevant asset category and depreciation starts. All other property, plant and equipment items are depreciated over their estimated useful lives to their estimated residual values.

The estimated useful lives of property, plant and equipment are as follows:

Philips Group

Useful lives of property, plant and equipment

 

 

Buildings

from 5 to 50 years

Machinery and installations

from 3 to 20 years

Other equipment

from 1 to 10 years

Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the book value of the assets concerned may not be recoverable. An impairment loss is recognized for the amount by which the asset's book value exceeds their recoverable amount. Impairments are reversed if and to the extent that the impairment no longer exists. The recoverable amount is defined as the higher of the asset’s fair value less costs of disposal and its value in use.

Gains and losses on the sale of property, plant and equipment are included in other business income. Costs related to repair and maintenance activities are expensed in the period in which they are incurred unless they extend the asset's original lifetime or capacity.

Right-of-use assets

The company leases various items of real estate, vehicles and other equipment. The company determines whether an arrangement constitutes or contains a lease based on the substance of the

arrangement at the lease inception. The arrangement constitutes or contains a lease if fulfillment is dependent on the use of a specific asset and the arrangement conveys a right to use the asset, even if that asset is not explicitly specified in the arrangement.

Company as a lessee

The company recognizes right-of-use assets and lease liabilities for leases with a term of more than 12 months if the underlying asset is not of low value. Payments for short-term and low-value leases are expensed over the lease term. Extension options are included in the lease term if their exercise is reasonably certain. Right-of-use assets are measured at cost less accumulated depreciation and impairment losses, adjusted for any remeasurements. Right-of-use assets are depreciated using the straight-line method over the shorter of the lease term and the useful life of the underlying assets.

Company as a lessor

When the company acts as a lessor, it determines at lease inception whether a lease is a finance lease or an operating lease. Leases in which the company does not transfer substantially all the risks and rewards incidental to ownership of an asset are classified as operating leases. The company recognizes lease payments received under operating leases as income on a straight-line basis over the lease term in the Consolidated statement of income.

Accounting estimates and judgments

Impairment of owned and right-of-use assets

Judgments are required, not only to determine whether there is an indication that an asset may be impaired, but also whether indications exist that impairment losses previously recognized may no longer exist or may have decreased (impairment reversal). After indications of impairment have been identified, estimates and assumptions are used in the determination of the recoverable amount of a fixed asset. These involve estimates of expected future cash flows (based on future growth rates and remaining useful life) and residual value assumptions, as well as discount rates to calculate the present value of the future cash flows.

Owned assets

Estimates are required to determine the (remaining) useful lives of fixed assets. Useful lives are determined based on an asset's age, the frequency of its use, repair and maintenance policy, technology changes in production and expected restructuring. The company estimates the expected residual value per asset item. The residual value is the higher of the asset's expected sales price (based on recent market transactions of similar sold items) and its material scrap value.

Right-of-use assets

Judgment is required to determine the lease term. The assessment of whether the company is reasonably certain to exercise extension options impacts the lease term, which could affect the amount of lease liabilities and right-of-use assets recognized.


Property, plant and equipment are fixed assets that are owned or right-of-use assets under a lease agreement. Owned and right-of-use assets are held for use in Philips' operating activities.

Philips Group

Property, plant and equipment in millions of EUR 

2023

2024

Owned assets

1,565

1,565

Right-of-use assets

919

886

Total

2,483

2,452


Philips Group

Property, plant and equipment in millions of EUR

Owned assets

Right-of-use assets

Property, plant and equipment

Land and buildings

Machinery and installations

Other equipment

Assets under construction

Total

Land and buildings

Other equipment

Total

Total

Balance as of January 1, 2024

Cost

1,114

1,731

1,404

274

4,521

1,425

216

1,641

6,162

Accumulated depreciation

(638)

(1,278)

(1,041)

(2,957)

(619)

(104)

(722)

(3,679)

Book value

476

453

363

274

1,565

806

113

919

2,483

Additions

2

134

76

236

448

101

87

189

637

Assets available for use

12

70

140

(248)

(26)

26

-

26

-

Depreciation

(49)

(191)

(166)

(406)

(146)

(56)

(202)

(608)

Impairments

(14)

(23)

(28)

-

(65)

(23)

-

(23)

(89)

Transfers to assets classified as held for sale

-

-

-

Reclassifications

7

(6)

8

(1)

8

(9)

(3)

(12)

(4)

Translation differences and other

20

2

9

10

41

(6)

(4)

(10)

31

Total change

(22)

(13)

38

(3)

1

(57)

24

(33)

(32)

Balance as of December 31, 2024

Cost

1,151

1,790

1,527

271

4,738

1,462

241

1,702

6,441

Accumulated depreciation

(697)

(1,350)

(1,126)

(3,173)

(712)

(104)

(816)

(3,989)

Book value

454

440

401

271

1,565

749

137

886

2,452




Philips Group

Property, plant and equipment in millions of EUR 

Owned assets

Right-of-use assets

Property, plant and equipment

Land and buildings

Machinery and installations

Other equipment

Assets under construction

Total

Land and buildings

Other equipment

Total

Total

Balance as of January 1, 2023

Cost

1,135

1,779

1,454

309

4,676

1,365

206

1,571

6,247

Accumulated depreciation

(621)

(1,291)

(1,046)

(2,958)

(543)

(108)

(651)

(3,609)

Book value

514

488

408

309

1,718

822

98

919

2,638

Additions

1

115

77

239

433

175

62

236

669

Assets available for use

20

90

144

(262)

(8)

2

6

8

-

Depreciation

(56)

(196)

(167)

(420)

(150)

(51)

(201)

(621)

Impairments

(5)

(23)

(17)

-

(45)

(23)

-

(23)

(68)

Transfers to assets classified as held for sale

(1)

(1)

(45)

(46)

(2)

(2)

(48)

Reclassifications

15

2

(17)

(5)

(6)

-

4

4

(2)

Translation differences and other

(14)

(22)

(19)

(7)

(62)

(18)

(5)

(23)

(85)

Total change

(39)

(35)

(45)

(35)

(154)

(16)

15

(1)

(154)

Balance as of December 31, 2023

Cost

1,114

1,731

1,404

274

4,521

1,425

216

1,641

6,162

Accumulated depreciation

(638)

(1,278)

(1,041)

(2,957)

(619)

(104)

(722)

(3,679)

Book value

476

453

363

274

1,565

806

113

919

2,483

Leasing activities

The company leases various items of real estate, vehicles and other equipment where it acts as a lessee. The company has multiple extension and termination options in a number of lease contracts. These are used to maximize operational flexibility in terms of managing the assets used in the company's operations. The options considered reasonably certain are part of lease liabilities. The company has no commitments to any leases not yet commenced in 2024 (2023: EUR 128 million). The company's lease contracts do not contain financial covenants.

The company enters into sale-and-leaseback transactions primarily for its Sleep & Respiratory Care Business. These transactions are accounted for at market value. The payments for these leases are considered in determining lease liabilities. Principal repayments are part of cash flows used for financing activities and interest payments are part of cash flows used for operating activities. The cash inflows arising from the sales transactions are part of cash flows provided by financing activities. Lease payments under sale-and-leaseback arrangements for 2024 were EUR 43 million (2023: EUR 55 million). The remaining minimum payment under sale-and-leaseback arrangements included in lease obligations above are as follows:

Philips Group

Remaining minimum payments under sale-and-leaseback arrangements in millions of EUR

2025

29

2026

21

2027

14

2028

7

2029

1

Thereafter

-

Further lease disclosures as lessee can be found in Income from operations; Financial income and expenses, Cash flow statement supplementary information and Debt. For disclosures for lease receivables refer to Receivables.



11    Goodwill


Accounting policies

The measurement of goodwill at initial recognition is described in the Acquisitions and divestments note. Goodwill is subsequently measured at cost less accumulated impairment losses.

Goodwill is not amortized but is instead tested for impairment annually in the fourth quarter, or more frequently if indicators of potential impairment exist. Internal and external sources of information are considered to assess if there are indicators that an asset or groups of cash-generating units (CGUs) may be impaired. Goodwill is allocated to groups of CGUs and tested for impairment at the Business level (one level below segment), which represents the lowest level at which goodwill is monitored internally for management purposes. An impairment loss is recognized in the Consolidated statements of income whenever and to the extent that the carrying amount of a group of CGUs exceeds the recoverable amount for the group of CGUs, whichever is the greater, its value in use or its fair value less cost of disposal. Value in use is measured as the present value of future cash flows expected to be generated by the asset. Fair value less cost of disposal is measured as the amount obtained from the sale of an asset in an arm’s length transaction, less costs of disposal.

Accounting estimates and judgments

The cash flow projections used in the value in use calculations for goodwill impairment testing contain various judgments and estimations as described in the ‘key assumptions’ section.


The changes in 2023 and 2024 were as follows:

Philips Group

Goodwill in millions of EUR

2023

2024

Balance as of January 1

Cost

12,747

12,133

Impairments

(2,509)

(2,256)

Book value

10,238

9,876

Acquisitions¹

24

Impairments

(8)

Divestments and transfers to assets classified as held for sale²

(8)

(22)

Translation differences and other

(370)

528

Total change

(362)

507

Balance as of December 31

Cost

12,133

12,777

Impairments

(2,256)

(2,394)

Book value

9,876

10,383

1    Refer to Acquisitions and divestments

2    Refer to Discontinued operations and assets classified as held for sale


In 2024, goodwill increased by EUR 507 million, primarily as a result of translation differences.

Goodwill impairment testing

During 2024, there were no goodwill impairments recorded.

Goodwill allocated to the Businesses (groups of cash-generating units) as of December 31, 2024, is presented in the following table:

Philips Group

Goodwill by business in millions of EUR

2023

2024

Monitoring

3,964

4,194

Image-Guided Therapy

3,044

3,216

Precision Diagnosis

1,363

1,440

Sleep & Respiratory Care

687

694

Personal Health

483

509

Enterprise Informatics

336

331

Book value

9,876

10,383


The carrying amount of each group of CGUs is compared to the recoverable amount of the group of CGUs. Unless otherwise noted, the recoverable amount for each group of CGUs is based on value-in-use calculations. Cash flow projections were determined using Philips management's internal forecasts that cover an initial forecast period from 2025 to 2027. Projections were extrapolated using the growth rates disclosed in the following table for an extrapolation period of 4 years (2028-2031), after which a terminal value was calculated per 2032. For the terminal value calculation, growth rates were capped at a historical long-term average growth rate. The company uses scenarios in the business forecasting process and the most reasonable and supportable assumptions that represent management’s best estimate are used as the basis for the value-in-use calculations.

Key assumptions

Key assumptions used in the value-in-use calculations were compound sales growth rates, EBITA* in the terminal value and the rates used for discounting the projected cash flows.

The compound sales growth rate is the annualized steady nominal growth rate over the forecast period calculated with reference to the latest full year of actual sales as the base for the growth. The compound sales growth rate used to calculate the terminal value is only applied to the first year after the extrapolation period, after which no further growth is assumed for the terminal value calculation.

The compound sales growth rates and EBITA* used to estimate cash flows are based on past performance, external market growth assumptions and industry long-term growth averages. EBITA* for each group of CGUs is expected to increase over the projection period as a result of volume growth and cost efficiencies. By their nature, these assumptions involve risk and uncertainty because they relate to future events and circumstances and there are many factors that could cause actual results and developments to differ materially from the plans, goals and expectations set forth in these assumptions.

The rates used for discounting the projected cash flows in goodwill impairment testing is based on a weighted cost of capital (WACC), which in turn is based on business-specific inputs along with other inputs as mentioned below. The WACC is based on post-tax cost of equity and cost of debt, and is further calculated based on market data and inputs to accurately capture changes to the time value of money, such as the risk-free interest rate, the beta factor and country risk premium. In order to properly reflect the different risk-profiles of different businesses, a WACC is determined for each business. As such, the beta factor is determined based on a selection of peer companies, which can differ per business. Different businesses have different geographical footprints, resulting in business-specific inputs for variables like country risk. Philips performs the value-in-use calculations using post-tax cash flows and discount rate, the implicit pre-tax rate discount rate is derived from an iterative calculation for disclosure purposes.

The values assigned to the key assumptions used for the value-in-use calculations were as follows:

Philips Group

Key assumptions 2024

Compound sales growth rate

Initial forecast period

Extrapolation period

Used to calculate terminal value

Pre-tax discount rates

Monitoring

5.3%

4.7%

2.5%

9.1%

Image-Guided Therapy

6.3%

5.0%

2.5%

9.7%

Precision Diagnosis

2.4%

3.6%

2.5%

9.9%

Sleep & Respiratory Care

10.1%

7.3%

2.5%

10.3%

Personal Health

5.1%

4.2%

2.5%

9.9%

Enterprise Informatics

4.4%

5.4%

2.5%

8.9%

The assumptions used for the 2023 value-in-use calculations for cash-generating units to which a significant amount of goodwill was allocated were as follows:

Philips Group

Key assumptions 2023

compound sales growth rate

initial forecast period

extrapolation period

used to calculate terminal value

pre-tax discount rates

Monitoring

8.2%

5.5%

2.5%

9.5%

Image-Guided Therapy

7.9%

5.2%

2.5%

10.7%

Precision Diagnosis

3.8%

3.4%

2.5%

10.4%

Sleep & Respiratory Care

9.5%

9.3%

2.5%

10.8%

Personal Health

5.0%

4.6%

2.5%

10.3%

Enterprise Informatics

5.3%

5.8%

2.5%

9.0%



Sensitivity to changes in assumptions

The results of the annual impairment tests of the groups of CGUs indicate that a reasonably possible change in key assumptions would not cause the value in use to fall to the level of the carrying value.

*    The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Information by segment and main country

12    Intangible assets excluding goodwill


Accounting policies

Acquired finite-lived intangible assets are amortized using the straight-line method over their estimated useful life. The useful lives are evaluated annually. Intangible assets are initially capitalized at cost, with the exception of intangible assets acquired as part of a business combination, which are capitalized at their acquisition date fair value.

The company expenses all research costs as incurred. Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized as an intangible asset if the product or process is technically and commercially feasible, the company has sufficient resources and the intention to complete development and can measure the attributable expenditure reliably.

The capitalized development expenditure comprises of all directly attributable costs (including the cost of materials and direct labor). Other development expenditures and expenditures on research activities are recognized in the Consolidated statements of income. Capitalized development expenditure is stated at cost less accumulated amortization and impairment losses. Amortization of capitalized development expenditure is charged to the Consolidated statements of income on a straight-line basis over the estimated useful lives of the intangible assets.

Philips Group

Expected useful lives of intangible assets excluding goodwill in years

Brand names

2-20

Customer relationships

2-25

Technology

3-20

Other

1-10

Software

1-10

Product development

3-10

The weighted average expected remaining life of brand names, customer relationships, technology and other intangible assets is 8.5 years as of December 31, 2024 (2023: 9.3 years).

Impairment of intangible assets not yet ready for use

Intangible assets not yet ready for use are not amortized but are tested for impairment annually and whenever impairment indicators require. In the case of intangible assets not yet ready for use, either internal or external sources of information are considered to assess if there are indicators that an asset or a CGU may be impaired.

Impairment of non-financial assets other than goodwill, intangible assets not yet ready for use, inventories and deferred tax assets

Non-financial assets other than goodwill, intangible assets not yet ready for use, inventories and deferred tax assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is assessed by a comparison of the carrying amount of an asset with the greater of its value in use and fair value less cost of disposal. Value in use is measured as the present value of future cash flows expected to be generated by the asset. Fair value less cost of disposal is measured as the amount obtained from a sale of an asset in an arm’s length transaction, less costs of disposal. If the carrying amount of an asset is deemed not recoverable, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the recoverable amount. The review for impairment is carried out at the level where cash flows occur that are independent of other cash flows.

Impairment losses recognized in prior periods for intangible assets other than goodwill are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if and to the extent that there has been a change in the estimates used to determine the recoverable amount. The loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. Reversals of impairment are recognized in the Consolidated statements of income.

Accounting estimates and judgments

The cash flow projections used in the value in use calculations for intangible assets excluding goodwill contain various judgments and estimations. For intangible assets excluding goodwill, estimates are required to determine the (remaining) useful lives.


Philips Group

Intangible assets excluding goodwill in millions of EUR

Brand names

Customer relationships

Technology

Product development

Product development in progress

Software

Other

Total

Balance as of January 1, 2024

Cost

629

2,593

2,908

2,432

635

929

139

10,265

Amortization / impairments

(511)

(1,718)

(1,895)

(2,096)

(91)

(662)

(101)

(7,075)

Book value

118

875

1,013

336

544

267

38

3,190

Additions

-

36

-

240

85

-

361

Assets available for use

266

(266)

Amortization

(19)

(92)

(138)

(162)

(95)

(1)

(506)

Impairments

(7)

-

(135)

(13)

(24)

(7)

(1)

(188)

Transfers to assets classified as held for sale

(11)

1

(10)

Translation differences and other

6

51

79

(9)

29

15

(37)

134

Total change

(20)

(52)

(158)

82

(21)

(3)

(38)

(208)

Balance as of December 31, 2024

Cost

671

2,722

2,900

2,659

624

984

-

10,559

Amortization / impairments

(573)

(1,899)

(2,044)

(2,241)

(101)

(719)

-

(7,578)

Book Value

98

823

855

418

523

265

-

2,982

Philips Group

Intangible assets excluding goodwill in millions of EUR

Brand names

Customer relationships

Technology

Product development

Product development in progress

Software

Other

Total

Balance as of January 1, 2023

Cost

647

2,735

2,947

2,605

648

869

152

10,602

Amortization / impairments

(507)

(1,665)

(1,845)

(2,212)

(146)

(589)

(113)

(7,077)

Book value

140

1,070

1,102

393

502

280

39

3,526

Additions

33

-

214

70

-

317

Assets available for use

157

(157)

-

-

Acquisitions

40

-

-

40

Amortization

(20)

(137)

(131)

(169)

(97)

(1)

(556)

Impairments

-

-

(7)

(7)

(1)

-

(16)

Transfers to assets classified as held for sale

(1)

(20)

(8)

(2)

(32)

Translation differences and other

(1)

(37)

(30)

(38)

1

18

-

(87)

Total change

(22)

(195)

(89)

(57)

42

(13)

(1)

(335)

Balance as of December 31, 2023

Cost

629

2,593

2,908

2,432

635

929

139

10,265

Amortization / impairments

(511)

(1,718)

(1,895)

(2,096)

(91)

(662)

(101)

(7,075)

Book Value

118

875

1,013

336

544

267

38

3,190

Philips did not make any acquisitions in 2024 (2023: acquisitions involved EUR 40 million of intangible assets). For more information, refer to Acquisitions and divestments.

Impairments in 2024 amounted to EUR 188 million (2023: EUR 16 million) and mainly relate to the impairment of acquired intangible assets following the decision to discontinue certain products in the Diagnosis & Treatment segment.


The company uses scenarios in the business forecasting process and the most reasonable and supportable assumptions which represent management’s best estimate are used as the basis for the value-in-use calculations.

The amortization and impairment of intangible assets is further specified in Income from operations.

The most notable intangible assets as of December 31, 2024 relate to the BioTelemetry customer relationships and technology with a carrying value of EUR 316 million and EUR 108 million and a remaining amortization period of 12 years and 8 years, respectively, and Spectranetics customer relationships and technology with a carrying value of EUR 256 million and EUR 164 million and a remaining amortization period of 13 years and 8 years , respectively. The most notable intangible assets as of December 31, 2023, relate to the BioTelemetry customer relationships and technology with value of EUR 327 million and EUR 123 million and a remaining amortization period of 13 years and 9 years, respectively, and Spectranetics customer relationships and technology with a carrying value of EUR 261 million and EUR 175 million and a remaining amortization period of 14 years and 9 years, respectively.

13    Other financial assets


Accounting policies

Classification and measurement of financial assets

The classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the company’s business model for managing them.

The company initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs.

For the purposes of subsequent measurement, financial assets are classified into four categories:

financial assets at amortized cost (debt instruments)

financial assets at fair value through other comprehensive income (OCI) with recycling of cumulative gains and losses (debt instruments)

financial assets designated at fair value through OCI with no recycling of cumulative gains and losses upon derecognition (equity instruments)

financial assets at fair value through profit or loss (debt instruments and equity instruments)

Impairment of financial assets

The company recognizes a loss allowance for expected credit losses for trade receivables, contract assets, lease receivables, debt investments carried at amortized cost and fair value through other comprehensive income (FVTOCI).

At each balance sheet date, the company assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired and recognizes a loss allowance for expected credit losses for financial assets measured at either amortized costs or at fair value through other comprehensive income. If, at the reporting date, the credit risk on a financial instrument has not increased significantly since initial recognition, the company measures the loss allowance for the financial instrument at an amount equal to 12 months of expected credit losses. If, at the reporting date, the credit risk on a financial instrument has increased significantly since initial recognition, the company measures the loss allowance for the financial instrument at an amount equal to the lifetime-expected credit losses. For all trade receivables, contract assets and lease receivables the company measures the loss allowance at an amount equal to lifetime-expected credit losses.

Accounting estimates and judgments

The determination of fair value is subject to estimates for investments that are not publicly traded. Refer to Fair value of financial assets and liabilities.

Financial assets classified at amortized cost and at fair value through OCI are subject to impairment assessment. The calculation of expected credit losses requires the company to apply significant judgment and make estimates and assumptions that involve significant uncertainty at the time they are made. Changes to these estimates and assumptions can result in significant changes to the timing and amount of expected credit losses to be recognized.

Other current financial assets

In 2024, Other current financial assets decreased from EUR 3 million to EUR 2 million (2023: decreased from EUR 11 million to EUR 3 million).

Other non-current financial assets

The company’s investments in Other non-current financial assets mainly consist of investments in common shares of companies in various industries and investments in limited life funds. The changes during 2024 and 2023 were as follows:

Philips Group

Other non-current financial assets in millions of EUR

Non-current financial assets at FVTP&L

Non-current financial assets at FVTOCI

Non-current financial assets at Amortized cost

Total

Balance as of January 1, 2024

284

258

77

619

Changes:

Acquisitions/additions

76

6

65

147

Sales/redemptions/reductions

(31)

(14)

(11)

(56)

Value adjustment through OCI

(23)

(23)

Value adjustment through P&L

(25)

1

(23)

Translation differences and other

8

12

(4)

16

Reclassification

(25)

4

(27)

(47)

Balance as of December 31, 2024

288

242

102

631

Philips Group

Other non-current financial assets in millions of EUR

Non-current financial assets at FVTP&L

Non-current financial assets at FVTOCI

Non-current financial assets at Amortized cost

Total

Balance as of January 1, 2023

322

284

54

660

Changes:

Acquisitions/additions

71

14

20

105

Sales/redemptions/reductions

(33)

(14)

(11)

(58)

Value adjustment through OCI

(17)

-

(17)

Value adjustment through P&L

(39)

-

-

(39)

Translation differences and other

(29)

(14)

(1)

(44)

Reclassifications

(8)

5

15

12

Balance as of December 31, 2023

284

258

77

619

As of December 31, 2024, equity investments of EUR 222 million (2023: EUR 231 million) are accounted under the FVTOCI category based on the company's election at initial recognition mainly because such investments are neither held for trading purposes nor primarily for their increase in value and the elected presentation is considered to reflect the nature and purpose of the investment.


14    Other assets


Accounting policies

The company recognizes contract assets for revenue earned from installation services because the receipt of consideration is conditional on successful completion of the installation. Upon completion of the installation and acceptance by the customer, the amount recognized as contract assets is reclassified to trade receivables.

Other assets are measured at amortized cost minus any impairment losses.


Other non-current assets

Other non-current assets as of December 31, 2024, were EUR 118 million (2023: EUR 93 million), mainly includes prepaid expenses.

Other current assets

Other current assets as of  December 31, 2024, totaled EUR 586 million (2023: EUR 500 million), primarily contract assets of EUR 349 million (2023: EUR 297 million) and prepaid expenses of EUR 238 million (2023: EUR 197 million) mainly related to Diagnosis & Treatment Businesses and Connected Care Businesses.

15    Inventories


Accounting policies

Inventories are stated at the lower of cost or net realizable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. The costs of conversion of inventories include direct labor and fixed and variable production overheads, considering the stage of completion and the normal capacity of production facilities. Costs of idle facility and abnormal waste are expensed. The cost of inventories is determined using the first-in, first-out (FIFO) method. The write-down of inventories to net realizable value is included in cost of sales.

Accounting estimates and judgments

Inventory is reduced for the estimated losses due to obsolescence. This reduction is determined for groups of products based on sales in the recent past and/or expected future demand.


Inventories are summarized as follows:

Philips Group

Inventories in millions of EUR

2023

2024

Raw materials and supplies

1,309

1,344

Work in process

552

414

Finished goods

1,629

1,439

Inventories

3,491

3,198

In 2024, overall global inventories have operationally decreased by EUR 293 million with the increase in finished goods and decrease in other categories.

The write-down of inventories to net realizable value was EUR 230 million in 2024 and EUR 339 million in 2023.


16    Receivables


Accounting policies

Receivables are initially measured at fair value and are subsequently measured at amortized cost if held within a business model with the objective to collect the contractual cash flows or at fair value through OCI if held within a business model with the objective of both holding to collect contractual cash flows and selling. Receivables are measured less any impairment losses.

Receivables are derecognized when the company has transferred substantially all risks and rewards, which includes transactions in which the company enters into factoring transactions, or if the company does not retain control over the receivables.

Accounting estimates

Receivables are subject to impairment assessment, which involves estimating expected credit losses. Refer to Other financial assets for accounting policies on impairment of financial assets.


Non-current receivables

Non-current receivables are associated mainly with customer financing in the Diagnosis & Treatment Businesses amounting (net of allowance) to EUR 81 million (2023: EUR 102 million), insurance receivables in the US amounting to EUR 33 million (2023: EUR 33 million) and income tax receivables amounting to EUR 36 million (2023: EUR 8 million).

Philips has leasing activities where it acts as lessor. In such arrangements, Philips provides the customer with a right to use of medical equipment in exchange for a series of payments. Residual values of assets under lease form an insignificant part of the carrying amount of those assets. Residual values are influenced by asset market prices and are therefore subject to management estimation. Residual values are at least reassessed on an annual basis, or more often when necessary. Reassessments are based on a combination of realization of assets sold, expert knowledge and judgment of local markets. In order to reduce residual value risk exposures there may be residual value guarantees or purchase options embedded in the customer contract. Credit risk for lease receivables is reviewed regularly and mitigated, for example, by retaining a security interest in the leased asset.

Current receivables

Current receivables of EUR 3,672 million (2023: EUR 3,733 million) as of December 31, 2024, included trade accounts receivable (net of allowance) of EUR 3,513 million (2023: EUR 3,546 million), accounts receivable other of EUR 134 million (2023: EUR 170 million), and accounts receivable from investments in associates of EUR 25 million (2023: EUR 18 million).

The trade accounts receivable, net, per segment are as follows:

Philips Group

Trade accounts receivable, net in millions of EUR

2023

2024

Diagnosis & Treatment

1,688

1,687

Connected Care

1,105

1,064

Personal Health

576

575

Other

177

187

Trade accounts receivable, net

3,546

3,513

The aging analysis of trade accounts receivable, net, representing current and overdue but not fully impaired receivables, is as follows:

Philips Group

Aging analysis in millions of EUR

2023

2024

Current

3,132

3,154

Overdue 1-30 days

117

141

Overdue 31-180 days

234

194

Overdue more than 180 days

63

24

Trade accounts receivable, net

3,546

3,513

The changes in the allowance for doubtful accounts receivable are as follows::

Philips Group

Allowance for accounts receivable in millions of EUR

2023

2024

Balance as of January 1

226

216

Additions charged to expense

27

112

Deductions from allowance¹

(26)

(88)

Transfer to assets held for sale

(1)

-

Other movements

(10)

5

Balance as of December 31

216

245

1    Write-offs for which an allowance was previously provided.


The allowance for doubtful accounts receivable has been primarily established for receivables that are past due. Additions and deductions in the allowance include the impact of changes in estimates for certain Connected Care receivables. The allowance presented also includes the allowance for Non-current customer finance receivables of EUR 8 million (2023: EUR 8 million). Other movements in the current period are mainly related to foreign currency valuations.

Included in the above balances as of December 31, 2024, are allowances for individually impaired receivables of EUR 239 million (2023: EUR 210 million).


17    Equity


Accounting policies

Common shares are classified as equity. Incremental costs directly attributable to the issuance of shares are recognized as a deduction from equity. Where the company repurchases the company’s equity share capital (treasury shares), the consideration paid, including any directly attributable incremental transaction costs (net of income taxes), is deducted from shareholders’ equity until such treasury shares are cancelled or reissued.

Where such treasury shares are subsequently reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in shareholders’ equity.

Call options on own shares are treated as equity instruments.

Dividends are recognized as a liability in the period in which they are declared and approved by shareholders. The income tax consequences of dividends are recognized when a liability to pay the dividend is recognized.

Common shares

As of December 31, 2024, authorized common shares consist of 2 billion shares (December 31, 2023: 2 billion; December 31, 2022: 2 billion), and the issued and fully paid share capital consists of 939,939,384 common shares, each share having a par value of EUR 0.20 (December 31, 2023: 913,515,966; December 31, 2022: 889,315,082).

Preference shares

As a means to protect the company against (an attempt at) an unsolicited takeover or other attempt to exert (de facto) control of the company, the ‘Stichting Preferente Aandelen Philips’ has been granted the right to acquire preference shares in the company. As of December 31, 2024, no such right has been exercised and no preference shares have been issued. Authorized preference shares consist of 2 billion shares as of December 31, 2024 (December 31, 2023: 2 billion; December 31, 2022: 2 billion).

Options, restricted and performance shares

Under its share-based compensation plans, the company granted stock options on its common shares and other conditional rights to receive common shares in the future such as restricted shares and performance shares (refer to Share-based compensation).

Treasury shares

In connection with the company’s share repurchase programs, shares which have been repurchased and are held in Treasury for the purpose of (i) delivery under share-based

compensation plans upon exercise of options, or vesting of restricted or performance shares, and (ii) capital reduction, are accounted for as a reduction of shareholders’ equity. Treasury shares are recorded at cost, representing the market price on the acquisition date. When treasury shares are delivered by the company under its share-based compensation plans, such shares are removed from treasury shares on a first-in, first-out (FIFO) basis.

When treasury shares are delivered by the company upon exercise of options, the difference between the cost and the cash received is recorded in retained earnings. When treasury shares are delivered by the company upon vesting of restricted shares or performance shares (granted under the company’s share-based compensation plans), the difference between the market price of the shares and the cost is recorded in retained earnings, and the market price is recorded in capital in excess of par value.

The following table shows the movements in the outstanding number of shares over the last three years:

Philips Group

Outstanding number of shares

2022

2023

2024

Balance as of January 1

870,182,445

881,480,527

906,403,156

Dividend distributed

14,174,568

39,334,938

30,860,582

Purchase of treasury shares

(5,080,693)

(15,964,445)

(13,718,391)

Delivery of treasury shares

2,204,207

1,552,136

1,463,727

Balance as of December 31

881,480,527

906,403,156

925,009,074

The following table reflects transactions that took place in relation to former and current share-based compensation plans:

Philips Group

Transactions related to share-based compensation plans

2022

2023

2024

Shares acquired

2,142,445

3,000,000

9,281,227

Average market price

EUR 31.76

EUR 41.59

EUR 21.88

Amount paid

EUR 68 million

EUR 125 million

EUR 203 million

Shares delivered

2,204,207

1,552,136

1,463,727

Average price (FIFO)

EUR 35.16

EUR 34.59

EUR 37.14

Cost of delivered shares

EUR 77 million

EUR 54 million

EUR 54 million

Total shares in treasury at year-end

5,664,946

7,112,810

14,930,310

Total cost

EUR 191 million

EUR 262 million

EUR 411 million

The following transactions took place for capital reduction purposes:

Philips Group

Transactions related to capital reduction

2022

2023

2024

Shares acquired

2,938,248

12,964,445

4,437,164

Average market price

EUR 36.61

EUR 37.25

EUR 37.56

Amount paid

EUR 108 million

EUR 483 million

EUR 167 million

Cancellation of treasury shares (shares)

8,758,455

15,134,054

4,437,164

Cancellation of treasury shares (EUR)

EUR 299 million

EUR 566 million

EUR 167 million

Total shares in treasury at year-end

2,169,609

Total cost

EUR 83 million

Share purchase transactions related to employee option and share plans, as well as transactions related to the reduction of share capital, involved a cash outflow of EUR 451 million in 2024. In 2024, we settled withholding tax liability for an amount of EUR 41 million relating to the dividend distribution in 2023 (EUR 11 million) and in 2024 (EUR 29 million).

Share repurchase methods for share-based remuneration plans and capital reduction purposes

Philips uses different methods to repurchase shares in its own capital: (i) share buyback repurchases in the open market via an intermediary; (ii) repurchase of shares via forward contracts for future delivery of shares; and (iii) the unwinding of call options on own shares. During 2024, Philips used methods (i) and (ii) to repurchase shares for share-based compensation plans and method (ii) to repurchase shares for capital reduction purposes.

Forward contracts to repurchase shares and open market repurchases of shares

For share-based compensation plans

On August 05, 2024, Philips announced that it would repurchase shares for an amount of up to EUR 125 million to cover certain of its obligations arising from its Long-Term Incentive plans. The repurchases were executed through a combination of open market purchases by an intermediary (in August 2024 acquiring 2.2 million shares which resulted in a EUR 60 million increase in retained earnings against treasury shares) and one forward contract for an amount of EUR 65 million to acquire 2.5 million shares with a settlement date in November 2026 and a weighted average forward price of EUR 26.40.

On June 14, 2023, Royal Philips announced that it will repurchase up to 7.1 million shares to cover certain of its obligations arising from its Long-Term Incentive and employee stock purchases plans. Under this program, Philips entered into one forward contract for an amount of EUR 138 million to acquire 7.1 million shares with settlement dates varying between November 2024 and November 2025 and a weighted average forward price of EUR 19.43. As of December 31, 2024, a total of 3.1 million shares under this program were acquired (settled in the fourth quarter of 2024). This resulted in a EUR 57 million increase in retained earnings against treasury shares.

On June 13, 2022, Royal Philips announced that it will repurchase up to 3.2 million shares to cover certain of its obligations arising from its Long-Term Incentive and employee stock purchases plans. Under this program, Philips entered into one forward contract for an amount of EUR 63 million to acquire 3.2 million shares with settlement dates in November 2024 and December 2024 and a weighted average forward price of EUR 19.75. As of December 31, 2024, all shares under this program were acquired (settled in the fourth quarter of 2024). This resulted in a EUR 63 million increase in retained earnings against treasury shares.

On January 29, 2020, Philips announced that it will repurchase up to 6 million shares to cover certain of its obligations arising from its Long-Term Incentive and employee stock purchase plans. Under this program, Philips entered into three forward contracts to acquire in total 5 million for an amount of EUR 174 million to acquire with settlement dates varying between October 2021 and November 2022 and a weighted average forward price of EUR 34.85. On October 26, 2022, the original settlement date of two tranches entered into under this program (in total 1.75 million shares) has been extended from November 23, 2022 to November 2023, and November 2024, respectively. As of December 31, 2024, a total of 5.0 million shares (December 31, 2023: 4.3 million shares) under this program were acquired (settled in the fourth quarter of 2021, 2022, 2023, and 2024). This resulted in a EUR 23 million (2023: EUR 35 million) increase in retained earnings against treasury shares.

As of December 31, 2024, the remaining forward contracts to cover obligations under share-based compensation plans related to 6.5 million shares (December 31, 2023: 11.1 million shares) and amounted to EUR 142 million (December 31, 2023: EUR 224 million).

For capital reduction

On July 26, 2021, Philips announced a share buyback program for share cancellation purposes for an amount of up to EUR 1.5 billion. Consequently, in the third quarter of 2021 Philips entered into three forward contracts for an amount of EUR 731 million to acquire 20 million shares with settlement dates in 2022, 2023 and 2024 and a weighted average forward price of EUR 37.36. Philips executed the remainder of the program through open market purchases by an intermediary in the fourth quarter of2021(acquiring 21 million shares) and January 2022 (acquiring 0.8 million shares). This resulted in a EUR 781 million increase in retained earnings against treasury shares. As of December 31, 2024, Philips completed the program announced in 2021 and as a result a total of 19.6 million (December 31, 2023: 15.1 million ) shares were acquired (in the fourth quarter of 2022 , second, third and fourth quarters of 2023, and first and second quarters of 2024). This resulted in a EUR 167 million increase in retained earnings against treasury shares (2023: EUR 483 million including dividend adjustment).

As of December 31, 2024, there were no remaining forward contracts entered into for capital reduction purposes. As of December 31, 2023, the remaining forward contracts entered into for capital reduction purposes related to 4.4 million shares and amounted to EUR 167 million.

Shares cancellation

In June 2024, Philips completed the cancellation of 4.4 million of its common shares (with a cost price of EUR 167 million). The cancelled shares were acquired as part of Philips’ EUR 1.5 billion share repurchase program announced on July 26, 2021.

Dividend distribution

2024

In May 2024, Philips distributed a dividend of EUR 0.85 per common share, representing a total value of EUR 768 million (including costs). The dividend was distributed in the form of shares only, resulting in the issuance of 30,860,582 new common shares. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2023. Further reference is made to Earnings per share.

A proposal will be submitted to the 2025 Annual General Meeting of Shareholders to pay a dividend of EUR 0.85 per common share, in shares or cash at the option of the shareholder, against retained earnings for 2024.

2023

In May 2023, Philips distributed a dividend of EUR 0.85 per common share, representing a total value of EUR 749 million (including costs). The dividend was distributed in the form of shares only, resulting in the issuance of 39,334,938 new common shares.

2022

In May 2022, Philips distributed a dividend of EUR 0.85 per common share, representing a total value of EUR 741 million (including costs). Shareholders could elect for a cash dividend or a share dividend. Approximately 45% of the shareholders elected for a share dividend, resulting in the issuance of 14,174,568 new common shares. The settlement of the cash dividend involved an amount of EUR 411 million (including costs).

Limitations in the distribution of shareholders’ equity

As of December 31, 2024, pursuant to Dutch law, certain limitations exist relating to the distribution of shareholders’ equity of EUR 3,254 million. Such limitations relate to common shares of EUR 188 million, as well as to legal reserves required by Dutch law included under retained earnings of EUR 1,052 million and unrealized currency translation differences of EUR 2,014 million. The unrealized gain related to cash flow hedges of EUR 1 million and unrealized loss related to fair value through OCI financial assets of EUR 90 million qualify as revaluation reserves and reduce the distributable amount due to the fact that these reserves are negative.

The legal reserves required by Dutch law of EUR 1,052 million included under retained earnings relates to any legal or economic restrictions on the ability of affiliated companies to transfer funds to the parent company in the form of dividends.

As of December 31, 2023, these limitations in distributable amounts were EUR 2,435 million and related to common shares of EUR 183 million, as well as to legal reserves required by Dutch law included under retained earnings of EUR 990 million and unrealized currency translation differences of EUR 1,263 million. The unrealized losses related to fair value through OCI financial assets of EUR

390 million and unrealized loss related to cash flow hedges of EUR 6 million qualify as a revaluation reserve and reduce the distributable amount due to the fact that this reserve is negative.

Non-controlling interests

Non-controlling interests relate to minority stakes held by third parties in consolidated group companies.

Capital management

Philips manages capital based upon the IFRS measures, net cash provided by operating activities and net cash used for investing activities as well as the non-IFRS measure net debt. The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included below.

Net debt is defined as the sum of long and short-term debt minus cash and cash equivalents. Group equity is defined as the sum of shareholders’ equity and non-controlling interests. This measure is used by Philips Treasury management and investment analysts to evaluate financial strength and funding requirements. The Philips net debt position is managed with the intention of retaining the current strong investment grade credit rating. Furthermore, Philips’ dividend policy is aimed at dividend stability and a pay-out ratio of 40% to 50% of Adjusted income from continuing operations attributable to shareholders (reconciliation to the most directly comparable IFRS measure, Net income, is provided at the end of this note).

Philips Group

Composition of net debt and group equity in millions of EUR unless otherwise stated

2022

2023

2024

Long-term debt

7,270

7,035

7,113

Short-term debt

931

654

526

Total debt

8,201

7,689

7,639

Cash and cash equivalents

1,172

1,869

2,401

Net debt

7,028

5,820

5,238

Shareholders’ equity

13,249

12,028

12,006

Non-controlling interests

34

33

37

Group equity

13,283

12,061

12,043

Net debt : group equity ratio

35:65

33:67

30:70

Adjusted income from continuing operations attributable to shareholders is not a recognized measure of financial performance under IFRS. The reconciliation of Adjusted income from continuing operations attributable to shareholders to the most directly comparable IFRS measure, Net income, is included in the following table.

Philips Group

Adjusted income from continuing operations attributable to shareholders1 in millions of EUR

2022

2023

2024

Net income

(1,605)

(463)

(698)

Discontinued operations, net of income taxes

(13)

10

(142)

Income from continuing operations

(1,618)

(454)

(840)

Income from continuing operations attributable to non-controlling interests

(3)

(2)

(3)

Income from continuing operations attributable to shareholders¹

(1,622)

(456)

(843)

Adjustments for:

Amortization and impairment of acquired intangible assets

363

290

392

Impairment of goodwill

1,357

8

0

Restructuring costs and acquisition-related charges

202

381

326

Other items:

925

1,358

830

Respironics litigation provision

575

984

Respironics insurance income

(538)

Respironics consent decree charges

250

363

113

Respironics field-action running costs

210

224

133

Quality actions

59

175

123

R&D project impairments

134

Portfolio realignment charges

109

Impairment of assets in S&RC

39

Provision for public investigations tender irregularities

60

Provision for a legal matter

31

Investment re-measurement loss

23

Loss (gain) on divestment of business

(35)

Remaining items

63

2

16

Net finance income/expenses

(4)

18

23

Tax impact on adjusting items²

(376)

(450)

(370)

Tax effect of derecognition of US deferred tax asset

941

Adjusted Income from continuing operations attributable to shareholders1

845

1,148

1,300

1    Shareholders in this table refers to shareholders of Koninklijke Philips N.V.

2    Includes deferred tax assets derecognized in the line below.

18    Debt


Accounting policies

Debt

Debt is initially measured at fair value net of directly attributable transaction costs. Subsequently, debt is measured at amortized cost using the effective interest rate method. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the effective interest rate. Debt is derecognized when the obligation under the liability is discharged, cancelled or has expired.

Lease liabilities

Lease liabilities are measured at the present value of the lease payments due over the lease term, generally discounted using the incremental borrowing rate. Lease liabilities are subsequently measured at amortized cost using the effective interest method. Lease liabilities are remeasured in case of modifications or reassessments of the lease.

Philips has a USD 2.5 billion Commercial Paper Program and a EUR 1 billion committed standby revolving credit facility that can be used for general group purposes. As of December 31, 2024, Philips did not have any loans outstanding under either facility. These facilities do not have a material adverse change clause, have no financial covenants and no credit-rating-related acceleration possibilities.

Philips established a Euro Medium-Term Note (EMTN) program, a framework that facilitates the issuance of notes for a total amount up to EUR 10 billion. In 2024, Philips issued EUR 700 million fixed rate notes due 2032 under the EMTN program for general corporate purposes, including the repayment of the 2025 EUR Bonds and other floating rate debt. As of December 31, 2024, Philips has EUR 3.7 billion (2023: EUR 3.3 billion) fixed rate notes outstanding under the EMTN program.

The provisions applicable to all USD-denominated corporate bonds issued by the company in March 2008 and March 2012 (due 2038 and 2042) contain a ‘Change of Control Triggering Event’. If the company would experience such an event with respect to a series of corporate bonds the company might be required to offer to purchase the bonds that are still outstanding at a purchase price equal to 101% of their principal amount, plus accrued and unpaid interest, if any. Furthermore, the conditions applicable to the EUR-denominated corporate bonds issued since 2018 contain a similar provision (‘Change of Control Put Event’). Upon the occurrence of such an event, the company might be required to redeem or purchase any of such bonds at their principal amount together with interest accrued. Philips’ outstanding long-term debt does not contain financial covenants.

As of December 31, 2024, debt includes forward contracts of EUR 142 million (nominal value) relating to the repurchase of shares to cover long-term incentive and employee stock purchase plans, with maturity dates in the fourth quarter of 2025 (EUR 77 million) and the fourth quarter of 2026 (EUR 65 million).

In 2023, Philips issued EUR 500 million of fixed rate notes under the company’s EMTN program that mature in 2031 and used the proceeds for general corporate purposes, including the repayment of EUR 500 million that was outstanding under the credit facility entered into in the fourth quarter of 2022. In 2023, Philips entered into a total amount of EUR 138 million forward contracts relating to the company’s long-term incentive plans. These forwards partly matured in the fourth quarter of 2024 (EUR 61 million) with the remainder maturing in 2025 (EUR 77 million). In addition, a total of EUR 125 million forward contracts relating to the Long-Term Incentive and employee stock purchase plans and EUR 481 million of forwards related to the share buyback program announced in 2021 matured throughout 2023.

Long-term debt

The following tables present information about the long-term debt outstanding, its maturity and average interest rates in 2024 and 2023.


Philips Group

Long-term debt in millions of EUR unless otherwise stated

2024

Amount outstanding

Current portion

Non-current portion

Between 1 and 5 years

Amount due after 5 years

Average remaining term (in years)

Average rate of interest

USD bonds

1,408

131

1,276

122

1,154

12.3

6.3%

EUR bonds

4,917

4,917

2,639

2,278

4.7

2.3%

Forward contracts

148

82

66

66

1.3

1.2%

Lease liabilities

1,073

219

854

506

347

3.8

3.7%

Bank borrowings

1

1

1

1

1.5

1.0%

Other long-term debt

-

-

-

-

-

3.2

1.2%

Long-term debt

7,546

434

7,113

3,333

3,779

5.9

3.2%

Philips Group

Long-term debt in millions of EUR unless otherwise stated

2023

Amount outstanding

Current portion

Non-current portion

Between 1 and 5 years

Amount due after 5 years

Average remaining term (in years)

Average rate of interest

USD bonds

1,325

1,325

240

1,085

13.3

6.3%

EUR bonds

4,569

4,569

2,335

2,234

5.1

2.0%

Forward contracts

396

321

76

76

0.8

1.4%

Lease liabilities

1,074

211

864

505

358

3.9

3.1%

Bank borrowings

203

1

201

201

1.2

4.2%

Other long-term debt

-

-

-

-

-

7.4

1.2%

Long-term debt

7,568

532

7,035

3,357

3,678

6.0

2.9%

Bonds

The following table presents the amount outstanding and effective rate of bonds.

Philips Group

Unsecured Bonds in millions of EUR unless otherwise stated

Effective rate

2023

2024

Unsecured EUR Bonds

Due 30/03/2025; 1 3/8%

1.509%

346

Due 22/05/2026; 1/2%

0.608%

750

750

Due 05/05/2027; 1 7/8%

2.049%

750

750

Due 02/05/2028; 1 3/8%

1.523%

500

500

Due 05/11/2029; 2 1/8%

2.441%

650

650

Due 30/03/2030; 2%

2.128%

500

500

Due 08/09/2031; 4 2/8%

4.33%

500

500

Due 31/05/2032; 3 3/4%

4.043%

700

Due 05/05/2033; 2 5/8%

2.71%

600

600

Unsecured USD Bonds

Due 15/05/2025; 7 3/4%

7.429%

49

52

Due 15/05/2025; 7 1/8%

6.794%

75

79

Due 01/06/2026; 7 1/5%

6.885%

114

121

Due 03/11/2038; 6 7/8%

7.21%

657

697

Due 15/03/2042; 5%

5.273%

452

480

Adjustments¹

(47)

(55)

Unsecured Bonds

5,894

6,324

1    Adjustments related to both EUR and USD bonds and concern bond discounts, premium and transaction costs.


Leases

The following table presents a reconciliation between the total of future minimum lease payments and their present value.


Philips Group

Lease liabilities in millions of EUR

2023

2024

Future minimum lease payments

Interest

Present value of minimum lease payments

Future minimum lease payments

Interest

Present value of minimum lease payments

Less than one year

239

28

211

255

35

219

Between one and five years

572

67

505

592

85

506

More than five years

388

30

358

385

38

347

Lease liabilities

1,200

125

1,074

1,232

159

1,073

Short-term debt

Philips Group

Short-term debt in millions of EUR

2023

2024

Short-term bank borrowings

122

92

Current portion of long-term debt

532

434

Short-term debt

654

526

During 2024, the weighted average interest rate on the bank borrowings was 9.3% (2023: 8.6%). This increase was mainly driven by higher interest rate environments across various countries globally.



19    Provisions


Accounting policies

A provision is a liability of uncertain timing or amount. Provisions are recognized if, as a result of a past event, the company has a present legal or constructive obligation, it is probable that an outflow of economic benefits will be required to settle the obligation and the amount can be estimated reliably. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money. The increase in the provision due to passage of time (accretion) is recognized as interest expense.

Restructuring-related provisions

Provisions for severance and termination benefits are recognized for those costs only when the company has a detailed formal plan for the restructuring and has raised a valid expectation with those affected that it will carry out the restructuring by starting to implement that plan or announcing its main features to those affected by it. Before a provision is established, the company recognizes any impairment loss on the assets associated with the restructuring.

Accounting estimates and judgments

By their nature, the recognition of provisions requires estimates and assumptions regarding the timing and the amount of outflow of resources. The main estimates include:

Product warranty provisions – the provisions for assurance-type product warranty reflect the estimated costs of replacement and free-of-charge services that will be incurred by the company with respect to products sold and include costs to execute quality remediation and related field actions (including the Respironics field action). These require management to make estimates and assumptions about items such as quantities and the portion of products to be remediated through replacement, repair or (partial) refund.

Environmental provisions – provisions for environmental remediation can change significantly due to the emergence of additional information regarding the extent or nature of the contamination, the need to utilize alternative technologies, actions by regulatory authorities as well as changes in judgments and discount rates. The impact of climate change is also considered when assessing whether Philips has a present legal or constructive obligation, particularly in relation to fines, penalties and commitments to reduce greenhouse gas emissions.

Legal provisions – provisions for legal claims and investigations reflect the best estimate of the outflow of resources, supported by internal and external legal counsel, when it is probable that such outflow of resources will be required to settle an obligation.

Contingent consideration provisions – the provision for contingent consideration reflects the fair value of the expected payment to former shareholders of an acquired company for the exchange of control if specified future events occur or conditions are met, such as the achievement of certain regulatory milestones or the achievement of certain commercial milestones. The provision for contingent consideration can change significantly due to changes in the estimated achievement of milestones and changes in discount rates. Changes in fair value of the contingent consideration liability are reflected in other business income (expenses).

Philips Group

Provisions in millions of EUR

Post-employment benefits

Product warranty

Environmental

Restructuring-related

Legal

Contingent consideration

Other

Total

Current

624

22

102

477

57

181

1,463

Non-current

558

67

80

14

10

58

248

1,035

Balance as of December 31, 2023

558

692

102

116

487

115

429

2,498

Additions

81

439

9

131

1,015

5

185

1,865

Utilizations

(76)

(507)

(15)

(127)

(477)

(9)

(124)

(1,336)

Releases

(5)

(15)

-

(26)

(28)

(3)

(35)

(113)

Accretion

5

38

3

(1)

45

Changes in discount rate

(7)

-

(8)

Translation differences and other

2

(24)

4

(1)

44

3

(8)

21

Total change

3

(107)

(5)

(23)

592

(2)

16

474

Current

522

20

77

1,066

61

229

1,977

Non-current

560

63

76

16

13

52

216

996

Balance as of December 31, 2024

560

585

96

94

1,079

113

446

2,972


Philips Group

Provisions in millions of EUR

Post-employment benefits

Product

 warranty

Environmental

Restructuring-related

Legal

Contingent

consideration

Other

Total

Current

653

20

134

74

23

112

1,018

Non-current

546

80

83

6

14

89

279

1,097

Balance as of December 31, 2022

546

733

104

140

89

113

390

2,115

Additions

112

553

18

263

644

24

223

1,836

Utilizations

(91)

(553)

(14)

(219)

(235)

(20)

(134)

(1,266)

Releases

(10)

(20)

(2)

(67)

(10)

(7)

(45)

(159)

Accretion

5

23

1

(3)

25

Acquisitions

6

6

Changes in discount rate

(6)

(6)

Translation differences and other

-

(22)

(3)

(2)

(23)

(2)

(1)

(53)

Total change

12

(42)

(2)

(24)

399

2

39

383

Current

624

22

102

477

57

181

1,463

Non-current

558

67

80

14

10

58

248

1,035

Balance as of December 31, 2023

558

692

102

116

487

115

429

2,498

Post-employment benefits

For details of post-employment benefits refer to Post-employment benefits.

Product warranty provisions

Product warranty provisions include costs to execute quality remediation and related field actions, as well as the field action provision in connection with the Philips Respironics voluntary recall notification which is explained separately below.The company expects the provisions to be utilized mainly within 2025.

Additions in 2024 include quality remediation and related field actions of EUR 137 million and EUR 139 million in the Diagnosis & Treatment and Connected Care segments, respectively, mainly for the following matters:

Trilogy EVO and Trilogy EV300

In September 2024, Philips issued a field safety notice to customers of its Trilogy EVO and Trilogy EV300 ventilators, regarding a potential contamination issue when the ventilator is used in combination with in-line nebulizers. This notification was updated in November 2024 with additional customer instructions. Philips is in the process of commencing the necessary remediation actions.

Respironics field-action provision

On June 14, 2021, Philips subsidiary Philips Respironics initiated a voluntary recall notification in the US and field safety notice outside the US for certain sleep and respiratory care products related to the polyester-based polyurethane (PE-PUR) sound abatement foam in these devices. The remediation is progressing globally. The total number of units expected to be remediated as of December 31, 2024 is 5.1 million (2023: 5.6 million) devices globally. The decrease in units is mainly due to current insights regarding the number of units that are not expected to be returned to Philips or where key data collection efforts to perform remediation have been exhausted.

Philips has recognized a provision based on Philips’ best estimate of the costs to repair, replace or refund devices, subject to the Respironics field action. The provision is related to the cost to repair, replace or provide financial compensation for affected devices and includes, among others, the costs for the remaining production, the cost of intensified communication with physicians and patients, material costs, labor cost and logistics, as well as costs relating to financial compensation provided to customers under the field action. The provision does not include any product liability costs or other claims.

Philips Group

Respironics field-action provision in millions of EUR

2023

2024

Balance as of January 1

390

334

Additions

240

30

Utilizations

(285)

(220)

Translation differences and other

(10)

(14)

Balance as of December 31

334

130

Utilizations for the year reflect the costs incurred in executing the remediation during the year.

The completion of the field action continues to be subject to uncertainty, which requires management to make estimates and assumptions about items such as quantities and the portion to be replaced, repaired and subject to financial compensation. An increase in the assumption for the financial compensation portion by 10 percentage points could have the effect of increasing the provision by an estimated EUR 18 million. Actual outcomes in future periods may differ from these estimates and affect the company’s results of operations, financial position and cash flows.

Further to the above, field-action running remediation costs during the year of EUR 133 million (2023: EUR 224 million, 2022: EUR 210 million), such as testing, external advisory and regulatory response and additional right-of-return and warranty provisions, have been incurred.

Philips and its affiliates are defendants in a number of consumer class action lawsuits from users of the affected devices and a number of individual personal injury and other compensation claims. For legal matters including claims refer to the legal provisions section of this note as well as Contingencies.

Environmental provisions

The environmental provisions include accrued costs recorded with respect to environmental remediation in various countries. In the US, subsidiaries of the company have been named as potentially responsible parties in state and federal proceedings for the clean-up of certain sites.

The additions and the releases of the provisions originate from additional insights in relation to factors like the estimated cost of remediation, changes in regulatory requirements and efficiencies in completion of various site work phases.

Approximately EUR 65 million of the long-term provision is expected to be utilized after one to five years, with the remainder after five years. For more details on the environmental remediation refer to Contingencies.

Restructuring-related provisions

Philips Group

Restructuring-related provisions in millions of EUR

December 31, 2023

December 31, 2024

Diagnosis & Treatment

36

34

Connected Care

18

19

Personal Health

7

15

Other

56

26

Philips Group

116

94

In 2024, the most significant restructuring projects impacted segments Other and Connected Care and mainly took place in the US and the Netherlands. The restructuring comprised mainly product portfolio rationalization and the reorganization of global support functions. The company expects the provisions to be utilized mainly within the next year.

In 2024, Philips continued general productivity actions aimed at simplifying the organization as part of its multi-year plan designed to create value with sustainable impact. This included the further reduction of 2,000 roles, thereby completing the planned reduction of 10,000 roles globally across the organization by 2025 ahead of schedule. Severance and termination-related costs of EUR 140 million were recorded in 2023.

Legal provisions

The company and certain of its group companies and former group companies are involved as a party in legal proceedings, including regulatory and other governmental proceedings.

Additions mainly relate to the legal provision in connection with the settlement of Respironics personal injury and medical monitoring claims in the US of EUR 982 million (discounted). Under the settlement Philips Respironics has agreed to pay a total of USD 1.1 billion. Most of the related payments are expected in 2025. In the first half of 2024 Philips Respironics recorded insurance income of EUR 538 million in connection with the agreement with insurers to partially reimburse the Respironics recall related product liability claims. This amount was paid in full to the company in 2024.

Utilizations of EUR 477 million mainly relate to the economic loss class action settlement in the US that was paid in 2024.

For details of other legal matters, including regulatory and other governmental proceedings, refer to Contingencies.

The company expects the provisions to be utilized mainly within the next three years.

Contingent consideration provisions

There is no material movement in 2024 and approximately EUR 21 million of the long-term provision is expected to be utilized within the next three years, with the remainder after four years.

Other provisions

The main elements of other provisions are:

Philips Group

Other provisions in millions of EUR unless otherwise stated

2023

2024

Other long-term employee benefits

77

80

Self-insurance

63

60

Non-income taxes / social security

51

48

Rights of return

39

44

Decommissioning costs

34

37

Onerous contracts

76

66

Remaining

89

111

Balance as of December 31

429

446

Onerous contracts reflect non-cancellable commitments on supplies for which no future demand or alternative usage has been identified.

Remaining provisions relate to a variety of positions, for example provision for disability of employees and provision for royalty obligations.

Releases in 2023 and 2024 are due to the reassessment of the positions in other provisions throughout the year.

The company expects the other provisions to be utilized mainly within the next five years.

20    Post-employment benefits


Accounting policies

Defined contribution plans

A defined contribution plan is a post-employment benefit plan for which the company pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognized as an employee benefit expense in the Consolidated statements of income in the periods during which services are rendered by employees.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan that is not a defined contribution plan. Defined benefit plans define an amount of pension benefit that an employee will receive after retirement. That pension benefit typically depends on several factors such as years of service, age and salary.

The net pension asset or liability recognized in the Consolidated balance sheets in respect of defined benefit plans is the fair value of plan assets less the present value of the projected defined benefit obligation at the balance sheet date. The defined benefit obligation is calculated annually by qualified actuaries using the projected unit credit method. Recognized assets are limited to the present value of any reductions in future contributions or any future refunds. The net pension liability is presented as a long-term provision; no distinction is made for the short-term portion.

For the company’s major plans, a full discount rate curve of high-quality corporate bonds is used to determine the defined benefit obligation, where available. The curves are based on the Mercer Yield Curve methodology, which uses data of corporate bonds rated AA or equivalent. For the other plans the Mercer Yield Curve/Mercer Methodology has also been used taking into account the cash flows as much as possible in case there is a deep market in corporate bonds. For plans in countries without a deep corporate bond market, the discount rate is based on government bonds and the plan’s maturity.

Pension costs with respect to defined benefit plans primarily represent the increase of the actuarial present value of the obligation for post-employment benefits based on employee service during the year and the interest on the net recognized asset or liability with respect to employee service in previous years.

Remeasurements of the net defined benefit asset or liability comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (excluding interest). The company recognizes all remeasurements in Other comprehensive income.

Past service costs arising from the introduction of a change to the benefit payable under a plan or a significant reduction of the number of employees covered by a plan (curtailment) are recognized in full in the Consolidated statements of income.

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. The company recognizes a liability and an expense for bonuses and incentives based on a formula that takes into consideration the profit attributable to the company’s shareholders after certain adjustments.

The company’s net obligation with respect to other long-term employee benefits is the amount of future benefit that employees have earned in return for their service in the current and prior periods, such as jubilee entitlements. That benefit is discounted to determine its present value. Remeasurements are recognized in the Consolidated statements of income in the period in which they arise.

Further information on other long-term employee benefits can be found in Provisions in the Other provisions section.

Accounting estimates and judgments

To make the actuarial calculations for the valuation of defined benefit obligations, assumptions are needed for interest rates, healthcare cost increases, future pension increases, life expectancy and employee turnover rates. The actuarial calculations are made by external actuaries based on inputs from observable market data, such as corporate bond returns and yield curves to determine the discount rates to apply, mortality tables to determine life expectancy and inflation rates to determine future salary and pension growth assumptions.


Employee post-employment benefit plans have been established in many countries in accordance with the legal requirements, customs and the local practice in the countries involved. The larger part of post-employment benefits are company pension plans, of which some are funded and some are unfunded. All funded post-employment benefit plans are considered to be related parties.

Most employees who take part in a company pension plan are covered by defined contribution (DC) pension plans. The main DC plans are in the Netherlands and the US. The company also sponsors a number of defined benefit (DB) pension plans. The benefits provided by these plans are based on employees’ years of service and compensation levels.

The company also sponsors a limited number of DB retiree medical plans. The benefits provided by these plans typically cover a part of the healthcare costs after retirement. None of these plans are individually significant to the company and are therefore not further separately disclosed.

The larger funded DB and DC plans are governed by independent Trustees who have a legal obligation to protect the interests of all plan members and operate under the local regulatory framework.

The DB plans in Germany and the US make up most of the defined benefit obligation (DBO) and the net position. The company also has DB plans in the rest of the world; however these are individually not significant to the company and do not have a significantly different risk profile that would warrant separate disclosure.

The adjacent table provides a breakdown of the present value of the funded and unfunded DBO, the fair value of plan assets and the net position in Germany, the US and in other countries. The table also provides the value of reimbursement rights.

Philips Group

Post-employment benefits in millions of EUR

Germany

United States

Other countries

Total

2023

2024

2023

2024

2023

2024

2023

2024

Present value of funded DBO

(511)

(531)

(404)

(416)

(182)

(205)

(1,097)

(1,152)

Present value of unfunded DBO

(253)

(242)

(118)

(131)

(137)

(134)

(508)

(507)

Total present value of DBO

(764)

(773)

(522)

(547)

(319)

(339)

(1,605)

(1,659)

Fair value of plan assets

481

496

442

465

166

189

1,089

1,150

Asset ceiling

(1)

(1)

Net position

(283)

(277)

(80)

(82)

(153)

(151)

(516)

(510)

Value of reimbursement rights

8

7

8

7

The classification of the net position is as follows::

Philips Group

Classification net position in millions of EUR

Germany

United States

Other countries

Total

2023

2024

2023

2024

2023

2024

2023

2024

Total asset for plans in a surplus

-

-

39

49

2

1

41

50

Total liability for plans in a deficit

(283)

(277)

(118)

(131)

(156)

(152)

(558)

(560)

Net position

(283)

(277)

(80)

(82)

(153)

(151)

(516)

(510)

Germany

The company has several DB plans in Germany, some of which are unfunded. The plan assets of the funded DB plans in Germany are held in a legally separate pension trust.

Due to the relatively high level of social security in Germany, the company’s pension plans mainly provide benefits for the higher earners. The plans are open for future pension accrual. Indexation is mandatory due to legal requirements. Some of the German plans have a DC design, but are accounted for as DB plans due to a legal minimum return requirement.

Company pension commitments in Germany are largely protected against employer bankruptcy via the “Pensions-Sicherungs-Verein” which charges a fee to all German companies providing pension promises.

Philips is one of the sponsors of Philips Pensionskasse VVaG in Germany, which is a multi-employer plan. The plan is classified and accounted for as a DC plan.

United States

The US DB pension plans are closed plans without future pension accrual. For the funding of any deficit in the US plan the Group adheres to the minimum funding requirements of the US Pension Protection Act.

The assets of the US funded pension plans are in Trusts governed by fiduciaries. The non-qualified pension plans that cover accrual above the maximum salary of the funded qualified plan are unfunded.

The company’s qualified pension commitments in the US are covered via the Pension Benefit Guaranty Corporation, which charges a fee to US companies providing DB pension plans. The fee is also dependent on the amount of unfunded vested liabilities.

Philips has announced to plan participants the intent to fully terminate the US qualified defined benefit pension plans in 2025. The announcements made did not impact the accounting for these plans during 2024 and the anticipated settlement, if and when completed, is not expected to have a material impact to the company’s results or cash flows in 2025.

Risks related to DB plans

DB plans expose the company to various demographic and economic risks such as longevity risk, investment risks, currency and interest rate risk and in some cases inflation risk. The latter plays a role in the assumed wage increase but more importantly in some countries where indexation of pensions is mandatory.

The company has an active de-risking strategy in which it constantly looks for opportunities to reduce the risks associated with its DB plans. Liability-driven investment strategies, lump sum cash-out options, buy-ins, buy-outs and a change to DC are examples of the strategy.

Investment policy in the largest pension plans

Plan assets are managed in legally separate pension trusts, primarily overseen by independent trustees, who bear full responsibility for and have complete discretion over the investment strategy for these plan assets. The plan assets of the Philips pension plans are invested in well-diversified portfolios. For most plans, the interest rate sensitivity of the fixed income portfolio is closely aligned with that of the plan’s pension liabilities. Contributions from the sponsoring company are primarily directed toward increasing the fixed income allocation. Additionally, in most investment strategies, any structural improvement in the plan's funded ratio over time is used to further reduce the interest rate mismatch between the plan assets and the pension liabilities.

Summary of pre-tax costs for post-employment benefits and reconciliations

The adjacent table contains the total of current and past service costs, administration costs and settlement results as included in Income from operations and the interest cost as included in Financial expenses.

Philips Group

Pre-tax costs for post-employment benefits in millions of EUR

2022

2023

2024

Defined benefit plans

50

47

43

- included in income from operations

39

25

23

- included in financial expense

10

21

20

- included in Discontinued operations

-

-

Defined contribution plans

400

376

365

- included in income from operations

400

376

365

- included in Discontinued operations

-

-

Post-employment benefits costs

449

423

408

Summary of the reconciliations for the DBO and plan assets

The adjacent tables contain the reconciliations for the DBO and plan assets.

Philips Group

Defined benefit obligations in millions of EUR

2023

2024

Balance as of January 1

1,621

1,605

Service cost

32

29

Interest cost

71

65

Employee contributions

3

4

Actuarial (gains) / losses

- demographic assumptions

-

- financial assumptions

48

20

- experience adjustment

2

9

(Negative) past service cost

(9)

(7)

Settlements

2

1

Benefits paid from plan

(104)

(63)

Benefits paid directly by employer

(39)

(36)

Translation differences and other

(22)

32

Balance as of December 31

1,605

1,659

Philips Group

Plan assets in millions of EUR

2023

2024

Balance as of January 1

1,122

1,089

Interest income on plan assets

49

45

Admin expenses paid

(1)

(1)

Return on plan assets excluding interest income

23

13

Employee contributions

3

4

Employer contributions

14

30

Settlements

-

Benefits paid from plan

(104)

(63)

Translation differences and other

(17)

33

Balance as of December 31

1,089

1,150

The past service costs in 2024 mainly relate to the retiree medical plans in Brazil and the pension plan in Switzerland. The past service costs in 2023 mainly relate to the retiree medical plans in Brazil.

Plan assets allocation

The asset allocation in the company’s DB plans as of December 31, 2024, was as follows:

Philips Group

Plan assets allocation in millions of EUR

2023

2024

Assets quoted in active markets

- Debt securities

513

460

- Equity securities

12

- Other1

182

431

Assets not quoted in active markets

- Debt securities

-

- Equity securities

31

-

- Other¹

363

247

Total assets

1,089

1,150

1    Other assets are primarily composed of cash and cash equivalents, real estate, investment funds, and assets managed by insurance companies.


The plan assets in 2024 contain 22% (2023: 36%) unquoted plan assets. Plan assets in 2024 do not include property occupied by or financial instruments issued by the company.



Assumptions

The mortality tables used for the company’s largest DB plans are:

Germany: Heubeck-Richttafeln 2018 Generational, assuming 93% of mortality rates for male retirees between ages 60 and 85. US: PRI-2012 Generational with MP2021 improvement scale + white collar adjustment.

The weighted averages of the assumptions used to calculate the DBO were as follows:

Philips Group

Assumptions used for defined benefit obligations in %

as of December 31,

Germany

United States

Other countries

Total

2023

2024

2023

2024

2023

2024

2023

2024

Discount rate

3.7%

3.3%

5.0%

5.1%

4.9%

4.2%

4.3%

4.0%

Inflation rate

2.0%

2.0%

2.3%

2.3%

2.5%

2.2%

2.2%

2.1%

Salary increase

2.8%

2.8%

0.0%

0.0%

4.3%

4.4%

3.0%

3.1%

Sensitivity analysis

The following table illustrates the approximate impact on the DBO from movements in key assumptions. The DBO was recalculated using a change in the assumptions of 1% which overall is considered a reasonably possible change. The impact on the DBO because of changes in discount rate is normally accompanied by offsetting movements in plan assets, especially when using matching strategies.

The average duration in years of the DBO of the DB plans is 10 (Germany: 11, US: 8, and other countries: 10) as of December 31, 2024 (2023: 10).

Philips Group

Sensitivity of key assumptions in millions of EUR

2023

2024

Increase

Discount rate (1% movement)

(123)

(123)

Pension increase (1% movement)

60

60

Salary increase (1% movement)

12

14

Longevity¹

32

34

Decrease

Discount rate (1% movement)

147

150

Pension increase (1% movement)

(52)

(52)

Salary increase (1% movement)

(11)

(12)

Longevity¹

(22)

(24)

1    The mortality table (i.e. longevity) also impacts the DBO. The above sensitivity table illustrates the impact on the DBO of a further 10% decrease / increase in the assumed rates of mortality for the company’s major plans. A 10% decrease / increase in assumed mortality rates equals a change of life expectancy by 0.5 - 1 year.

Cash flows and costs in 2025

Cash outflows in relation to post-employment benefits are estimated to amount to EUR 421 million in 2025, consisting of:

EUR 24 million employer contributions to DB plans (Germany: EUR 11 million, US: EUR 0 million, other countries: EUR 13 million);

EUR 45 million cash outflows in relation to DB plans (Germany: EUR 21 million, US: EUR 10 million, Other Countries: EUR 14 million); and

EUR 352 million employer contributions to DC plans (Netherlands: EUR 142 million, US: EUR 144 million, Other Countries: EUR 66 million).

The service and administration cost for 2025 is expected to amount to EUR 33 million for DB plans. The net interest cost for 2025 for the DB plans is expected to amount to EUR 18 million. The cost for DC pension plans in 2025 is equal to the expected DC cash flow.

21    Accrued liabilities


Accounting policies

Accrued liabilities are initially measured at fair value and subsequently at amortized cost and are derecognized when the obligation under the liability is discharged, cancelled or has expired.


Accrued liabilities are summarized as follows:

Philips Group

Accrued liabilities in millions of EUR

2023

2024

Personnel-related costs:

- Salaries and wages

791

601

- Accrued holiday entitlements

96

95

- Other personnel-related costs

93

101

Fixed-asset-related costs:

- Gas, water, electricity, rent and other

43

41

Communication and IT costs

61

55

Distribution costs

99

95

Sales-related costs:

- Commission payable

12

16

- Advertising and marketing-related costs

133

120

- Other sales-related costs

20

15

Material-related costs

138

124

Interest-related accruals

76

83

Other accrued liabilities

324

283

Accrued liabilities

1,887

1,630

22    Other liabilities


Accounting policies

Other liabilities are initially measured at fair value and subsequently at amortized cost and are derecognized when the obligation under the liability is discharged, cancelled or has expired.

The company recognizes contract liabilities if a payment is received or a payment is due (whichever is earlier) from a customer before the company transfers the related goods or services. Contract liabilities are recognized as revenue when the company performs under the contract (i.e., transfers control of the related goods or services to the customer).


Other non-current liabilities

Non-current liabilities were EUR 45 million as of December 31, 2024 (December 31, 2023: EUR 54 million).

Non-current liabilities are associated mainly with indemnification and non-current accruals.

Other current liabilities

Other current liabilities are summarized as follows:

Philips Group

Other current liabilities in millions of EUR

2023

2024

Accrued customer rebates

186

169

Other taxes including social security premiums

129

115

Other liabilities

98

70

Other current liabilities

414

354

Contract liabilities

Non-current contract liabilities were EUR 431 million as of December 31, 2024 (December 31, 2023: EUR 469 million) and current contract liabilities were EUR 1,699 million as of December 31, 2024 (December 31, 2023: EUR 1,809 million).

The current contract liabilities decreased by EUR 109 million, which is mainly driven by an decrease in deferred balances for customer service contracts.

The current contract liabilities as of December 31, 2023, resulted in revenue recognized of EUR 1,809 million in 2024.


23    Cash flow statement supplementary information


Accounting policies

Cash and cash equivalents

Cash and cash equivalents include all cash balances, certain money market funds and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash. Bank overdrafts are included in borrowings in current liabilities.

Cash flow statements

The cash flow statement is prepared using the indirect method. Cash flows related to interest and tax are included in operating activities. Assets and liabilities acquired as part of a business combination are included in investing activities (net of cash acquired). Dividends paid to shareholders are included in financing activities. Dividends received are included in operating activities.

Cash flows arising from transactions in a foreign currency are translated into the company’s functional currency using the exchange rate at the date of the cash flow. Cash flows from derivative instruments that are accounted for as cash flow hedges are classified in the same category as the cash flows from the hedged items. Cash flows from other derivative instruments are classified as investing cash flows.

Income taxes

Income taxes in 2023 include EUR 2 million of interest related to uncertain tax positions.

Cash paid for leases

In 2024, gross lease payments of EUR 252 million (2023: EUR 271 million; 2022: EUR 316 million) included interest of EUR 37 million (2023: EUR 27 million; 2022: EUR 25 million).

Net cash used for derivatives and current financial assets

In 2024, a total of EUR 38 million cash was received with respect to foreign exchange derivative contracts related to activities for liquidity management and with respect to the purchase and proceeds from current financial assets (2023: EUR 46 million outflow; 2022: EUR 72 million outflow)

Purchase and proceeds from non-current financial assets

In 2024, the net cash outflow is EUR 66 million. In 2023, the net cash outflow is EUR 44 million. In 2022, the net cash outflow is EUR 38 million.

Reconciliation of liabilities arising from financing activities

Certain items in the statements of cash flows do not correspond to the differences between the balance sheet amounts for the respective items, principally because of the effects of translation differences and consolidation changes.

Philips Group

Reconciliation of liabilities arising from financing activities in millions of EUR

Balance as of December 31, 2023

Cash flow

Currency effects and consolidation changes

Other¹

Balance as of December 31, 2024

Long term debt²

7,567

(53)

107

(74)

7,546

EUR bonds

4,569

340

8

4,917

USD bonds

1,325

83

1,408

Leases

1,074

(192)

24

167

1,073

Forward contracts³

396

(248)

148

Bank borrowings

203

(201)

(1)

1

Other long-term debt

Short term debt²

122

(30)

1

92

Short-term bank borrowings

122

(31)

1

92

Other short-term loans

-

1

1

Equity

(656)

(413)

516

(554)

Dividend payable

(3)

3

-

Forward contracts³

(394)

251

(143)

Treasury shares⁴

(262)

(410)

262

(411)

Total

(496)

1Besides non-cash, other includes interest paid on leases, which is part of cash flows from operating activities

2In this table, current portion of long-term debt is included in long-term debt (and excluded from short-term debt).

3The forward contracts are related to the share buyback program and LTI plans

4Cash flow in 2024 includes withholding tax for share buyback amounting to EUR 41 million.

Philips Group

Reconciliation of liabilities arising from financing activities in millions of EUR

Balance as of December 31, 2022

Cash flow

Currency effects and consolidation changes

Other¹

Balance as of December 31, 2023

Long term debt²

8,111

(210)

(96)

(238)

7,567

EUR bonds

4,061

497

11

4,569

USD bonds

1,378

(53)

1,325

Leases

1,082

(200)

(42)

235

1,074

Forward contracts³

858

(462)

396

Bank borrowings

705

(502)

203

Other long-term debt

28

(5)

(1)

(22)

Short term debt²

89

29

3

122

Short-term bank borrowings

89

46

(14)

122

Other short-term loans

(17)

17

-

Equity

(1,133)

(666)

1,143

(656)

Dividend payable

(4)

4

Forward contracts³

(858)

465

(394)

Treasury shares

(275)

(662)

675

(262)

Total

(848)

1Besides non-cash, other includes interest paid on finance leases, which is part of cash flows from operating activities

2In this table, current portion of long-term debt is included in long-term debt (and excluded from short-term debt).

3The forward contracts are related to the share buyback program and LTI plans

4Cash flow in 2023 includes withholding tax for share buyback amounting to EUR 55 million.


24    Contingencies


Accounting policies

Contingent liabilities

A contingent liability is a liability of uncertain timing and amount. Contingencies are not recognized in the balance sheet because they are dependent on the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the company or because the risk of loss is estimated to be possible but not probable or because the amount cannot be measured reliably. Pursuant to IAS 37, Provisions, Contingent Liabilities and Contingent Assets, certain information is not disclosed for legal proceedings for which the company concludes that disclosure can be expected to seriously prejudice the outcome of the matter.

Contingent assets

Contingent assets are disclosed if the inflow of economic benefits is probable, but not virtually certain. If the inflow of economic benefits becomes virtually certain, the asset would no longer be contingent and its recognition appropriate.

Financial guarantees

Philips’ policy is to provide guarantees and other letters of support only in writing. Philips does not stand by other forms of support. The company recognizes a liability at the fair value of the obligation at the inception of a financial guarantee contract. The guarantee is subsequently measured at the higher of the best estimate of the obligation or the amount initially recognized less, when appropriate, cumulative amortization.

Accounting estimates and judgments

Significant judgment is required to determine the likelihood of a potential outflow of resources. In addition, judgment is involved in determining whether the amount of an obligation can be measured with sufficient reliability. Contingencies involve inherent uncertainties including, but not limited to, court rulings, negotiations between affected parties, governmental actions, tax and environmental remediation. Contingent assets require management to apply judgment, especially to estimate the likelihood of the inflow of economic benefits and timing of recognition.

Guarantees

The total fair value of guarantees recognized on the balance sheet amounts to EUR nil million for both 2024 and 2023. Remaining off-balance-sheet business related guarantees on behalf of third parties and associates as of December 31, 2024, amounted to EUR 343 million (December 31, 2023: EUR 2 million). These mainly include bank guarantees secured for insurance companies to cover product liability-related cash flows related to the Respironics recall.

Environmental remediation

The company and its subsidiaries are subject to environmental laws and regulations. Under these laws, the company and/or its subsidiaries may be required to remediate the effects of certain manufacturing activities on the environment.

Legal proceedings

The company and certain of its group companies and former group companies are involved as a party in legal proceedings, regulatory and other governmental proceedings, including discussions on potential remedial actions, relating to such matters as competition issues, commercial transactions, product liability, participations, and environmental pollution.

While it is not feasible to predict or determine the outcome of all pending or threatened legal proceedings, regulatory and governmental proceedings, the company is of the opinion that the cases described below may have, or have had in the recent past, a significant impact on the company’s consolidated financial position, results of operations and cash flows.

Public investigations

In February 2023, the company received a statement of objections from the French Competition Authority (FCA) initiating a formal investigation to verify whether the company and certain other manufacturers of small domestic appliances breached antitrust rules in France in the period 2009-2014 through the alleged exchange of commercially sensitive information. The FCA issued its

decision in December 2024, in which it closed the case by concluding that the company did not violate antitrust rules in France.

Respironics recall

On June 14, 2021, Philips subsidiary Philips RS North America LLC (Philips Respironics) issued a voluntary recall notification in the United States and field safety notice outside the United States for specific Philips Respironics CPAP, Bi-Level PAP, and mechanical ventilator devices (the “Recalled Devices”).

Consent Decree

On August 26, 2021, the US Food and Drug Administration (FDA) commenced an inspection of the Philips Respironics manufacturing facility in Murrysville, Pennsylvania, and provided Philips Respironics with its preliminary inspectional observations on November 9, 2021. In the first half of 2024, Philips Respironics reached an agreement with the US Department of Justice (DoJ), acting on behalf of the FDA, regarding the terms of a consent decree to resolve the identified issues in relation to the inspection. The consent decree was entered by the court in April 2024.

DOJ investigation; state Attorneys General investigation

Philips Respironics and certain of Philips' subsidiaries in the US continue to cooperate with a criminal and civil investigation triggered by a subpoena received from the DOJ in 2022 to provide information related to events leading to the Respironics recall. In addition, the same entities are cooperating with an investigation initiated in 2024 by certain US state Attorneys General into trade practices related to the products subject of the Respironics recall. While the outflow of economic resources in connection with these investigations is assessed as probable, given the current stage of the investigations, the company is not able to reliably estimate the financial impact.

Product liability claims

Following the voluntary recall notification, a number of civil complaints have been filed in several jurisdictions against Philips Respironics and certain of its affiliates (including the company) generally alleging economic loss, personal injury and/or the potential for personal injury allegedly caused by the recalled devices.

In the US, consumer and commercial class action lawsuits have been filed alleging economic loss and medical monitoring claims. Individual personal injury lawsuits have also been filed. On October 8, 2021, a Multi-District Litigation (MDL) in the US District Court for the Western District of Pennsylvania was formed, and most of these class action and personal injury lawsuits have been consolidated in the MDL for pre-trial proceedings.

On September 7, 2023, Philips Respironics reached agreement on a class action settlement in relation to the economic loss class action complaint, for which the company recorded a EUR 575 million provision in the first quarter of 2023. Under the agreement, which became final in May 2024, the Philips defendants agreed to provide predefined cash awards to all eligible participants in the US depending on the type of device, extended warranties on all remediated devices provided as part of Respironics’ recall program, and an additional cash award if they return the recalled device

to Philips Respironics. The settlement also provides for compensation for individuals who acquired replacement devices in the market after the recall and prior to the announcement of the settlement. The settlement also provides for compensation to private insurers and other third-party payers. The claims period concluded on August 9, 2024, and since then, the Claims Administrator has been processing claims, calculating relevant payment amounts, and making payments to eligible class members.

On May 9, 2024, Philips Respironics reached agreement on a class action settlement in relation to the medical monitoring class action complaint. Under the agreement, which became final in January 2025, the Philips defendants agreed to pay USD 25 million into a Qualified Settlement Fund for the benefit of eligible class members. The USD 25 million amount is a fixed cap on the amount of the settlement and will be used to fund, among other things, research related to the advancement of public knowledge regarding the detection, diagnosis, and treatment of those injuries alleged to have been caused by use of the recalled devices.

Also on May 9, 2024, Philips Respironics reached agreement on a private settlement in relation to US personal injury claims. Under the agreement, the Philips defendants have agreed (subject to a termination right) to pay USD 1.075 billion to consist of USD 25 million in notice and administrative costs and USD 1.050 billion into a Personal Injury Settlement Fund. The settlement is an opt-in agreement, by which eligible claimants would release all of their personal injury claims in exchange for participation in the Personal Injury Settlement Fund. To participate in the settlement, an eligible claimant must have experienced a qualifying injury. The Philips parties had the right to terminate the settlement if less than 95% of eligible claimants would register for the settlement by the registration deadline on January 31, 2025. As at the registration deadline registrations exceeded 95%, the settlement has now become final with payment expected in the first half of 2025. For any individuals who declined to participate in, or are ineligible for, the settlement, and who wish to litigate their personal injury claims, they will need to identify themselves after the registration deadline and then comply with court orders imposing certain discovery obligations on them, including with respect to early disclosure of their evidence on causation.

Philips Respironics and certain of its affiliates (including the company) continue to be defendants in consumer class action lawsuits in Australia, Canada and Israel and collective or group actions in Chile, France, Germany, Italy and the Netherlands alleging economic loss and/or personal injury.

While the company believes it is probable that ongoing lawsuits will in the aggregate lead to an outflow of economic resources for Philips Respironics or other Philips entities, given the significant uncertainty regarding the nature of the relevant events and potential obligations, the company is not currently able to reliably estimate the amount of the obligation associated with these various lawsuits. The final outcome of the lawsuits and the remaining cost to resolve them cannot currently be determined due to a number of variables, including the early stages of some of these proceedings and uncertainty regarding the number of remaining claimants, their allegations, and their alleged injuries. The courts have not yet been asked to decide the question of whether any of the claimed injuries could have been caused by use of the recalled devices.

In 2024, the company and its insurance carriers reached an agreement on the basis of which the insurance carriers agreed to contribute EUR 540 million to cover product liability-related cash flows related to the Respironics recall. This amount was paid in full to the company in 2024.

Securities claims

On August 16, 2021, a securities class action complaint was filed against the company, its former CEO and its former CFO in the US District Court for the Eastern District of New York alleging violations of the Securities Exchange Act of 1934 causing damage to investors. On September 23, 2024, following amendments to the complaint, the court issued a decision dismissing all claims against the company’s former CFO and the former head of Philips Respironics but denying in part the motion to dismiss with respect to the company and its former CEO. The Court narrowed the class period and dismissed all claims based on statements made before 2018. The Court also dismissed all claims relating to certain categories of alleged misstatements. On October 28, 2024, the company and its former CEO moved for reconsideration of that portion of the decision denying their motion, and that motion was pending as of December 31, 2024.

In the Netherlands, six different parties (including European Investors – VEB and Deminor Litigation Funding) representing both retail and institutional investors have approached the company, holding the company and its directors liable for alleged misstatements and failures to make timely disclosures in relation to the Respironics recall. As of December 31, 2024, one party has filed a civil complaint with the Amsterdam District Court.

It is the company’s assessment that it is possible but not probable that these cases could lead to a certain outflow of economic resources. The company is not able to reliably estimate the financial impact, if any. An adverse outcome of these cases could have a material impact on the company’s consolidated financial position, results of operations and cash flows.

SEC investigation

Following earlier requests for information from the US Securities and Exchange Commission (SEC), in March 2024, the company received a subpoena from the SEC relating to the Respironics Recall and compliance with relevant securities laws. The investigation is not an indication that the SEC or its staff have determined that any violations of law have occurred. The company is fully cooperating with the investigation.It is the company's assessment that it is possible but not probable that this investigation could lead to certain outflow of resources. The company is not able to reliably estimate the financial impact, if any.

Other claims

On October 12, 2021, SoClean, a company offering ozone-based cleaning products for sleep devices, filed a lawsuit in the US against the company and certain of its affiliates alleging that the defendants’ statements about the potential adverse effect ozone cleaning may have on the recalled devices has significantly damaged its business. Philips believes that the claim is without merit and will vigorously defend itself. In November 2023, the court ruled on one of the motions to dismiss filed by defendants and partially dismissed some of SoClean’s claims. On January 4, 2024, Philips and its affiliates filed their answer and counterclaims against SoClean and one of its affiliates. In

October 2024, the court partially dismissed some of the counterclaims. Philips and its affiliates are also pursuing claims against SoClean and one of its affiliates for contribution for personal injury settlement costs and/or personal injury liability incurred by the company or its affiliates. SoClean and its affiliate have sought to dismiss those claims, but the court has not yet reached a decision.

In addition, some of Philips Respironics’ business partners, such as distributors and durable medical equipment providers, have filed or threatened to file claims alleging economic losses suffered as a consequence of the voluntary recall. Philips Respironics is engaging with certain of its business partners on the level of compensation they allege to be entitled to under Philips Respironics’ replacement program of the recalled devices. As of December 31, 2024, most of these claims have been resolved.

It is the company’s assessment that it is possible but not probable that these cases could lead to a certain outflow of economic resources. The company is not able to reliably estimate the financial impact, if any. In the event of an adverse outcome, these matters could have a material impact on the company’s consolidated financial position, results of operations and cash flows.

To date, other than for the economic loss, medical monitoring and personal injury settlements discussed above, no provisions have been recorded for the litigation and investigations in the US and Canada associated with the Respironics field action.

Other

In the second half of 2023, Electro Medical Systems S.A., a manufacturer of, among others, medical devices for dental prophylaxis, filed a lawsuit against the company alleging that the company materially breached its duties under a cooperation agreement entered into between the parties in 2016, claiming damages in excess of EUR 300 million, alleging loss of profit and lost increase in brand value. Philips disagrees with the allegations and has submitted its statement of defense in June 2024. The first Court hearing is expected to take place in the first half of 2025.

Miscellaneous

For details on other contractual obligations, please refer to liquidity risk in Details of treasury and other financial risks.

25    Related-party transactions

In the normal course of business, Philips purchases and sells goods and services from/to various related parties in which Philips typically holds between 20% and 50% equity interest and has significant influence. These transactions are generally conducted with terms comparable to transactions with third parties.

Philips Group

Related-party transactions in millions of EUR

2022

2023

2024

Sales of goods and services

111

106

89

Purchases of goods and services

46

42

50

Receivables from related parties

55

18

25

Payables to related parties

2

2

2

The above table includes sales transactions between Philips and PMC of EUR 88 million in 2024 (2023: EUR 87 million; 2022: EUR 101 million), under which PMC has leased the equipment to the ultimate customer. In addition, as part of its S&RC operations in the US, Philips Medical Capital LLC funded durable medical equipment (DMEs) providers, through loans and leases. PMC-funded transactions these DMEs entered into with Philips amount to EUR 75 million in 2024 (2023: EUR 117 million; 2022: EUR 117 million). The associated costs of these funding transactions are borne by the ultimate customer and settled directly with Philips Medical Capital LLC. Philips Medical Capital LLC, a Pennsylvania limited liability company, is owned 60% by De Lage Landen Financial Services, Inc. (DLL) and 40% by Philips Electronics North America Corporation (Philips).

On August 14, 2023, it was announced that Exor N.V. acquired a 15% minority stake in Philips shares and entered into a relationship agreement with the company. Pursuant to the relationship agreement with the company, Exor N.V. proposed one member to the Supervisory Board, who was confirmed at the 2024 Annual General Meeting of Shareholders on May 7, 2024. From this date, Exor is considered a related party for reporting purposes. For remuneration details of Benoît Ribadeau-Dumas as the Exor nominee see Information on remuneration. Exor has agreed to maintain its shareholding of at least 15% up to 20% for three years from August 13, 2023. Philips did not have other reportable transactions with Exor during the period ended December 31, 2024.

In light of the composition of the Executive Committee, the company considers the members of the Executive Committee and the Supervisory Board to be the key management personnel as defined in IAS 24 Related Party Disclosures.

For remuneration details of the Executive Committee, the Board of Management and the Supervisory Board see Information on remuneration.

For Post-employment benefit plans see Post-employment benefits.


26    Share-based compensation


Accounting policies

Philips share-based compensation is an equity-settled plan made of restricted and performance shares. The restricted shares are subject to a three-year service condition and the performance shares include both market and non-market-based performance conditions, in addition to a three-year service condition. These shares are awarded to the Executive Committee and senior management.

The grant date fair value of market-based performance shares is determined through a Monte Carlo valuation model. The grant date fair value of non-market-based performance shares and restricted shares is determined as the share price at the grant date as participants receive notional dividends throughout the vesting period. The costs of share-based compensation plans are revised for expected performance (non-market-based performance shares) and forfeiture and are spread evenly over the service period.

Share-based compensation is recognized over the service period as personnel expense in the consolidated statement of income, with a corresponding increase to equity.

Accounting estimates and judgments

The use of a valuation model to determine market-based performance share fair value requires estimates for the expected volatility of the Philips share price and correlation among input variables.

At each reporting date, Philips calculates the expected realization of the non-market-based performance targets and revises the expected share-based compensation expense. The cumulative effect is recorded in the consolidated statement of income with a corresponding adjustment in equity.

No expense is recognized for awards that do not ultimately vest because non-market performance and/or service conditions have not been met.

The purpose of the share-based compensation plans is to align the interests of management with those of shareholders by providing incentives to improve the company’s performance on a long-term basis, thereby increasing shareholder value.


The company has the following plans:

performance shares: rights to receive common shares in the future based on performance and service conditions

restricted shares: rights to receive common shares in the future based on a service condition

options on its common shares

Since 2013 the Board of Management and other members of the Executive Committee are only granted performance shares*. Performance shares as well as restricted shares can be granted to executives, certain selected employees and new employees. Prior to 2013, options were also granted.

Under the terms of employee stock purchase plans established by the company in various countries, employees are eligible to purchase a limited number of Philips shares at discounted prices through payroll withholdings.

Share-based compensation costs were EUR 104 million (2023: EUR 97 million; 2022: EUR 104 million). This includes the employee stock purchase plan of EUR 8 million, which is not a share-based compensation that affects equity. In the Consolidated statements of changes in equity EUR 96 million is recognized in 2024 and represents the costs of the share-based compensation plans. The amount recognized as an expense is adjusted for forfeitures. USD-denominated performance shares, restricted shares and options are granted to employees in the US only.

Performance shares

The performance is measured over a three-year performance period. The performance shares have three performance conditions: relative Total Shareholders’ Return (TSR) compared to a peer group of 20 companies including Philips (20 companies including Philips (2023: 20 companies; 2022: 20 companies, 2021: 20    companies); adjusted Earnings Per Share growth** (EPS); and a sustainability criterion. The criterion is based on three Sustainable Development Goals (SDG) as defined by the United Nations that are included in Philips’ strategy on sustainability (refer to Environment, Social and Governance). The performance conditions are weighted as follows: TSR 50%, EPS 40% and SDG 10% (applicable for 2021, 2022 and 2023 plans). As of 2024 the performance conditions are weighted as follows: TSR 40%, EPS 40% and SDG 20%.

The performance shares vest three years after the grant date. The number of performance shares that will vest is dependent on achieving the performance conditions provided that the grantee is still employed with the company.

The amount recognized as an expense is adjusted for actual performance of adjusted EPS growth** and the actual realization of the SDGs, since these are non-market performance conditions. It is not adjusted for non-vesting or extra vesting of performance shares due to a relative TSR performance that differs from the performance anticipated at the grant date, since this is a market-based performance condition.

The fair value of the performance shares is measured based on Monte Carlo simulation, which takes into account dividend payments between the grant date and the vesting date by including reinvested dividends as well as the market conditions expected to impact relative Total Shareholders’ Return performance in relation to selected peers. The following weighted-average assumptions were used for the 2024 grants:

risk-free rate: 2.72%

expected share price volatility: 39%

The assumptions were used for these calculations only and do not necessarily represent an indication of management’s expectation of future developments for other purposes. The company has based its volatility assumptions on historical experience measured over a 10-year period.

A summary of the status of the company’s performance share plans as of December 31, 2024, and changes during the year are presented in the following table:

Philips Group

Performance shares

2023

2024

Shares

Weighted average grant-date fair value

Shares

Weighted average grant-date fair value

EUR-denominated

Outstanding as of January 1

4,385,837

33.13

5,392,035

27.22

Granted

2,299,280

23.65

2,265,462

28.94

Notional dividends¹

240,977

27.15

218,782

24.35

Vested/Issued

(154,987)

44.08

(169,524)

50.30

Forfeited

(489,295)

27.05

(451,052)

25.07

Adjusted quantity²

(889,777)

44.27

(788,865)

50.65

Outstanding as of December 31

5,392,035

27.22

6,466,838

24.41

USD-denominated

Outstanding as of January 1

2,749,983

36.66

3,261,048

29.73

Granted

1,667,812

25.96

1,733,891

31.07

Notional dividends¹

152,750

29.78

142,892

26.85

Vested/Issued

(121,760)

48.33

(80,151)

61.37

Forfeited

(596,846)

28.95

(489,195)

28.35

Adjusted quantity²

(590,890)

48.28

(377,857)

61.37

Outstanding as of December 31

3,261,048

29.73

4,190,628

26.89

1    Dividend declared in 2024 on outstanding shares.

2    Adjusted quantity includes the adjustments made to Performance shares outstanding due to updates on the actual TSR, EPS, and SDG.


As of December 31, 2024, a total of EUR 128 million of unrecognized compensation costs relate to non-vested performance shares (as of December 31, 2023 EUR 102 million; as of December 31, 2022 EUR 103 million). These costs are expected to be recognized over a weighted-average period of 2.0 years.

Restricted shares

The fair value of restricted shares is equal to the share price at grant date. The company issues restricted shares that, in general, have a three-year cliff-vesting period provided that the grantee is still employed with the company.

A summary of the status of the company’s restricted shares as of December 31, 2024, and changes during the year are presented in the following table:

Philips Group

Restricted shares

2023

2024

Shares

Weighted average grant-date fair value

Shares

Weighted average grant-date fair value

EUR-denominated

Outstanding as of January 1

2,321,250

30.73

2,995,252

23.39

Granted

1,471,975

16.35

1,367,380

22.64

Notional dividends¹

135,791

27.98

52,481

22.57

Vested/Issued

(595,796)

35.07

(627,855)

35.10

Forfeited

(337,968)

24.46

(263,352)

21.06

Outstanding as of December 31

2,995,252

23.39

3,523,906

21.17

USD-denominated

Outstanding as of January 1

2,345,263

33.87

2,654,193

26.04

Granted

1,284,761

17.72

1,460,620

24.59

Notional dividends¹

126,498

31.12

48,774

24.33

Vested/Issued

(679,430)

37.83

(582,404)

40.51

Forfeited

(422,899)

26.79

(253,953)

23.43

Outstanding as of December 31

2,654,193

26.04

3,327,230

23.04

1    Dividend declared in 2024 on outstanding shares.


As of December 31, 2024, a total of EUR 73 million of unrecognized compensation costs relate to non-vested restricted shares (as of December 31, 2023 EUR 63 million; as of December 31, 2022 EUR 72 million). These costs are expected to be recognized over a weighted-average period of 1.9 years.

Option plans

Retention option plan

In April 2023, the company granted non-recurring retention options that expire after 10 years. These options vest after two years, provided that the grantee is still employed with the company.

The fair value of the options under this plan is measured based on Black-Scholes-Merton option pricing model. The expected life of the options is calculated as the average between vesting period (two years) and the total contractual life (10 years).

The following tables summarize information about the company’s options as of December 31, 2024, and changes during the year:

Philips Group

Options on EUR-denominated listed share

Options

Weighted average exercise price

Outstanding as of January 1, 2024

3,660,000

22.16

Exercised

(3,793)

22.16

Forfeited

(259,668)

22.16

Outstanding as of December 31, 2024

3,396,539

22.16

The total intrinsic value of EUR-denominated options exercised during 2024 was EUR 15,475. Cash received during 2024 from exercises under the company’s options plans amounted to EUR 84,053. As of December 31, 2024, there were 39,983 options exercisable with a weighted average remaining contractual term of 0.4 years and total intrinsic value of EUR 89,562.
The weighted average remaining contractual term for options outstanding as of
December 31, 2024, was 8.1 years.

Philips Group

Options on USD-denominated listed share

Options

Weighted average exercise price

Outstanding as of January 1, 2024

1,929,000

24.42

Forfeited

(291,236)

24.42

Outstanding as of December 31, 2024

1,637,764

24.42

There were no exercisable USD-denominated options as of December 31, 2024. The weighted average remaining contractual term for options outstanding as of December 31, 2024, was 8.0 years.

As of December 31, 2024, a total of EUR 2 million of unrecognized compensation costs relate to outstanding options. These costs are expected to be recognized over a weighted-average period of 0.3 years.

Philips Group

Outstanding options in millions of EUR unless otherwise stated 

Number of options

Intrinsic value

Weighted average remaining contractual term in years

EUR-denominated

20-25

3,396,539

8

8.1

Outstanding options

3,396,539

8

8.1

USD-denominated

20-25

1,637,764

1

8.0

Outstanding options

1,637,764

1

8.0

*    Executive Committee members can receive restricted share rights as a sign-on LTI awards upon hiring.

**    The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Equity.


27    Information on remuneration

Remuneration of the Executive Committee

In 2024, the total remuneration costs relating to the Executive Committee (consisting of 15 members throughout the year, including the members of the Board of Management) amounted to EUR 32.0 million (2023: EUR 32.8 million; 2022: EUR 25.6 million) and consisted of the elements in the following table.

Philips Group

Remuneration costs of the Executive Committee1 in EUR

2022

2023

2024

Base salary/Base compensation

9,528,279

8,729,458

9,362,765

Annual incentive²

208,370

11,405,130

5,292,388

Performance shares³

11,242,581

7,272,815

12,673,614

Stock options

13,358

90,503

Restricted share rights³

1,191,529

1,907,511

999,374

Pension allowances⁴

1,949,204

1,346,937

1,197,695

Pension scheme costs

288,179

260,554

269,092

Other compensation⁵

1,216,163

1,900,224

2,136,668

Total

25,624,305

32,835,987

32,022,099

1    The Executive Committee consisted of 13 members as per December 31, 2024 (2023: 13 members; 2022: 13 members)

2    The annual incentives are related to the performance in the year reported which are paid out in the subsequent year.

3    Costs of performance shares and restricted share rights are based on accounting standards (IFRS) and do not reflect the value of performance shares at the vesting/release date

4    Pension allowances are gross taxable allowances paid to the Executive Committee members in the Netherlands. These allowances are part of the pension arrangement

5    The stated amounts mainly concern (share of) allowances to members of the Executive Committee that can be considered as remuneration. In a situation where such a share of an allowance can be considered as (indirect) remuneration (for example, private use of the company car), then the share is both valued and accounted for here. The method employed by the fiscal authorities is the starting point for the value stated

Remuneration of the Board of Management

In 2024, the total remuneration costs relating to the members of the Board of Management amounted to EUR 10.3 million (2023: EUR 9.9 million; 2022: EUR 8.5 million). See the following table.

Philips Group

Remuneration costs of individual members of the Board of Management in EUR

Base compensation/salary

Annual incentive¹

Performance shares²

Restricted share rights²

Pension allowances

Pension scheme costs

Other compensation³

Total costs

2024

R. Jakobs

1,237,500

927,750

1,692,087

274,925

32,218

83,870

4,248,350

C. Hanneman⁴

175,545

98,372

104,606

35,247

7,775

23,089

444,633

A. Bhattacharya

622,500

351,934

1,424,219

129,788

25,478

963,596

3,517,514

M.J. van Ginneken

652,500

422,374

740,101

128,675

32,218

74,227

2,050,095

2,688,045

1,800,429

3,961,013

568,635

97,689

1,144,781

10,260,593

2023

R. Jakobs

1,200,000

2,004,480

968,922

267,798

31,891

109,256

4,582,347

A. Bhattacharya

810,000

1,075,939

793,429

197,133

31,891

94,516

3,002,907

M.J. van Ginneken

630,000

846,922

614,840

125,298

31,891

53,446

2,302,397

2,640,000

3,927,341

2,377,191

590,228

95,673

257,218

9,887,650

2022

R. Jakobs⁵

256,438

112,737

57,973

6,012

11,507

444,667

F.A. van Houten⁵

1,041,849

208,370

2,930,068

444,051

22,121

42,533

4,688,992

A. Bhattacharya

806,250

763,140

237,250

28,133

61,308

1,896,081

M.J. van Ginneken

626,250

585,490

141,622

28,133

35,343

1,416,837

2,730,788

208,370

4,391,434

880,896

84,398

150,691

8,446,577

1    The annual incentives are related to the performance in the year reported which are paid out in the subsequent year.

2    Costs of performance shares and restricted share rights are based on accounting standards (IFRS) and do not reflect the value of performance shares at the vesting/release date

3    The stated amounts mainly concern (share of) allowances to members of the Board of Management that can be considered as remuneration. In a situation where such a share of an allowance can be considered as (indirect) remuneration (for example, private use of the company car), then the share is both valued and accounted for here. The method employed by the fiscal authorities is the starting point for the value stated.

4    As per October 1, 2024, Charlotte Hanneman was appointed as CFO of the company. This table includes actual costs incurred as of this date and until the end of the year.

5    As per October 15, 2022, Roy Jakobs was appointed as CEO of the company. The table includes actual costs incurred in respect of the remuneration received by Mr Van Houten and Mr Jakobs, respectively, as CEO.


The accumulated annual pension entitlements and the pension costs of individual members of the Board of Management are as follows:

Philips Group

Accumulated annual pension entitlements and pension-related costs in EUR unless otherwise stated

Age as of December 31, 2024

Accumulated annual pension as of December 31, 2024

Total pension related costs

R. Jakobs

50

60,886

307,143

C. Hanneman

46

1,298

100,072

M.J. van Ginneken

51

58,167

160,894

Pension costs

568,109

When pension rights are granted to members of the Board of Management, necessary payments (if insured) and all necessary provisions are made in accordance with the applicable accounting principles. In 2024, no (additional) pension benefits were granted to former members of the Board of Management.

Remuneration of the Supervisory Board

The remuneration of the members of the Supervisory Board amounted to EUR 1.7 million (2023: EUR 1.5 million; 2022: EUR 1.5 million). Former members received no remuneration.

The members of the Supervisory Board do not receive any share-based remuneration. Therefore, as of December 31, 2024, the members of the Supervisory Board held no stock options, performance shares or restricted shares.

The individual members of the Supervisory Board received, by virtue of the positions they held, the following remuneration:


Philips Group

Remuneration of the Supervisory Board in EUR

Membership

Committees

Other compensation¹

Total

2024

F. Sijbesma

166,500

37,500

28,945

232,945

P.A.M. Stoffels

123,500

37,500

13,269

174,269

S.K. Chua

107,500

19,250

26,107

152,857

M.E. Doherty

107,500

29,000

20,289

156,789

A.M. Harrison

107,500

15,000

7,769

130,269

P. Löscher

107,500

34,250

18,769

160,519

I. Nooyi

107,500

15,000

20,154

142,654

S. Poonen

107,500

16,771

19,267

143,538

D.E.I. Pyott

107,500

28,750

18,769

155,019

B. Ribadeau-Dumas

70,390

9,822

17,986

98,198

H. Verhagen

107,500

26,229

16,267

149,996

1,220,390

269,072

207,592

1,697,054

2023

F. Sijbesma

155,000

35,000

16,345

206,345

P.A.M. Stoffels

115,000

35,000

22,269

172,269

S.K. Chua

100,000

18,000

22,269

140,269

M.E. Doherty

100,000

27,000

27,269

154,269

A.M. Harrison

100,000

14,000

19,769

133,769

P. Löscher

100,000

32,000

17,269

149,269

I. Nooyi

100,000

14,000

17,269

131,269

S. Poonen

100,000

18,000

19,769

137,769

D.E.I. Pyott

100,000

35,000

19,769

154,769

H. Verhagen

100,000

14,000

7,269

121,269

1,070,000

242,000

189,266

1,501,266

2022

F. Sijbesma

155,000

35,000

16,345

206,345

P.A.M. Stoffels

115,000

35,000

27,269

177,269

S.K. Chua

100,000

18,000

22,269

140,269

N. Dhawan

35,616

6,411

5,808

47,836

M.E. Doherty

100,000

27,000

24,769

151,769

A.M. Harrison

100,000

14,000

12,269

126,269

P. Löscher

100,000

32,000

24,769

156,769

I. Nooyi

100,000

14,000

17,269

131,269

S. Poonen

100,000

18,000

17,269

135,269

D.E.I. Pyott

100,000

35,000

17,269

152,269

H. Verhagen

100,000

14,000

7,269

121,269

1,105,616

248,411

192,574

1,546,602

1    The amounts mentioned under other compensation relate to the fee for intercontinental travel, inter-European travel, the Philips product arrangement and the annual fixed net expense allowance.

Supervisory Board members’ and Board of Management members’ interests in Philips shares

Members of the Supervisory Board and of the Board of Management are prohibited from writing call and put options or similar derivatives of Philips securities.

Philips Group

Shares held by Board members1 2 in number of shares

December 31, 2023

December 31, 2024

R. Jakobs

126,809

134,298

M.J. van Ginneken

129,447

137,753

P. Stoffels

17,759

18,366

S. Poonen

3,133

3,240

I. Nooyi

3,238

3,348

D. Pyott

19,848

20,526

S.K. Chua

2,089

2,160

F. Sijbesma

25,000

25,854

M. Harrison

1,567

1,620

P. Löscher

21,658

22,398

1    Reference date for board membership is December 31, 2024

2    The total shares held by the members of the Board of Management is less than 1% of the company's issued share capital.


28    Fair value of financial assets and liabilities


Accounting policies

Fair value hierarchy

For financial reporting purposes, financial instruments are categorized into Level 1, 2 or 3, based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, which are as follows:

Level 1 – inputs are quoted prices (unadjusted) for identical assets or liabilities in active markets that the company can access at the measurement date.

Level 2 – all significant inputs (other than quoted prices included within Level 1) are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices).

Level 3 – one or more of the significant inputs are not based on observable market data, such as third-party pricing information without adjustments, for the asset or liability.

Transfers between levels of the fair value hierarchy are recognized at the end of the reporting period during which the change has occurred.

Offsetting and master netting agreements

Financial assets and liabilities are offset and the net amount is reported in the balance sheet when, and only when, the company currently has a legally enforceable right to set-off the amounts and the group intends either to settle them on a net basis or to realize the asset and settle the liability simultaneously.

Accounting estimates and judgments

Determining the fair value of financial instruments requires the use of estimates according to the method applied for each type of financial asset of liability. The estimated fair value of financial instruments has been determined by the company using available market information and appropriate valuation methods. The estimates presented are not necessarily indicative of the amounts that will ultimately be realized by the company upon maturity or disposal. The use of different market assumptions and/or estimation methods may have a material effect on the estimated fair value amounts.

Specific valuation techniques used to value financial instruments include:

Level 1

Instruments included in level 1 are composed primarily of listed equity investments classified as financial assets carried at fair value through profit or loss or carried at fair value through other comprehensive income (OCI). The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.

Level 2

The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives or convertible bond instruments) is determined by using valuation techniques. These valuation techniques maximize the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to fair value an instrument are based on observable market data, the instrument is included in level 2. The fair value of derivatives is calculated as the present value of the estimated future cash flows based on observable interest yield curves, basis spread and foreign exchange rates. The valuation of convertible bond instruments uses observable market quoted data for the options and present value calculations using observable yield curves for the fair value of the bonds.

The fair value of debt is estimated on the basis of the quoted market prices for certain issuances, or on the basis of discounted cash flow analysis using market rates plus Philips’ spread for the particular tenors of the borrowing arrangement. Accrued interest is not included within the carrying amount or estimated fair value of debt.

Level 3

If one or more of the significant inputs are not based on observable market data, such as third-party pricing information without adjustments, the instrument is included in level 3.

The fair value of contingent consideration is dependent on the terms of the respective acquisition agreement that may require Philips to pay additional consideration to former shareholders if specified future events occur or conditions are met, such as the achievement of certain regulatory milestones or the achievement of certain commercial milestones. The fair value of the contingent consideration provision is generally determined using a probability-weighted and a risk-adjusted approach to estimate the achievement of future regulatory and commercial milestones, respectively. The discount rates used in the risk adjusted approach reflect the inherent risk related to achieving the commercial milestones. Both regulatory and commercial milestones are discounted for the time value of money at risk-free rates. The fair value measurement is based on management’s estimates and assumptions and hence classified as Level 3 in the fair value hierarchy.

The following tables show the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. Fair value information for financial assets and financial liabilities not carried at fair value is not included if the carrying amount is a reasonable approximation of fair value.


Philips Group

Fair value of financial assets and liabilities in millions of EUR 

2023

2024

Carrying amount

Estimated fair value¹

Carrying amount

Estimated fair value¹

Level 1

Level 2

Level 3

December 31

Financial assets

Carried at fair value:

Debt instruments

226

226

231

231

231

Equity instruments

2

2

3

3

2

Other financial assets

56

56

54

54

53

-

Financial assets carried at FVTP&L

284

284

288

288

53

234

Debt instruments

27

27

21

21

20

Equity instruments

231

231

222

222

4

218

Current financial assets

3

3

2

2

2

Receivables - current

32

32

Receivables - non-current

Financial assets carried at FVTOCI

293

293

244

244

4

20

220

Derivative financial instruments

48

48

77

77

72

6

Financial assets carried at fair value

624

624

609

609

4

146

460

Carried at (amortized) cost:

Cash and cash equivalents

1,869

2,401

Loans and receivables:

Current loans receivables

-

-

Other non-current loans and receivables

77

102

Receivables - current

3,701

3,672

Receivables - non-current

193

208

Financial assets carried at (amortized) cost

5,840

6,382

Total financial assets

6,465

6,992

Financial liabilities

Carried at fair value:

Contingent consideration

(115)

(115)

(113)

(113)

(113)

Financial liabilities carried at FVTP&L

(115)

(115)

(113)

(113)

(113)

Derivative financial instruments

(43)

(43)

(63)

(63)

(63)

Financial liabilities carried at fair value

(158)

(158)

(176)

(176)

(63)

(113)

Carried at (amortized) cost:

Accounts payable

(1,917)

(1,830)

Interest accrual

(76)

(83)

Debt (Corporate bonds and leases)

(6,969)

(6,798)

(7,397)

(7,363)

(6,290)

(1,073)

Debt (excluding corporate bonds and leases)

(721)

(241)

Financial liabilities carried at (amortized) cost

(9,682)

(9,551)

Total financial liabilities

(9,840)

(9,728)

1    For Cash and cash equivalents, Loans and receivables, Accounts payable, interest accrual and Debt (excluding corporate bonds and leases), the carrying amounts approximate fair value because of the nature of these instruments (including maturity and interest conditions) and therefore fair value information is not included in the table above.


The following table shows the reconciliation from the beginning balance to the end balance for Level 3 fair value measurements.

Philips Group

Reconciliation of Level 3 fair value measurements in millions of EUR

2023

2024

Financial assets

Financial liabilities

Financial assets

Financial liabilities

Balance as of January 1

549

113

503

115

Acquisitions

6

Purchase

85

86

Sales

(56)

(48)

Utilizations

(20)

(9)

Recognized in profit and loss:

other business income

16

2

financial income and expenses¹

(43)

1

(23)

3

Recognized in other comprehensive income²

(40)

(2)

(8)

3

Receivables held to collect and sell

6

(32)

Reclassification

1

(18)

-

Balance as of December 31

503

115

460

113

1    Refer to Financial income and expenses for details. 

2    Includes translation differences


Offsetting and master netting agreements

Transactions in derivatives are subject to master netting and set-off agreements. In the case of certain termination events, under the terms of the master agreement, Philips can terminate the outstanding transactions and aggregate their positive and negative values to arrive at a single net termination sum (or close-out amount). This contractual right is subject to the following:

The right may be limited by local law if the counterparty is subject to bankruptcy proceedings.

The right applies on a bilateral basis.

Philips Group

Financial assets subject to offsetting, enforceable master netting arrangements or similar agreements in millions of EUR

2023

2024

Derivatives

Gross amounts of recognized financial assets

48

72

Gross amounts of recognized financial liabilities offset in the balance sheet

Net amounts of financial assets presented in the balance sheet

48

72

Related amounts not offset in the balance sheet

Financial instruments

(34)

(45)

Net amount

13

27

Philips Group

Financial liabilities subject to offsetting, enforceable master netting arrangements or similar agreements in millions of EUR

2023

2024

Derivatives

Gross amounts of recognized financial liabilities

(43)

(63)

Gross amounts of recognized financial assets offset in the balance sheet

Net amounts of financial liabilities presented in the balance sheet

(43)

(63)

Related amounts not offset in the balance sheet

Financial instruments

34

45

Net amount

(9)

(18)

29    Details of treasury and other financial risks


Accounting policies

Derivative financial instruments, including hedge accounting

The company uses derivative financial instruments principally to manage its foreign currency risks and, to a more limited extent, interest rate and commodity price risks. All derivative financial instruments are accounted for at the trade date and classified as current or non-current assets or liabilities based on the maturity date or the early termination date. The company measures all derivative financial instruments at fair value that is derived from the market prices of the instruments, calculated on the basis of the present value of the estimated future cash flows based on observable interest yield curves, basis spread, credit spreads and foreign exchange rates, or derived from option pricing models, as appropriate. Gains or losses arising from changes in fair value of derivatives are recognized in the Consolidated statements of income, except for derivatives that are highly effective and qualify for cash flow or net investment hedge accounting.

Changes in the fair value of a derivative that is highly effective and that is designated and qualifies as a cash flow hedge are recorded in other comprehensive income (OCI) until the Consolidated statements of income are affected by the variability in cash flows of the designated hedged item. To the extent that the hedge is ineffective, changes in the fair value are recognized in the Consolidated statements of income

Changes in the fair value of foreign exchange forward contracts attributable to forward points and changes in the time value of the option contracts are deferred in the cash flow hedges reserve within equity. The deferred amounts are recognized in the Consolidated statements of income against the related hedged transaction when it occurs.

The company formally assesses, both at the hedge’s inception and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is established that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the company discontinues hedge accounting prospectively. When hedge accounting is discontinued because a forecasted transaction is expected not to occur, the company continues to carry the derivative on the Consolidated balance sheets at its fair value, and gains and losses that were accumulated in OCI are recognized immediately in the same line item as they relate to in the Consolidated statements of income.

Foreign currency differences arising upon retranslation of financial instruments designated as a hedge of a net investment in a foreign operation are recognized directly in the currency translation differences reserve through OCI, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognized in the Consolidated statements of income.


Accounting estimates and judgments

Financial assets are subject to impairment assessment, which involves estimating expected credit losses. Refer to Other financial assets for accounting policies on impairment of financial assets.

Philips is exposed to several types of financial risks which are further analyzed below. Philips does not purchase or hold derivative financial instruments for speculative purposes. Information regarding financial instruments is included in Fair value of financial assets and liabilities.

Liquidity risk

Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk for the group is monitored through the Treasury liquidity committee, which tracks the development of the actual cash flow position for the group and uses input from a number of sources in order to forecast the overall liquidity position on both short and longer term basis. Philips invests surplus cash in short-term deposits with appropriate maturities and money market funds to ensure sufficient liquidity is available to meet liabilities when due and in money market funds.

The rating of the company’s debt by major rating agencies may improve or deteriorate. As a result, Philips’ future borrowing capacity may be influenced and its financing costs may fluctuate. Philips has various sources to mitigate the liquidity risk for the group. As of December 31, 2024 Philips had EUR 2,401 million in cash and cash equivalents (2023: EUR 1,869 million), which includes short-term deposits of EUR 1,946 million (2023: EUR 1,399 million). Cash and cash equivalents include all cash balances, money market funds and short-term highly liquid investments with an original maturity of three months or less that are readily convertible into known amounts of cash. Philips pools cash from subsidiaries to the extent legally and economically feasible; cash not pooled remains available for the company’s operational or investment needs.

Philips faces cross-border foreign exchange controls and/or other legal restrictions in a few countries that could limit its ability to make these balances available on short notice for general use by the group.

Philips has a USD 2.5 billion Commercial Paper Program and a EUR 1 billion committed standby revolving credit facility that can be used for general group purposes. As of December 31, 2024, Philips did not have any loans outstanding under either facility. These facilities do not have a material adverse change clause, have no financial covenants and have no credit-rating-related acceleration possibilities.

Philips established a Euro Medium-Term Note (EMTN) program, a framework that facilitates the issuance of notes for a total amount up to EUR 10 billion. In 2024, Philips issued EUR 700 million fixed rate notes due 2032 under the EMTN program for general corporate purposes, including the repayment of the 2025 EUR Bonds and floating rate debt. As of December 31, 2024, Philips has

EUR 3.7 billion (2023: EUR 3.3 billion) fixed rates notes outstanding under the EMTN program. For a description of Philips’ credit facilities, refer to Debt.

In addition to cash and cash equivalents, as of December 31, 2024, Philips also held EUR 4 million (2023: EUR 14 million) of listed (level 1) equity investments at fair value (classified as other non-current financial assets).

The following table presents a summary of the Group’s fixed contractual cash obligations and commitments as of December 31, 2024. These amounts are an estimate of future payments which could change as a result of various factors such as a change in interest rates, foreign exchange, and contractual provisions, as well as changes in business strategy and needs. Therefore, the actual payments made in future periods may vary from those presented in the following table:

Philips Group

Contractual cash obligations1 2 in millions of EUR

Payments due by period

Total

Less than 1 year

1-3 years

3-5 years

After 5 years

Long-term debt

7,168

2,006

1,338

3,824

Short-term debt

525

525

Interest on debt

1,792

197

368

325

902

Derivative liabilities

72

64

8

Purchase obligations³

1,161

300

307

210

344

Trade and other payables

1,830

1,830

Contractual cash obligations

12,548

2,916

2,689

1,873

5,070


1    Amounts in this table are undiscounted

2    This table excludes post-employment benefit plan contribution commitments and income tax liabilities in respect of tax risks because it is not possible to make a reasonably reliable estimate of the actual period of cash settlement.

3    Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding for the Group. They specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price provisions and the approximate timing of the transaction. They do not include open purchase orders or other commitments which do not specify all significant terms.


Philips has contracts with investment funds where it committed itself to make, under certain conditions, capital contributions to these funds of an aggregated remaining amount of EUR 130 million (2023: EUR 153 million). As of December 31, 2024, capital contributions already made to these investment funds are recorded as non-current financial assets.

Philips offers voluntary supply chain finance programs for certain US Dollar, Euro and Swedish Krona third parties which provide participating suppliers the opportunity to factor their trade receivables at the sole discretion of both the suppliers and the third parties. Philips continues to recognize these liabilities as trade payables and settles them accordingly on the invoice maturity date based on the terms and conditions of those arrangements. As of December 31, 2024,

approximately EUR 97 million (2023: EUR 114 million) of the Philips account payable were transferred under these arrangements.

Philips Group

Carrying amount of financial liabilities1 in millions of EUR

2024

Presented in accounts payables:

97

- of which suppliers have received payment from finance provider

85


Philips Group

Range of payment due dates

2024

Liabilities that are part of the arrangements

30 -135 days

Comparable trade payables that are not part of the arrangements

0 -135 days

1There were no material business combinations or foreign exchange differences during the year.


With respect to the Respironics field action, please refer to Contingencies. The management continues to monitor the risks associated with such potential claims and its impact on liquidity position, if any.

Currency risk

Currency risk is the risk that reported financial performance or the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Philips operates in many countries and currencies and therefore currency fluctuations may impact Philips’ financial results. Philips is exposed to currency risk in the following areas:

transaction exposures, related to anticipated sales and purchases and on-balance-sheet receivables/payables resulting from such transactions

translation exposure of foreign-currency intercompany and external debt and deposits

translation exposure of net income in foreign entities

translation exposure of foreign-currency-denominated equity invested in consolidated companies

translation exposure to equity interests in non-functional-currency investments in associates and other non-current financial assets

It is Philips’ policy to reduce the potential year-on-year volatility caused by foreign-currency movements on its net earnings by hedging the anticipated net exposure of foreign currencies resulting from foreign-currency sales and purchases. In general, net anticipated exposures for the Group are hedged during a period of 15 months in layers of 20% up to a maximum hedge of 80%. Philips’ policy requires significant committed foreign currency exposures to be fully hedged, generally using forwards. However, not every foreign currency can or shall be hedged as there may be regulatory barriers or prohibitive hedging cost preventing Philips from effectively and/or efficiently hedging its currency exposures. As a result, hedging activities cannot and will not eliminate all currency risks for anticipated and committed transaction exposures.

The following table outlines the estimated nominal value in millions of EUR for committed and anticipated transaction exposure and related hedges for Philips’ most significant currency exposures consolidated as of December 31, 2024:

Philips Group

Estimated transaction exposure and related hedges in millions of EUR

Sales/Receivables

Purchases/Payable

Exposure

Hedges

Exposure

Hedges

Balance as of December 31, 2024

Exposure currency

USD

2,071

(1,669)

(1,163)

1,049

JPY

527

(300)

(7)

7

GBP

259

(161)

(15)

14

CNY

442

(312)

(209)

209

PLN

95

(62)

(1)

1

CAD

236

(134)

AUD

177

(104)

CHF

144

(85)

KRW

126

(83)

ILS

12

(8)

(204)

121

EUR

160

(158)

(121)

121

Others

169

(113)

(23)

23

Total 2024

4,420

(3,188)

(1,743)

1,543

Total 2023

4,287

(3,185)

(1,346)

1,173

Philips uses foreign exchange spot and forward contracts, as well as zero cost collars in hedging the exposure. The derivatives related to transactions are, for hedge accounting purposes, split into hedges of on-balance-sheet accounts receivable/payable and forecasted sales and purchases. Changes in the value of on-balance-sheet foreign-currency accounts receivable/payable, as well as the changes in the fair value of the hedges related to these exposures, are reported in the income statement under costs of sales. Hedges related to forecasted transactions, where hedge accounting is applied, are accounted for as cash flow hedges. The results from such hedges are deferred in other comprehensive income within equity to the extent that the hedge is effective. As of December 31, 2024, a gain of EUR 1 million was deferred in equity as a result of these hedges (2023: EUR 6 million gain). The result deferred in equity will be released to earnings mostly during 2025 at the time when the related hedged transactions affect the income statement. During 2024, nil (2023 nil) was recorded in the consolidated statement of income as a result of ineffectiveness on certain anticipated cash flow hedges. Ineffectiveness arises when anticipated exposures are no longer expected to be highly probable. During 2024, a gain of EUR 29 million (2023 EUR 19 million gain) included in the cash flow hedges reserve in equity pertaining to changes in fair value of foreign exchange forward and option contracts was released to income statement.

The total net fair value of hedges related to transaction exposure as of December 31, 2024, was an unrealized loss of EUR 2 million. The estimated impact of a 10% increase of value of the EUR is estimated to be EUR 122 million. The following table contains an overview of the instantaneous 10% increase in the value of EUR against major currencies.

Philips Group

Estimated impact of 10% increase of value of the EUR on the fair value of hedges in millions of EUR

2023

2024

USD

64

63

JPY

15

13

GBP

16

13

CHF

5

7

PLN

1

1

RUB

-

1

The EUR 122 million increase includes a gain of EUR 34 million that would impact the income statement, which would largely offset the opposite revaluation effect on the underlying accounts receivable and payable, and the remaining gain of EUR 88 million would be recognized in equity to the extent that the cash flow hedges were effective.

Foreign exchange exposure also arises as a result of inter-company loans and deposits. Where the company enters into such arrangements, the financing is generally provided in the functional currency of the subsidiary entity. The currency of the company’s external funding and liquid assets is matched with the required financing of subsidiaries, either directly through external foreign currency loans and deposits, or synthetically by using foreign exchange derivatives, including cross currency interest rate swaps and foreign exchange forward contracts. In certain cases where group companies may also have external foreign currency debt or liquid assets, these exposures are also hedged through the use of foreign exchange derivatives. Changes in the fair value of hedges related to this exposure are recognized within financial income and expenses in the statements of income. When such loans would be considered part of the net investment in the subsidiary, net investment hedging would be applied.

Translation exposure of foreign-currency equity invested in consolidated entities is generally not hedged. If a hedge is entered into, it is accounted for as a net investment hedge. Net current-period change, before tax, of the currency translation reserve of positive EUR 768 million mainly relates to the development of the USD versus the EUR. As of December 31, 2024, a weakening of USD by 10% versus the EUR would result in a decrease in the currency translation reserve in equity of approximately EUR 1,275 million, while a strengthening of USD by 10% versus the EUR would result in an increase in the currency translation reserve in equity of approximately EUR 1,558 million. Refer to the country risk paragraph for countries with significant foreign currency denominated equity invested.

As of December 31, 2024, external bond funding for a nominal value of USD 1,466 million (liability at book value: EUR 1,408 million) was designated as a net investment hedge of financing investments in foreign operations for an equal amount. During 2024, no ineffectiveness was recognized in the income statement on net investment hedges arising from counterparty and own credit risk.

As of December 31, 2024, an instantaneous 10% increase in the value of the EUR against all currencies would lead to an decrease of EUR 106 million in the value of the derivatives, including a EUR 50 million decrease related to the USD.

As of December 31, 2023, external bond funding for a nominal value of USD 1,474 million (liability at book value: EUR 1,325 million) were designated as a net investment hedge of financing investments in foreign operations for an equal amount. During 2023 a total loss of EUR 2 million was recognized in the income statement as ineffectiveness on net investment hedges, arising from counterparty and own credit risk.

As of December 31, 2023, an instantaneous 10% increase in the value of the EUR against all currencies would lead to an decrease of EUR 52 million in the value of the derivatives, including a EUR 11 million increase related to the USD.

Generally Philips does not hedge the foreign exchange exposure arising from equity interests in non-functional-currency investments in associates and other non-current financial assets.

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. As of December 31, 2024, Philips had outstanding debt of EUR 7,639 million (2023: EUR 7,689 million), which constitutes an inherent interest rate risk with potential negative impact on financial results. As of December 31, 2024, Philips held EUR 2,401 million in cash and cash equivalents (2023: EUR 1,869 million), and had total long-term debt of EUR 7,113 million (2023: EUR 7,035 million) and total short-term debt of EUR 526 million (2023: EUR 654 million). As of December 31, 2024, Philips had a ratio of fixed-rate long-term debt to total outstanding debt of approximately 93% compared to 89% one year earlier. Philips debt has a long maturity profile with an average tenor of long-term debt of 5.9 years with maturities up to 2042.

The following table provides the impact of a 1% increase/decrease of interest rates on the fair value of the debt and the annualized net interest expenses.

Philips Group

Interest rate sensitivity in millions of EUR

2023

2024

Impact 1% interest rate increase on fair value of fixed-rate long-term debt¹ ²

(283)

(304)

Impact 1% interest rate decrease on fair value of fixed-rate long-term debt¹ ²

284

304

Impact 1% interest rate increase on annualized net interest expense³

15

23

1    The sensitivity analysis conducted shows that if long-term interest rates were to increase/decrease instantaneously by 1% from their level of December 31, 2024, with all other variables (including foreign exchange rates) held constant.

2    Fixed-rate long-term debt is excluding forward contracts.

3    The impact is based on the outstanding net floating-rate position as of December 31, 2024.


Equity price risk

Equity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in equity prices.

Philips is a shareholder in some publicly listed companies and as a result is exposed to potential financial loss through movements in their share prices. The aggregate equity price exposure in such financial assets amounted to approximately EUR 4 million as of December 31, 2024 (2023: EUR 14 million). Philips does not hold derivatives in the above-mentioned listed companies. Philips also has shareholdings in several privately-owned companies amounting to EUR 220 million, mainly consisting of minority stakes in companies in various industries. As a result, Philips is exposed to potential value adjustments.

Commodity price risk

Commodity price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in commodity prices.

Philips is a purchaser of certain base metals, precious metals and energy. Philips may hedge certain commodity price risks using derivative instruments to minimize significant, unanticipated earnings fluctuations caused by commodity price volatility. As of December 31, 2024 Philips had financial commodity derivatives outstanding to the value of EUR 6 million (2023: nil).

Credit risk

Credit risk represents the loss that would be recognized at the reporting date, if counterparties failed completely to perform their payment obligations as contracted. Credit risk is present within Philips trade receivables and contract assets. To have better insights into the credit exposures, Philips performs ongoing evaluations of the financial and non-financial condition of its customers and adjusts credit limits when appropriate. In instances where the creditworthiness of a customer is determined not to be sufficient to grant the credit limit required, there are a number of mitigation tools that can be utilized to close the gap, including reducing payment terms, cash on delivery, pre-payments and pledges on assets.

Philips invests available cash and cash equivalents with various financial institutions and is exposed to credit risk with these counterparties. Philips is also exposed to credit risks in the event of non-

performance by financial institutions with respect to financial derivative instruments. Philips actively manages concentration risk and on a daily basis measures the potential loss under certain stress scenarios, should a financial institution default. These worst-case scenario losses are monitored and limited by the company.

The company does not enter into any financial derivative instruments to protect against default by financial institutions. However, where possible the company requires all financial institutions with which it deals in derivative transactions to complete legally enforceable netting agreements under an International Swap Dealers Association master agreement or otherwise prior to trading, and whenever possible, to have a strong credit rating. Philips also regularly monitors the development of the credit risk of its financial counterparties. Wherever possible, cash is invested and financial transactions are concluded with financial institutions with strong credit ratings or with governments or government-backed institutions.

The following table shows the number of financial institutions with credit rating A- and above with which Philips has cash at hand and short-term deposits above EUR 10 million as of December 31, 2024.

Philips Group

Credit risk with number of counterparties for deposits above EUR 10 million

10-100 million

100-500 million

500 million and above

AAA rated bank counterparties

2

AA- rated bank counterparties

1

A+ rated bank counterparties

1

4

A rated bank counterparties

2

2

A- rated bank counterparties

2

2

Total

6

10

For an overview of the overall maximum credit exposure related to debt instruments, derivatives and loans and receivables, refer to Fair value of financial assets and liabilities.

Country risk

Country risk is the risk that political, legal, or economic developments in a single country could adversely impact performance. The country risk per country is defined as the sum of the equity of all subsidiaries and associated companies in country cross-border transactions, such as intercompany loans, accounts receivable from third parties and intercompany accounts receivable. The country risk is monitored on a regular basis.

As of December 31, 2024, the company had country risk exposure of EUR 13.6 billion in the United States, EUR 2.3 billion in the Netherlands, EUR 872 million in China (including Hong Kong). Other countries higher than EUR 500 million are United Kingdom EUR 787 million, Japan EUR 635 million and Germany EUR 625 million. Other countries with significant exposure are: Israel EUR 301 million, Singapore EUR 221 million, and India EUR 226 million. The degree of risk of a country is

taken into account when new investments are considered. The company does not, however, use financial derivative instruments to hedge country risk.

The impact of hyperinflation is also routinely assessed and was not material for the periods presented.

Other insurable risks

Philips is insured for a broad range of losses by global insurance policies in the areas of property damage/business interruption, general and product liability, transport, directors’ and officers’ liability, employment practice liability, crime and cybersecurity. The counterparty risk related to the insurance companies participating in the above-mentioned global insurance policies is actively managed. As a rule, Philips only selects insurance companies with a financial strength of at least A-. Throughout the year the counterparty risk is monitored on a regular basis.

To lower exposures and to avoid potential losses, Philips has a global Risk Engineering program in place. The main focus of this program is on property damage and business interruption risks including company interdependencies. Regular on-site assessments take place at Philips locations and business-critical suppliers by risk engineers of the insurer in order to provide an accurate assessment of the potential loss and its impact. The results of these assessments are shared across the company’s stakeholders. On-site assessments are carried out against the predefined Risk Engineering standards, which are agreed between Philips and the insurers. Recommendations are made in a Risk Improvement report and are monitored centrally. This is the basis for decision-making by the local management of the business as to which recommendations will be implemented.

For all policies, deductibles are in place, which vary from EUR 0 million to EUR 10 million per occurrence, and this variance is designed to differentiate between the existing risk categories within Philips. Above a first layer of working deductibles, Philips operates its own re-insurance captive, which during 2024 retained EUR 25 million per claim and EUR 50 million in the annual aggregate for general, product, professional liability, and marine cargo claims and EUR 15 million aggregate for cyber.

New contracts were signed effective December 31, 2024, for the coming year, whereby the re-insurance captive retention remained the same.


30    Subsequent events


On January 28, 2025, Philips announced that it has signed an agreement to sell its Emergency Care Business Unit, which is part of the Connected Care segment, to Bridgefield Capital. The transaction is subject to the satisfaction of certain closing conditions and receipt of regulatory approval, and is expected to be completed in the second half of 2025.

7    Company financial statements

7.1    Statements of income

156

7.2    Balance sheets before appropriation of results

157

7.3    Statements of changes in equity

158

7.4    Notes to the Company financial statements 

159

7.1    Statements of income


Koninklijke
Philips N.V.

Statements of income in millions of EUR1
for the year ended December 31,

2023

2024

Sales

B

432

465

Cost of sales

(19)

(10)

Gross margin

413

455

Selling expenses

(11)

(19)

General and administrative expenses

(25)

(41)

Other business income

C

116

92

Income from operations

D

493

488

Financial income

E

166

207

Financial expenses

E

(368)

(419)

Results relating to investments in associates

I

(87)

(32)

Income before taxes

203

243

Income tax (expense) benefit

F

(66)

52

Income after tax

137

295

Net income from group companies

(603)

(997)

Net income

(466)

(702)


Amounts may not add up due to rounding.1

7.2    Balance sheets before appropriation of results


Koninklijke Philips N.V.

Balance sheets in millions of EUR2
as of December 31,

2023

2024

Non-current assets

Property, plant and equipment

1

1

Intangible assets

H

101

120

Financial fixed assets

I

20,759

21,628

Non-current receivables

25

33

Deferred tax assets

502

454

Other non-current financial assets

J

213

173

Other non-current assets

14

23

Total non-current assets

21,615

22,431

Current assets

Current financial assets

J

3

2

Receivables

K

2,239

1,579

Cash and cash equivalents

L

1,605

2,173

Total current assets

3,847

3,754

Total assets

25,462

26,185

2023

2024

Shareholders’ equity

M

Common shares

183

188

Capital in excess of par value

5,827

6,654

Revaluation reserves

(384)

(89)

Other legal reserves

2,252

3,066

Other reserves

4,615

2,888

Net income

(466)

(702)

Total shareholders’ equity

12,028

12,006

Non-current liabilities

Long-term debt

N

6,170

6,259

Long-term provisions

7

Deferred tax liabilities

13

15

Non-current tax liabilities

243

19

Other non-current liabilities

70

62

Total non-current liabilities

6,504

6,354

Current liabilities

Short-term debt

N

6,738

7,561

Other current liabilities

O

191

264

Total current liabilities

6,929

7,825

Total liabilities and shareholders’ equity

25,462

26,185

Amounts may not add up due to rounding.2

7.3    Statements of changes in equity


Koninklijke Philips N.V.

Statements of changes in equity in millions of EUR
for the year ended December 31,

Common shares

Capital in excess of par value

Fair value through OCI

Cash flow hedges

Currency translation differences

Affiliated companies

Retained earnings

Treasury shares

Net income

Shareholders’ equity

Revaluation reserves

Other legal reserves

Other reserves

Balance as of December 31, 2022

178

5,025

(376)

(2)

1,866

1,010

7,431

(275)

(1,608)

13,249

Appropriation of prior year result

(1,608)

1,608

Net income

(466)

(466)

Net current period change

(20)

29

(578)

(20)

(6)

(595)

Income tax on net current period change

3

(2)

-

3

5

Reclassification into income

(19)

(26)

(45)

Dividend distributed

8

741

(816)

(68)

Transfer of result on disposal of equity investments at FVTOCI to retained earnings

4

(4)

-

Purchase of treasury shares

-

-

Re-issuance of treasury shares

(29)

(24)

54

-

Forward contracts

465

(608)

(143)

Share call options

-

-

Cancellation of treasury shares

(3)

(563)

566

Share-based compensation plans

88

88

Income tax on share-based compensation plans

2

2

Balance as of December 31, 2023

183

5,827

(390)

6

1,263

990

4,878

(262)

(466)

12,028

Appropriation of prior year result

(466)

466

Net income

(702)

(702)

Net current period change

(21)

21

766

62

(80)

749

Income tax on net current period change

9

3

(8)

12

17

Reclassification into income

(29)

(7)

(36)

Dividend distributed

6

762

(799)

(31)

Transfer of result on disposal of equity investments at FVTOCI to retained earnings

311

-

(313)

(2)

Purchase of treasury shares

-

(60)

(60)

Re-issuance of treasury shares

(36)

(18)

54

-

Forward contracts

251

(310)

(59)

Cancellation of treasury shares

(1)

(166)

167

Share-based compensation plans

96

96

Income tax on share-based compensation plans

5

5

Balance as of December 31, 2024

188

6,654

(90)

1

2,014

1,052

3,299

(411)

(702)

12,006

Amounts may not add up due to rounding.

7.4    Notes to the Company financial statements 


A     General information to the Company financial statements

Accounting policies applied

The financial statements including the notes thereon have been prepared in accordance with Part 9 of Book 2 of the Dutch Civil Code. In accordance with Section 2:362 (8) of the Dutch Civil Code, the recognition and measurement principles applied in these company financial statements are the same as those applied in the consolidated financial statements (refer to General information to the Consolidated financial statements and the accounting policies relating to specific financial statement items included in the respective notes to the consolidated financial statements).

Presentation of Company financial statements

The structure of the Company balance sheets and Company statements of income are aligned as much as possible with the Consolidated statements in order to achieve optimal transparency between the Group financial statements and the Company financial statements.

The Company balance sheet is presented prior to the appropriation of results.

B     Sales

Sales relate to external sales and mainly comprise of license income from intellectual property rights owned by the company.

C     Other business income (expense)

Koninklijke Philips N.V.

Other Business Income in millions of EUR

2023

2024

Other business income (expense) from sold and deconsolidated businesses

4

6

Other

112

86

Other business income

116

92

Other business income (expense) includes the results from various sold and deconsolidated businesses.

The line Other mainly includes income and expense from transactions with group companies regarding overhead services and from brand license agreements.

D     Sales and costs by nature

Koninklijke Philips N.V.

Sales and costs by nature in millions of EUR

2023

2024

Sales

432

465

Costs of materials used

(3)

13

Employee benefit expenses

(15)

(30)

Depreciation and amortization

(10)

(14)

Advertising and promotion

(3)

(3)

Other operational costs

(25)

(34)

Other business income

116

92

Income from operations

493

488

The line Costs of materials used includes foreign exchange results.

For more information about Other business income, refer to Other business income (expense) and Discontinued operations and assets classified as held for sale

For a summary of the audit fees related to the Philips Group, refer to the Group financial statements which is deemed incorporated and repeated herein by reference.

E     Financial income and expense

Financial income mainly relates to intercompany financing transactions of EUR 33 million (2023: EUR 32 million) and interest income from third parties of EUR 57 million (2023: EUR 26 million). Interest income from third parties increased mainly due to increase in free cash available.

Financial expense mainly relates to interest paid on external debt of EUR 217 million (2023: EUR 207 million) and interest expense from intercompany financing transactions of EUR 58 million (2023: EUR 13 million). Increase in interest expense from intercompany financing transactions mainly comes from an increase in interest expense on in-house bank balance, due to capital injections made to group companies.

F     Income taxes

Koninklijke Philips N.V. is the lead legal entity of the fiscal unity that exists for Dutch corporate income tax purposes and reports the income tax expense and deferred tax assets and liabilities of the fiscal unity. The components of income before taxes and income tax expense are as follows:

Koninklijke Philips N.V.

Income tax expense in millions of EUR

2024

Income before taxes

243

Investments in associates, net of income taxes

(32)

Income before taxes excluding Investment in associates

276

Current tax (expense) benefit

96

Deferred tax (expense) benefit

(44)

Income tax (expense) benefit

52

Discontinued operations tax benefit excluded

(140)

Income tax (expense) benefit of continuing operations

(89)

Discontinued operations is a tax benefit relating to tax audit settlements of prior years.

The effective tax rate in 2024 is higher than the Dutch statutory tax rate of 25.8% mainly due to non-deductible expenses and the increase in Others which mainly represents the effect of the inclusion of income of other legal entities that are part of the fiscal unity contributing to the fiscal unity income tax expense, partly offset by recurring tax incentives.

Koninklijke Philips N.V.

Effective income tax rate in %

2024

Weighted average statutory income tax rate

25.8

Unrecognized tax loss and credit carryforwards

Changes to recognition of temporary differences

Non-taxable income and tax incentives

(16.6)

Non-deductible expenses

8.8

Withholding and other taxes

(1.4)

Tax rate changes

Prior year tax

5.1

Tax expenses (benefit) due to other tax liabilities

(6.6)

Others, net

16.9

Effective income tax rate

32.0

As of December 31, 2024, tax credit carry forwards for which no deferred tax assets have been recognized in the balance sheet amount to nil (2023: nil).

Consistent with the IAS 12 amendment regarding Pillar Two taxation as issued by the IASB and adopted by the EU, Philips does not recognize and disclose deferred taxes arising from tax laws that implement Pillar Two model rules published by the Organisation for Economic Co-operation and Development. The estimated current tax expense related to Pillar Two is EUR 1 million, resulting in an increase of ETR by 0.4% in the company financial statements. This amount has been accounted for within the income taxes of the reporting period. Refer to section Global minimum tax (Pillar Two) in Income taxes.

G     Employees

The number of persons having a contract with the company as of December 31, 2024 was 8 (2023: 9):

3 of them had a services contract;

5 of them had a contract of employment.

They were all posted in the Netherlands.

For the remuneration of past and present members of both the Board of Management and the Supervisory Board, refer to Information on remuneration, which is deemed incorporated and repeated herein by reference.

H     Intangible assets

Intangible assets include mainly licenses and patents. The changes during 2024 were as follows;

Koninklijke Philips N.V.

Intangible assets in millions of EUR

2024

Balance as of January 1

Cost

239

Amortization / impairments

(138)

Book value

101

Additions

33

Disposal

-

Amortization

(13)

Impairment

(1)

Total change

19

Balance as of December 31

Cost

268

Amortization / impairments

(148)

Book Value

120

I     Financial fixed assets

Accounting policies

Investments in group companies and associates are measured on the basis of the equity method. Loans provided to group companies are stated at amortized cost, less impairment. The company makes use of the option to eliminate intercompany expected credit losses against the book value of loans and receivables to group companies, instead of elimination against the investments in group companies.


The changes during 2024 were as follows:

Koninklijke Philips N.V.

Financial fixed assets in millions of EUR

Investments in group companies

Investments in associates

Loans to group companies

Total

Balance as of January 1, 2024

19,945

133

681

20,759

Changes:

Reclassifications

8

8

Acquisitions/additions

1,522

2

9

1,533

Sales/redemptions

(39)

(11)

(122)

(172)

Net income from group companies and associates

(997)

(25)

(1,022)

Dividends received

(353)

(353)

Translation differences

843

2

(6)

839

Impairment

(10)

(10)

Other

46

46

Balance as of December 31, 2024

20,967

99

562

21,628

Investments in group companies

Investment in group companies increased by EUR 1,022 million. The increase is driven by the capital injection of EUR 1.4 billion into a US group company. The capital injection took place to settle intercompany debt and in connection with the Respironics claim. The transaction was cash neutral at a consolidated group level. For further information regarding the Respironics claim, refer to Provisions. The increase is offset by negative result from group companies and dividends paid by group companies to Koninklijke Philips N.V.

No acquisitions were made in 2024. Divestments were not material from the point of view of the company financial statements. For further information about acquisitions and divestments, refer to Acquisitions and divestments.

Investments in associates

Investments in associates represent minority investments in various companies with significant influence. 

In 2024 the company recorded its share in negative results of associates of EUR 25 million and impairment of EUR 10 million. The EUR 8 million in Reclassifications mainly concerns the conversion of convertible notes. For more information on conversions, refer to Other financial assets.

For further information about associates, refer to Interests in entities.

Loans to group companies

The decrease in loans by EUR 119 million in 2024 is mainly due to the repayment of loans granted to group companies.

List of investments in group companies

A list of investments in group companies, prepared in accordance with the relevant legal requirements (Dutch Civil Code, Book 2, Sections 379 and 414), is deposited at the Chamber of Commerce in Eindhoven, the Netherlands.

J     Other financial assets

Other current financial assets

Other current financial assets of EUR 2 million as of December 31, 2024 (2023: EUR 3 million) is related to earn-out arising from equity investment.

Other non-current financial assets

The changes during 2024 were as follows:

Koninklijke Philips N.V.

Other non-current financial assets in millions of EUR

Non-current financial assets at FVTP&L

Non-current financial assets at FVTOCI

Non-current financial assets at Amortized cost

Total

Balance as of January 1, 2024

138

68

7

213

Changes:

Acquisitions/additions

32

5

1

37

Sales/redemptions/reductions

(47)

(4)

-

(52)

Value adjustments through OCI

3

3

Value adjustments through P&L

(20)

-

(20)

Translation differences and other

2

2

-

4

Reclassifications

(14)

(14)

Balance as of December 31, 2024

90

74

8

173

The company's investments in Other non-current financial assets mainly consist of investments in common shares of companies in various industries and investments in limited life funds. Acquisitions/additions of EUR 32 million mainly relate to capital calls for certain limited life funds and bridge financing of equity investment mainly in the form of convertible notes. Sales/redemptions/reductions of EUR 47 million mainly pertain to the transfer of limited life funds to other Philips entities. The transaction was neutral at the group level. Reclassifications mainly relates to equity financing events that resulted in the conversion of notes into equity. For further information on conversion to equity, refer to Investments in associates.

K    Receivables

Koninklijke Philips N.V.

Receivables in millions of EUR

2023

2024

Trade accounts receivable

107

102

Receivables from group companies

1,916

1,293

Advances and prepaid expenses

60

73

Derivative instruments - assets

68

105

Other receivables

88

6

Receivables

2,239

1,579

Receivable from group companies mainly relate to in-house bank contracts. The position decreased mainly due to the conversion of loans in the US to equity. For further details, refer to note Debt and Financial fixed assets

For further details on derivative instruments, refer to note Fair value of financial assets and liabilities and Details of treasury and other financial risks.

L    Cash and cash equivalents

Cash and cash equivalents are all freely available. For further details on Cash and cash equivalents, refer to note Fair value of financial assets and liabilities and Details of treasury and other financial risks.

M     Shareholders’ equity

Accounting policies

The revaluation reserves and other legal reserves are recognized based on the Dutch Civil Code.

For details, please refer to Group financial statements note Equity.

Revaluation and Other Legal Reserves

As of December 31, 2024, revaluation reserves relate to unrealized loss on financial assets fair value through OCI of EUR 90 million (2023: EUR 390 million unrealized losses) and unrealized currency translation gain of EUR 2,014 million (2023: EUR 1,263 million unrealized gain). Legal reserves relate to ‘affiliated companies’ of EUR 1,052 million (2023: EUR 990 million) and unrealized gain on cash flow hedges of EUR 1 million (2023: EUR 6 million unrealized gain).

The item ‘affiliated companies’ relates to the ‘wettelijke reserve deelnemingen’, which is required by Dutch law. This reserve relates to any legal or economic restrictions on the ability of affiliated companies to transfer funds to the parent company in the form of dividends.


N     Debt

Long-term debt

The following tables present information about the long-term debt outstanding, its maturity and average interest rates in 2024 and 2023.

Koninklijke Philips N.V.

Long-term debt in millions of EUR

USD bonds

EUR bonds

Loans from group companies

Forward contracts

Bank borrowings

Total debt

Balance as of January 1, 2024

1,325

4,569

609

396

200

7,100

New financing

686

1,247

65

1,997

Repayment

(346)

(1,417)

(319)

(200)

(2,282)

Exchange differences

82

14

96

Other changes in value

7

6

13

Balance as of December 31, 2024

1,408

4,917

453

148

6,924

Koninklijke Philips N.V.

Long-term debt in millions of EUR, unless otherwise stated

2024

Amount outstanding

Current portion

Non-current portion

Between 1 and 5 years

Amount due after 5 years

Average remaining term (in years)

Average rate of interest

USD bonds

1,408

131

1,276

122

1,154

12.3

6.3%

EUR bonds

4,917

4,917

2,639

2,278

4.7

2.3%

Loans from group companies

453

453

0.9

3.1%

Forward contracts

148

82

66

66

1.3

1.2%

Long-term debt

6,924

666

6,259

2,827

3,432

Koninklijke Philips N.V.

Long-term debt in millions of EUR, unless otherwise stated

 

2023

 

Amount outstanding

Current portion

Non-current portion

Between 1 and 5 years

Amount due after 5 years

Average remaining term (in years)

Average rate of interest

USD bonds

1,325

1,325

240

1,085

13.3

6.3%

EUR bonds

4,569

4,569

2,335

2,234

5.1

2.0%

Loans from group companies

609

609

0.9

3.1%

Forward contracts

396

321

76

76

0.8

1.4%

Bank borrowings

200

200

200

1.2

4.2%

Long-term debt

7,100

930

6,170

2,851

3,319

New external financing in long-term debt mainly relates to the issuance of nominal EUR 700 million bond due in 2032 under the EMTN program, partially offset by the redemption of EUR 346 million EUR bonds due in 2025. Other external payments relate to a loan repayment of EUR 200 million

and the settlement of forward contracts with a nominal value of EUR 313 million. The remaining balance of forward contracts relates to the long-term incentive and employee stock purchase plans.

Short-term debt

The following table presents information about the short-term debt outstanding in 2024 and 2023.

Koninklijke Philips N.V.

Short-term debt in millions of EUR 

2023

2024

Short-term bank borrowings

Current portion of external long-term debt

321

213

Current portion of intercompany loans

609

453

Other debt to group companies

5,808

6,895

Short-term debt

6,738

7,561

Short-term debt mainly relates to the other debt to group companies of EUR 6,895 million which represents in-house bank contracts driven by investments and operational cash needs in subsidiaries. The increase in debt is mainly related to the conversion of loans into equity in the US.

For further details on debt and treasury risk, refer to Debt and Details of treasury and other financial risks.

O    Other current liabilities

Koninklijke Philips N.V.

Other current liabilities in millions of EUR

2023

2024

Accrued expenses

102

107

Derivative instruments - liabilities

72

98

Other short-term liabilities

18

59

Other current liabilities

191

264

For further details on derivative instruments, refer to note Fair value of financial assets and liabilities and Details of treasury and other financial risks.

P    Commitments and contingencies

The company has contracts with investment funds where it committed itself to make, under certain conditions, capital contributions to their funds up to an aggregated remaining amount of EUR 76 million (2023: EUR 122 million). As of December 31, 2024, capital contributions already made to these investment funds are recorded as Other non-current financial assets.

General guarantees as referred to in Section 403, Book 2, of the Dutch Civil Code, have been given by the company on behalf of several group companies in the Netherlands. The liabilities of these companies to third parties and investments in associates totaled EUR 1,107 million as of December 31, 2024 (2023: EUR 1,304 million). Guarantees totaling EUR 328 million (2023: EUR

369 million) have also been given on behalf of other group companies. Bank guarantees totaling EUR 339 million (2023: nil) have been secured for insurance companies to cover product liability related cash flows related to the Respironics recall.

The company is the head of a fiscal unity that contains the most significant Dutch wholly-owned group companies. The company is therefore jointly and severally liable for the tax liabilities of the tax entity as a whole.

For additional information, refer to Contingencies.

Q    Subsequent events

For more information refer to Group financial statements Subsequent events.

8    Sustainability statement

This chapter comprising our sustainability statement and the information incorporated by reference as presented in ESRS cross-reference table. The Notes refer to the location in the sustainability statement where the disclosures are presented.

8.1    Tracking our 2025 ESG program

166

8.2    General basis for preparation

169

8.3    Double Materiality Assessment

171

8.4    Environmental information

183

8.5    Social information

215

8.6    Governance information

237

8.7    ESRS cross-reference table

243

Notes to the sustainability statement

Note I Climate change

183

Note II Resource use and circular economy

196

Note III Other environmental information

205

Note IV Workforce of the future

216

Note V Diversity, Inclusion and Well-Being

218

Note VI Employee engagement

220

Note VII Equal opportunities and equal pay

221

Note VIII Living Wage and Adequate Wage

222

Note IX Employee volunteering

222

Note X Building employability

223

Note XI Health and Safety

223

Note XII Workforce details

225

Note XIII Supplier sustainability & Workers in the value chain

228

Note XIV Human rights

235

Note XV Measuring health impacts

236

Note XVI Lives improved

236

Note XVII Product responsibility and safety

236

Note XVIII Other social information

236

Note XIX Philips SpeakUp (Ethics Line)

237

Note XX Advocacy activities and expenses

238

8.1    Tracking our 2025 ESG program

In the table below, we provide a condensed overview of our metrics and targets linked to our ESG commitments, with reference to the topical ESRS. These topics are discussed in greater detail in the corresponding notes to the sustainability statement, where we also provide further context to the metrics and targets that we use.

We track the effectiveness of our policies and actions through quarterly performance reviews with our Businesses, Functions and Regions. For more information refer to ESG governance.

In 2024, we did not change targets nor corresponding metrics for entity-specific metrics. Our metrics are aligned, where necessary, to the relevant ESRS definitions. If any underlying measurement methodology has been changed or updated, this is addressed in the relevant note.

Legend

Value chain

p¢q

Upstream

p¢q

Own operations

p¢q

Downstream

2025 target achieved

Note/Section

Material topics

Commitment

KPI

Value chain

Unit

2020 Baseline

2023

2024

2025 target*

Environmental

We act responsibly towards our planet in line with UN SDGs 12 and 13.

Section 4.1.2

I

XIII

Climate change

(ESRS E1)

We will maintain carbon neutrality and use 75% renewable energy in our operations by 2025. We have set ambitious targets to reduce CO₂ emissions in our entire value chain in line with a 1.5 °C global warming scenario (based on Science Based Targets).

Net operational carbon footprint

p¢q

kilotonnes CO2- e

0

0

0

0

Renewable energy in our operations

p¢q

% of energy from renewable sources

72%

77%

80%

75%

Scope 1 & 2 emissions

p¢q

kilotonnes CO2- e

35

22

20

34

Scope 3 emissions

p¢q

kilotonnes CO2- e

7,360

4,973

4,378

4,269

(2030 target)

% of suppliers committed to Science Based Targets

p¢q

%

N/A

46%

48%

50%

I

II

Energy efficiency

(ESRS E1)

We will design all new product introductions in line with our EcoDesign requirements by 2025, with ‘EcoHeroes’ accounting for 25% of hardware revenues.

EcoDesigned NPIs

p¢q

%

N/A

N/A

100%

100%

II

Circular Economy

(ESRS E5)

We will generate 25% of our revenue from products, services and solutions contributing to circularity, and offer responsible take-back on all professional medical equipment by 2025.

EcoHero revenues

p¢q

% hardware revenues

N/A

15.9%

21.9%

25%

Circular revenues

p¢q

% total revenues

14.6%

20.0%

24.4%

25%

Closing the Loop

p¢q

Systems or pieces of equipment

Achieved for large medical equipment

11,500

more than 8,600

Extend to small medical equipment

II

Waste management

(ESRS E5)

We will embed circular practices at our sites and put zero waste to landfill by 2025.

Circular Materials Management

p¢q

%

90%

91%

94%

95%

Zero waste to landfill as a percentage of total regular waste

p¢q

%

2.6%

0.0%

0.0%

less than 0.5%

Note/Section

Material topics

Commitment

KPI

Value chain

Unit

2020 Baseline

2023

2024

2025 target*

Social

Our purpose is to improve people’s health and well-being through meaningful innovation, in line with UN SDG 3. We act responsibly towards society and partner with our stakeholders.

V

VII

XII


Fair & Inclusive workplace

(ESRS S1)

We aim to be the best place to work for our employees, providing opportunities for learning and development, promoting an inclusive workplace, and assuring a safe and healthy work environment. We pay at least a living wage and aim for employee engagement above the high-performance norm.

Women in leadership positions

p¢q

% of senior management positions

27%

31%

33%

35%

Employee Engagement Index

p¢q

%

79%

73%

78%

N/A

VIII

XII


Employee rights

(ESRS S1)

We pay at least a living wage

p¢q

%

100%

100%

100%

100%

XI

XII

Employee well-being, Health & Safety

(ESRS S1)

Total Recordable Case (TRC) rate

p¢q

Total recordable cases per 100 FTE

0.24

0.24

0.21

N/A

IV

X

XII

Talent & development (ESRS S1)

Training hours per employee

p¢q

Hours

N/A

43

47.5

N/A

XI

XIII

Section 4.2.3 XIV

Human Rights

(ESRS S1 and S2)

Human Rights impact assessments at our at-risk sites

p¢q

%

60%

100%

100%

100%

XIII

Responsible & resilient supply chains (ESRS S2)

We work with our suppliers to reduce the environmental footprint of our supply chain in line with a 1.5 °C global warming scenario (based on Science Based Targets).


% of suppliers committed to Science Based Targets

p¢q

%

N/A

46%

48%

50%

Through our supplier development program we will improve the lives of 1 million workers in our supply chain by 2025.

Lives improved in the supply chain

p¢q

Number of lives

302,000

723,000

936,000

1 million

XVI

Access to (quality & affordable) care

(ESRS S4)

We aim to improve the health and well-being of 2 billion people per year by 2025, including 300 million people in underserved communities.

Lives improved in medically underserved communities

p¢q

Number of lives

127 million

221 million

242 million

300 million

It is our strategy to lead with innovative solutions to deliver real change – helping our customers achieve better health outcomes, a better experience for patients and staff, and lower cost of care, as well as helping people take better care of their health.

Lives improved

p¢q

Number of lives

1.53 billion

1.88 billion

1.96 billion

2 billion

VII

Section 4.2.3

Product responsibility & safety

(ESRS S4)

Enabling the delivery of patient-centric, safe, and high-quality care – the essence of patient safety and quality – is foundational to Philips’ purpose to improve the health and well-being of people through meaningful innovation.

Total training hours in Quality Management Learning (QML)

p¢q

Hours

2.33 million

2.44 million

N/A

Note/Section

Material topics

Commitment

KPI

Value chain

Unit

2020 Baseline

2023

2024

2025 target*

Governance

(ESRS G1)

We aim to deliver superior long-term value for our customers and shareholders, and we live up to the highest standards of ethics and governance in our culture and practices.

XIX

Section 4.3.4

Business ethics & general business principles

(ESRS G1)

Our General Business Principles set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and serve as a reference for the business conduct we expect from all our business partners.

p¢q

N/A

Section 4.3.7

Governance

(ESRS G1)

Our management structure and governance combines responsible leadership and independent supervision.

p¢q

N/A

Section 4.3.8

Public affairs

(ESRS G1)

We are transparent about our plans, activities, results and contributions to society (e.g., tax reporting, and engaging with shareholders, customers, business partners, governments and regulators through a variety of platforms).

p¢q

N/A

Section 4.3.5

Big data, Al & cybersecurity

N/A

Section 4.3.4

Competition & market access

N/A

II

XIV

Sustainable value creation

We engage with our stakeholders and other companies to drive sustainability efforts addressing the United Nations Sustainable Development Goals.

Lives improved

p¢q

Number of lives

1.53 billion

1.88 billion

1.96 billion

2 billion

Lives improved in medically underserved communities

p¢q

Number of lives

127 million

221 million

242 million

300 million

II

XIV

Innovation & research

Green/EcoDesigned Innovation

EUR

255 million

142 million

263 million

N/A

Section 4.3.7 Section 4.3.8

Geopolitical events

Tax transparency

EUR

N/A


*     N/A - Philips currently has not set measurable, quantitative targets related to these material impacts, risks, or opportunities. Philips nevertheless tracks the effectiveness of our policies and actions related to these material impacts, risks, opportunities through having qualitative ESG commitment and/or quantitative metrics in place. Philips continues to monitor these commitments and metrics via Philips’ ESG governance structure and processes.

8.2    General basis for preparation


Basis for preparation

Although the European Corporate Sustainability Reporting Directive (CSRD) has not been transposed and implemented in Dutch law on the date of this Annual Report, Royal Philips has prepared the accompanying sustainability statement in accordance with the European Sustainability Reporting Standards (ESRS) as adopted by the European Commission. The sustainability statement also meets the specifications adopted pursuant to Article 8(4) of the Taxonomy Regulation (Regulation (EU) 2020/852 of the European Parliament and of the Council).

The sustainability statement consists of chapter 8 Sustainability statement and the information incorporated by reference as presented in ESRS cross-reference table.

Consolidation

The sustainability statement has been prepared on a consolidated basis, with the same scope of consolidation as applied in our group financial statements, which is based on the financial control approach. Therefore it includes ESG information of Royal Philips and its subsidiaries. The sustainability statement also includes value chain information relating to Philips' direct and indirect business relationships (downstream and upstream) through which the company has impact and where identified risks and opportunities are potentially material. Where applicable, this is disclosed in the relevant section of the material topic. The selected consolidated financial information in the sustainability statement has been derived from the group financial statements, which are prepared in accordance with IFRS. Based on stakeholder engagement and impact assessments of our value chain, we have identified the material topics, determined their relative impact in the value chain (downstream, our own operations, upstream) and reported for each topic on the relevant parts of the value chain. More details are provided in the relevant sections in the sustainability statement.

Philips has not used the option to omit a specific piece of information corresponding to intellectual property, know-how or the results of innovation. Philips also did not use the exemption from disclosure of subsidiaries provided for in articles 19a (3) and 29a (3) of Directive 2013/34/EU.

Disclosures in relation to specific circumstances

Time horizons

Short-, medium-, and long-term time horizons are defined in ESRS 1, meaning one year or less, one to five years, and over five years, respectively. Philips used different time horizons for its Climate Resilience Assessment. Please refer to Climate change for more details.

Value Chain estimation

Where applicable, we include information from our upstream and/or downstream data as part of our metrics. We use primary data from our suppliers when available. When value chain information cannot be measured directly and can only be estimated, measurement uncertainty may exist.

Sources of estimation and outcome uncertainty

We used expert opinions, estimates and proxies for some parts of the metrics calculations and some data points, which are disclosed in the relevant methodology sections. When metrics are subject to a high level of measurement uncertainty, the source is disclosed, including the estimates, assumptions and judgments applied. We regularly reassess our use of these expert opinions, estimates and proxies based on, for example, the availability of new data, experience, new standards and methodologies, and the availability and quality of value chain information. There is therefore an inherent uncertainty in our calculations, for example, lives improved, Environmental Profit & Loss statement, and Scope 3 carbon emissions calculations. In these cases the figures reported are Philips’ best estimate. As our insight increases, or higher-quality sources become available, we may enhance the methodology in the future.

Changes in preparation or presentation of sustainability information

In the current year, Philips has changed the preparation of the sustainability statement to be in accordance with ESRS. The sustainability information that was included in our Annual Report 2023 was prepared by Philips using the GRI Sustainability Reporting Standards supplemented by Philips’ own criteria. Comparative figures in this year’s sustainability statement have the same definitions and scopes which were applied in the prior year, unless stated otherwise. In case of material changes in the preparation and presentation of individual metrics and disclosures, we disclose the nature of these changes, the new information provided, including the difference between the previously reported metric and the revised metric and revised comparative figures (if possible). When it is not possible to report revised comparative information, this will be disclosed.

Subsequent events

On January 28, 2025, Philips announced that it has signed an agreement to sell its Emergency Care business unit to Bridgefield Capital, which is part of the Connected Care segment. The transaction is subject to the satisfaction of certain closing conditions and receipt of regulatory approval, and is expected to be completed in the second half of 2025. Sustainability information related to Emergency Care business unit is included in the sustainability statement 2024 and after completion of the transaction this information will be excluded from our future sustainability reporting.

Reporting errors in prior periods

Adjustments of our sustainability statement may or may not follow an adjustment or restatement of our Group financial statements (if any), and will be based on our judgment as to whether we should restate information, considering materiality. We clearly disclose where we have restated any information, including the nature of the correction.

Philips did not identify material misstatements related to sustainability information in prior reporting periods.

Incorporation by reference

Philips applied the option to incorporate content in this sustainability statement by reference, as defined in ESRS 1. By doing so, we aim to enhance the readability of the sustainability statement and provide the relevant context.

We included links to external websites for information purpose only; these links are not incorporated by reference into the sustainability statement as information addressing the relevant ESRS disclosure requirements are presented in the sustainability statement itself.

8.2.1    Tracking trends

We follow external trends and upcoming legislation to determine the issues most relevant for our company and where we can make a positive contribution to society at large. In addition to our own research and stakeholder engagement, we make use of a variety of sources, including the United Nations Environmental Programme (UNEP), World Bank, World Economic Forum (WEF), International Financial Reporting Standards (IFRS) and ISSB, EFRAG, World Health Organization, the World Business Council for Sustainable Development (WBCSD), and various rating agencies and analyst reports. Our work also involves tracking topics of concern to governments, non-governmental organizations (NGOs), regulatory bodies, academia, and following the resulting media coverage.

8.2.2    ESG governance, strategy and policies

ESG is embedded in our core business processes, such as innovation (EcoDesign), sourcing (Supplier Sustainability Program), manufacturing (Sustainable Operations), logistics (Green Logistics), and in programs such as our Circular Economy program.

Statement on due diligence

Philips incorporates due diligence in various parts of its operating model. An overview of the core elements of due diligence is given in the next table :

Philips Group

Steps of the due diligence process

Core elements of due diligence

References in sustainability statement *

Embedding due diligence in governance, strategy and business model

ESRS 2 GOV-2: Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies

ESRS 2 GOV-3: Integration of sustainability-related performance in incentive schemes

ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model

Engaging with affected stakeholders in all key steps of due diligence

ESRS 2 GOV-2: Information provided to and sustainability matters addressed by the undertaking’s administrative, management and supervisory bodies

ESRS 2 SBM-2: Interests and views of stakeholders

ESRS 2 IRO-1:Description of the processes to identify and assess material impacts, risks and opportunities

ESRS 2 MDR-P: Policies adopted to manage material sustainability matters

Topical ESRS: reflecting the different stages and purposes of stakeholder engagement throughout the due diligence process.

Identifying and assessing adverse impacts

ESRS 2 IRO-1 (including Application Requirements related to specific sustainability matters in the relevant ESRS)

ESRS 2 SBM-3: Material impacts, risks and opportunities and their interaction with strategy and business model

Taking actions to address those adverse impacts

ESRS 2 MDR-A: Actions and resources in relation to material sustainability matters

Topical ESRS: reflecting the range of actions, including transition plans, through which impacts are addressed

Tracking the effectiveness of these efforts and communicating

ESRS 2 MDR-M: Metrics in relation to material sustainability matters

ESRS 2 MDR-T: Tracking effectiveness of policies and actions through targets

Topical ESRS: regarding metrics and targets

*    Please refer to the the ESRS cross-reference table for the paragraphs in the sustainability statement


Strategy

Strategy, business model, and value chain

At Philips, ESG has been embedded in the strategy for over 15 years, and is driven by five-year programs. As a health technology company, Philips is committed to driving progressive value creation through a strategy of focused growth, scalable patient- and people-centric innovation, and focus on reliable execution supported by our culture of impact with care. We have a portfolio of patient- and people-centric innovations in hardware, software, AI and services, supporting care in the hospital and in the home. We serve our key customers including healthcare providers, patients, and people who use our products. Our integrated supply chain is tailored to customer needs, which encompasses supplier selection and management through procurement, manufacturing across all the industrial sites, logistics and warehousing operations, and customer installation, as well as demand/supply orchestration.

We gather stakeholder inputs as described in Double Materiality Assessment and Working with stakeholders and advocacy. We summarized the current and future expected benefits for our stakeholders in the Impacts, Risks and Opportunities table. For headcount of employees by geographical areas, refer to Employees headcount by contract type and region.

Interests and view of stakeholders

Philips actively engages with stakeholders and this engagement is closely aligned with the company’s purpose to improve people’s health and well-being through meaningful innovation. More information on this process can be found in Working with stakeholders and advocacy.

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

Philips conducted a Double Materiality Assessment (DMA) in 2024 to identify material topics, the related impacts risks and opportunities, and the subsequent reporting scope. Details can be found in Double Materiality Assessment and Material topics and our focus.

Policies

Policies adopted to manage material sustainability matters

Philips policies relating to the material topics identified through the DMA process can be found in the Policy Overview. More details on these policies can be found in the topical sections in the sustainability statement.

To read the policies in full, please refer to ESG downloads. To read the General Business Principles in full, please refer to General Business Principles. To read the SpeakUp Policy in full please refer to Philips SpeakUp Policy.

The policies and the General Business Principles are made available via the Philips website to all potentially affected stakeholders, and to stakeholders who need help to implement them. The scope of the policies includes activities of Philips, including all of its Businesses, Regions, and Functions. Key stakeholders, such as employees, customers and NGOs, are engaged to understand their interests. These interests are fully considered and their inputs inform Philips policies both in their objectives and their governance. For more information on how Philips engages with stakeholders, please refer to Working with stakeholders and advocacy.

Actions

Actions and resources in relation to material sustainability matters

Actions and resources relating to the material topics can be found in the topical sections in the sustainability statement.

8.2.3    External assurance

EY Accountants B.V. (EY) has issued an assurance report on the information included in our sustainability statement. Refer to Independent auditor’s assurance report on the ESG information and the EU Taxonomy information. Also refer to ESRS cross-reference table where we specify level of assurance provided by EY. All datapoints in the ESRS cross-reference table are subject to limited

assurance. In addition, the sustainability information on which EY provided reasonable assurance in prior year has been included in the FY2024 reasonable assurance scope. In 2023, the sustainability information was prepared by Philips using the GRI Sustainability Reporting Standards supplemented by Philips' own criteria. Comparative figures of the prior year have the same definitions and scopes, which are applied in the current year unless otherwise stated.

Where the measurement of a metric has been validated by an external organization other than EY, this is clearly indicated in the relevant section.

8.3    Double Materiality Assessment

We have conducted a Double Materiality Assessment (DMA) to determine the scope of sustainability reporting requirements applicable to us, pursuant to the EU Corporate Sustainability Reporting Directive (CSRD) and the related European Sustainability Reporting Standards (ESRS). This is the third DMA we conducted. We have built years of experience conducting impact materiality assessments in line with the GRI requirements and consider it a multi-stakeholder process. Please refer to Working with stakeholders and advocacy.

The DMA addresses both financial materiality (the impact of society on Philips) as well as impact materiality (the impact of Philips on society). We believe that the ESG topics we identified, have the greatest impact on our business and the greatest level of concern to stakeholders along our value chain, for instance patient safety and quality.

Taking our 2023 DMA as a starting point, we used an evidence-based approach to this year’s DMA, powered by a third-party AI-based application. This application has been updated in 2024 to address the DMA requirements under the CSRD, and now includes data from our supply chain partners and industry peers, as well as customers. We included, for example, data from 21 key suppliers, 37 customers of our Businesses, 32 peer companies and 72 countries. The application allows automated sifting and analysis of millions of data points from publicly available sources, including corporate reports, mandatory regulations and voluntary initiatives, as well as news. Combining all input, we first created a long list of sustainability topics based on the outcome of this assessment and analyzed the number of occurrences in the AI tool. We narrowed down this list based on workshops with internal subject matter experts. From the original list, 32 of the most relevant topics were retained for the short-list of sustainability topics and mapped against the company’s value chain. These topics were clustered to avoid overlaps. As part of the process, we defined and assessed Impacts, Risks and Opportunities (IROs, as referred to by the ESRS) with respect to the identified topics connected to our strategy and business model. Subject matter experts assessed the materiality of negative impacts based on scale, scope and any irremediable character. The materiality of positive impacts was assessed based on scale and scope. As such, positive and negative impacts have been assessed, where most impacts were also assessed to be ‘actual’ rather than ‘potential’. Materiality thresholds used in the DMA have primarily a qualitative nature and are quantitative where possible. For risks and opportunities, we assessed the dependencies on natural, human and social resources. The materiality of risks and opportunities is assessed based on a combination of the likelihood of occurrence and the potential magnitude of the financial effects. Subsequently, we created a validation survey, which was sent to more than 300 internal and external stakeholders. We received 117 responses from a representative stakeholder group.

We calibrated the financial and impact materiality of the 20 topics (clustered from 32 topics) with the CSRD Steering Committee, a team of internal experts from Enterprise Risk Management, Group Control, Internal Audit, Legal, Insurance and Risk Management, People Function, and Sustainability and aligned them with our Enterprise Risk Management assessment.


Results

As a result of the DMA, three topical standards, water, pollution, and biodiversity, were deemed not material for our strategy and business model, which is also supported by the outcome of our EP&L, the Climate Resilience report, and the TNFD report. The latter includes the process of how Philips assessed IROs, specifically related to pollution, water, and biodiversity for own sites and business activities. Next, three sub-topics from ESRS S1 were assessed to be not material to Philips: child labor, forced labor and adequate housing. Philips did not explicitly consult with affected communities as we deemed our current stakeholder consultation process to be sufficient.

The results were calibrated and approved by our Board of Management and the other Executive Committee members, followed by the Supervisory Board.

During the calibration sessions, the financial materiality of most of the Environmental topics increased compared with the initial assessment. On the Social topics, the financial impact of Human rights increased the most, followed by Fair & inclusive workplace. Product responsibility & safety, Geopolitical events, Big data, AI and cybersecurity, and Business ethics & general business principles were assessed to have the highest financial materiality, similar to 2023.

Overall, the impact materiality of the resulting topics did not change significantly compared to the 2023 DMA.

Philips has not identified any actual material risks and opportunities meaning that the risks and opportunities identified as an outcome of Philips' DMA process do not have any current financial effects on Philips' financial position, cash flows, and carrying value of assets and liabilities reported in the financial statements within the next annual reporting period.

The material topics are monitored regularly. The 2024 DMA also serves as input for the development of our 2030 ESG program. Assessing these material topics enables us to prioritize and address these in our policies, programs, targets and actions, and address the material impacts, risks, and opportunities with full consideration of the interests of the key stakeholders, such as end-users.

Material topics

For 2024, Philips reports on topical standards ESRS E1 (climate change), E5 (resource use and the circular economy), S1 (own workforce), S2 (workers in the value chain), S4 (consumer and end-users), and G1 (business conduct). Philips also reports on a number of company-specific topics, such as product responsibility, product safety, big data, AI and cybersecurity. The accompanying table provides an overview of the material topics, policies, and metrics, along with the applicability in our value chain.

Legend

Time horizon

òòò

Short-term

òòò

Medium-term

òòò

Long-term

Value chain

p¢q

Upstream

p¢q

Own operations

p¢q

Downstream

Environmental

Impacts, Risks and Opportunities

Description

Time horizon

Policies

Actions

Metrics

Value chain

2025 Target

KPI

Unit

2025 target

Climate change (ESRS E1)

Material negative impact,

material risk


As a healthcare company, Philips has a negative impact on the environment due to GHG emissions as a result of Philips' own operations and value chain activities.

òòò

Environmental Policy

Section 4.1.2

Note I

Note XIII

E1-5 – Energy consumption and mix

E1-6 – Gross Scopes 1, 2, 3 and Total GHG emissions

E1-8 – Internal carbon pricing

Entity specific:

Operational Carbon Footprint

p¢q

Net operational carbon footprint

kilotonnes CO2- e

0

Renewable energy in our operations

% of energy from renewable sources

75%

Scope 1 & 2 emissions

kilotonnes CO2- e

34

Philips is exposed to certain physical risks (including acute and chronic risks) and certain transitional risks which can lead to disruptions in Philips' operations, supply chain, and increased costs.

òòò

Scope 3 emissions

kilotonnes CO2- e

4,269

(2030 target)

% of suppliers committed to Science Based Targets

%

50%

Energy efficiency

(ESRS E1)

Material risk, material opportunity

Risk of losing Philips' competitive position if Philips does not develop energy-efficient equipment.

òòò

Environmental Policy

Note I

Note II

E1-5 – Energy consumption and mix

Entity specific:

EcoDesigned new product introductions (NPIs)

Green Innovation

p¢q

EcoDesigned NPIs

%

100%

Risk of reputation loss if Philips fails to deliver on external (e.g., SBTi) commitments and fails to increase the share of renewables on site.

òòò

Philips has a potential opportunity to further improve its reputation which may lead to increased sales if Philips continues to develop energy-efficient equipment through its' EcoDesign program and bring them to market.

òòò

Environmental

Impacts, Risks and Opportunities

Description

Time horizon

Policies

Actions

Metrics

Value chain

2025 Target

KPI

Unit

2025 target

Circular Economy

(ESRS E5)

Material negative impact,

material risk, material opportunity

Philips has a negative impact on the environment due to resource extraction to manufacture Philips' products that can further contribute to resource scarcity.

òòò

Environmental Policy

Note II

E5-4 – Resource inflows

E5-5 – Resource outflows

Entity specific:

Environmental Profit & Loss

Circular Revenues

EcoHero Revenue

EcoDesigned NPIs

Closing the Loop

p¢q

EcoHero revenues

% hardware revenues

25%

Risk of resource scarcity and risk of competing for sustainable materials can result in lack of resiliency in Philips' supply chain and increased costs of operation.

òòò

Risk of failing to meet customers' changing demands from customers (buying more environmentally friendly) can result in declining sales.

Philips could face challenges in incorporating EcoDesign criteria from new or upcoming legislation into its products and services.

òòò

Circular revenues

% total revenues

25%

Opportunity to further embed circular economy practices across Philips' value chain, which can further grow Philips' business and reputation.

òòò

Closing the Loop

Systems or pieces of equipment

Extend to small medical equipment

Waste management (ESRS E5)

Material negative impact

Philips has a negative impact on the environment as a result of Philips putting a significant amount (and weight) of electronics products to the market, which is also one of the world's fastest growing waste streams.

òòò

Environmental Policy

Note II

E5-5 – Resource outflows

Entity specific:

Circular Revenues

Circular Material Management

Waste to Landfill

Closing the Loop

p¢q

Circular Materials Management

%

95%

Philips has a negative impact on the environment as a result of Philips generating waste in own operations and value chain because of Philips' manufacturing activities.

òòò

Zero waste to landfill as a percentage of total regular waste

%

less than 0.5%


Social

Impacts, Risks or Opportunities

Description

Time horizon

Policies

Actions

Metrics

Value Chain

2025 target

KPI

Unit

2025 target

Fair & Inclusive workplace

(ESRS S1)

Material positive impact,

material opportunity

Philips makes a positive impact on employees by promoting an inclusive workplace, where all employees and other workers feel valued and respected.

òòò

General Business Principles,

Diversity & Inclusion Policy,

Fair Employment Policy


Note V

Note VII

Note XII


S1-6 – Characteristics of the undertaking’s employees

S1-7 – Characteristics of non-employee workers in the undertaking’s own workforce

S1-9 – Diversity metrics

S1-12– Persons with disabilities

S1-16 – Compensation metrics (pay gap and total compensation)

Entity specific:

Women in leadership positions

Employee Engagement Index

p¢q

Women in leadership positions

% of senior management positions

35%

Philips has an opportunity to support and strengthen employee belonging and employment engagement by providing a fair, safe and respectful treatment for all employees in employment practices, compensation and an inspiring place to work and grow.

òòò

Employee Engagement Index

%

N/A

Employee rights

(ESRS S1)

Material positive impact,

material risk

Philips has positive impacts on employees by respecting employee rights, providing at least a living wage to all employees, providing fair employment, providing fair and equal opportunities for development, and respecting employees' right to organize and collective bargaining.

òòò

General Business Principles,

SpeakUp Policy,

Fair Employment Policy,

Human Rights Policy


Note VIII

Note XII


S1-8 – Collective bargaining coverage and social dialogue

S1-10 – Adequate wages

S1-11 – Social protection

Entity specific:

Philips pays its employees at least a living wage

p¢q

We pay at least a living wage

%

100%

Risk of fines, legal liabilities, and reputational damage for Philips due to Philips not adequately addressing employee rights in their operations.

òòò

Employee well-being, Health & Safety

(ESRS S1)

Material positive impact,

material negative impact,

material risk

Philips has a positive impact on employees' well-being as a result of providing a healthy work-life balance.


òòò

Diversity & Inclusion Policy,

Occupational Health & Safety Policy,

Mental Health Champion program

Note XI

Note XII

S1-14 – Health and safety metrics

S1-15 – Work-life balance metrics


p¢q

Total Recordable Case (TRC) rate

Total recordable cases per 100 FTE

N/A

Negative impact on Philips' employees due to work-related incidents and illnesses.

òòò

Health & Safety: Risk of fines, legal liabilities, increased absenteeism due to work-related incidents and illnesses in Philips' own operations.

òòò

Talent & development (ESRS S1)

Material positive impact,

material opportunity

Philips has positive impacts on employees by providing opportunities to develop their skills and to realize their full potential through on-the job training, learning from others (such as through coaching and mentoring) and virtual and classroom courses.

òòò

Fair Employment Policy

Note IV

Note X

Note XII

S1-13 – Training and skills development metrics

p¢q

Training hours per employee

Hours

N/A

Philips has an opportunity to further strengthen relationships with employees and increase company performance through employees' continuous learning and growth.

òòò

Social

Impacts, Risks or Opportunities

Description

Time horizon

Policies

Actions

Metrics

Value Chain

2025 target

KPI

Unit

2025 target

Human Rights (ESRS S1 and S2)

Material negative impact (operations and supply chain), material risk

(supply chain)

Potential impact of discrimination, including harassment on Philips’ workforce and workers in Philips' supply chain through the failure to ensure a safe and respectful workplace and/or ineffective grievance mechanisms.

òòò

Human Rights Policy

Note XI

Note XIII

Section 4.2.3 Note XIV

S1-17 – Incidents, complaints and severe human rights impacts

S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions

Entity specific:

Human rights impact assessments at our at-risk sites

Suppliers participating in Supplier Development program


p¢q

Human Rights impact assessments at our at-risk sites

%

100%

Potential negative impact of illegal or unethical labor practices on own workforce and workers in Philips' supply chain.

òòò

Risk of fines, legal proceedings, and reputational damage due to incidents of human rights violations, including existing and emerging regulatory requirements.

òòò

Responsible & resilient supply chains

(ESRS S2 and G1)

Material positive

impact,

material

risk

Philips brings positive impacts to workers in the value chain by engaging suppliers in sustainability initiatives through its supplier sustainability program.

òòò

General Business Principles

Human Rights Policy

Note XIII

S2-4 – Taking action on material impacts on value chain workers, and approaches to managing material risks and pursuing material opportunities related to value chain workers, and effectiveness of those actions

G1-2 – Management of relationships with suppliers

Entity specific:

Human rights impact assessments,

Suppliers participating in Supplier Development program

p¢q

% of suppliers committed to Science Based Targets

%

50%

Risk of loss in revenue and risk of reputational damage for Philips due to not having a resilient supply chain as a result of poor working conditions and unequal treatment of workers in the value chain by Philips' suppliers.

òòò

Lives improved in the supply chain

Number of lives

1 million

Social

Impacts, Risks or Opportunities

Description

Time horizon

Policies

Actions

Metrics

Value Chain

2025 target

KPI

Unit

2025 target

Access to (quality & affordable) care

(ESRS S4)

Material positive impact,

material opportunity

Philips makes a positive impact on consumers, customers and their patients by improving people's health and well-being by bringing access to quality and affordable care.

òòò

General Business Principles,

Stakeholder Engagement Policy

Note XVI

S4-4 – Taking action on material impacts on consumers and end-users, and approaches to managing material risks and pursuing material opportunities related to consumers and end-users, and effectiveness of those actions

Entity specific:

Lives improved

Lives improved in underserved health communities

p¢q

Lives improved

Number of lives

2 billion

Philips has an opportunity to further its' partnerships with healthcare customers to increase productivity and deliver better care for more people, additionally to further empower more people to take care of their health and well-being through Philips' personal health propositions.

òòò

Lives improved in medically underserved communities

Number of lives

300 million

Product responsibility & safety

(ESRS S4) 

Material negative impact,

material risk

Philips can have negative impacts on its consumers, its customers and their patients because of the safety and quality compliance of Philips' products and services.

òòò

General Business Principles, SpeakUp Policy, Quality and Safety Standards

Note XVII Section 4.2.3

S4-4 – Taking action on material impacts on consumers and end-users, and approaches to managing material risks and pursuing material opportunities related to consumers and end-users, and effectiveness of those actions

Entity specific:

Quality Management Learning (QML)

p¢q

Total training hours in Quality Management Learning (QML)

Hours

N/A

Risk of substantial fines, reputational damages or legal costs due to defects of Philips' products.


òòò

Governance

Impacts, risks or opportunities

Description

Time horizon

Policies

Actions

Metrics

Value Chain

2025 target

KPI

Unit

2025 target

Business ethics & General Business Principles

(ESRS G1)

Material positive impact,

material risk

Philips makes a positive impact on people and society by operating in a responsible and ethical manner, contributing to long-term value creation for all stakeholders.


òòò

General Business Principles,

SpeakUp Policy

Note XIX

Section 4.3.4

G1-1– Corporate culture and Business conduct policies

G1-3 – Prevention and detection of corruption and bribery

G1-4 – Confirmed incidents of corruption or bribery

G1-6 – Payment practices


p¢q

N/A

Risk of non-compliance with business conduct rules and regulations due to unethical behaviors, including corruption and bribery.


òòò

Governance (ESRS G1)

Material risk,

material opportunity

Risk of not effectively simplifying the organization and ways of working, including (but limited to) changes in governance, processes, and IT landscape and architecture.


òòò

General Business Principles

Section 4.3.7

Entity specific:

Tax transparency

p¢q

N/A

Philips has an opportunity to grow its business by creating a simplified, more agile operating model to improve the execution of Philips' strategy.


òòò

Public affairs

(ESRS G1)

Material positive impact,

material risk

Philips has positive impacts on internal and external stakeholders by actively engaging in public affairs; making advocacy efforts to foster an open, meaningful, effective, and informed dialogue regarding Philips' activities; and meeting internal and external stakeholders’ needs, concerns and expectations.

òòò

Stakeholder Engagement Policy

Section 4.3.8

G1-5 – Political influence and lobbying activities

p¢q

N/A

Philips may be unable to meet internal or external aims or expectations with respect to ESG-related matters

òòò

Big data, AI & Cybersecurity

Potential negative impact,

material risk, opportunity

Philips can have negative impacts on employees, customers, and consumers if Philips fails to meet cybersecurity standards.


òòò

General Business Principles,

Internal cybersecurity policies

Section 4.3.5

S1-17 – Incidents, complaints and severe human rights impacts

p¢q

N/A

Risk of business operations disruptions, customer dissatisfaction, reputation loss, and legal liabilities and fines, if Philips fails to meet cybersecurity standards.


òòò

Philips has an opportunity to further integrate AI, and incorporate AI and capabilities in its products and services, which can result in improving customer experiences and driving efficiencies, which in turn grows Philips' business.


òòò

Competition & market access

Material positive impact,

material risk

Philips can have a positive impact on society by complying with global regulations and standards and advocate fair competition.



òòò

General Business Principles,

SpeakUp Policy

Section 4.3.4

S1-17 – Incidents, complaints and severe human rights impacts

p¢q

N/A

Risk of substantial fines, reputational damage or legal costs due to competition and market access issues.

òòò

Governance

Impacts, risks or opportunities

Description

Time horizon

Policies

Actions

Metrics

Value Chain

2025 target

KPI

Unit

2025 target

Sustainable value creation

Material positive impact,

material opportunity

Philips has positive impacts on people and society by delivering sustainable value to its customers and consumers.

òòò

General Business Principles, Environmental Policy

Note II

Note XIV

Entity specific:

Lives improved

Lives improved in medically underserved communities


p¢q

Lives improved

Number of lives

2 billion

Philips has an opportunity to create sustainable value by developing sustainable products and solutions.

òòò

Lives improved in medically underserved communities

Number of lives

300 million

Innovation & research 

Material positive impact,

material opportunity

Philips can have a positive impact on society by developing sustainable products and solutions.

òòò

Environmental Policy

Note II

Note XIV

Entity specific:

Green/EcoDesigned innovation


p¢q

Green/EcoDesigned Innovation

EUR

N/A

Opportunity to gain sustainable competitive advantage and create value with sustainable impact by delivering scalable, people-centric, and patient-centric innovations.

òòò

Geopolitical events

Material risk

Risk of adversely impacted business and operations due to unfavorable macro-economic conditions and geopolitical instability in global and individual markets as result of changes in politics as well as monetary, trade and tax policies in the US, the EU and China.

òòò

Stakeholder Engagement Policy

Section 4.3.7 Section 4.3.8

Entity specific:

Tax transparency

p¢q

Tax transparency

EUR

N/A


The scope of below policies applies to Philips Group including all of its Businesses, Regions, and Functions. In general, as stated in the ESG Governance section in Chapter 4, the Board of Management defines Philips’ ESG strategy, commitments, programs, action plans and policies, oversees major transactions, monitors progress on ESG priorities (including the implementation of due diligence), and takes corrective action where needed.

Philips Group

Policy Overview

Policy

Key content

Third party standards

Reference to relevant section

Availability of the policy

Environmental Policy

To optimize Philips' environmental strategy and performance to support the transition towards a low-carbon, nature positive and circular economy through Philips' key environmental programs including Climate Action and Circular Economy addressing the below key aspects of the program:

reduce full value chain emissions and building Philips' adaptive capacity

implement energy efficiency measures, phasing out fossil fuels, procuring renewable electricity

maximize value with minimal consumption of virgin and non-renewable materials guided by Philips' circularity principles 'use less, use longer, and use again' through application of EcoDesign and Circular principle in the design of software and hardware as well as in manufacturing, end-use management, and shift towards cloud

UN SDG

TCFD

8.4 Environmental information

Philips Key ESG downloads

General Business Principles

To establish Philips' standard for integrity, guiding ethical behavior, transparency, and accountability.

N/A

4.3.4 General Business Principles (GBP)

8.6 Governance information

Philips website

To set the minimum standard for our business conduct as a health technology company, for our individual employees and for our subsidiaries, and serve as a reference for the business conduct we expect from all our business partners.

Diversity & Inclusion Policy

To have a diverse workforce and an inclusive work environment, and to be an equal-opportunity employer, ensuring that all hiring, promotions, and pay decisions are based solely on merit, qualifications and performance.


N/A

8.5 Social information

Philips Key ESG downloads

Commitment to not discriminate on the basis of race, color, ethnicity, age, gender, gender identify or expression, sexual orientation or identity, marital status, language, background, religion, health status, pregnancy, political or other opinions, disability, national or social origin/birth or any other status in our recruitment, hiring, training, promotion, compensation, or employment practices.

Fair Employment Policy

Details the ethical and social principles that govern the company's relationship with its employees and other workers world wide.

International Bill of Human Rights

International Labour Organization (ILO)

8.5 Social information

Philips Key ESG downloads

Promotes transparency, accountability, and a positive work environment and is aimed at creating a fair and equal work space.

Create an environment of inclusion and belonging where all employees and other workers are treated fairly, free from discrimination, harassment, and other prohibited behaviors.

Provide all employees with fair and equal development opportunities.

Speak Up Policy

To ensure the highest standards of business conduct by sustaining a culture in which all employees show ethical conduct, and where doing things ethically is recognized and valued.

N/A

8.5 Social information

8.6 Governance information

Philips website

To establish a process of reporting a concern and explanation of process of subsequent investigation in situations which people do not uphold the standards of business conduct, leading to potential violations of the GBP.

Human Rights Policy

Commitment to identify, prevent, and mitigate adverse human rights impacts. Philips' commitment to human rights, including labor rights of workers, extends to other parts of our value chain, affecting our business partners, suppliers, and customers.

International Bill of Human Rights

International Labour Organization (ILO)

8.5.2 Workers in the value chain

Philips Key ESG downloads

Declaration on Fundamental Principles and Rights at Work

Philips conducts human rights due diligence by identifying, prioritizing, and addressing impact areas and aims to periodically review and strengthen our due diligence approach in alignment with our own learnings and industry best practices.

United Nations Guiding Principles on Business and Human Rights (UNGP)

Organization for Economic Co-operation and Development (OECD)

Occupational Health & Safety Policy

Commitment to prevent injuries, illnesses and incidents by providing a health and safe working environment to every employee, contractor and visitor through proactive risk management focused on:

hazard control and elimination

consultation and engagement of employees

fostering a culture of health and well-being

ensuring regulatory compliance and continual improvement through OHS performance management

ISO standard

8.5 Social information

Philips Key ESG downloads

Mental Health Champion Program

To promote and support well-being and mental wellness. Providing the right foundations for the Mental Health Champions will help create a more engaged, happy and high performing culture at Philips.

N/A

Note V Diversity, Inclusion and Well-Being

Philips intranet

Quality and Safety Standard

Expresses our overall intention and direction with respect to quality. It states our objectives for, and commitment to, quality.

N/A

4.3.3 Patient safety, quality and regulatory

Philips intranet

Stakeholder Engagement Policy

To pursue and foster an open, meaningful, effective, and informed dialogue regarding our activities and our internal and external stakeholders' needs, concerns and expectations.

1.1.5 of the Dutch Corporate Governance Code

4.3.8 Working with stakeholders and advocacy

8.3 Double Materiality Assessment

Philips website

Internal Cybersecurity Policies

Philips’ products and services need appropriate security features and controls to ensure our customers and Philips can comply with applicable legislation, recommended security best practices and internal policies.

N/A

4.3.5 Cybersecurity

Philips intranet

In addition to the DMA process where we specifically consult affected stakeholders regarding inputs to the materiality assessment, Philips also engage our key stakeholders throughout the year which help us deliver on one of our key ESG commitments: to be transparent about our plans, activities, targets, results and contributions to society, and to engage with shareholders, customers, business partners, employees, academics, governments and regulators through a variety of platforms.

Philips Group

Stakeholder engagement overview (non-exhaustive)

Stakeholders

Processes

Results

Employees

European Works Council

Local works councils

Individual employees

Regular meetings across all levels (such as individual discussions, group sessions, and town hall meetings), quarterly Employee Survey, employee development process, quarterly update webinars. For more information, refer to Social.

Regular mail updates, team meetings, webinars

Engaged and informed employees, action plans, policies and policy updates, offering attractive employment and career paths, fostering skill development,talent and experience

Customers

Hospitals

Retailers

Consumers

Regular engagements dialogue and guidance, joint (research) projects, business development, Lean value chain projects, strategic partnerships, consumer panels, Net promoter scores, Philips Customer Experience Centers, Philips customer care centers, training centers, social media

New technologies and processes, frustration-free packaging solutions, green consumer propositions, life cycle analysis of products, EU Product Environmental Footprint pilots

Suppliers

Chinese suppliers in the Supplier Development program

Randstad, Lenovo

Supplier development activities (including topical training sessions), supplier forums, supplier website, participation in industry working groups such as COCIR and RBA. For more information, refer to Supplier sustainability &  Workers in the value chain

Supplier improvement projects, supplier commitments to Science Based Targets to reduce CO2-e emissions, joint projects, informed selection of suppliers

Governments, municipalities, etc.

European Commission

US government

Chinese government

Regular (topical) meetings and engagements, research projects, policy and legislative developments, business development, multi-stakeholder projects

Feedback on proposed legislation, investment plans, transition plans to a circular and low-carbon society, aligning business model and strategy to mitigate risk, ensuring regulatory compliance

NGOs

UNICEF, International Red Cross

Friends of the Earth, Greenpeace

Topical meetings, multi-stakeholder projects, joint (research) projects, innovation challenges, renewables projects, social investment program and Philips Foundation

Projects to increase access to care in underserved communities, action plans, policies, site-specific initiatives

Investors

Mainstream investors

ESG investors

Investor platforms

Webinars, roadshows, capital markets day, investor relations and sustainability accounts

Green and Sustainability Innovation Bonds, visits to Philips Customer Experience Centers, enhanced transparency

Communities

Local communities

Underserved and disadvantaged communities

Active engagement, supporting initiatives, building relationships, addressing questions and concerns, engaging with independent foundations, increased direct-to-consumer relationships

Volunteering, internships, STEM (Science, Technology, Engineering,

Mathematics) initiatives, social value creation, building trust, community benefits

8.4    Environmental information


Note I Climate change

Climate change has been a material topic for Philips for many years, and the Double Materiality Assessment (DMA) performed in 2024 re-confirmed this. It has also been a part of senior management remuneration as further explained in Remuneration report 2024. Building on our success in achieving carbon neutrality in 2020, this chapter details how Philips aligns its climate actions with the Science Based Targets initiative (SBTi) and European Sustainability Reporting Standards (ESRS). We will set out Philips’ policy, targets and metrics, material climate-related risks and opportunities as well as actions and resources allocated to the transition.

Please note that Philips is not excluded from any EU Paris-aligned Benchmarks as we do not meet any of the exclusion criteria stated in Article 12.1 (d) to (g) of Commission Delegated Regulation (EU) 2020/1818.

Policies, metrics and targets

In this section, Philips’ Environmental policy, Science Based Targets and climate action scope will be further explored. For a more detailed overview of this please refer to the Climate Resilience report.

Philips’ Policy and targets related to climate change mitigation and adaptation

Our Climate Action targets are in line with our Environmental Policy, aiming to reduce our full value chain emissions and building Philips’ adaptive capacity. These targets therefore also help to address the impacts, risks and opportunities related to climate change.

Philips set its first science-based emission reduction targets back in 2017 for its Scope 1 & 2 (market-based) emissions, officially approved by the Science Based Targets initiative (SBTi). In 2022, Philips has stepped-up and introduced new Science Based Targets, covering Scope 1, 2 and 3 emissions (approximately 96% of our value chain emissions). We are therefore committed to collaborating with suppliers and customers to amplify our impact and reduce our footprint across the value chain.

 

Our Scope 3 target includes the following Greenhouse Gas Protocol categories:

Category 1: Purchased goods and services

Category 4: Upstream transportation and distribution

Category 6: Business travel

Category 4: Downstream transportation and distribution

Category 11: Use of sold products


All other Scope 3 emission categories are excluded from our inventory after a thorough assessment of their relevance and materiality in line with the GHG Protocol and CDP reporting requirements. Capital goods (Category 2), fuel- and energy-related activities (Category 3), waste generated in operations (Category 5), employee commuting (Category 7), and end-of-life treatment of sold products (Category 12) are all considered immaterial due to size. Additionally, upstream/downstream leased assets (Category 8 and 13), processing of sold products (Category 10), franchises (Category 14), and investments (Category 15) are not applicable to Philips'. This approach is consistent with the best practice of focusing on material categories that have the most impact on emissions reductions and ensures the accuracy and credibility of the disclosed inventory.

For all of our SBTi-approved and 1.5 °C-aligned targets, baselines and performance, please refer to the following table. These targets follow the cross-sector guidance of the SBTi and take into consideration future developments such as changes in sales volumes, shifts in customer preferences and demand, regulatory factors, and advancements in technology.

Please note that we have also committed to Net Zero via SBTi and are in the process of formalizing this target, including the target year.

Philips Group

Science Based Targets reduction % compared to baseline

Scope coverage

2025

2030

2040

Absolute Contraction Approach (ACA) emission reduction targets

Scope 1 & 2 (Baseline 2015)

100%

-75%

-90%

Scope 3

(Baseline 2020)

95%

-42%

In accordance with the SBTi guidance, our site specific direct (Scope 1) and indirect (Scope 2) emissions fall under the same target. During our baseline year, our Scope 1 and 2 emissions were divided as follows: 26% Scope 1 emissions and 74% Scope 2 (market-based) emissions. In 2024, 89% of our target consisted of Scope 1 emissions and 11% consisted of Scope 2 (market-based) emissions. We have therefore decarbonized our Scope 2 emissions at a faster rate compared with Scope 1.

All our consolidated subsidiaries contribute to our Science Based Targets at Group level listed above. We do not have material subsidiaries that are not fully consolidated and that would therefore require separate targets.

In establishing our Greenhouse Gas (GHG) emissions baseline, the selection of the base year was guided by several considerations. More precisely, it was driven by historical data availability, the stability of operations during that period, and the desire to capture a representative snapshot of our emissions profile. In particular, we considered factors such as significant changes in business operations, facility expansions, or the implementation of emission reduction initiatives.

Despite the unprecedented challenges brought about by the COVID-19 pandemic, the baseline year 2020 for Scope 3 stands out as a significant year for Philips, marked by a level of relative stability in both customer base and emissions profile. In contrast, the year 2015 was selected as the baseline for Scope 1 and 2 emissions because it was the earliest feasible date for measurement and target-setting in alignment with the Paris Agreement. Should enhancements in data quality or methodological changes lead to an emission deviation exceeding 5% compared with our current baseline emissions, we intend to restate the baseline in accordance with the Science Based Targets initiative.

Actions associated with climate change

In this section Philips’ 2024 performance will be further described. This includes an analysis of our energy performance, gross Scope 1, 2 and 3 emissions, investments linked to carbon credits and internal carbon pricing mechanisms. This section will therefore provide further clarification on our 2024 performance.

Philips’ energy consumption and mix

In 2024 our total energy demand has slightly increased by 2% compared to 2023. This was primarily due to an increased consumption of electricity and purchased heating, cooling and steam which can be linked to employees going to the office more frequently. Most notably the amount of self generated non-fuel renewable energy has increased by 45% compared to 2023 highlighting our commitment to expand the share of on site renewables.

As such we are making good progress in transitioning to renewable energy, increasing the share to 80% in 2024. We have therefore achieved our 2025 ambition of sourcing 75% of our energy from renewable sources. This is largely driven by multiple Power Purchase Agreements (PPAs) securing the supply of renewable electricity. Prior to 2023, these included the Los Mirasoles wind farm in the US and the Krammer and Bouwdokken wind farms in the Dutch province of Zeeland. To further secure the long-term delivery and quality of renewable electricity for all our operations in Europe, we increased our portfolio in 2023 and 2024 with a wind farm in Mutkalampi, Finland and a solar farm in Pontinia, Italy. In December 2023, we also closed our first direct renewable energy deal in China followed by a second one in December of 2024. For all remaining electricity demand, we acquire unbundled Energy Attribute Certificates (EACs). Details regarding the attributes per country are available through RE100.

EACs play a pivotal role in achieving our renewable energy target, aligning with the recommendations of RE100. These instruments serve as strategic tools in our commitment to sustainability and environmental responsibility. By investing in renewable energy projects through the purchase of EACs, we not only contribute to the growth of the clean energy sector, but also directly limit our carbon footprint associated with electricity consumption. For more information on our renewable energy strategy please refer to the renewable energy methodology.


Philips Group

Energy consumption in megawatt hours (MWh) unless otherwise stated

2020

2021

2022

2023

2024

Fuel consumed from coal and coal products

Fuel consumed from crude oil and petroleum products

7,400

4,300

5,000

5,120

4,773

Fuel consumed from natural gas

126,400

116,300

97,700

84,853

78,702

Fuel consumed from other non-renewable sources

445

Consumption from nuclear products

Consumption of purchased electricity, heat, steam, and cooling from non-renewable sources

12,600

14,400

11,900

11,682

11,025

Total non-renewable energy consumption

146,400

135,000

114,600

101,656

94,945

Fuel consumption from renewable sources (including biomass, biogas, non-fossil fuel waste, etc.)

In-contract renewable electricity

63,100

56,700

39,600

34,416

26,457

Power Purchase Agreement (PPA)

186,200

168,700

187,400

198,454

204,204

Consumption of purchased electricity, heat, steam, and cooling from renewable sources

130,000

161,300

152,300

119,778

134,251

Total consumption of self-generated non-fuel renewable energy

2,100

2,400

2,700

3,272

4,730

Total renewable energy consumption

381,400

389,100

382,000

355,921

369,642

Share of non-renewable energy consumption (%)

28%

26%

23%

22%

20%

Share of renewable energy consumption (%)

72%

74%

77%

78%

80%

Share of renewable electricity consumption (%)

100%

100%

100%

100%

100%

Total energy consumption

527,800

524,100

496,600

457,576

464,587

Total Sales in millions of EUR¹

EUR 18,169

EUR 18,021

Total energy efficiency in MWh/million EUR sales

25.18

25.78

Energy consumption from high climate impact sectors³

464,587

Total Sales in million of EUR from high climate impact sectors²

EUR 16,848

Energy intensity from high climate impact sectors in MWh/million EUR sales³

27.58

1    Total sales can be found in 6.1 Consolidated statements of income

2    In accordance with the ESRS we have only accounted for revenue from manufacturing associated with NACE code C26.6 (excluding revenue and energy consumed from our Enterprise Informatics business/sites which is linked to NACE J62.01)

3    Calculation as follows: Energy consumption total x Share of high climate impact sector sales. Share of high climate impact sector sales is calculated as: (Total Sales - EI business sales) / Total Sales


Our total energy efficiency slightly declined by 2%, from 25.18 MWh/million EUR sales in 2023 to 25.78 MWh/million EUR sales in 2024. As noted, this is primarily due to increase office attendance.

No capital expenditures have been made related to coal, oil or gas-related economic activities. There have also not been any site-related investments in 2024 with significant locked-in GHG emissions that might impede our renewable energy and/or emission-related targets. On the contrary, by signing new long-term Power Purchase Agreements, we have been able to secure the delivery of renewable energy for the future.

Philips’ gross Scope 1, 2, 3 and Total GHG emissions

We report on our full value chain emissions covering approximately 96% of our Scope 1, 2 and 3 emissions. Compared to 2023 we have not made any changes to this reporting scope ensuring comparability. The main adjustment compared with the previous year has been the splitting of upstream transportation and distribution from downstream transportation and distribution. This is further explained in Scope 3, Category 4 & 9 - Transportation and Distribution.

Overall, we are well underway to achieving our Science Based Targets. We have reduced our Scope 1 and 2 emissions by 85% meaning that for the achievement of our long-term 2040 target we will only have to reduce our emissions by 7 kilotonnes CO2-e. Additionally, we have reduced our Scope 3 emissions by 12% meaning that in the remaining 6 years we will only have to reduce emissions by 110 kilotonnes CO2-e. This excludes the use of any carbon credits (e.g., removal or reduction projects).

Philips Group

Carbon footprint by Scope and category in tonnes CO2-equivalent1

Retrospective

Milestones and target years²

Base year

2023

2024

2025

2030

2040

Scope 1 GHG emissions (Baseline 2015)

Scope 1&2 GHG emissions

Gross Scope 1 GHG emissions

34,896

19,856

17,783

33,543

13,417

% Scope 1 emissions covered by ETS²

3%

2%

Scope 2 GHG emissions (Baseline 2015)

Gross Location-based emissions

198,820

145,908

157,610

Gross Market-based emissions

99,275

2,137

2,179

Significant Scope 3 emissions (Baseline 2020)³

Scope 3 GHG emissions

Category 1- Purchased goods and services

1,715,819

1,511,035

1396,321

4,268,906

Category 4 - Upstream transportation & distribution

271,071

209,605

228,409

Category 6 - Business travel

70,158

90,776

115,534

Category 9 - Downstream transportation & distribution

143,613

95,481

109,568

Category 11 - Use of sold products

5,159,574

3,066,284

2,528,611

Total GHG emissions

Total GHG emissions (Location-based)

5,138,945

4,553,836

Total GHG emissions (Market-based)

4,995,174

4,398,405

Total GHG emissions including biofuels (Market-based)⁴

4,994,496

4,398,405

Total Sales in millions of EUR⁵

18,169

18,021

GHG intensity

GHG intensity (Location-based approach) (kgCO₂-e/EUR)

0.28

0.25

GHG intensity (Market-based approach) (kgCO₂-e/EUR)

0.27

0.24

1     The emissions cover all activities over which Philips has operational control. This is done in respect of ESRS 1 - DR 62 and 67

2     For each of these trading schemes only emissions from CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3 are regulated. Please also note that none of our operational activities fall under the EU ETS

3     We do not currently use any biomass in our upstream and downstream value chain

4     Philips does not consume any biofuels in its direct, upstream and downstream operations that would contribute to biogenic emissions

5     Total sales can be found in 6.1 Consolidated statements of income


Scope 1 and 2 greenhouse gas emissions

At our sites, we reduced our Scope 1 (direct) CO2-e emissions by 10% and increased our Scope 2 (market-based approach) CO2-e emissions by 1% compared to 2023. Scope 1 emissions include the emissions from direct fuel consumption and refrigerant use, while Scope 2 (market-based) emissions cover non-renewable electricity and purchased (city/district) heating, cooling, and steam.

In line with our environmental policy, we are actively implementing energy efficiency measures, phasing out fossil fuels, and procuring renewable electricity to meet our Science Based Targets for Scope 1 and 2 (market-based) emissions in line with limiting global warming to 1.5 degrees Celsius. This commitment is further underscored by our pursuit of ISO 50001 certification for our manufacturing sites, enabling a systematic approach to continuous energy management improvements. For more information on our energy performance please refer to Philips’ energy consumption and mix.

Although we have already achieved our 2025 SBTi targets, we are committed to accelerating our Scope 1 and 2 decarbonization efforts by reducing overall energy consumption and sourcing alternative renewable energy solutions. This ensures we remain on track to meet our long-term 2040 Science Based Target.

As part of our reporting obligations, we are also committed to disclosing emissions per greenhouse gas type, where available. We do this for our Scope 1 and 2 (market-based) emissions as these are under our direct operational control. Knowing which greenhouse gases contribute the most to our footprint allows us to scrutinize the underlying processes and if needed take corrective actions.

In accordance with international reporting requirements, emissions from each of the gases are weighted by their Global Warming Potential (GWP), so that total Greenhouse Gas emissions can be reported on a consistent basis. For an overview of the respective GWPs per fuel please refer to Philips’ Emission calculation methodologies.

Philips Group

Greenhouse Gas emissions per gas type in tonnes CO2-equivalent

2023

2024

Scope 1

Carbon dioxide (CO₂)

18,267

16,971

Methane (CH₄)

25

25

Nitrous oxide (N₂0)

13

10

Hydrofluorocarbons (HFC)

1,297

550

Perfluorinated carbons (PFC)

0

0

Chlorofluorocarbons (CFC)

5

4

Hydrochlorofluorocarbons (HCFC)

249

223

Scope 2 (Market based)

Carbon dioxide (CO₂)

2,118

2,160

Methane (CH₄)

12

12

Nitrous oxide (N₂0)

7

7

Total amount of emissions

21,993

19,962

Scope 3, Category 1 - Purchased Goods and Services

Our emissions from purchased goods and services were 1,396 kilotonnes CO2-e in 2024. This is a reduction of 19% compared to the 2020 baseline and a 8% reduction compared to 2023. The main reason for this reduction is the reduced sales volume of Philips in 2024 vs 2023 and the shift in our product portfolio reducing the per unit purchased goods emissions.

To further reduce these emissions towards our 2030 SBTi target and Net Zero commitment, we are driving action through our Circular Economy and EcoDesign programs, applying the principles ’use less, use longer and use again’. For more information on our actions associated with the Circular Economy program please refer to Resource use and circular economy. For more information on how we are planning to decarbonize our purchased goods and service emissions in the future please refer to Philips’ transition plan.

We also announced at COP26 our plan to step up our acclaimed Supplier Sustainability program with the goal of having at least 50% of our suppliers (based on spend) committing to Science Based Targets for CO2-e emissions reduction by 2025. This will help amplify our impact reducing emissions across the supply chain. For more information please refer to Supplier sustainability & Workers in the value chain.

Scope 3, Category 4 & 9 - Transportation and Distribution

In 2024, we split our upstream transportation and distribution emissions from our downstream transportation and distribution. This adds a level of granularity to our report that we were not able to provide in previous years. To ensure comparability across the years we have decided to use the same proportionate split between upstream and downstream for all historic years up to our baseline year 2020. This change has therefore not impacted our total value chain emissions but merely added more granularity.

Overall, we recorded an increase of 11% in our emissions from our Transportation and Distribution compared to 2023. The reason for this increase is primarily driven by the updated BEIS emission factors that have increased by 20% compared to our 2023 emission factors (for long haul flights). This is a variable that we are not able to influence and therefore out of our control. Looking at the variables we are able to influence, we have successfully reduced our total number of air freight shipments by 2% which has mitigated the increase in emission factors.

This reduction in air freight shipments can be associated with several business specific projects. These among others include the Magnet by Ocean project, where we shifted several up- and downstream lanes from air freight to ocean freight, and the shipment consolidation project, where we group multiple shipments in one to reduce the total number of shipments. It is also important to note that Philips was the first healthcare company to sign the coZEV ambition statement for Sustainable Maritime Freight Shipping. This will support our efforts in accelerating maritime decarbonization.


Philips Group

Logistic Freight emissions per mode of transportation in tonnes CO2-equivalent

2020

2021

2022

2023

2024

Air freight

261,504

252,104

213,562

168,153

210,633

Road freight

64,124

54,897

27,276

26,393

22,183

Sea freight

42,913

38,997

22,150

23,552

18,774

Parcel freight

46,090

70,963

63,811

86,988

86,387

Philips Group

414,631

416,961

326,798

305,086

337,977

Scope 3, Category 6 - Business Travel

Our business travel emissions increased by 27% compared to 2023. This is mainly due to the restructuring at Philips that required increased travel to allow for an optimal transition. The post-pandemic increase in travel was also driven by a need to align with customers which further contributed to the increased emissions. Moving forward, we continue to electrify our lease fleet and promote online collaboration, as well as increase our efforts to move travelers to rail transport for shorter distances. With tightened travel budgets in 2025, we aim to curb the growth of travel emissions.

Philips Group

Business travel emissions per mode of transportation in tonnes CO2-equivalent

2020

2021

2022

2023

2024

Air travel

21,433

21,051

30,231

42,130

60,453

Lease cars

46,503

48,370

52,838

45,249

52,365

Rental cars

2,223

2,723

3,330

3,397

2,716

Philips Group

70,158

72,144

86,399

90,776

115,534

Scope 3, Category 11 - Use of sold products

In 2024, our emissions related to the use of sold products were 2,529 kilotonnes CO2-e, a reduction of 51% compared to our baseline in 2020 and an 18% reduction compared to 2023. The reduction in use-phase emissions can mainly be explained through reduced sales volume of energy-intensive products, and changes in the sales mix towards more energy efficient products.

To reduce the impact of our sold products we are implementing energy efficiency measures for our existing and future installed base. This is closely tied to our EcoDesign commitment of having all new product introductions EcoDesigned by 2025. This is further explored under EcoDesign.

We are also involved in novel partnerships with our customers to ensure reduced energy consumption and increased renewable energy usage of our devices. For more information on our partnerships please refer to Advocacy activities and expenses.

Philips’ GHG removals and GHG mitigation projects financed through carbon credits

Although reduction is key to achieving carbon neutrality, unavoidable carbon emissions require compensation. This is achieved by the cancellation of acquired carbon credits. In 2024, we offset a total of 474 kilotonnes CO2-e, equivalent to the annual uptake of approximately 14.2 million medium-sized oak trees. To plant all these trees an area of 512 million m2 would be required, equivalent to 9 times the area of Manhattan. This covers our operational carbon footprint, which includes all CO2-e emissions from our sites, business travel, and transportation and distribution. We thereby address climate change outside our own value chain and contribute to the reduction of global CO2-e emissions that we cannot eliminate along our own value chain. These activities complement our existing climate strategy and are excluded from our Science Based Targets for emission reductions. Thus, ensuring that these investments do not impede the achievement of our carbon reduction targets.

Philips not only offsets its operational carbon footprint by funding impactful social and environmental projects but is also proactively exploring innovative approaches to directly reduce carbon emissions in its value chain, particularly for unavoidable transport-related emissions. Although we did not use any biofuels in 2024, we do believe this is a potential lever that can help us reduce our carbon footprint in the future. For future reference we only accept biofuels from wastes, residues and by-products as feedstocks with preference for REDII Annex IX feedstocks for advanced biofuels. This strategic move not only resulted in a modest reduction of emissions, but also aligns with our commitment to nature-based solutions.

Philips Group

Carbon credits cancelled outside Philips own value chain1 in tonnes CO2-equivalent

2023

2024

Total credits cancelled

417,900

474,000

Share from removal projects (%)²

2%

2%

Share from reduction projects (%)

98%

98%

Gold Standard GS (%)

17%

3%

Verra VCS (%)

83%

97%

Share from projects within the EU (%)

-

-

Share of carbon credits that qualify as corresponding adjustments (%)

-

-

1    All credits are from project outside our own value chain thereby avoiding the risk of double counting

2    All our removal projects are from biogenic sinks. We are currently not exploring technological sinks


Carbon credits planned to be cancelled in the future is 420-450 kilotonnes CO2-e in 2025. This future cancellation is a high-level estimate and is subject to change depending on our operational carbon footprint in 2025.

We finance projects in emerging regions that have a strong link with UN Sustainable Development Goals 3 and 12. To ensure these offsets meet our high-quality standard of additionality, permanence and avoidance of double counting, Philips only procures carbon credits from carbon standards that are endorsed by ICROA, such as VCS Standard and Gold Standard. Each program is also verified by an independent third party. We ensure, through our providers, that the quality criteria of additionality, permanence and avoidance of double counting are met. In addition, Philips has conducted site visits to some of the projects in our portfolio. None of our credits as of now are subject to corresponding adjustment under Article 6 of the Paris Agreement. Philips will follow the developments of Article 6 closely to understand if, and when, any of the projects might become subject to corresponding adjustments. Please note that all removal credits are associated with biogenic sinks and linked to activities outside Philips value chain.

All our carbon offsets drive social, economic and environmental progress in emerging markets. In 2024 we did not retire any carbon credits from removal projects. Our projects include:

Restoring ecosystems and empowering communities through tree planting

In Kenya, subsistence farmers are supported to plant and maintain trees on their land through the International Small Group and Tree Planting Program (TIST). This carbon removal project enhances biodiversity, improves soil fertility, and strengthens community resilience, providing co-benefits beyond carbon sequestration. Farmers retain ownership of the trees and their products, receiving training and a share of carbon revenues. As an Afforestation, Reforestation, and Revegetation (ARR) initiative, it is a nature-based solution contributing to the protection of a biogenic sink. To ensure quality, all offsets are verified under the VCS standard with the CCB label.

Providing access to safe drinking water while reducing wood consumption

This carbon-emission reduction project is expected to provide millions of liters of safe drinking water in Uganda and reduce the mortality risk from water-borne diseases. Additionally, less wood will be required for boiling water, leading to less indoor air pollution and slowing down the deforestation rate. As such, this contributes to the protection of a biogenic sink. To ensure quality, all offsets are verified under the Gold Standard.

Protecting forests through sustainable production

Deforestation is expected to be reduced through promotion of sustainable businesses to protect the forest. Unsustainable harvest of fuelwood is reduced, thereby contributing to the protection of a biogenic sink. The forest supports the supply of water to other parts of Ethiopia and neighboring countries. It is also the habitat of diverse and, in some cases, rare species. To ensure quality, all offsets are verified under the VCS standard.

Increasing employment through provision of sustainable energy

In India, the energy supply gap is reduced by providing access to clean energy and related employment through wind generation. This is therefore considered a technological solution that also enables an improvement in livelihoods. To ensure quality, all offsets are verified under the VCS standard.

Improving respiratory health and reducing deforestation through provision of clean cookstoves

By supporting a range of cookstove technologies across Ghana and Kenya, the projects improve respiratory health, reduce fuel costs and reduce deforestation. As such, this project contributes to the protection of a biogenic sink. This also gives people more time for paid work, thus improving prospects. To ensure quality, all offsets are verified under the Gold Standard.

Philips’ internal carbon pricing

At Philips, we apply an internal carbon shadow discount price for our IT, Real Estate, Businesses and R&D investments. If an investment may support our climate targets by reducing CO2-e emissions, the relevant Function and/or Business is encouraged to apply EUR 150 discount per saved tonne CO2-e. This enables all Functions and Businesses to incorporate climate impacts in their business case development. Furthermore, by using a discount we proactively incentivize the pursuit of sustainable projects, rather than imposing penalties on unsustainable investments. The scope spans all Philips operations and includes Scope 1 and 2 emissions, as well as all the material Scope 3 categories. There are no geographic or business-specific boundaries. This therefore covers 100% of our Scope 1 & 2 targets and approximately 95% of our gross Scope 3 emissions (96% of overall emissions).

The price of EUR 150 per metric ton CO2-e is derived from the internationally recognized ReCiPe methodology, in combination with the environmental pricing provided by CE Delft. The price is also validated by an external body other than our assurance provider, namely KPMG and set in alignment with our EP&L statement. The key assumption is that the price of carbon will increase in the future. Therefore, to ensure price stability over the coming years, an uplift was applied to the price of carbon, identified by CE Delft.

Please note that the internal carbon pricing is not considered in the financial statements as the assumptions in the financial statements are based on (external) market assumptions.

Philips Group

Carbon pricing in tonnes CO2-equivalent unless otherwise stated

Type of carbon price

Volume at stake (tCO₂-e)

Price applied (EUR/tCO₂-e)

Perimeter description

Shadow discount price (CapEx, R&D, etc.)

4,398,405

150

All Philips employees are encouraged to leverage the

internal carbon price of EUR 150 to include

environmental factors in the decision making process

Impact, risk and opportunity management

The analysis of climate change related impacts, risks and opportunities is contingent on a multitude of assumptions that are based on desk research, internal and external experts, trend analysis and other resources. Conclusions are therefore merely indicative, and quantifications should be considered estimates with considerable levels of uncertainty. For a full overview of our assumptions

please refer to the Climate Resilience report 2024 that can be found via our ESG download page. Most importantly our definitions for the short-, medium-, and long-term diverge from our central definition prescribed by the ESRS. This was done in consultation with other departments, to ensure perpetual business continuity and acknowledge the fact that climate related risks and opportunities generally materialize beyond a 5-year time horizon. It also accounts for the time horizons linked to our commitments.

Philips Group

Impact risk and opportunity management time horizons

Time Horizons

Short term

Medium term

Long term

Duration

1 < x < 2 years

5 < x < 10 years

10 < x < 25 years

Target year

2025

2030

2050*

* 2100-time horizon for sea level rise due to limited data availability (physical risk exposure) and 2040 for site related emissions (transition pathway)

Philips transition plan for climate change mitigation

Together with our customers and suppliers, we aim to reduce our collective carbon footprint and build a more sustainable and resilient healthcare industry, in line with a 1.5 degrees scenario (as validated by SBTi). This aligns and is embedded in our business strategy as well as financial planning. To achieve this, we focus on the following core objectives, prioritized by their potential impact. Further details on underlying assumptions are available in our Climate Resilience report, which has been approved by our administrative, management and supervisory bodies.

Designing energy-efficient products and collaborating with our customers to reduce emissions during the use-phase

Since most of our climate impact occurs downstream during the use-phase of our products, we are dedicated to designing energy-efficient solutions and supporting the transition to renewable energy sources.

All new product introductions adhere to our EcoDesign requirements, where energy efficiency is a key focus. This approach allows us to engineer a product portfolio optimized for energy consumption during use, which not only reduces our environmental footprint but also helps our customers lower their operational costs.

Moreover, the adoption of renewable energy by our customers, also supports our use phase decarbonization by eliminating CO2-e emissions during the energy generation. We therefore actively support and encourage our customers in their transition to renewables (see Champalimaud case). Our key assumption is that electrical grids will decarbonize in line with the International Energy Agency’s (IEA) Stated Policy Scenario (SPS) or Announced Pledge Scenario (APS).

Based on preliminary estimates, we expect to reduce our use phase (GHGP category 11) carbon footprint as follows:

Philips Group

Expected use-phase emission reduction in kilotonnes CO2-equivalent unless otherwise stated

Current

Medium-term

Long-term

(Expected) emissions level

2,529

2,797 – 2,330

1,590 – 98

Reduction compared to 2020 baseline

2,631

2,363 – 2,829

3,570 – 5,062

Percentage Reduction compared to 2020 baseline

51%

46% - 55%

69% - 98%

Minimizing our purchased goods emissions by adopting circular economy practices and transitioning to sustainable alternatives

From a climate perspective, applying circular business models has the potential for significant emission reductions. By retaining materials’ value, we reduce the need for virgin resources and the energy required to produce them, resulting in lower emissions. This approach is led by our Circular Economy team through the principles of ‘use less, use longer, and use again’, which also includes our ambition of ‘closing the loop’.

Circular design is one of the key focal areas of EcoDesign, which includes for example design for low weight, which reduces the need for material extraction and thereby contributes to emission reductions. It also includes designing with sustainable materials (recycled, biobased, etc.), which often require less energy to process, cutting down greenhouse gases in the sourcing and manufacturing phase. For our Personal Health segment, for example, this includes replacing virgin plastic packaging with paper-based alternatives or increasing the recycled content of the materials we use.

Next, we focus on increasing circular practices at our sites and responsible waste management according to the waste hierarchy. As such we actively monitor the waste management of our industrial sites with the aim of retaining the value of materials. This is further explained in Sustainable Operations.

Lastly, we initiated the process to focus on responsibly reusing products and parts at the end of their use. Among other things, this includes refurbishment, and responsible takeback. By recirculating products, parts and materials, we increase the market for used products and ensure materials are longer in use. Altogether we believe that by applying our circularity principles, we will be able to reduce our purchased goods emissions (GHGP category 1) by:

Philips Group

Expected purchased goods emission reduction in kilotonnes CO2-equivalent unless otherwise stated

Current

Medium-term

Long-term

(Expected) emissions level

904

1,023 – 872

812 – 148

Reduction compared to 2020 baseline

275

156 – 307

367 – 1,031

Percentage Reduction compared to 2020 baseline

23%

13% - 26%

31% - 87%

Philips Group

Climate mitigation across the value chain

Scope 3

Purchased goods and services

Scope 3

Transportation and

distribution

Scope 1 & 2

Sites

Scope 3

Business travel

Scope 3

Use of sold products

Strategy

Design products for low weight and sustainable materials

Collaborate with our suppliers to amplify our impact

Promote material reuse

Optimize route planning and inventory management

Transition to low carbon modes of transportation and fuel


Improve our sites’ energy efficiency

Transition to renewable energy

Promote video conferences and low carbon travel

Electrify our lease fleet

Design products for energy efficiency

Support our customers in expanding the share of renewables


Topic owner

Supplier Sustainability,

EcoDesign, Circular Economy

Supplier Sustainability, Procurement

Real Estate,

Procurement

Finance,

Procurement

EcoDesign, Markets,

Circular Economy




Collaborating with our suppliers to reduce emissions in our supply chain

There is a pressing need for industry and business to manage and reduce CO2-e emissions across the entire value chain – including at supplier level. To this end, we have invited many of our largest suppliers to report their climate performance and strategy as part of the Carbon Disclosure Project (CDP) Supply Chain program. Additionally, we engage with these suppliers to reduce their emissions as part of our Supplier Sustainability program. By engaging with suppliers, encouraging them to set Science Based targets and supporting their decarbonization efforts we believe we will be able to amplify our impact. We acknowledge our dependency on suppliers’ decarbonization in achieving our climate ambitions and will continue our focus on driving impact throughout the value chain. To that end, we expect that by further engaging with our suppliers through our Supplier Sustainability program we are able to reduce our purchased services emissions as follows (GHGP category 1):

Philips Group

Expected purchased services emission reduction in kilotonnes CO2-equivalent unless otherwise stated

Current

Medium-term

Long-term

(Expected) emissions level

492

442 – 388

334 – 308

Reduction compared to 2020 baseline

44

95 – 149

203 – 229

Percentage Reduction compared to 2020 baseline

8%

18% - 28%

38% - 43%

Reducing emissions from logistics by optimizing our planning horizon

We are committed to minimizing the CO2-e impact of our logistics operations by working closely with our logistics partners and transportation providers. To this end, we have initiated collaborations with our key logistics suppliers to transition to low-emission vehicle fleets, increase fuel efficiency, and optimize route planning. We actively engage with all partners (both internal and external) through our Sustainable Logistics program, which aims to identify further opportunities for emission reductions, including alternative fuel options and innovative, lower-emission transport modes. Key decarbonization levers are correspondingly: reducing the need for shipments, shifting air to ocean, reducing shipment chargeable weight in line with our EcoDesign strategy and transitioning to alternative fuels (e.g. electric or biofuel). To that end we expect to reduce our logistic emissions (GHGP categories 4 and 9) as follows:

Philips Group

Expected upstream and downstream logistics emissions reduction in kilotonnes CO2-equivalent unless otherwise stated

Current

Medium-term

Long-term

(Expected) emissions level

338

275 – 200

239 – 67

Reduction compared to 2020 baseline

77

140 – 215

176 – 348

Percentage Reduction compared to 2020 baseline

18%

34% - 52%

42% - 84%

Transitioning to lower carbon-emitting energy at our sites

By continuing to phase-out fossil fuels at our sites and increase our global renewable energy share, we will be able to achieve our long-term emission targets (GHGP Scope 1 and 2). The main lever to

transition to lower carbon-emitting energy at our sites is by reducing our natural gas consumption. We are aiming to significantly reduce our natural gas consumption by for example moving towards geothermal and renewable district heating and cooling solutions as well as exploring the option of switching towards biofuels. As such we expect to decarbonize our sites as follows:

Philips Group

Expected Scope 1 and 2 emission reduction in kilotonnes CO2-equivalent unless otherwise stated

Current

Medium-term

Long-term

(Expected) emissions level

20

19 – 13

13 – 1

Reduction compared to 2020 baseline

124

116 – 121

121 – 134

Percentage Reduction compared to 2020 baseline

84%

86% - 90%

90% - 99%


Philips Group

Climate Transition plan

2024

Emission reductions are linked to performance bonuses through for example the Long-term Incentive (LTI) program. As mentioned previously we have also included carbon pricing as standard measure in our corporate saving and investment tooling highlighting our climate change governance and embeddedness.

Material physical and transition risks and potential climate-related opportunities

Philips recognizes the importance of identifying, assessing and mitigating climate-related risks to ensure business continuity and resilience. We publish the annual Climate Resilience report (formerly TCFD report) to provide the information needed by investors, lenders, insurance underwriters and

other stakeholders to appropriately assess and price climate-related risks and opportunities. Please see the visual below for an indication of Philips’ climate-related risks and opportunities.

Philips Group

Climate risks and opportunities

2024

For the physical risk (including both climate and nature related risks) assessment, a range of Philips sites are evaluated over short-, medium-, and long-term and the expected impact on them due to acute and chronic physical risks. This is done using a high global warming scenario with expected average temperature increase of above 4 degrees Celsius (RCP8.5 – SSP5). Transition risks on the other hand are globally assessed across the short-, medium-, and long-term, encompassing both upstream and downstream activities and their potential impact. This done using a low global warming scenario in line with the Paris ambition of keeping global warming below 1.5 degrees Celsius (RCP1.9 – SSP1, IEA APS, IEA SPS).

The assessment of each risk is conducted by a multi-disciplinary team, consisting of members of Philips Group Sustainability, Business Continuity Management, Real Estate, Enterprise Risk Management, Insurance & Risk Management, Innovation & Strategy, Health and Safety and Group control. By embedding this risk assessment in existing processes and frameworks we have ensured alignment with the company’s strategy and financial plans.

All Climate-related risks are a result of the DMA and maintained as part of the common risk view and considered in the Philips Enterprise Risk Management (ERM) framework. As such Philips Executive Committee identifies, oversees, and manages the climate-related risks Philips faces in executing its strategy and its objectives. A Risk Management Support Team together with Philips Group Sustainability, consisting of several functional experts covering the various categories of enterprise risks, supports the Executive Committee through regular analysis of the climate-related risk- and opportunity profiles. Where needed assets and business activities at risk are addressed through climate mitigation or adaptation actions.

To evaluate enterprise-wide risks (including climate risks), these are cascaded to the relevant target of evaluation, which are then expected to identify Philips risk exposure utilizing the Risk Assessment Number (RAN). This standardized metric, spanning from 1 to 125, allows all relevant stakeholders to uniformly compare diverse risks, irrespective of their varying risk drivers. The RAN is defined through three distinct variables. Namely, the likelihood of the risk materializing, the impact of the risk considering no control measures and lastly the control effectiveness of existing controls. Each of these variables are rated on a Likert scale from 1 to 5 by relevant subject matter experts.

Physical Risk Assessment

We assess physical risks through objective definition, risk exposure identification, vulnerability calculation, and impact analysis. The result of the risk assessment will constitute the basis for Philips’ adaptation actions. For more information on the underlying process and tooling used please refer to the Climate Resilience report that is available via the ESG download page. This risk assessment is limited to 24 of our sites that are considered critical for our business continuity. Critical suppliers have also been screened as part of the hot spot analysis but not yet integrated in our risk process. The following risks are assessed: drought, heat stress, wildfire, precipitation, river flood, tropical cyclones, cold stress, sea level rise and chronic risks.

To evaluate Philips’ exposure to physical climate risks a two-step approach was employed. First, a hotspot analysis was conducted using the NATHAN tool to identify the expected future likelihood of risks becoming material. This initial analysis was enriched through site specific insights gathered through a workshop for relevant risks per site. This workshop engaged experts from Business Continuity Management, Plant Management, and Environmental and Financial Management for each in-scope site. These experts collaborated to assess the potential impact and the effectiveness of existing controls under a hypothetical worst-case scenario.

This comprehensive assessment enabled us to quantitatively assess each site’s exposure to climate related perils. The resulting risk scores were aggregated at the company level.

From an acute perspective results show that three sites require particular attention, namely Best, Reedsville and Pune. The site of Best (Netherlands, NUTS code: NL414) and Reedsville (US) face high-level risks across all time scales, primarily due to cold stress. According to NATHAN analysis, this risk is expected to decrease significantly in the future. The site of Pune (India) is projected to face high-level physical risks in the medium and long-term. Its exposure to precipitation and heat stress is expected to increase, alongside the consistently high risk of fire weather across all time scales. Additionally, sites in Alajuela (Costa Rica), Haifa (Israel), and Colorado Springs (US) are assessed to have medium-level risks in the foreseeable future predominately driven by heat stress and drought.

From a chronic perspective results indicate that none of our sites are expected to be exposed to sea level rise and exposure to chronic shifts (e.g. change average temperatures) is also very limited. It is however important to note that there are a few sites in direct proximity to high-risk areas for sea level rise. This includes the Drachten site (Netherlands), Hamburg site (Germany), and Batam site (Indonesia).

Philips has implemented robust control measures across our sites to address identified climate risks. Our risk analysis demonstrates comprehensive preparedness: among the 12 risks categorized as very high likelihood, all are controlled by measures with medium or higher effectiveness, with 83% controlled by high or very high effective measures. Similarly, for the 29 risks identified with high likelihood, 86% are managed through control measures of high or very high effectiveness. This data validates the strength and thoroughness of our risk adaptation strategy, confirming our operational resilience in the face of climate challenges.

Transition Risk & Opportunity Assessment

To ensure a smooth and gradual transition it is important for us to anticipate potential transition events and their impact on Philips’ operations. Conducting a transition risk/opportunity assessment therefore helps us navigate the rapidly evolving global market and regulatory landscape marked by sustainability imperatives. It also enables us to identify opportunities that we should capitalize on.

Overall, through a stringent transition risk and opportunity assessment we are able to ensure the company stays compliant with upcoming regulations, adapts its business strategies, invest in sustainable technologies, minimize financial disruptions and proactively attract eco-conscious customers and investors. For more information on the methodology and results of the risk assessment please refer to the Climate Resilience report 2024. Please note that calculation methodologies, critical assumptions and scope of assessment are specific to each transition and explored below underneath each header.

Upstream transition events

It is expected that the prices for Greenhouse Gas (GHG) emissions will rise in the future to incentivize the adoption of low-carbon technologies. This can be driven by mechanisms such as the Emission Trading Schemes (ETS) or carbon taxation. While we endorse this general policy direction, it comes with associated risks. From an upstream perspective, we expect that impacted suppliers will pass on the cost of carbon using the rates as defined by CE Delft (2021) per sector. The general

assumption is that depending on the homogeneity of the product and elasticity of demand, some sectors are more inclined to pass on the cost of carbon downstream to their value chain partners (e.g. Philips).

Most notably the EU-ETS is a cap-and-trade system that covers roughly 40% of all EU wide emissions. Sectors in scope are among others steel, iron, aluminum, paper and cardboard and glass. With the introduction of the Carbon Border Adjustment Mechanism (CBAM) legislation in 2026, the scope of the EU ETS will expand to also include importers that currently reside outside the EU.

For a preliminary estimation we have the below key assumptions: 

We can decarbonize our Scope 3 GHG emissions from purchased goods and service in line with Philips’ transition plan.

Maximum carbon prices in accordance with the SSP1-1.9 scenario as derived by IIASA.

Only purchased goods and service-related emissions are of interest.

For the short- and medium-term it was assumed that only high emitting industries, in alignment with the EU-ETS, will be directly impacted by carbon pricing (steel, iron, aluminum, glass, etc.). Carbon prices were therefore only applied to chemicals, glass, a subset of metals, and paper and cardboard. For the long-term it was then assumed that all materials regardless of their type will be impacted by carbon pricing.

As response, we actively monitor the life cycle emissions of our purchased goods and steer our businesses towards sustainable product development through our EcoDesign and Circular Economy program. For more information, please refer to Resource use and circular economy.

Operations transition events

As Philips we have set a stringent long-term emission reduction target of reducing our Scope 1 and 2 emissions by 90% until 2040 compared to the 2015 baseline. From a transition perspective we are therefore interested in identifying potential stranded assets, which are concretely planned sites, across the medium- and long-term with significant locked-in GHG emissions.

Based on our internal investigations that included members from our integrated supply chain, Real estate and Group Sustainability, we have concluded that there are no expected stranded assets and no assets exposed to transition risks. This is based on the fact that in 2024 we have already reduced our Scope 1 and 2 emissions by 85% compared to 2015 meaning a target achievement rate of 95%. We are therefore well on track to achieving our long-term reduction targets. To manage our remaining energy and GHG intensive sites we monitor the emissions of our high impact sites monthly and together with Real estate are investigating novel ways to eliminate the usage of fossil fuels on site. All high impact sites are therefore under control and addressed by climate mitigation plans. From 2025 onwards a new KPI will also be introduced targeted at the CO2-e footprint of our sites.

Please note that no carbon pricing scheme associated with our Scope 1 and 2 emissions (ETS, carbon tax, etc.) has a current material impact on our financial statements.

Downstream transition events

Under the given low global warming scenario, it is assumed that there is strong socio-economic drive to shift towards a low-carbon economy. With more than 60% of our full value chain emissions residing downstream during the use phase of our products this is our main exposure. This could include energy efficiency policies, market forces demanding energy efficiency improvements and consumer preferences that drive technological advancements. The rapid change could lead to a situation where Philips’ current technological capabilities lag behind those of our competitors and where the locked-in GHG emissions of our products inhibit our Scope 3 target achievement. For a more detailed overview of this risk please refer to our Climate Resilience report that is available via our ESG download page.

To manage this risk, we continue our focus on energy efficiency, with Energy as one of four key focal areas of our EcoDesign program. All new product introductions are expected to optimize their energy efficiency. For more information on how EcoDesign can help our target achievement besides the transition towards renewable energy please refer to Philips transition plan for climate change mitigation. For a quantitative assessment of our locked-in GHG emissions associated with our products please refer to Climate change and more specifically our emission associated with purchased goods and use of sold products.

Resources allocated to climate change

To strengthen our climate resilience from both adaptation and mitigation perspective and meet external commitments (e.g. Science Based Targets) we have allocated resources to reducing our environmental impact and preparing for potential acute and chronic climate related risks.

Past and current resources

Philips has allocated resources to enhance environmental resilience, including proceeds from the Green and Sustainability Innovation Bonds issued under Philips’ Green and Sustainability Innovation Bond Framework (April 24, 2019). These funds have been invested in Green and Sustainability Eligible Projects aligned with the objectives of:

Reducing value chain emissions (climate mitigation)

Building adaptive capacity (climate adaptation)


All bonds issued under the Framework follow the International Capital Market Association (ICMA) Green Bond Principles 2018, Social Bond Principles 2018 and the ICMA Sustainability Bond Guidelines 2018, to ensure that the selected and disclosed projects meet widely recognized criteria. For more information, visit https://www.philips.com/a-w/about/investor-relations/debt.html.

We have other expenditures allocated to our environmental objectives. For climate mitigation and adaptation, a subset of the expenditures for the EU Taxonomy reporting are relevant. This is equivalent to approximately EUR 3 million (0.3%) of our EU Taxonomy aligned CapEx related to our actions to improve energy efficiency, phase out fossil fuels and build adaptive capacity on site.

Refer to our EU Taxonomy disclosures for more. We have also invested EUR 263 million in Green Innovation in 2024 to support our efforts in reducing our biggest emissions contributors which are purchased goods and use of sold products. In total, our aforementioned expenditures cover these key actions related to our decarbonization levers:

Designing energy-efficient products and collaborating with our customers to reduce emissions during the use-phase

Minimizing our purchased goods emissions by adopting circular economy practices and transitioning to sustainable alternatives

Collaborating with our suppliers to reduce emissions in our supply chain

Reducing emissions from logistics by optimizing our planning horizon

Transitioning to lower carbon-emitting energy at our sites


Future resources

To ensure we meet our future climate targets and continue to build our adaptive capacity, it is important that future resources are allocated to our target achievement, such as:

Investments in renewable energy and energy efficiency

Development of EcoDesigned new product introductions and partnerships

Infrastructure resilience, flood defense improvements, and climate-resilient, nature-based solutions

The final financial planning including future financial resources related to our transition plan is in progress.

Philips’ Emission calculation methodologies:

Philips reports in line with the Greenhouse Gas Protocol (GHGP). The GHGP distinguishes three Scopes, as described below. The GHGP requires businesses to report on the first two Scopes to comply with the GHGP reporting standards. As per the updated GHGP Scope 2 reporting guidance, from 2015 onward our Scope 2 emissions reporting includes both the market-based method and the location-based method. The market-based method of reporting will serve as our reference for calculating our total carbon footprint. As part of our carbon footprint, Philips also reports on five Scope 3 categories. These are indirect emissions that reside either upstream or downstream and are included in our approved Science Based Target of 42% reduction by 2030.

Scope 1 greenhouse gas emissions

These are direct emissions caused by company owned and -controlled entities. For example, the burning of fossil fuels and the use of refrigerants or chemicals on-site generates Scope 1-related CO2-e (carbon dioxide equivalent) emissions. Sites report their consumption of refrigerants, and anthropogenic or biogenic-based fuels via our internal sustainability reporting system. Consumption per resource is then aggregated across all sites and multiplied by resource-specific emission factors. This approach is being used for all industrial sites and 80% of our non-industrial sites’ floor area. For all other sites, consumption is extrapolated. For Scope 1 emissions we use two sets of emission factors. For fossil fuels and natural gases, we use the UK Department for Business, Energy & Industrial Strategy (BEIS) database (v1.1 2023 – Global Warming Potentials (GWP) 5th

Intergovernmental Panel on Climate Change (IPCC) Assessment Report (AR)). For all other relevant Scope 1 refrigerants, we use the IPCC database (Either AR6, v1.2 or v1.5, or AR5, v1.2).

Scope 2 greenhouse gas emissions

These are indirect emissions caused by the purchase of electricity, heating, steam, and cooling. These emissions are not generated on our sites but are still directly impacted by our consumption level and contractual agreements. We can therefore reduce these emissions by reducing consumption or by ensuring purchased energy comes from low-emission sources. We report on both market-based and location-based emissions. For the market-based approach, we first subtract the amount of renewable energy acquired or self-generated in a specific region from the actual amount of electricity consumed. All renewable electricity claimed by Philips is sourced from the same energy market where the electricity-consuming operations are located, and is tracked and redeemed, retired, or cancelled solely on behalf of Philips. To ensure ‘additionality’, all certificates were generated in 2024 – or maximum six months prior – in the market of consumption and are retired on behalf of Philips. The remainder can then be considered grey electricity, meaning a non-renewable source. We then multiply this by a residual mix emission factor. For more information on our renewable energy methodology please refer to the ESG download page. For the location-based approach, we examine energy purchases and disregard any renewable energy certificates acquired. This amount is then multiplied by grid-average emission factors. The grid emission factors used for the market-based approach are dependent on the location. For sites in the US, we apply the eGrid-specific Residual Mix emission factor (Green-e 2023 v1.1 (2021 Data)), and for sites in Europe we use the AIB European Residual Mixes (2022 v1.1). For all other countries, we apply the IEA emission factors because residual mix emission factors are non-existent for these regions (2023 v1.1 - GWP AR4, or 2022 v1.1 – GWP AR4). For the location-based approach we use eGrid and IEA grid average emission factors (Both v1.1 – GWP AR4). For all other energy purchases we use the emission factors from Bets (v1.1 2023 – GWP AR5).

Scope 3, category 1 – Purchased goods and services

This includes any emissions generated by the consumption of raw materials, components, packaging, and services that are acquired to create and distribute Philips products. This is partially done in alignment with the Philips EP&L statement and only includes production-related goods (e.g., components and parts) and all services that fall under the GHG Protocol described category. Goods-related emissions are calculated using an average data method and services using a spend-based method. Components and material specific emission factors are determined using EcoInvent (v3.9.1 – GWP AR6). These factors are regularly updated and consider the sourcing as well as raw material processing. The impact of purchased services is in contrast based on an input-output model. To derive emissions the Exiobase database (v3.8.2 – GWP AR5 and AR6) is leveraged, which factors in all activities connected to the corresponding service.

Scope 3, category 4 – Upstream transportation and distribution

This includes all emissions generated by transporting components, products, or raw materials from one location to another via a mode owned by a third party. This includes both upstream and mainstream (shipment between Philips facilities) related shipments and can include transport via air, road, or sea. Rail transport is rarely used by Philips and therefore has a negligible influence on total

emissions. For air freight, road freight or less than a container load ocean freight, the emission factors from BEIS are leveraged (v1.1 2023 - GWP AR5). For full container load transports the emission factors from Clean Cargo are used (version 2022 – GWP AR6).

Scope 3, category 6 – Business travel

This covers any mode of transportation that is used by employees for business purposes and operated by a third party, excluding commuting. To calculate business travel emissions, we distinguish air travel and automobile travel. For automobile travel, we include leased vehicles and rented vehicles. All other modes of transportation are not considered due to their minimal usage for business purposes and negligible total impact (e.g., trains in the Netherlands run on renewable electricity). The emissions factors from BEIS (v1.1 2023 – GWP AR5) are leveraged as these are updated annually.

Scope 3, category 9 – Downstream transportation and distribution

This includes all emissions generated by transporting finished goods from a Philips facility or third-party warehouse to a customer via a mode owned by a third party. Please note that we are not always able to clearly distinguish shipments paid by Philips or by our customers, thereby slightly deviating from the GHGP. This can include transport via air, road, or sea. Rail transport is rarely used by Philips and therefore has a negligible influence on total emissions. For air freight, road freight or less than a container load ocean freight the emission factors from BEIS are leveraged (v1.1 2023 - GWP AR5). For full container load transports the emission factors from Clean Cargo are used (version 2022 – GWP AR6).

Scope 3, category 11 – Use of sold products

To calculate the emissions generated during the use phase of our products we are interested in three key variables: the lifetime energy per device, number of products sold per country and country specific emission factors. It should be noted that the energy consumption during the full lifetime of the products sold is included in the emission calculation of the year of sale. To calculate emissions, the country grid average emission factors from EcoInvent (v3.9.1 – GWP AR6) are used. Only the direct energy need during use is accounted for (e.g., electricity to power our products).

For more information on our emission and renewable energy calculation methodologies please refer to the ESG download page. This also includes a detailed analysis of the proportion of emissions calculated using primary data from our suppliers.


Note II Resource use and circular economy

For Philips, resource use and circular economy has, similar to climate change, been a material topic for many years, reconfirmed also by the DMA conducted in 2024. Our first circularity targets were established in the 1990s when we set recycling targets for our manufacturing sites. Since then, we have continued with waste related targets that build on established measurements in line with global waste standards. Recognizing that circularity goes beyond waste, already in 2016, we committed to deliver 15% circular revenues by 2020, building on experiences from the significant progress through our Green Revenue commitment. This was followed by another commitment in 2018 at Davos to ‘close the loop’ of our large medical equipment, recognizing the need to also take responsible care of them at their end-of-use.

This chapter details Philips’ policies, targets, metrics, impacts, risks, opportunities as well as actions and resources allocated to the transition towards sustainable resource use and a circular economy.

Policies, metrics and targets

Philips’ policy and 2025 circularity targets

Our circularity targets are in line with our Environmental Policy, aiming to maximize value with minimal consumption of virgin and non-renewable materials. Philips looks at circularity in its broadest sense, meaning that we do not only address the type and weight of the materials we use, but also, for example, dematerialization (e.g. through digitalization), efficiency (e.g., improving utilization), optimizing products-in-use (e.g. upgrades) and take-back of our products at end-of-use. The accompanying table shows how our 2025 circularity targets relate to increasing the circularity of our resource inflows and outflows while reducing waste. These targets also help to address the impacts, risks and opportunities related to resource use.

Philips Group

Philips 2025 targets linked to circularity of resource inflows and outflows

KPIs

Increase circular design

Increase circular material use rate

Minimize primary raw materials

Increase sustainable sourcing of renewable materials

Ensure waste management

Circular revenues

EcoDesigned NPIs

EcoHero revenues

Close the loop on medical equipment

Zero waste to landfill

Circular materials management

Philips tracks progress on its 2025 targets as included in the next table, which also describes key actions to further deliver on these metrics. The progress toward accomplishing these targets is internally monitored on at least a quarterly basis, with quarterly progress externally reported for a selection of these via the Philips results hub.

Philips Group

Progress towards Philips' 2025 circularity targets

Metrics

Unit

2020 Baseline

2022 Results

2023 Results

2024 Results

2025 Targets

Key actions to deliver on 2025 targets linked to strategic circularity areas

Resource inflows & outflows

Circular revenues

% total revenues

14.6%

18.1%

20.0%

24.4%

25.0%

Grow sales from products, services and solutions that use less virgin materials, optimize product lifetime, and recirculate materials. This relates to the strategic areas of circular design, delivery and financing models, services in use-phase and end-of-use management.

EcoDesigned NPIs

%

N/A

N/A

N/A

100%

100%

Increase EcoDesigned hardware, including circular design of hardware. This relates to the strategic area of circular design.

EcoHero revenues

% hardware revenues

N/A

N/A

15.9%

21.9%

25.0%

Grow sales from EcoHero products that are EcoDesigned and significantly outperform in at least one of the focal areas of EcoDesign. One of the outperformance criteria is related to the strategic area of circular design.

Close the loop on medical equipment

Systems or pieces of equipment

Achieved for large medical equipment

Extend to small medical equipment

Adopt policy to responsibly take-back all professional medical equipment sold directly to customers as part of a trade-in offer or as a service at customer request. This relates to the strategic area of circular end-of-use management.

Resource outflows (waste)

Zero waste to landfill

%

2.6%

0.0%

0.0%

0.0%

less than 0.5

Minimize waste to landfill, as part of the strategic area of circular manufacturing and supply

Circular materials management

%

90%

91%

91%

94%

95%

Increase the recirculation of discarded material through prevention, reuse and recycling as part of the strategic area of circular manufacturing and supply

We use circular revenues as an overarching target metric that collates practices at Philips related to products, services and solutions that contribute to circularity across all our businesses. It measures the revenue contributions across four of our five strategic circularity areas – Circular design of software and hardware, Circular delivery & finance models, Circular service in-use phase and Circular end-of-use management. Circular revenues addresses circular design, circular material use rate, primary material consumption, renewable resources, plus all layers of the waste hierarchy – from prevention to recycling.

Our EcoDesigned NPIs fulfill circular design requirements on, for example, low weight design and sustainable materials that can reduce primary material consumption and increase use of sustainably sourced renewable materials. Requirements to design for disassembly and recycling also support recirculation that improves the circular material use rate. A subset of the EcoHero revenues are related to sales of products that outperform on circular design. These support the increase of circular design, circular material use rate and also minimizing primary raw materials. Hence, this subset of EcoHero revenues is also included in the circular revenues metric. See EcoDesign.

For the strategic area circular manufacturing and supply we have separate targets on Zero waste to landfill and Circular materials management that address waste management at our sites including prevention, reuse and recycling. This can, for example, support the provision of secondary materials. See Sustainable Operations.

Our target for Close the Loop on medical equipment extends waste management to our customers and beyond our sites, supporting also an increase in circular material use rate and reduction of primary materials. By the end of 2020, Philips ‘closed the loop’ on its large medical equipment by structurally embedding a responsible take-back policy into its customer trade-in offers. This means that for all large equipment that a customer is willing to trade-in at end of use, Philips will, where feasible, take it back for refurbishment and/or parts recovery, or locally recycle it in a certified way to avoid equipment from ending up in landfill. This includes MR, IGT, CT, US and DXR systems. Following our policy implementation for our large medical equipment, Philips is continuing to extend its ’closing the loop’ program to small medical equipment by adapting this policy to fit with the different value drivers, distribution channels and modalities of small equipment. This includes patient monitors, ECGs, and image guided therapy consoles. By 2025, we aim to have a policy in place to responsibly take-back all professional medical equipment sold directly to customers as part of a trade-in offer or as a service at customer request. This excludes consumables, accessories and non-Philips equipment.

Philips’ material flows

In addition to tracking progress towards our 2025 circularity ambitions, we are also measuring the impact of these on Philips’ material flows. In 2024, Philips put a total weight of 60 kilotonnes of products & parts, 34 kilotonnes of packaging on the market, 20 kilotonnes of waste and less than 0.07 kilotonnes of chemicals via emissions. As such, the total weight of 114 kilotonnes is used as the reference value for all ‘%’ related reporting on material weight.

The main materials that Philips used in 2024 for its products, parts and packaging include plastics (29%), metals (18%), cardboard (13%), and paper (7%). A more granular view on the material inflow content (such as whether it’s reused or renewable) and material outflow potential (its ability to re-enter the technical and biological loops of a circular economy) are depicted in the below table.

Philips Group

Philips material flows

2024

Total weight of products, parts and materials, waste and VOC emissions

114 kilotonnes

Material inflow content

Recycled content

22 kilotonnes / 19%

Renewable content

30 kilotonnes / 26%

Reused content (excl. recycled content)

2.6 kilotonnes / 2%

Critical raw materials

7.7 kilotonnes / 6.8%

Strategic raw materials

7.6 kilotonnes / 6.7%

Material outflow potential

Recyclable content

87 kilotonnes / 76%

Technical materials

75 kilotonnes / 66%

Technical recyclable materials

57 kilotonnes / 50%

Technical non-recyclable materials

15 kilotonnes / 13%

Biological materials

29 kilotonnes / 26%

Packaging is a key contributor to both recycled (10%) and renewable content (21%) in 2024. Additionally, 1% of Philips material flow was from sustainably sourced renewable materials with a certification from, e.g., FSC or ISCC. The numbers are currently low and we are working to improve the reporting process.

We continue our efforts to advance our transparency on use of both Critical and Strategic Raw Materials as defined by the European Commission. Our current data shows that most of the critical raw materials (such as aluminum and helium) are also considered strategic.

In 2024, the theoretical recyclability of products and packaging was 77% and 97% respectively. While looking at the recyclable content is important, it is also critical to look at the recyclability at a product level. Product design can negatively impact a product’s recyclability, making it harder to recover value from them at the end of their useful lives. To improve product level recyclability of our professional and consumer portfolio, we have developed and started to deploy a recyclability tool that uses product-specific data on the materials and the types of connections used to determine the recyclability rate.

Approximately 91% of our total weight is classified either as a technical or biological material. The remaining 9% (3 kilotonnes) includes materials not reported via the EP&L as well as the out of

scope materials within the EP&L. While biological materials like paper are suitable for biological loops, these are also materials that can be recycled and have a high rate of recyclable content. That is why the recyclable content is higher for our biological materials (100%) compared to our technical materials (50%). For our biological and renewable materials, it is important to note that in line with the 1st priority of the cascading principle, these materials are used in our products and packaging and not for energy purposes. Similar to our renewable materials, 1% of Philips material flow was from sustainably sourced biological materials. The results are similar because most renewable materials are also considered biological.

Diagnosis & Treatment and Connected Care contributed with 2.5 kilotonnes of reused materials. This includes our Circular Edition refurbished medical equipment and recirculated parts. Personal Health contributed with 0.01 kilotonnes from refurbished products.

Actions

Philips circular revenues, which is our overarching circularity metric, increased with 4% compared to 2023. The step-up is mainly driven by contributions from circular design, mostly from low-weight design and use of sustainable materials. Revenues associated with circular services in use-phase dropped, mainly related to reclassifying products within ‘circular service in use-phase’ to other circular revenue categories. This is also one of the main reasons why circular revenues from circular delivery and financing models increased compared to 2023.

Philips Group

Philips Circular revenues as % of total Philips revenues

More detailed actions to deliver on our 2025 circularity commitments are described in subsequent sections.

Circular design of software and hardware

Our EcoDesign program is a key driver for our Circular Economy program. One of the focal areas of EcoDesign is circularity, which encompasses, for example, the application of recycled and bio-based materials and designing for low weight, durability, disassembly, and recycling. A subset of EcoDesigned products, those which specifically outperform on the focal area of circular design, will therefore also be counted as contributing to circular revenues target metric. These include, for example, products that meet defined thresholds on reduced weight compared to competitor products or their predecessors.

Durability is a product’s ability to remain functional and relevant when used as intended and can be expressed through different ways such as reliability and lifetime. At this moment, Philips cannot report on the durability of its product groups compared to industry average, as there are no publicly available industry averages for our product groups. We however continue our efforts to optimize lifetime either through circular design requirements (by outperforming on our EcoDesign requirements for ‘design for durability & reliability’ vs predecessor) or for which lifetime extensions and refurbishment can be offered.

Most of our medical equipment portfolio is serviceable, including service instructions for professional maintenance, and spare parts and support availability over the product lifetime. Consumer products are being redesigned as required to meet all relevant new standards and regulations including Right to Repair regulations and the EU Battery Directive, if applicable and required. Philips strives to improve professional and consumer repairability of its products, and our design process includes tools to assess repairability.

Circular manufacturing and supply

In line with our ambition for fully circular operations, Philips applies Lean methodologies to improve processes and continuously reduce the environmental footprint across our sites. Circular materials management is our leading KPI and is not expressed in circular revenues. We retain as much as possible material value of our waste stream through waste management and increasing circular practices at our sites. Waste related to biological materials is taken care of according to the cascading principle, which is similar to the waste hierarchy for which we apply with regards to waste from technical materials. We team up with our supply chain partners to find circular solutions for discarded materials, for example in the ’waste to value’ initiative. For inbound supplier packaging, we aim to replace single-use packaging with more sustainable solutions like reusable boxes to contribute to our packaging waste ambitions from recycling to re-use and reduce. For example, at the Philips Personal Health Industrial Site in Zhuhai 0.8 kilotonnes of plastic waste and 0.4 kilotonnes of cardboard waste were prevented by implementing reusable plastic trays to replace cardboard box partitions and implementing circular systems in which boxes are continuously sent back to the suppliers for them to use again for the supply of future shipments. Through initiatives like this in 2024, a total of 4.8 kilotonnes of waste were prevented or reused, thereby averting end of life emissions of 3.0 kilotonnes of CO2-e (assuming incineration as end-of-life treatment). For more information, please refer to Sustainable Operations.

Circular delivery and financing models

Circular delivery and financing models enable ecosystem partners, including customers and suppliers, to work closely together on products that incentivize material efficiency across the company’s value chain. This includes leasing, rentals, and service-based models such as Enterprise Monitoring as a Service (EMaaS) and mobile cardiac telemetry monitoring. By subscribing to EMaaS, customers gain access to critical patient monitoring capabilities and managed services. This can help advance staff’s capabilities and analyze performance across care settings to help improve workflows. A collaborative Life Cycle Assessment (LCA) conducted with Jackson Health System in Miami-Dade County, Florida also showed Philips patient monitors can help reduce carbon emissions by 685.1 tonnes of CO2-e or 47% compared to previous systems. Through digitalizing documentation flow and telemetry monitoring, the customer was able to eliminate the need for an estimated 6.5 million sheets of paper and 420,000 disposable AA batteries, which can allow the health system to save $1.2 million over a 10-year device lifetime. For our consumer products, we offer, for example, rental programs for Lumea IPL and the Avent breastpump. When the rental period is over, we take the product back and wherever possible, refurbish it so it can be used by another consumer. Circular delivery and financing models also include digital solutions that drive dematerialization, helping to further reduce resource use. Our businesses develop and operate cloud-based informatics solutions for customers, which use less resources compared to running these solutions on IT hardware on premises. For instance, Philips is further advancing our digital pathology solutions with AWS. Digitalizing pathology also reduces the need to process and store glass slides while improving workflow efficiency.

Circular service in use-phase

During the use-phase of our products, we help our customers to optimize the use of our products to maximize their value. For example in 2024, we upgraded almost 3000 medical systems around the globe combined for HPM, MR, CT, Image Guided Therapy and Ultrasound. For example, our MR SmartPath portfolio helps customers to re-use their existing magnets and convert these to the next-generation MR. Our software upgrades like SmartSpeed increases imaging speed by up to a factor of 3* while reducing power consumption on average by 32% per patient scan** while still using the same equipment.

*    Compared to Philips SENSE imaging.

**    Applicable to BlueSeal SE. Philips SmartSpeed power consumption versus Philips SENSE based scanning. Based on COCIR and in-house simulated environment. Results can vary based on site conditions.


Circular end-of-use management

Keeping materials in circulation is a vital element of the circular economy. Philips strives to recirculate products and parts that come back to our operations.

Medical equipment

Operationalizing our ’closing the loop’ commitment has reduced our environmental footprint by enabling us to reclaim more and triage for re-use at highest value. In 2024, as part of ‘Closing the Loop’ Philips:

Reclaimed more than 8,600 systems or pieces of equipment, driven largely by the take-back program for patient monitors (more than 5,800 patient monitors). This is lower than 2023 where

we reclaimed 11,500 systems or pieces of equipment. This drop is mainly attributed to less Philips systems and equipment made, influenced also by market conditions.

Managed our active refurbished systems (Circular Edition) installed base of over 10,000 systems.

Locally recycled 0.3 kilotonnes of medical systems and equipment through our certified global recycling network. This is a decrease compared to 2023 where 0.5 kilotonnes was locally recycled. The results are however not comparable to 2023 due to an improvement in the reporting methodology.


We have more than 30 years of experience providing hospitals with refurbished systems. Our refurbished portfolios (Circular Edition), offer refurbished imaging systems that are ‘as good as new’ across MR, CT, Ultrasound and Image Guided Therapy Systems, with the same high-quality standards, warranty and service performance levels as you expect from new Philips systems. Our Circular Edition refurbishment factories are compliant with ISO standard 13485 and ISO 14001. In 2024, Philips re-used on average 84% of material weight from returned MR, CT, US and IGT systems during refurbishment, thereby reducing the need for additional materials. The reuse of materials also drives carbon emission savings. For example, the carbon footprint of a refurbished Azurion 7 C20 system is 28% lower compared to a new one, saving 26 tonnes CO2-e emissions, thanks to reusing more than 2,457 kg (80%) of the material weight. This translates to 60% less Scope 3 emissions for a hospital versus a new system. When shifting to renewable electricity during use, the carbon footprint saving goes up to 55%***. In addition, Philips has also recirculated more than 100,000 parts for use again with customers. This includes repaired and recovered parts from the take-back of medical equipment and parts, including also All Parts Medical.

***    Comparison of a new Azurion 7 C20 and a refurbished Azurion 7 C20. Based on Life Cycle Assessment (LCA) in line with ISO14040/44 and using ReCiPe2016, EcoInvent3.9.1 database including global average energy mix, COCIR standard for energy consumption, and the average reused weight percentage during refurbishment in Best in 2023. Results will vary based on amount, system type and age of returned systems as well as the country due to, amongst other things, source of energy and logistics. Supply chain emissions refer to all life cycle stages, excluding use-phase and end of life. For a healthcare customer this is equivalent to Scope 3 emissions - for more information, refer to the Greenhouse Gas Protocol.


Consumer products

In 2024, we offered refurbished products in 16 countries that also come with a warranty. Our refurbished products include Lumea IPL, shavers, hair care products and baby monitors. This year, we also started to offer refurbished toothbrushes.

While we proactively engage with our Business-to-Business customers, including retailers, to responsibly take care of products at end-of-use, products are also disposed via local take back systems. These are discarded by consumers at the end of their useful life, and they are eventually processed by national collection and recycling schemes. Europe has advanced schemes, and in accordance with the recycling rates published for packaging and the EU Waste Electrical and Electronic Equipment (WEEE) regulations, we estimate that approximately 9 kilotonnes of products (in WEEE category 5) and packaging from our Personal Health business units were recycled in the EU in 2024. This is a decrease compared to the previous year (11.8 kilotonnes), mainly attributable to a shift in methodology for packaging, and lower packaging volumes put to market. The weight of recycled consumer products & packaging is estimated by multiplying the weight of products and

packaging put to market (stemming from the Philips Environmental Profit and Loss Account – EP&L) with the EU WEEE recycling rates. For products, we use a 3-year average weight put to market, and for packaging we use the weight put to market in the reporting year only. This is a slight change from last year, where we used a 3-year average for both. The change in methodology for packaging is because we assume that packaging is disposed of in the year of purchase. Due to this change, this year’s figure is not comparable to last year.

Impact, risk and opportunity management

In this section, Philips’ nature risk assessment approach (including risks related to resource use and circular economy), and the results of this assessment, will be explained.

Philips nature risk assessment approach

Philips recognizes the importance of identifying, assessing and mitigating nature-related risks to ensure business continuity and resilience. The Task Force on Nature-related Financial Disclosures (TNFD) report provides information needed by investors, lenders, insurance underwriters, and other stakeholders to appropriately assess nature-related risks and opportunities, including those related to ESRS E5.

To identify and evaluate our impacts and dependencies (actual and potential) and assess related risks and opportunities related to resource use and circular economy, we applied the Locate, Evaluate, Assess, and Prepare (LEAP) approach, in line with the recommended approach of TNFD. This approach constitutes four stages: Locate (Philips’ interface with nature), Evaluate (Philips’ dependencies and impacts on nature), Assess (Philips’ nature-related risks and opportunities) and Prepare (to respond to and report on material nature-related issues). This is also aligned with the recommended disclosures for Task Force on Nature-related Financial Disclosures (TNFD).

As part of the Locate stage, we determined the scope of our risk and opportunities assessment includes Philips’ businesses, regions, and functions focusing on Philips’ 23 manufacturing sites. To apply the LEAP approach, Philips used multiple available tools such as an external risk insurance tool (Munich Re), the Ecosystem Intelligence tool (Ecometrix), and the Philips EP&L. Local teams at our manufacturing sites were involved in the impact assessment to identify high priority nature-related risks and opportunities. As part of the improvement opportunities in developing the LEAP approach, we aim to expand the consultations with local affected stakeholders in the coming years.

Philips nature risk assessment results

In the Evaluate stage, the dependencies analysis results showed dependencies on the ecosystem services like resource extraction. While resource extraction occurs outside the scope of our manufacturing sites, we further assessed its dependencies and impacts on material flows based on 2023 EP&L data. See Philips material flows for more information. The highest dependencies identified are: Paper & Cardboard (29%), Plastics (29%) and Metals (21%). In terms of materials type, the highest impacts are caused by metals (including processing) (37%), PCBs (33%), and electronics components (10%). Overall, the majority of the material impacts are found in the upstream value chain.

As part of the Assess stage, we applied the same time horizons in the climate-related risk assessments. These timeframes are agreed in the Kunming-Montreal Global Biodiversity Framework (GBF) for ‘halting and reversing nature loss’ and ‘living in harmony with nature’. See Philips transition plan for climate change mitigation. The main physical and transitional risks include:

Physical

Philips only uses limited amounts of water, but four manufacturing sites are located in water-stressed regions. Continued and/or expansion of business operations could place additional stress on scarcer water supply.

Transitional

A high priority risk identified is the volatility of costs of materials due to change in global abundance of resources: Our analysis suggests that the highest risk stems from rising costs from material scarcity due to various geopolitical drivers as well as developments in the non-renewables market in the upstream value chain.

Secondly, Philips could face challenges in incorporating EcoDesign criteria from new or upcoming legislation into its products and services.

The Prepare phase establishes metrics and targets related to nature-related dependencies and impacts. These have been set as part of our ESG 2025 commitments. For targets linked to circularity of resource inflows, outflows and waste management, see Philips’ policy and 2025 circularity targets.

Allocated Resources to Resource use and circular economy

To support the transition towards a circular economy and ensure we meet our external circularity commitments, we have allocated resources.

Past and current resources

Part of Philips resources is from the proceeds of the Green and Sustainability Innovation Bonds that were issued under Philips’ Green and Sustainability Innovation Bond Framework dated April 24, 2019. Refer to Climate change for more information. In addition to the proceeds, we also have other expenditures allocated to our environmental objectives. For circular economy, a subset of the expenditures for the EU Taxonomy reporting are relevant. This is equivalent to approximately EUR 83 million (13%) of our CapEx related to our actions to grow circular revenue sales from 'Circular delivery and financing models' and 'Circular end-of-use management'. The former amounts to EUR 72 million from 'CE4.1 Provision of IT/OT data driven solutions' and 'CE5.5. Product-as-a-service and other circular use- and result oriented services'. Their expenditures relate mainly to property, plant, equipment and Right-of-Use assets (75%) followed by intangible assets (25%). The expenditures of ‘Circular end-of-use management’ amounts to EUR 11 million from 'CE5.1 Repair, refurbishment and remanufacturing' and 'CE5.2 Sales of spare parts'. Their expenditures only relate to property, plant, equipment and Right-of-Use assets. Approximately EUR 361 million (19%) of our OpEx expenditures relate primarily to our actions to grow circular revenue sales from 'Circular delivery and financing models'. This amounts to EUR 357 million from 'CE4.1 Provision of IT/OT

data driven solutions' and 'CE5.5. Product-as-a-service and other circular use- and result oriented services'. Their expenditures relate primarily to research and development (62%) and the remainder to property, plant and equipment related costs including short term leases (38%). Refer to EU Taxonomy disclosures. We have also invested EUR 263 million in Green Innovation in 2024 to support our efforts on circularity such as increasing circular design and shifting to cloud.

Future resources

The final financial planning including future financial resources related to our transition plan is in progress.

EcoDesign

EcoDesigned New Product Introduction (NPI) and Green Innovation

A target metric for the EcoDesign program is EcoDesigned NPIs, measuring new product introduction that are designed to meet the criteria for EcoDesigned Product that must comply with all applicable legal requirements, Philips policies, and all stated EcoDesigned Product requirements in our four focal areas: Energy, Substances, Circularity and Packaging.

For Energy, we, for example, set requirements to deliver low energy consumption during use and standby. For Packaging, we design for minimal weight and volume and maximized recyclability while also using sustainably sourced and recycled materials. Our Circularity requirements include designing with minimal materials, using sustainable materials and optimizing design for e.g. disassembly. For Substances, we work to phase-out hazardous substances and ensure full compliance with the Philips Regulated Substances List (RSL).

Our Green Innovation – the Research & Development spend related to the development of EcoDesigned Innovation and Circular Innovation. EcoDesigned Innovations include innovation projects that are designed to contribute to our EcoDesign requirements while Circular innovations relate to innovation projects that primarily aim to contribute to circular revenues.

Philips Group

Green Innovation per segment in millions of EUR

Diagnosis & Treatment

Philips develops innovative solutions that support precision diagnosis and effective, minimally invasive interventions and therapy, while respecting the limits of natural resources. Investments in Green Innovation in 2024 amounted to EUR 109 million compared to EUR 78 million in 2023. Energy efficiency is a key area of focus, especially for our large imaging systems such as MRI. Through circular design (both part of our Circular Economy Program and our EcoDesign program), Philips also pays particular attention to enabling reduction in use of virgin materials, for example, through designing for low weight and enabling the upgrading and re-use of our products. This helps to further increase the value created and decrease the environmental impact Philips can deliver during product use, but also from returned systems as part of our closing the loop commitment on medical equipment.

Connected Care

Philips’ connected health solutions integrate, collect, combine, and deliver quality data for actionable insights to help improve access to quality care, while respecting the limits of natural resources. Green Innovation investments in 2024 amounted to EUR 94 million, a significant step up compared to 29 million in 2023, mainly driven by investments in new product introductions. For the hardware designs, we are focusing on our focal areas, especially reducing energy and phasing out hazardous material.

Personal Health

Green Innovation investments in 2024 amounted to EUR 60 million, compared to 33 million in 2023. Personal Health continued its work on improving the energy efficiency of its products, and the voluntary phase-out of polyvinyl chloride (PVC), brominated flame retardants (BFR), Bisphenol A (BPA) and phthalates from, among others, food contact and childcare products. New hairdryers have been launched that are more energy-efficient, with an average efficiency improvement of more than 15% compared to the 2020 baseline. Personal Health also continues to increase circularity by, for example, using sustainable materials in products and packaging. As part of our Personal Health Packaging Program, we have launched additional paper-based packaging solutions for e.g. OneBlade, Baby Monitors and electrical power toothbrushes as part of our transition and phase out of single use plastic from our consumer packaging.

Other

The segment Other invested EUR 0 million in Green Innovation in 2024, compared to 2 million in 2023. As part of the new operating model, most investments shifted toward the business segments.

EcoHero Revenues and Green Revenues

Another target metric under the EcoDesign Program is EcoHero revenues, which are generated from products that meet all EcoDesign requirements applicable to new product introductions and outperform in at least one of the focal areas of EcoDesign (Energy, Packaging, Substances and Circularity) either compared to their predecessor or relevant benchmarks, or meeting a set threshold, supported by a sustainability claim. Green Revenues is an additional metric on revenues generated by EcoDesigned products, refurbished products, rentals, leases, as-a-service, upgrades and green services.

Philips Group

Green Revenues per segment in millions of EUR unless otherwise stated

Diagnosis & Treatment

EcoHero revenues from Diagnosis & Treatment were 32.9% in 2024. A notable EcoHero launch in 2024 is Radiography 7000M from DXR. Compared to its predecessor (MobileDiagnost wDR), energy consumption is 51% lower. Additional improvements are 22% lower system weight and 13% less packaging weight. Other EcoHeroes include the CT Incisive platform with reduced weight, Ultrasound Epiq and Affiniti with reduced energy compared to their predecessors and the MR 1.5T systems with low helium usage. On average, 1.5T ZBO magnets lose about 1200 liters of liquid helium over 10 year lifetime globally, compared with 0 liters for BlueSeal magnets*. With 1,500 units installed globally, MRI scanners equipped with Philips’ BlueSeal magnet technology have already saved more than 2.75 million liters of helium, since 2018. This year Philips also announced the new BlueSeal XE and SE. Its main environmental benefit compared to predecessor models Ambition X and S, is the standard feature PowerSave+ which ensures additional energy savings by switching automatically to stand-by mode within 30 minutes of idle time. This reduces power consumption by up to 45% and saves up to 40MWh in energy per year **. With EUR 7.3 billion, Green Revenues amounted to 83% of total sales.

*    Based on typical performance of 1.5T ZBO magnets (Ingenia systems) in the Philips installed base.

**    Philips stand-by versus ready-to-scan mode. Results can vary based on site conditions

Connected Care

Connected Care’s EcoHero revenues were 5.6% in 2024. Examples of an EcoHero include patient monitors MX750 and MX850. In comparison to it's predecessor (MX800) the MX850 and the MX750 have a significant better energy efficiency. For the MX850 the energy consumption is reduced by 20%, for the MX750 around 30%. With EUR 3.0 billion, Green Revenues amounted to 59% of total. An example is the Philips EcoDesigned PageWriter TC35 cardiograph, with reduced power in on-mode compared to its predecessors TC 20 and TC 30.

Personal Health

EcoHero revenues from Personal Health were 17.1% in 2024. One example of an EcoHero for Personal Health is the Oral Healthcare Brush Head with biobased content. In our Mother and Child Care portfolio, Philips launched a new baby monitor with 50% mechanically recycled ABS material in the housing, coming in a paper based packaging. With EUR 3.3 billion, Green Revenues were equivalent to 96% of total sales, demonstrating the maturity of the Personal Health business in EcoDesign.

Waste

In 2024, our manufacturing sites generated 20 kilotonnes of waste, an increase of 4% compared to 2023, mainly driven by the increased amount of reused materials reported from our two sites in the US. The reused materials represent 13% of the total waste in 2024 compared to the 9% in 2023. In the Personal Health segment the waste increased significantly, by 19% due to increased operational waste of the reused materials. Diagnosis & Treatment waste in 2024 was comparable to 2023. Connected Care decreased waste by 31% due to decrease in operational waste at Sleep & Respiratory Care Sites.

Philips Group

Total waste in tonnes

2020

2021

2022

2023

2024

Diagnosis & Treatment

19,703

9,974

10,694

9,422

9,424

Connected Care

3,475

2,753

2,899

2,276

1,580

Personal Health

7,929

9,477

9,209

7,677

9,153

Philips Group

31,107

22,204

22,802

19,375

20,157

Until 2020, total waste consisted of waste that is delivered for landfill, incineration, waste to energy or recycling. We extended the scope with materials sent for re-use and other recovery as of 2021. Total waste does not include waste prevented.

Materials delivered for re-use, other recovery or recycling via an external contractor amounted to 18,485 tonnes, which equals 92% of the total waste. Non-recycled waste, classified as materials delivered to incineration and landfill amounted to 1,672 tonnes, which equals 8% of the total waste of which 67% comprised non-hazardous waste and 33% hazardous waste.

The total amount of non-recycled waste (subtracting recycled waste from total waste) is 4,211 tonnes, which equals 21% of the total waste of which 2,528 tonnes are prepared for reuse.

We recorded 2,314 tonnes of waste prevented in our own activities in 2024, compared to 1,531 tonnes in 2023. Philips did not produce any radioactive waste in 2024.

Philips Group

Total waste by destination in tonnes

Total waste generated

Hazardous waste

Non-hazardous waste

Preparation for reuse

2,528

1

2,527

Recycling

15,946

1,551

14,395

Other recovery

11

-

11

Waste diverted from disposal by recovery operation

18,485

1,552

16,933

Incineration (with energy recovery)

1,109

178

931

Incineration (without energy recovery)

365

358

7

Landfill

198 ¹

11

187

Waste directed to disposal by disposal operation

1,672

547

1,125

Total waste generated

20,157

2,099

18,058

1    1.1 tonnes out of 198 tonnes of waste sent to landfill, excluding one-time-only waste and waste delivered to landfill due to regulatory requirements

The total waste destinations are fully categorized above. There is no waste generated that is destined for other disposal methods. Our sites addressed both the Circular Materials Management percentage as well as waste sent to landfill, as part of our ESG commitments; refer to Definitions and abbreviations for the definition of Circular Materials Management.

The Circular Materials Management percentage has replaced the recycling percentage in 2021. In 2024, 94% was achieved compared to 91% in 2023, the change was mainly driven by improving operational waste management for instance through reuse of materials and through establishing new partnerships for previously non-recycled materials.

Our Zero Waste to Landfill KPI excludes one-time-only waste and waste delivered to landfill due to regulatory requirements. According to this definition, in 2024 our manufacturing sites reported 1.1 tonnes of waste sent to landfill, a significant decrease compared to 2.7 tonnes in 2023. All our 23 industrial sites achieved Zero Waste to Landfill status in 2024.

Philips Group

Total waste by composition in tonnes

Waste generated

Waste diverted from disposal

Waste directed to disposal

Metal waste

4,296

4,238

58

Wood waste

4,237

4,227

10

Paper/cardboard waste

3,092

3,087

5

Plastic waste

2,669

2,568

101

Chemical waste

2,112

1,571

541

Municipal (mixed) waste

2,054

1,162

892

Electrical and electronic waste

535

526

9

Other

1,162

1,106

56

For all waste types and waste destinations, preparation for proper treatment takes place. This preparation is case specific; in some cases it includes separation, inspection and cleaning.

The measurement of all the metrics included above for waste were validated by the assurance provider and no further external bodies.

Philips methodologies for 2025 circularity targets:

Circular revenues: Propositions that qualify for circular revenues must comply with the requirements for at least one of the circular revenue categories. These include, among others, products with low weight or containing a minimum threshold of recycled or bio-based plastics, as-a-service models, software running on cloud, telehealth, upgrades, lifetime extensions, and refurbished equipment. Each contribution is underpinned and connected to sales via Philips management accounting data or via inputs linked to other IT systems. Circular revenues is a financial based metric, providing us with an integral overall view of how we progress and is primarily a steering metric that helps us to move the organization in one overarching direction. It should be seen as one of the multiple metrics needed to drive a business to circularity and to report on its impact. Circular revenues do as such not measure the environmental impact – however, we do measure its scientific impact on our material flow metrics. For more information, please refer to our joint publication with KPMG: ‘Driving circularity in a multinational - Lessons from Philips’.

Circular Materials Management: Circular Materials Management is a KPI for promoting an increase in the proportion of waste treated using waste management hierarchy levels that are circular: prevention, re-use, and recycling. Circular Materials Management % is the proportion of materials managed circularly in comparison to the total used materials baseline. The total used materials baseline is the total of both circular and linear waste, excluding linear disposal of waste that is required by law. Circular Materials Management includes recycling, re-use, prevention and other recovery (e.g. repurposing). It excludes all linear disposal, which is classified as waste to energy, incineration and landfill. Philips estimates waste prevented by calculating the reduction in waste generation resulting from in its own activities, based on the Circular Materials Management method.

Close the Loop on medical equipment: While our target is to adopt a policy to responsibly take-back all professional medical equipment, we monitor the impact of our Close the Loop on medical equipment by measuring the amount of reclaimed Philips equipment. This refers to the number of systems or pieces of equipment that is returned to us for refurbishment, parts recovery or local recycling. As part of the reporting process, we use the technical expertise of Philips experts.

EcoDesign NPI: The EcoDesign adherence of new product introductions is measured at two milestones during the product development process. The measurement includes the parts subject to design change for all hardware products where Philips is the design owner and that results in a full product or system, following the Philips PDLM (Product Development, Launch and Maintenance) process. This excludes for example software, consumables and minor part modifications. Acquisitions and ventures are included once the integration of the EcoDesign process has been completed. The evaluation is performed by internal EcoDesign experts, based on pre-defined criteria that are captured in the Philips EcoDesign requirements standard.

EcoHero Revenues: The EcoHero adherence is underpinned similar to EcoDesign new product introductions and connected to sales limited to hardware, measured via Philips management accounting data. They are expressed as a percentage of all revenues related to hardware. A product or solution that has been determined to contribute to EcoHero or Green Revenues will continue to do so until it is decommissioned.

Green Revenues: Revenues reported as ‘Green’ are a combination of revenues related to products that were evaluated to meet the EcoDesign criteria at time of introduction and revenues generated by green services, upgrades and refurbished products. Green revenues are measured via Philips management.

Green Innovation: Green/EcoDesigned Innovation is measured by the financial spend related to R&D projects that directly contribute to the intended development and maintenance of EcoDesigned or Circular products, technologies or services. The evaluation is performed by internal EcoDesign experts, based on pre-defined criteria that are captured in the Philips standard on Green Innovation.

Zero Waste to Landfill: A site is classified as ’zero waste to landfill’ if less than or equal to 0.5% of the total regular waste reported by the site is sent directly to landfill via an external contractor. This excludes one-time waste and waste that is landfilled due to a regulatory requirement.

Philips material flow methodology:

For our materials flows, we measure the following attributes: recycled, renewable, biological, technical, recyclable, critical raw materials and strategic raw materials. These are mainly measured via our EP&L, which is one of our main data sources capturing the Bill of Materials (BOM) of reference products and packaging as well as waste data. The packaging BOM for Personal Health businesses (with the exception of certain Mother and Child Care products) is determined via the WEEE packaging data and assumes an average weight per material. The methodology to use different sources is the best estimate by Philips and we allow a 5% deviation in weight. The waste

and VOC emissions data comes from an environmental reporting tool and a sub-set of these are also integrated into our EP&L. We also report on reused content from recirculated parts and refurbished (healthcare and consumer) products. For parts, we use inputs from other IT systems. For the reporting on reused content, the re-used weights from our refurbished equipment are calculated based on a 1-year average re-use % per equipment multiplied by its original weight. For X-ray tubes, only the re-used material weight is considered. For the re-used and refurbished products from Personal Health, as well as reused spare parts for our medical equipment, we have assumed that all product and part weight have been re-used. For shavers, however, we assume the shaver head is always replaced. Since there are different reporting methodologies for reused vs recycled content, there is no double-counting between these metrics. For our biofuel reporting, we have assumed this is equivalent to wood, which is mainly used in our packaging. We have used the technical expertise of Philips experts for our material flow reporting with recycled content and critical & strategic raw materials as exception.

For more information on our calculation methodologies please refer to the ESG download page.

Philips Circular end-of-use management methodology:

Locally recycled medical systems and equipment: To report on the recycling of our medical systems and equipment as part of ‘Closing the loop’, we use primary data from our certified recycling network from which documentation is received on the total material weight. This is then multiplied by the product-level recyclability for total recycled weight. The latter is an improvement in the methodology compared to previous year.

Philips Environmental Profit & Loss account and Material Flow reporting methodology:

The Philips Environmental Profit & Loss (EP&L) account measures our environmental impact on society at large. The EP&L account is based on Life Cycle Analysis methodology in which the environmental impacts are expressed in monetary terms using specific conversion factors. The outcomes help us to assess the highest impact areas, but we do not have targets for the EP&L. Our material flow captures the weight-based flow of materials from our products, parts, and packaging and sites waste, including Volatile Organic Compound (VOC) emissions, across its lifecycle with Philips. From our material flow, we derive the total weight of materials put to market in the reporting year.

For more information on our calculation methodologies please refer to the ESG download page.


Note III Other environmental information


Sustainable Operations

Our Sustainable Operations program relates to improving the environmental performance of our manufacturing facilities and focus on most of the contributors to climate change, circular economy and biodiversity & ecosystem services, addressing also for example water, recycling of waste and chemical substances. Of the topics described below, water and pollution are not material topics as per the 2024 DMA.

Philips Group

Sustainable Sites

baseline year 2020

Actual 2024

target 2025

Total CO₂ from manufacturing¹

0 kilotonnes

0 kilotonnes

0 kilotonnes

Water withdrawal²

753,508 m³

672,608 m³

5% reduction

Zero waste to landfill

2.6%

-

less than 0.5%

Circular Materials Management

90%

94%

95%

Hazardous substances emissions

2,465 kilos

1,216 kilos

25% reduction

VOC emissions

79 tonnes

69 tonnes

10% reduction

1    Net carbon footprint, includes offsets

2    Baseline 2019


Water

Total water withdrawal in 2024 was 672,608 m3, a 5% decrease compared with 2023 and a 11% reduction compared with 2019 (pre-COVID level). Diagnosis & Treatment, which consumes 49% of Philips total water usage, recorded a 3% increase, mainly caused by increased manufacturing activities at a site in Costa Rica. Personal Health recorded a 12% decrease, as a result of process improvements at our sites in the Netherlands and Indonesia. Connected Care showed a decrease of 11%, due to improvement actions at our sites in Germany and the United States. The data was restated for the reporting years 2019-2023 due to an updated groundwater withdrawal methodology in 2024. This caused a significant increase at one Personal Health site.

Annually, we undertake thorough assessments of both our operational sites and strategic suppliers to address potential water-related risks. Even though not considered as material in our DMA, we recognize the importance of responsible water management. We utilize publicly accessible tools such as the Aqueduct Water Risk Atlas by WRI and WWF Water Risk Filter to define and respond to these risks. This comprehensive process evaluates the vulnerability of our sites to various risks including water stress.

While Philips is not a water-intensive organization, this practice ensures the uninterrupted continuity of our operations and the provision of high-quality Water, Sanitation and Hygiene (WASH) services at all our sites. Among our facilities, six locations have been identified as exposed to substantive financial and strategic risks related to water. Three sites in China and Indonesia are

highly vulnerable to coastal flooding and one sites in India is vulnerable to heavy precipitation. Furthermore, six sites are in regions with extremely high water stress and three sites in regions with high water stress in the US, India, China, Israel, Germany, and the Netherlands.

We are proud to have again received an ’A’ score for disclosure transparency on water security in the CDP Europe 2024, demonstrating our ongoing commitment to water risk management and sustainability practices.

Philips Group

Water withdrawal in thousands of m3

2020

2021

2022

2023

2024

Diagnosis & Treatment

286

337

310

324

333

Connected Care

116

119

111

99

88

Personal Health

259

282

302

286

252

Philips Group

661

738

723

709

673

In 2024, 93% of water was purchased and 7% was extracted from groundwater wells.

Hazardous substances emissions

Compared to heavy industry, our sites have relatively few chemical emissions and we have voluntary targets to reduce them. However, most of our manufacturing operations have processes that result in some emissions to air and water. Therefore, we carefully monitor all emissions and are working to limit hazardous chemical and VOC emissions. Many of these decisions happen at the product and process design stage.

Philips Group

Hazardous substances emissions in kilograms

2020

2021

2022

2023

2024

Diagnosis & Treatment

92

181

175

158

162

Connected Care

20

1,239

863

781

708

Personal Health

455

1,242

510

362

345

Philips Group

567

2,662

1,548

1,300

1,216

At Philips, we want to track the impact of chemical substances on a life-cycle basis and, based on a risk-level classification and precautionary principle, to ensure implementation in an active and practical way. The Classified Substances List (CSL) has been set up to manage, restrict, control and/or monitor chemical substances according to regulation requirements and/or known risks. In our CSL, we label substances with known harmful effects on health and the environment as 'Risk Level II'. This classification requires action to minimize exposure and emissions. For our chemical reduction program ending in 2020, we used the 2015 CSL. In 2021, we began a new 5-year program with an updated CSL that includes many more chemicals. As a result, the 2021 figures are significantly higher than those in 2020 due to global protocol advancements. In 2024, we continued our efforts to adopt safer chemicals, reducing exposure to carcinogenic, mutagenic, and reprotoxic hazards at our industrial sites. The hazardous substances emissions amounted to 1,216

kg in 2024, which is a 6% reduction compared to the 1,300 kg in 2023. In the Diagnosis & Treatment segment the emissions increased by 3% due to the repair activities in US sites. The emissions in the Connected Care segment amounted 708 kg, which is a 9% reduction compared to the prior year caused by replacing harmful chemicals and lower production volumes. In the Personal Health segment the hazardous substances emissions were 345 kg in 2024, 5% reduction compared to 2023.

VOC emissions

Philips Group

VOC emissions in tonnes

2020

2021

2022

2023

2024

Diagnosis & Treatment

44

42

38

34

38

Connected Care

3

3

2

2

2

Personal Health

32

33

37

38

29

Philips Group

79

78

77

74

69

Volatile Organic Compounds (VOC) can easily become airborne, leading to health issues. Through photochemical reactions with carbon monoxide and nitrogen oxides (NOx), VOCs form ground-level ozone. This ozone is capable of traveling long distances, impacting remote areas and ecosystems.

To address this, Philips is implementing low-VOC processes and alternatives, alongside enhanced collection and treatment methods, to achieve emission reductions. The Personal Health site in Indonesia has installed an efficient VOC treatment facility, successfully reducing annual emissions by over 7 tonnes in 2024. This reduction was achieved through a well-designed system for collecting and treating emissions from the painting processes. Additionally, low-VOC cleaning materials have been sourced, tested, and implemented across other sites, following strict internal validation.

VOC emissions decreased by 7% in 2024, to 69 tonnes compared to 74 tonnes in 2023. The Personal Health businesses, which represent 39% of total VOC emissions, decreased by 24% due to effective control of waste air treatment improvement in Asia sites. VOC emissions in the Connected Care businesses remains at the same low level. VOC emissions at the Diagnosis & Treatment business units (representing 51% of total VOC emissions) increased by 12%, mainly driven by the cleaning activities for hygiene purposes in our site in Costa Rica.

ISO 14001 certification

The Philips manufacturing sites are certified individually by external certification bodies. In 2024, 100% of reporting manufacturing sites were certified. Plymouth site achieve the certificate in 2024. Smaller sites are required to maintain environmental management systems while external certification is not mandatory.

Philips Group

ISO 14001 certifications as a % of all reporting organizations

2020

2021

2022

2023

2024

Philips Group

81%

92%

96%

96%

100%

Environmental incidents

In 2024, one environmental incident was reported by at a Diagnosis & Treatment site were a sinkhole that was previously remediated has re-opened. This incident was followed by investigations and remedial actions.

No environmental incidents nor non-compliances were reported at Connected Care sites.

In Personal Health, two sites reported two environmental incidents. One incident was due to a wastewater leakage in the past year, where immediate actions were taken. There was no groundwater pollution, although minor contamination was detected on the upper soil. The remediation was closed in 2024. The other incident was due to fires near to one of our factories. Considerable amounts of water were consumed, addressing both air and water concerns in the affected area.

To find out about our sustainability results at global and regional and market level, go to the Philips results hub.


Philips Group 

Market

Manufacturing sites

Total recordable case rate¹

Energy (GWh)

Waste (Tonnes)

CMM (%)

Water (m³)

Hazardous substances (kg)

VOC (kg)

Asia-Pacific

1

0.04

53,696

3,194

98%

96,553

39

20,160

Belgium, the Netherlands, Luxembourg

2

0.20

81,226

5,987

91%

57,045

206

11,026

Central Eastern Europe

0

0.00

Germany, Austria, Switzerland

3

0.49

43,260

2,468

94%

79,909

3

3,827

France

0

0.21

Greater China

5

0.14

42,303

2,348

97%

151,157

811

4,205

Iberia

0

0.50

Italy, Israel, Greece

1

0.40

8,905

386

80%

9,273

0

174

Indian Subcontinent

1

0.05

6,676

187

100%

17,531

8

88

Japan

0

0.24

Latin America

2

0.13

20,673

1,005

93%

81,689

1

20,252

Middle East, Türkiye, Africa

0

0.00

Nordics

0

1.38

North America

8

0.36

74,576

4,582

93%

179,451

148

9,418

Russia, Central Asia

0

0.26

UK & Ireland

0

0.00

1    Includes manufacturing and non-manufacturing sites 


Philips’ Environmental data for operations methodology:

All environmental data from manufacturing operations, except process chemicals, are reported on a monthly basis in our sustainability reporting and validation tool, according to company guidelines that include definitions, procedures and calculation methods. Process chemicals are reported on a half-yearly basis.

These environmental data from manufacturing are tracked and reported to measure progress against our Sustainable Operations targets.

Data on emissions of substances are based on measurements and estimates at manufacturing site level. The basis of preparation is data submitted by our environmental coordinators at our manufacturing sites, which is validated and consolidated by Group Sustainability.

Reporting on ISO 14001 certification is based on manufacturing units reporting in the sustainability reporting system.

EU Taxonomy disclosures

The aim of the European Taxonomy Regulation (EU 2020/852), including the delegated acts adopted thereunder, is to provide companies, investors and policymakers with appropriate criteria for determining which economic activities can be considered environmentally sustainable, and it requires companies to report on how and to what extent their activities are associated with such ‘taxonomy-eligible activities’. The Taxonomy Regulation is relatively new and still under development (e.g. changes to the first Delegated Act, changes in presentation format), leaving still significant uncertainties around its phased implementation.

The Taxonomy Regulation provides certain conditions for taxonomy alignment. Among others, the relevant activity must substantially contribute to one or more of the following six environmental objectives (while not significantly harming any of the others):

Climate change mitigation

Climate change adaptation

The sustainable use and protection of water and marine resources

The transition to a circular economy

Pollution prevention and control

The protection and restoration of biodiversity and ecosystems


The delegated acts adopted under the Taxonomy Regulation provide technical screening criteria which must also be met to constitute taxonomy alignment. In 2023, the second Delegated Act was published concerning activities significantly contributing to environmental objectives 3-6 above.

The taxonomy framework provisions effective on the date of this Annual Report require Philips to disclose the proportion of its taxonomy-eligible and taxonomy-aligned activities (described in any delegated act adopted to date) and non-eligible and non-aligned economic activities in its total turnover,

capital and operational expenditure, as well as certain qualitative information for environmental objectives 1-6. We used the Regulation (EU) 2020/852 as supplemented with Commission Delegated Regulation (EU) 2021/2139, Commission Delegated Regulation (EU) 2021/2178, Commission Delegated Regulation (EU) 2022/1214, Commission Delegated Regulation (EU) 2023/2485 and Commission Delegated Regulation (EU) 2023/2486 to identify activities that are eligible.

Consequently, 99.5% of Philips’ revenues were eligible under these delegated acts during 2024. All remaining revenues were non-eligible (0.5%). We assessed the substantial contribution criteria and the do no significant harm criteria related to our revenue related eligible economic activities. None of our revenues were aligned, mainly due to the substantial contribution criteria and the strict criteria in Annex C. Although we received waivers for using specific substances (as there currently are no alternatives for these substances) we are not aligned with Appendix C. We used delegated act (EU) 2021/2178, 2023/2485 and 2023/2486 for the definition and calculation of the taxonomy-eligible and taxonomy-alignment percentages. Revenue is calculated based on ’Sales’ as per Consolidated statements of income. 

Reportable taxonomy-eligible capital expenditures in 2024 amounted to EUR 688.56 million, or 69.0% of total capital expenditure (non-eligible capital expenditures 31.0%). Some other (enabling) Philips activities are included in the delegated act (EU) 2021/2139 and are eligible for capital expenditures for the objective of climate change mitigation and climate change adaptation to be reported over 2024. We therefore assessed our capital expenditure, and identified relevant activities mainly related to our real estate portfolio. For these activities, capital expenditures are determined based on the 2024 additions to property, plant and equipment, intangible assets, and additions to right-of-use assets, excluding any re-assessments (refer to Property, plant and equipment and Intangible assets excluding goodwill).

Reportable taxonomy-aligned capital expenditures in 2024 amounted to EUR 3 million, or 0.3% of total capital expenditure (non-aligned capital expenditures 99.7%), and mainly related to energy efficiency improvement measures in our buildings (installation, maintenance, and repair of energy efficiency equipment), such as energy-efficient heating, ventilation, and air conditioning (HVAC) in various locations around the world. Next, we invested in onsite renewable electricity generation (installation, maintenance and repair of renewable energy technologies) by installing PV (solar) panels.

We assessed compliance with the criteria set out in Article 3 of Regulation (EU) 2020/852 and the associated technical screening criteria on a project basis.

Similar to capital expenditures, we screened (EU) 2021/2139 for relevant operational expenditure activities. Total operational expenditures are determined based on the 2024 non-capitalized costs that relate to research and development, building renovation, short-term lease, maintenance and repair, and any other direct expenditures relating to day-to-day servicing of property, plant and equipment. Reportable taxonomy-eligible operational expenditures in 2024 amounted to EUR 1,918 million, or 85.7% of total operational expenditures expenditure (non-eligible operational expenditures 14.3%), In 2024, we did not record reportable taxonomy-aligned operational expenditures (0%), as for example, the sourcing of renewable energy is not included in the Taxonomy. Non-aligned operational expenditures were 100%.

Philips Group

Nuclear and fossil gas related activities

Row

Nuclear energy related activities

1.

The undertaking carries out, funds or has exposures to research, development, demonstration and deployment of innovative electricity generation facilities that produce energy from nuclear processes with minimal waste from the fuel cycle.


NO

2.

The undertaking carries out, funds or has exposures to construction and safe operation of new nuclear installations to produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production, as well as their safety upgrades, using best available technologies.


NO

3.

The undertaking carries out, funds or has exposures to safe operation of existing nuclear installations that produce electricity or process heat, including for the purposes of district heating or industrial processes such as hydrogen production from nuclear energy, as well as their safety upgrades.


NO

Fossil gas related activities

4.

The undertaking carries out, funds or has exposures to construction or operation of electricity generation facilities that produce electricity using fossil gaseous fuels.


NO

5.

The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of combined heat/cool and power generation facilities using fossil gaseous fuels.


NO

6.

The undertaking carries out, funds or has exposures to construction, refurbishment, and operation of heat generation facilities that produce heat/cool using fossil gaseous fuels.


NO


Philips Group

Proportion of turnover from products or services associated with Taxonomy-aligned economic activities – 2024
in millions of EUR unless otherwise stated

Financial year 

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

 

Economic Activities (1)

Code (a) (2)

Turnover (3)

Proportion of Turnover, 2024 (4)

Climate Change Mitigation (5)

Climate Change Adaptation (6)

Water (7)

Pollution (8)

Circular Economy (9)

Biodiversity (10)

Climate Change Mitigation (11)

Climate Change Adaptation (12)

Water (13)

Pollution (14)

Circular Economy (15)

Biodiversity (16)

Minimum Safeguards (17)

Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) turnover, 2023 (18)

Category enabling activity (19)

Category transitional activity (20)

 

 

EUR

%

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

%

E

T

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1)

0

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

0%

 

 

Of which Enabling

0

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

0%

E

 

Of which Transitional

0

0%

 

 

 

 

 

 

 

 

 

 

 

 

 

0%

 

T

A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (g)

 

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

 

 

 

 

 

 

 

 

 

 

Manufacture of electrical and electronic equipment 

CE1.2

13,164.19

73.1%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

73.6%

 

 

Provision of IT/OT data-driven solutions

CE4.1

1,080.78

6.0%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

5.1%

 

 

Repair, refurbishment and remanufacturing

CE5.1

26.80

0.1%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

0.2%

 

 

Sale of spare parts

CE5.2

77.65

0.4%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

0.2%

 

 

Product-as-a-service and other circular use- and result-oriented service models

CE5.5

3,588.66

19.9%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

19.6%

 

 

Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)

 

17,938.09

99.5%

0%

0%

0%

0%

99.5%

0%

 

 

 

 

 

 

 

 98.7%

 

 

A. Turnover of Taxonomy eligible activities (A.1+A.2)

 

17,938.09

99.5%

0%

0%

0%

0%

99.5%

0%

 

 

 

 

 

 

 

 98.7%

 

 

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Turnover of Taxonomy-non-eligible activities

 

83.00

0.5%

 

 

 

 

 

 

 

 

 

 

 

 

 

1.3%

 

 

Total

 

18,021.09

100%

 

 

 

 

 

 

 

 

 

 

 

 

 

100%

 

 

Philips Group

Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities – 2024
in millions of EUR unless otherwise stated

Financial year 

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

 

Economic Activities (1)

Code (a) (2)

CapEx (3)

Proportion of CapEx, 2024 (4)

Climate Change Mitigation (5)

Climate Change Adaptation (6)

Water (7)

Pollution (8)

Circular Economy (9)

Biodiversity (10)

Climate Change Mitigation (11)

Climate Change Adaptation (12)

Water (13)

Pollution (14)

Circular Economy (15)

Biodiversity (16)

Minimum Safeguards (17)

Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2023 (18)

Category enabling activity (19)

Category transitional activity (20)

 

 

EUR

%

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y; N; N/EL (b) (c)

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

Y/N

%

E

T

A. TAXONOMY-ELIGIBLE ACTIVITIES

A.1. Environmentally sustainable activities (Taxonomy-aligned)

Electricity generation using solar photovoltaic technology

CCM4.1/CCA4.1

0.35

0%

Y

N

N/EL

N/EL

N/EL

N/EL 

 

Y

Y

Y

Y

Y

Y

0%

E

 

Installation and operation of electric heat pumps

CCM4.16/CCA4.16

0.01

0%

Y

N

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

0%

E

Renovation of existing buildings

CCM7.2/CCA7.2/CE3.2

0.03

0%

Y

N

N/EL

N/EL

N

N/EL

 

Y

Y

Y

Y

Y

Y

0%

T

Installation, maintenance and repair of energy efficient equipment

CCM7.3/CCA7.3

2.17

0.3%

Y

N

N/EL

N/EL

N/EL

N/EL

 

Y

Y

Y

Y

Y

Y

0.4%

E

Installation, maintenance and repair of charging stations for electric vehicles 

CCM7.4/CCA7.4

0.19

0.0%

Y

N

N/EL

N/EL

N/EL 

N/EL

 

Y

Y

Y

Y

Y

Y

0%

E

Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings

CCM7.5/CCA7.5

0.02

0%

Y

N

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

0%

E

Acquisition and ownership of buildings

CCM7.7/CCA7.7

0

0%

Y

N

N/EL

N/EL

N/EL

N/EL

Y

Y

Y

Y

Y

Y

0%

T

CapEx of environmentally sustainable activities (Taxonomy-aligned) (A.1)

2.77

0.3%

0.3%

0%

0%

0%

0%

0%

 

Y

Y

Y

Y

Y

Y

0.4%

 

 

Of which Enabling

2.74

0.3%

0.3%

0%

0%

0%

0%

0%

 

Y

Y

Y

Y

Y

Y

0.4%

E

 

Of which Transitional

0.03

0%

0%

 

 

 

 

 

 

Y

Y

Y

Y

Y

Y

0%

 

T

Financial year 

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

 

Economic Activities (1)

Code (a) (2)

CapEx (3)

Proportion of CapEx, 2024 (4)

Climate Change Mitigation (5)

Climate Change Adaptation (6)

Water (7)

Pollution (8)

Circular Economy (9)

Biodiversity (10)

Climate Change Mitigation (11)

Climate Change Adaptation (12)

Water (13)

Pollution (14)

Circular Economy (15)

Biodiversity (16)

Minimum Safeguards (17)

Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2023 (18)

Category enabling activity (19)

Category transitional activity (20)

A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (g)

 

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

EL; N/EL (f)

 

 

 

 

 

 

 

 

 

 

Electricity generation using solar photovoltaic technology

CCM4.1/CCA4.1

0

0%

EL

EL

N/EL

N/EL

N/EL

N/EL

 

 

 

 

 

 

 

0%

 

 

Installation and operation of electric heat pumps

CCM4.16/CCA4.16

0

0%

EL

EL

N/EL

N/EL

N/EL

N/EL

 

 

 

 

 

 

 

0%

 

 

Renovation of existing buildings

CCM7.2/CCA7.2/CE3.2

23.12

2.3%

EL

EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

3.1%

 

 

Installation, maintenance and repair of energy efficient equipment

CCM7.3/CCA7.3

0.03

0%

EL

EL

N/EL

N/EL

N/EL

N/EL

 

 

 

 

 

 

 

0.4%

 

 

Installation, maintenance and repair of charging stations for electric vehicles

CCM7.4/CCA7.4

0

0%

EL

EL

N/EL

N/EL

N/EL

N/EL

 

 

 

 

 

 

 

0%

 

 

Installation, maintenance and repair of instruments and devices for measuring, regulation and controlling energy performance of buildings

CCM7.5/CCA7.5

0

0%

EL

EL

N/EL

N/EL

N/EL

N/EL

0%

Acquisition and ownership of buildings

CCM7.7/CCA7.7

23.29

2.3%

EL

EL

N/EL

N/EL

N/EL

N/EL

0%

Manufacture of electrical and electronic equipment 

CE1.2

556.60

55.8%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

53.5%

 

 

Provision of IT/OT data-driven solutions

CE4.1

51.49

5.2%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

4.3%

 

 

Repair, refurbishment and remanufacturing

CE5.1

10.42

1.0%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

0.9%

 

 

Sale of spare parts

CE5.2

0.26

0%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

0%

 

 

Financial year 

Year

Substantial Contribution Criteria

DNSH criteria (’Does Not Significantly Harm’)(h)

 

Economic Activities (1)

Code (a) (2)

CapEx (3)

Proportion of CapEx, 2024 (4)

Climate Change Mitigation (5)

Climate Change Adaptation (6)

Water (7)

Pollution (8)

Circular Economy (9)

Biodiversity (10)

Climate Change Mitigation (11)

Climate Change Adaptation (12)

Water (13)

Pollution (14)

Circular Economy (15)

Biodiversity (16)

Minimum Safeguards (17)

Proportion of Taxonomy aligned (A.1.) or eligible (A.2.) CapEx, 2023 (18)

Category enabling activity (19)

Category transitional activity (20)

Product-as-a-service and other circular use- and result-oriented service models

CE5.5

20.58

 2.1%

N/EL

N/EL

N/EL

N/EL

EL

N/EL

 

 

 

 

 

 

 

 2.0%

 

 

CapEx of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2)

 

685.79

68.7%

 4.6%

 4.6%

0%

0%

 64.1%

0%

 

 

 

 

 

 

 

64.2%

 

 

A. CapEx of Taxonomy eligible activities (A.1+A.2)

688.56

69.0%

4.9%

4.6%

0%

0%

 64.1%

0%

 

 

 

 

 

 

 

64.6%

 

 

B. TAXONOMY-NON-ELIGIBLE ACTIVITIES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CapEx of Taxonomy-non-eligible activities

 

308.96

31.0%

 

 

 

 

 

 

 

 

 

 

 

 

 

35.4%

 

 

Total

 

997.52

100%