![]() Smurfit Kappa Group plc Annual Report 2022 ![]() Smurfit Kappa Group plc Annual Report 2022 # Dynamically # & Sustainably # Delivering #### Annual Report 2022 ![]() \* For the purpose of this Annual Report the number of countries in which SKG operates is as at 31 December 2022. #### Overview 1-13 Strategic Framework and Financial Highlights of 2022 2 What We Do 4 Where We Operate 6 Our Sustainability Commitments 8 Our Innovative Solutions 10 #### Strategic Report 14-97     Our Business Model 24 Our Strategy 26 Key Performance Indicators 28 Risk Report 32 Finance Review 37 Stakeholders 42 Sustainability 50 People 86 #### Governance 98-147 Board of Directors 100 Corporate Governance Statement 104 Audit Committee Report 113 Remuneration Report 117 Nomination Committee Report 137 Sustainability Committee Report 141     #### Financial Statements 148-223   Consolidated Income Statement 157 Consolidated Statement of Comprehensive Income 158 Consolidated Balance Sheet 159 Company Balance Sheet 160 Consolidated Statement of Changes in Equity 161 Company Statement of Changes in Equity 162 Consolidated Statement of Cash Flows 163 Company Statement of Cash Flows 164 Notes to the Consolidated Financial Statements 165 #### Supplementary #### Information 224-232 Alternative Performance Measures 226 Shareholder Information 232 #### This report is also available online at #### www.smurfitkappa.com/investors/ #### reports-and-presentations Smurfit Kappa (‘SKG’), a FTSE 100 company, #### is one of the leading providers #### of paper-based packaging #### solutions in the world. #### We operate across 36 \* countries with approximately 48,000 employees in over 350 production sites with revenue of €12.8 billion in 2022. ![]() 1Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information ![]() 2 Smurfit Kappa Annual Report 2022 #### Our Strategic Framework #### Our Purpose #### At Smurfit Kappa we are proud to create, #### protect and care. #### Our Vision #### To be a globally admired #### business, dynamically #### and sustainably delivering secure and superior returns for #### all stakeholders. #### Delivered via #### Our Strategy #### Our objective is to develop long-term customer #### relationships by providing customers with #### innovative, sustainable packaging solutions that #### enhance the customers’ prospects of success #### in their end markets. #### Our Strategic Priorities #### Market #### Position #### Partner #### of ChoiceOperational #### Excellence #### Investment #### in People #### Capital #### Allocation #### Financial Highlights of 2022 Revenue (million) €12,815 +27% €10,107 €12,815 2021 2022 Free Cash Flow \* (million) €545 +20% €455 €545 2021 2022 EBITDA \* (million) €2,355 +38% €1,702 €2,355 2021 2022 Basic Earnings per Share (cent) 365.3 +38% 263.9 365.3 2021 2022 EBITDA Margin \* (%) 18.4 16.8 18.4 2021 2022 Pre-exceptional Basic Earnings per Share \* (cent) 444.1 +62% 274.5 444.1 2021 2022 ![]() 3Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Overview Strategic Report Governance Financial Statements Supplementary Information #### Supported by #### Sustainability Strategy We are committed to being an impactful business, supporting a greener, bluer planet. This means doing the right thing for our people, our communities and the environment, through products and processes that make a real difference for our customers and across our entire value chain. Read more on pages 50 to 85 #### Supported by #### People Strategy We want to be recognised as a globally admired employer of choice. We believe our employees are at the centre of everything we do. Read more on pages 86 to 97 #### Underpinned by #### Our Values #### We have a strong and positive culture based on our values of: #### Safety #### Loyalty #### Integrity #### Respect #### These values foster the guiding principles by which we operate: #### Teamwork #### Entrepreneurship #### Inclusion, Diversity and Equality #### Rewards and Recognition #### Performance Driven #### Accountability Net Debt to EBITDA \* (times) 1.3x 1.7x 1.3x 2021 2022 Net Debt \* (million) €2,992 +4% €2,885 €2,992 2021 2022 Profit Before Income Tax (million) €1,293 +42% €913 €1,293 2021 2022 Return on Capital Employed \* (%) 21.8 16.0 21.8 2021 2022 Operating Profit before Exceptional Items \* (million) €1,662 +55% €1,073 €1,662 2021 2022 \* These financial Key Performance Indicators are not defined under International Financial Reporting Standards. Further information in relation to these Alternative Performance Measures is included in the Supplementary Information section on pages 226 to 231. ![]() 4 Smurfit Kappa Annual Report 2022 #### What We Do We create innovative and sustainable paper-based packaging solutions for our customers, we protect products in transit and precious resources for future generations while caring for each other, the environment and the planet. #### A packaging leader #### in a growth industry #### Forestry #### We own approximately 68k hectares #### of forest globally, which are FSC ® or #### PEFC certified, promoting economic #### growth, protection of biodiversity #### and ecosystems and fostering #### social equity. #### Paper We manufacture a wide range of #### papers mainly used for packaging purposes. Our total global paper #### and board capacity is approximately #### 8.4 million tonnes per annum. #### Packaging #### We design, manufacture and supply paper-based packaging to package,  products. We manufacture #### corrugated packaging and also #### produce solidboard, folding carton #### and bag-in-box. ![]() 5Smurfit Kappa Annual Report 2022 Overview Governance Financial Statements Supplementary InformationStrategic Report Overview #### Recycling We provide recycling solutions to  #### packaging and paper is recycled #### responsibly, efficiently and reliably. We handle 8 million tonnes of #### primarily post consumer recovered #### paper each year across the globe. #### Our Innovative Solutions We offer an unrivalled portfolio of sustainable packaging solutions in a selection of materials and combine innovative structural design with high-quality print to maximise brand impact and drive increased sales. At Smurfit Kappa, innovation and impact is data driven, with a proven scientific approach informing good business decisions. Data collected from our operations is combined with market and sectoral research and a deep knowledge of over 100,000 supply chains, providing a unique insight and fit-for-purpose solutions for our customers. #### Consumer Packaging TopLock is a sustainable, child-proof box for detergent pods and capsules. It is one example of how Smurfit Kappa is making it easier for consumers to shop more sustainably. #### Industrial Packaging Our range of corrugated and honeycomb packaging products is designed to provide optimal levels of strength and protection to meet supply chain challenges. Here is an example of a sustainable and cost efficient solution designed by Smurfit Kappa Hexacomb for Scania windscreen packaging. #### E-Commerce Packaging Introducing our latest innovation, eWow, a sustainable and stylish e-packaging solution that enhances brand engagement. The eWow box was first designed to promote a new product launch, the design brief focused on a creating a memorable unboxing experience. The stand-out feature of this box is the removable lid inside the box which creates additional printing space to tell the product story or share sustainability information. Easy assembly and closure of the box during the packaging process also contributes to  #### Bag-in-Box ® We are proud to be one of just a few providers of complete Bag-in-Box ® and Pouch-Up ® products. Bag-in-Box ® delivers the ideal and full solution, from films and accessories, to bags, taps and boxes, right up to the filling lines. It protects liquid products with a very effective barrier bag inside, a strong and protective paper-based outer packaging and an easy-to-use tap to dispense the liquid product. Find out more about innovative products on pages 10 to 13 ![]() 6 Smurfit Kappa Annual Report 2022 1.0 9.9 €7. 8 €9.9 20212022 #### Where We Operate We are one of the largest integrated manufacturers of paper-based packaging solutions in the world. We are located in 23 countries in Europe and 13 in the Americas. In Europe, we are the leader by production volume in corrugated packaging and containerboard and in Latin America, we are the only large-scale pan-regional player. #### A world leader #### with global presence #### Europe We are the European leader in the production of corrugated packaging, containerboard and bag-in-box. The Europe segment includes mills and plants that primarily produce containerboard that is converted into corrugated containers. In addition, we produce other types of paper, such as solidboard, sack kraft paper, MG paper and graphic paper; other paper-based packaging, such as honeycomb, solidboard packaging and folding cartons; and bag-in-box packaging. Read more on page 21 Kraftliner – 1.6 Recycled containerboard – 3.9 Other paper and board – 0.8 Corrugated – 4.9 Solidboard packaging – 0.1 2022 Gross Sales Volume (million tonnes) 11.3 Revenue #### €9.9 billion ![]() 7Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 1.0 2.9 €2.3 €2.9 20212022 Containerboard – 1.4 Other paper and board – 0.2 Corrugated – 1.6 Other paper-based packaging – 0.2 2022 Gross Sales Volume (million tonnes) 3.4 Revenue #### €2.9 billion #### The Americas  comprise of a system of mills and plants that primarily produce containerboard that is converted into corrugated containers. Our operations in the Americas also include forestry; other types of paper, such as boxboard and sack paper; and paper-based packaging, such as folding cartons, honeycomb and paper sacks. Read more on page 21 #### Our Scale and Geographic Diversity Our large manufacturing footprint provides us with a clear point of differentiation because the corrugated packaging market is a localised market and therefore converting plants need to be close to customers (within 300kms). Our unique global footprint makes us well placed to reliably deliver on customer requirements. Converting Plants 243 Forestry Plantations (hectares) 68k Mills 35 Other Production Facilities 33 Fibre Sourcing 46 ![]() 8 Smurfit Kappa Annual Report 2022 Long-term ambition, #### delivering today Globally, citizens are asking tougher questions and becoming a strong force in the drive for climate and societal change in recent years. The focus on how we treat our planet, how we create a more inclusive world for everyone and support equality across all communities has never been so high on people’s agendas. #### Better Planet 2050 (‘BP2050’) #### Our Sustainability Commitments #### Category #### Climate Change Forest Water Waste Health and Safety People Communities #### Target s #### Net zero our ambition is to have at least net zero emissions by 2050 with a 55% reduction in fossil fuel emissions intensity by 2030 >95% packaging solutions sold as Chain of Custody certified to customers by 2025 60% reduction in Chemical Oxygen Demand intensity by 2025 1% reduction of our water usage intensity annually 30% reduction in waste to landfill intensity by 2025 #### at least 5% reduction in Total Recordable Injury Rate annually 25% of management positions held by women by 2024 #### €24 million will be donated between 2020-2025 to support social, environmental and community initiatives #### Progress in 2022 \* 43.9% reduction in CO 2 emissions since 2005 94.3% packaging solutions sold as Chain of Custody certified in 2022 36.9% reduction in Chemical Oxygen Demand since 2005 2.1% reduction of our water usage in 2022 24% reduction in waste to landfill since 2013 13.6% reduction in Total Recordable Injury Rate in 2022 23.5% of management positions held by women at end of 2022 #### €18.4 million donated since 2020 Link to #### Sustainability #### Strategy #### Link to Sustainable #### Development Goals #### (‘SDGs’) \* For more details on our progress, please see our Sustainable Development Report 2022 which will be available on our website from the end of March 2023. ![]() 9Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Key for Sustainability Strategic Priorities #### Planet People Impactful Business #### Category #### Climate Change Forest Water Waste Health and Safety People Communities #### Target s #### Net zero our ambition is to have at least net zero emissions by 2050 with a 55% reduction in fossil fuel emissions intensity by 2030 >95% packaging solutions sold as Chain of Custody certified to customers by 2025 60% reduction in Chemical Oxygen Demand intensity by 2025 1% reduction of our water usage intensity annually 30% reduction in waste to landfill intensity by 2025 #### at least 5% reduction in Total Recordable Injury Rate annually 25% of management positions held by women by 2024 #### €24 million will be donated between 2020-2025 to support social, environmental and community initiatives #### Progress in 2022 \* 43.9% reduction in CO 2 emissions since 2005 94.3% packaging solutions sold as Chain of Custody certified in 2022 36.9% reduction in Chemical Oxygen Demand since 2005 2.1% reduction of our water usage in 2022 24% reduction in waste to landfill since 2013 13.6% reduction in Total Recordable Injury Rate in 2022 23.5% of management positions held by women at end of 2022 #### €18.4 million donated since 2020 Link to #### Sustainability #### Strategy #### Link to Sustainable #### Development Goals #### (‘SDGs’) ![]() 10 Smurfit Kappa Annual Report 2022 #### Our Innovative Solutions #### We create innovative #### and sustainable solutions #### for our customers Our approach to innovation is both market and data-driven, it focuses on finding impactful solutions that can be delivered at scale. We deliver innovation to our customers in many ways, namely by, designing smarter sustainable packaging solutions, through process improvement, or by optimising supply chain efficiency. #### Mabe #### Reducing Environmental Impact #### Mexico Mabe, a Mexico-based international appliance  sustainable features and adding practical solutions. Recently the company launched a series of initiatives to reduce its carbon footprint. Smurfit Kappa partnered with Mabe to develop a holistic packaging solution for their washing machine centre drum product, to replace an unsustainable packaging material, mainly expanded polystyrene, with a paper-based solution. The Smurfit Kappa team identified the packaging functionality requirements and the most critical components of the product to protect. We designed and developed a packaging solution with 100% recyclable material, capable of containing products of two different sizes. The basket protector holds and protects the tank during transportation. It is a lightweight structure with high resistance which means less packaging is needed, resulting in cost savings in transportation and storage. ![]() 11Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Zebrah #### Sustainable Solution for Vegan Wines #### Brazil Zebrah is a fun brand which sells Brazilian vegan wine in cans and aims to surprise customers with its excellent taste. They were looking for a new pack to hold three cans of wine for their retail channels. Why three? Because, together, the cans hold the same amount of wine as a traditional bottle. The biggest challenge was to create an innovative pack for the point of purchase which portrayed their brand values of authenticity, fun and differentiation.  developed a number of different proposals using our unique tools. The sustainable solution delivered increased sales through brand visibility at the point of purchase in retail stores and optimisation throughout the supply chain. The paper-based packaging also reflects the sustainable feel of a vegan product. #### Closer Pets #### E-commerce Packaging for Amazon UK Closer Pets is focused on pet technology to create products that keep people closer to their pets, wherever they are. Designing products for more than 30 years, Closer Pets  and to help pet parents look after their animal friends. The Closer Pets team were working on a new project developing dog and cat automatic feeding products. Faced with escalating production costs and shipping prices, they wanted to switch their packaging supplier. One of the main requirements for Closer Pets was for Amazon-certified packaging, so they selected Smurfit Kappa for our expertise in certified testing. The convenience of being able to conduct the testing at the Smurfit Kappa ISTA (International Safe Transfer Association) Lab in Northampton was an additional  Frustration-Free Packaging guidelines. The result  requirements, leaving the brand free to sell via the  knowledge they were completely compliant. Certified to sell on Amazon with testing at Smurfit Kappa ISTA Lab in Northampton. ![]() 12 Smurfit Kappa Annual Report 2022 #### Our Innovative Solutions continued #### Unilever #### Our Circular Approach #### Italy Unilever partnered with Smurfit Kappa in Italy to design display solutions for their health and beauty range to be paper-based, FSC certified, 100% recyclable, and to be made with recycled raw materials. The designs also  In addition, we designed the solutions to be suitable for multi-brand use, meaning the need for versatility and to be reusable. The result was a mono-material design of corrugated cardboard, comprising three standardised elements that can be combined, with customisable front designs, depending on the product to be displayed. “With this project, we responded to two needs” explains Fabrizio Beraldi, Sales and Trade Marketing Director Beauty & Personal Care of Unilever Italia. “On the one hand, sustainability, with the aim of reducing the environmental impact of our processes and products. On the other hand, we wanted to achieve ever greater simplification and efficiency.” #### Seedlip #### Premium Packaging for the World’s First #### Distilled Non-Alcoholic Spirit UK  that combines farming heritage with the love of nature and design. The brand pioneered a sophisticated non-alcoholic option creating a new segment in the ever-growing no and low alcohol category. Seedlip has two growing brand promises, sustainable packaging and natural ingredients. Smurfit Kappa was delighted to partner with Seedlip to create sustainable packaging that delivers on its brand promise. Our team worked with Seedlip to create a luxury gift range, a seemingly simple project, but with the delicate design of the packaging, we needed to be creative and therefore called upon the experience of our litho printing specialists. The collaboration and expertise of the teams was a success.  in the Harpers Design Awards. “In this process, we have found a partner in Smurfit Kappa Italia who has met our needs, not only as a display supplier but also who has supported a circular approach through the collection and recycling of old display materials.” ![]() 13Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Extrusiones #### Engineering a Sustainable #### Alternative Solution #### Colombia Extrusiones, a Colombian customised engineering solutions company, tasked us with creating a sustainable solution to replace their plastic reels. The new design needed to align with their goal of increasing the use of recyclable materials and also have a unique design to avoid competitors reusing their generic plastic product when discarded, which negatively impacted their brand image. Our experienced design team developed a robust corrugated cardboard solution which was easy to assemble and met the high demands of the exportation process. The new reel was printed with the company logo to stand out from the competition along with relevant product information to achieve greater differentiation and brand awareness in the market. Plastic consumption was reduced by 35 tonnes, resulting in a reduction of 3,840 tonnes of CO 2 per year. In addition, this new solution delivered warehouse and supply chain savings and the additional warehouse space enabled Extrusiones to increase inventory levels and respond to growing demand. 35 #### tonnes #### reduction in #### plastic consumption 3,840 #### tonnes CO 2 #### savings per annum ![]() 14 Smurfit Kappa Annual Report 2022 #### Strategic Report 14-97     Our Business Model 24 Our Strategy 26 Key Performance Indicators 28 Risk Report 32 Finance Review 37 Stakeholders 42 Sustainability 50 People 86 ![]() 15Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information ## Strategic ## investment ## in the UK Smurfit Kappa UK Limited announced the #### acquisition of Atlas Packaging in May 2022. Atlas Packaging, based in Barnstaple, North Devon, is well invested with a strong market presence in the UK which allows them to meet the needs of and deliver value to its broad customer base. With a particularly strong presence in shelf ready packaging, gift boxing and the e-commerce sector, they offer an exciting and broad range of innovative products. Eddie Fellows, CEO of Smurfit Kappa Corrugated UK & Ireland, commented: “I am delighted with this acquisition and to welcome another strong professional management team into the Smurfit Kappa organisation. The business has an established customer base across several industries and an excellent reputation.” “This acquisition has further strengthened our ability to service the UK market and our customers with innovative and sustainable packaging solutions.” #### Delivering on our Strategic Priorities ![]() 16 Smurfit Kappa Annual Report 2022 Our performance reflects the ongoing benefits of our investment programme. Together with our customer-led innovation and sustainability initiatives, this demonstrates the continued dedication of our 48,000 employees. #### Irial Finan #### Chair #### Chair’s Statement # 2022 was # another highly # successful year ![]() 17Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### 2022 Performance 2022 was another highly successful year for Smurfit Kappa. The Group delivered an excellent performance for 2022 set against a year of extraordinary circumstances. Revenue for the year was up 27% to €12.8 billion with EBITDA of €2,355 million, a 38% increase over 2021. Our performance reflects the ongoing benefits of our investment programme. Together with our customer-led innovation and sustainability initiatives, this demonstrates the continued dedication of our 48,000 employees. On behalf of the Board and management team, I would like to record our sincere appreciation to each and every one of our employees. #### Capital Strength   SKG with significant strategic and financial flexibility. At the year-end, the net debt to EBITDA of the Group was less than 1.3x.  operations, it was further embedded into the capital structure with the inaugural €1 billion dual-tranche Green Bond issued in September 2021. Building on our vision to dynamically and sustainably deliver, the Group published its first Green Bond Allocation and Impact Report, which provided details on the use of the proceeds of the 8 and 12 year Green Bonds. In December 2022, the Group announced and successfully completed a share buyback transaction of almost 1.2 million shares to mitigate the dilution of shares issued on the vesting of awards under our Performance Share Plan earlier in 2022. The shares repurchased as part of the transaction were cancelled. #### Sustainability  As a responsible company, operating globally, Smurfit Kappa has a product that is naturally sustainable and a circular process that is increasingly sustainable, driven by a culture with strong values of safety, loyalty, integrity and respect and our purpose to create, protect and care. SKG understands the challenges facing both our business and the planet and is committed to doing its part in resolving these critical issues. Therefore, our ambition is to deliver sustainable growth for the benefit of all our stakeholders based on three pillars: Planet, People and Impactful Business. The Group delivered many sustainability achievements during 2022. In early 2022 we announced that our climate emission targets received SBTi validation as being consistent with levels required to meet the goals of the Paris Agreement. More recently, the Group was named as an industry top rated company by Sustainalytics. In addition, the evolution of our sustainability reporting continues with the publication date of the annual Sustainability Development Report being aligned with this Annual Report as well as the evolution of our Task Force on Climate-related  and net zero transition plan disclosures. The Group continued to invest in significant sustainable projects during the year. The Board had the opportunity to visit the Cali mill in Colombia before the announcement of an almost US$100 million investment in a sustainable biomass boiler which will reduce Group emissions by approximately 6%. As the progress made in 2022 outlines, the  sustainable growth for the benefit of all our stakeholders, customers, investors, employees, suppliers and the communities in which we operate while being, and being recognised as, a global leader in sustainability. #### Innovation We continue to provide innovative, circular and fit-for-purpose packaging solutions for our customers, led by our Better Planet Packaging initiative. Our culture of innovation is based on our experience, science, creativity and data, with state-of-the-art facilities that allow us to help our entire value chain, our customers, and their consumers, to reduce their carbon footprint and avoid packaging waste. During 2022, Smurfit Kappa launched Design2Market Factory, which is a unique facility created to meet our customers need for speed and flexibility in the development and roll-out of products. This concept ensures that we can work with and respond to customer requirements quickly and at the same time have a seamless development process from packaging design through to market launch. To date this has been a very successful initiative which is redefining how we collaborate with our customers. Some examples of our recent innovative solutions developed for our customers across Europe and the Americas are outlined on pages 10 to 13. #### Board Composition We recognise the importance of continued Board refreshment and renewal, and the benefit of bringing fresh perspectives to complement our longer-tenured Directors. We also recognise the importance of inclusion, diversity and equality throughout the organisation and up to Board level, which includes varying perspectives and career experience as well as diversity of gender, ethnicity, nationality and age. The Board welcomed the introduction during 2022 of the new FCA Listing Rules requirement  representation in relation to gender diversity at Board level. The Board is committed to ensuring that gender diversity continues to be a focus on the Board and senior management agendas and to increasing the representation of women within senior management roles. The Board and the Nomination Committee considered many aspects of Board refreshment during the year. In October 2022, Kaisa Hietala was appointed as Senior Independent Director by the Board, succeeding Gonzalo Restrepo. In December 2022, we announced that John Moloney who has served on the Board since 2013 and Gonzalo Restrepo who has served on the Board since 2015, would not be seeking re-election at the forthcoming Annual General  on that date. On behalf of the entire Board, we extend our sincere appreciation to John and Gonzalo for their respective contributions to Smurfit Kappa over the last number of years. As a result of these changes and to ensure an orderly succession for the Committees of the Board, the following Chair designates have been appointed: Jørgen Buhl Rasmussen will succeed John Moloney as Chair of the Remuneration Committee, Anne Anderson will succeed Gonzalo Restrepo as Chair of the Nomination Committee and Kaisa Hietala will succeed Jørgen as Chair of the Sustainability Committee. Since the year-end, on 5 January 2023, the Board was delighted to appoint Mary Lynn Ferguson-McHugh as an independent Non-executive Director of the Group. Mary Lynn is a former senior Procter & Gamble executive who retired in 2021 following over 35 years with the company and is also an independent Non-executive Director of Molson Coors Beverage Company since 2015. She brings significant global operational experience and fast-moving consumer goods knowledge to the Board. On her appointment, Mary Lynn joined both the Audit Committee and Remuneration Committee. At the conclusion of the forthcoming AGM, the Board will be comprised of 11 Directors, subject to shareholder approval of the election and re-election of the Directors. For further details on the election and re-election of Directors, please see page 110. This will include five female Directors which is in line with our commitment to ensure greater Board diversity. We are also pleased to have a Board which includes Directors from eight different countries including Directors from Europe, North America and Latin America, a diversity of geographic backgrounds which matches our diverse business. ![]() 18 Smurfit Kappa Annual Report 2022 #### Chair’s Statement continued As part of the ongoing development of the Board, for both new and existing Non-executive Directors, a training and development programme continued throughout 2022 with sessions that included specific business areas, innovation, cyber security and governance. #### Governance and Oversight   relationship with its shareholders and other stakeholders and highlights the importance of establishing a corporate culture aligned with business strategy and one which promotes integrity and diversity. As we reflect on 2022, through our engagement with our people and our continued commitment to the environment and the communities we serve, we truly believe that Smurfit Kappa has a culture and an approach to business which aligns with the spirit of the Code and promotes an inclusive and positive working environment which recognises the perspectives of all our stakeholders. Details of this are included throughout this Annual Report and in the Corporate Governance Statement. #### Employee Engagement #### and Development Employee engagement is a key consideration of the executives and Board, and one which has continuously developed over time. The Sustainability Committee continues to hold responsibility for workforce engagement on behalf of the Board. The Sustainability Committee assists the Board in understanding the views of the wider workforce, to ensure that the voice of the workforce is heard in the boardroom and the views and interests of employees are taken into account when making decisions. A detailed update on our employee engagement including details of our high level of employee interaction during the year and commentary from the Chair of the Sustainability Committee, Jørgen Buhl Rasmussen, is included on page 45. Following the very limited opportunity to travel over the last two years due to the COVID-19 pandemic, I was very pleased to be able to visit many of our operations in Europe and the Americas during 2022, and to report back to the Board on my experiences including my engagement with employees. During the second quarter, I spent time visiting our operations in Spain including our corrugated plants in Madrid, Alicante and Valencia, our mill near Bilbao and our bag-in-box facility in the south of the country. In July 2022, I spent over a week travelling across Colombia visiting our various operations. I was joined for part of the visit by the full Board who had the opportunity to visit our mill in Cali, our corrugated plants in Bogota and Cali, and our sack plant in Palmira. In October 2022, I visited a number of our plants in Northern Italy including the Asti and Vignate corrugated plants, our Orsenigo folding carton plant, as well as our bag-in-box facility. In addition, the full Board travelled to Italy to visit our recent acquisition Verzuolo, a recycled paper mill in Northern Italy. As part of these visits, we were delighted to once again have the opportunity to meet face-to-face with management and employees and to  in these countries. In addition to the plant visits, I attended two in-person regional conferences in Miami and Vienna in September 2022, attended by over 500 people collectively, representing the leadership communities in our Europe and Americas regions. I was delighted to  past and present, which included interviews with our former Chairs, Dr Michael Smurfit  a fire-side chat and a Q&A session with all of those in attendance and was delighted to have the opportunity to engage with so many of the leadership team. We recognise that a central element to our continued success is the quality of our people and therefore supporting and developing the culture and practice of talent management in the organisation is essential. In 2022, we have continued to focus on ensuring that we have the right people in the right place and at the right stages of development to fill critical positions as they become available. Our approach to talent has delivered many leaders for the organisation, who have built successful careers over many years, with an average tenure of 22 years among this cohort. Additionally, by focusing on talent through comprehensive and considered succession plans, we can ensure that we continue to fill key operational and strategic positions across the Group. The Smurfit Kappa Academy supports the development and succession planning for the Group and is an important source of development for our people. In addition to our existing well-established programmes, during the year, we expanded our offering with a new programme, SK Rise, to support female talent. We also embarked on a new partnership with Harvard Executive Education in Boston where a select number of senior executives attended an executive development programme in line with their development plans and succession planning requirements. For further details on our development programmes see page 88. In April 2022, the entire workforce was invited to participate in EveryOne Discovery, a global online confidential employee Inclusion,  survey. This initiative, which was deployed in #### Case Study #### Creating a Culture of Learning #### Dominican Republic Villa Agrícolas is a neighbourhood which is known for being one of the most violent areas in Santo Domingo. In the last registered census, which was conducted in 2010, Villa Agrícolas was the most under-resourced urban neighbourhood with the largest population growth. Since then, thousands of people from Haiti have migrated and settled in this area. When the Smurfit Kappa Foundation considered contributing to creating a suitable learning environment in the Villa Agrícolas neighbourhood, and instilling in children the love of knowledge, we were aware that we would also be protecting a vulnerable population and improving their lives for the long-term. In 2003, the Abriendo Caminos Foundation in the Dominican Republic was created as a centre where children, young adults and their families could access educational and recreational activities. The objective has always been to reinforce and elevate their talents and knowledge, helping them prepare to begin, or remain within the educational system. ![]() 19Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 19Smurfit Kappa Annual Report 2022 21 languages across the countries we operate in, provided us with real time feedback from employees across our five ID&E communities: Disability; Family & Age; Gender; LGBTQ+ & Allies and Origin, Race & Ethnicity. Participation in the survey was voluntary with almost 8,000 respondents taking part and providing us with over 9,000 comments,  strategy into the future. Read more in the People section on pages 92-93. #### Stakeholder Engagement The Group and the Board have a continued focus on stakeholder engagement to ensure we build a culture that fosters engagement and enables us to develop successful relationships with our stakeholders. In addition to the further enhanced engagement with our workforce as set out above, we continue to work collaboratively with our customers, suppliers, shareholders and the communities in which we operate. In May, the Group hosted its biggest ever  vision for packaging to be truly circular. The purpose of this event was to help our customers understand the steps involved in effectively transitioning to circular packaging and how to align their packaging decisions with specific EU Green Deal packaging commitments. During the year, we continued to build and maintain transparent and long-term relationships with our suppliers. This partnership approach enables us to work together on sustainability improvement processes and provides the opportunity to carry out audits on compliance with our sustainable supply chain standards and work together to improve sustainability in their business where any shortcomings are identified. Our leadership team and investor relations team maintain active engagement and dialogue with the investment community and our shareholders, to discuss key issues including strategy, sustainability, capital allocation, remuneration and governance. We remained deeply committed to our local communities during 2022, despite another challenging year, our teams across the world continued to donate their time, effort and expertise to make a positive and lasting impact on their local communities. In 2022, 8,700 of our colleagues participated in 173 initiatives across 24 countries. We have committed to continuing this work as part of our Better Planet 2050 targets and have committed to donate €24 million between 2020 and 2025. The Smurfit Kappa Foundation, a registered charity in Ireland, redefined and expanded its purpose during 2022 to financially support sustainable projects that positively impact the lives of underprivileged people in the areas of health and nutrition, education and basic care, thus helping to reduce the inequalities that exist. In 2022, Lourdes Melgar, one of our Non-executive Directors, became an advisor to the Smurfit Kappa Foundation, bringing her experience from her other charitable and not-for-profit roles. Further details on stakeholder engagement in 2022 is outlined on pages 42 to 49. In the period ahead, my continued focus as Chair will be on the further development of engagement with our key stakeholders. #### Dividends Dividends remain a central component of  shareholders. Our progressive dividend policy recognises the importance of dividends to our shareholders. The Board is recommending a 12% increase in the final dividend to 107.6 cent per share, subject to the approval of shareholders at the AGM in April 2023. This in combination with the interim dividend of 31.6 cent per share paid in October 2022 will deliver a total dividend of 139.2 cent per share for 2022. This further increase in the dividend reflects our confidence in the strength, quality and performance of the Smurfit Kappa business. #### Outlook While there are and always will be challenges, the Group has never been in better shape strategically, financially and operationally. We have put ourselves in a position with the steps that we have taken and continue to take, to deliver high quality performance and to take advantage of the many opportunities we see around us. Irial Finan Chair Over the past five years, the Smurfit Kappa Foundation has  and the upgrade of its educational tools. Initially, we worked together on the remodelling of their library and in 2022, a robotics laboratory was installed for the vocational training of young people. Over 100 children will work with an expert facilitator who will provide technical professional training courses, creating an interest in technology and developing new skills which will help facilitate their continued education, and pave the way for their bright futures. Smurfit Kappa Dominican Republic will continue to co-partner with the Abriendo Caminos Foundation in the development of integral education programmes. ![]() 20 Smurfit Kappa Annual Report 2022 # SKG has never # been in better shape strategically, financially and # operationally Group Chief Executive Officer’s Statement Set against a year of extraordinary circumstances, 2022 was another highly successful year for the Smurfit Kappa Group. SKG’s integrated model together with our geographic spread continue to deliver for all stakeholders. #### Tony Smurfit #### Group Chief Executive Officer ![]() 21Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### 2022 Overview Revenue for the year increased by 27% to €12.8 billion. EBITDA for the full year was €2,355 million, a 38% increase over 2021, with an EBITDA margin of 18.4%, ROCE of 21.8% and a net debt to EBITDA of less than 1.3x. Our balance sheet metrics are the strongest  significant strategic and financial flexibility. For the full year, box volumes for the Group were down less than 2%. The rate and pace of inflation clearly had a negative effect on the demand environment in 2022. This coincided with the partial reversal of the unsustainably high demand levels seen through the pandemic period. This slowdown was particularly evidenced in the latter part of the year, especially in the month of December, where we saw stock reductions and downtime taken by customers. In our European business, box volumes were down 2% year-on-year. While two of our larger countries, Germany and the UK, performed below our expectations, others such as France and Spain, were less affected. Box volumes in the Americas for the full year were broadly flat year-on-year, excluding acquisitions, with growth in Mexico, Colombia, Brazil and Argentina offset by a weaker performance in our North American business. The year was characterised by unprecedented cost inflation, especially in energy, which moderated in the latter part of the year. As illustrated by our performance in 2022, the Group has successfully navigated this environment. In 2022, we invested close to €1 billion to support our customers and capitalise on the long-term demand growth drivers. We also continue to make progress towards our sustainability goals with investments to reduce our carbon footprint, reduce our impact on the environment and help our customers achieve their own carbon reduction and sustainability goals. The Group continued to expand its geographic footprint and product portfolio through acquisitions in 2022. In Europe, we purchased operations in Spain and the UK while in the Americas, we acquired operations in Argentina and Brazil. #### Europe The Europe segment is the larger of the  of its revenue and 78% of its EBITDA in 2022. Our Europe segment is highly integrated. It includes a system of mills and plants that primarily produce a full line of containerboard that is converted into corrugated containers. In addition, the Europe segment also produces other types of paper, such as solidboard,  and graphic paper; and other paper-based packaging, such as honeycomb, solidboard packaging and folding cartons; and bag-in-box packaging. The Group currently has facilities in 23 countries in Europe. These comprise 23 mills (of which 18 produce containerboard), 184 converting plants (the majority of which produce corrugated packaging products) and 28 other production facilities carrying out related activities. The mills are supported by 19 recovered fibre collection facilities, three other conversion facilities and two wood procurement operations.  system consists of three kraftliner mills; in Sweden, France and Austria, which between them sold approximately 1.6 million tonnes of brown and white kraftliner in 2022, while our 15 recycled containerboard mills sold over 3.9 million tonnes of paper in 2022. We also have two virgin fibre-based mills in Spain, which in 2022 sold approximately 146,000 tonnes of sack kraft paper and approximately 84,000 tonnes of MG paper. In 2022, our three recycled containerboard mills in Germany together sold approximately 326,000 tonnes of solidboard and boxboard and approximately 74,000 tonnes of graphicboard. The Parenco containerboard mill, in the Netherlands, sold 208,000 tonnes of graphic paper in the year. On the conversion side, the operations comprise 44 sheet plants and 109 corrugated plants which sold approximately 9.6 billion square metres (4.9 million tonnes) in 2022. In addition, we have 31 plants which produce high-end innovative packaging products such as litho-laminated corrugated products, display units and solidboard-based packaging, all of which extend the range of packaging solutions in our portfolio. Our converting operations are supported by a number of other small plants producing pre-print packaging, fulfilment activities and other packaging related products. Our European-managed bag-in-box operations comprise nine plants located in Europe, Argentina, Canada, Mexico and the United States. Our European business delivered a strong performance with a 42% increase in EBITDA to €1,846 million for the year. The EBITDA margin was 18.6%, up from 16.6% in 2021, reflecting the impact of higher paper and corrugated prices partly offset by higher energy, recovered fibre and other raw material costs. Corrugated box volumes were down 2% in 2022 against a strong prior year comparative, with a slowdown in our German and UK markets in particular being partly offset by a more robust performance in countries such as France and Spain. Our European business continued to build on its strong operating platform in 2022 with a number of projects across our paper and corrugated divisions. We have approved projects in our Facture, Nettingsdorf, Parenco, Piteå and Verzuolo mills which will reduce cost,  sustainability footprint. In our corrugated division, we are investing across the region in the latest high-tech and energy efficient machinery, including new corrugators, converting machines and facility expansion projects, which will allow us to increase production, reduce our environmental footprint and expand the range of high-value, innovative and sustainable packaging solutions that we offer our customers. The Group also announced an investment in its first Moroccan facility, along with the acquisition of a corrugated business in the UK and a bag-in-box plant in Spain. On 1 April 2022 the Group announced that it would exit the Russian market in an orderly manner and subsequently announced that it had entered an agreement to sell its Russian operations to local management. The completion of the transaction is conditional on regulatory approval being obtained from the Russian authorities which remains outstanding. #### The Americas Our Americas segment is also highly integrated. Like our Europe segment, it includes a system of mills and plants that primarily produce a full line of containerboard that is converted into corrugated containers. The Americas segment, which includes a number of Latin American countries, the United States and Canada, also comprises forestry; other types of paper, such as boxboard and sack paper; and paper-based packaging, such as folding cartons, honeycomb and paper sacks.  consist of 12 paper mills in five countries (Argentina, Brazil, Colombia, Mexico and the United States) producing containerboard, boxboard, sack paper and printing and writing paper with a combined sales volume of 1.6 million tonnes in 2022. The mills are Further information in relation to Alternative Performance Measures referenced in this Statement is included in the Supplementary Information section on pages 226 to 231. ![]() 22 Smurfit Kappa Annual Report 2022 supported by 25 recovered fibre facilities in seven countries and forestry operations in Colombia. We have 42 corrugated plants in ten countries, including the plants acquired in Argentina and Brazil during the year, with 2022 sales volume of approximately 2.7 billion square metres (1.6 million tonnes). We also have 14 other converting plants in six countries, producing mainly paper sacks or folding cartons, a preprint facility and three foam packaging plants in Mexico and a packaging solutions facility in North America.  be a region of geographic diversification, high growth and significant opportunity. EBITDA increased by 25% on 2021 to €553 million. The EBITDA margin was marginally lower at 19.0% in 2022, compared to 19.5% in 2021 with Colombia, Mexico and  earnings. Box volumes in the Americas, excluding acquisitions, were broadly flat year-on-year, again compared with a very strong prior year comparative. The Group continued to invest in its Americas business in 2022 with significant capacity and sustainability related investments in the corrugated, containerboard and speciality businesses in Central America, Argentina, Colombia, Mexico and the US, along with many smaller projects spread across the region. During the year, we also acquired corrugated packaging plants in Argentina and Brazil, expanding both our footprint and customer offering in these attractive growth markets. #### Capital Structure Net debt was €2,992 million at the end of December 2022, resulting in a net debt to EBITDA ratio of 1.3 times compared to 1.7 times at the end of December 2021. With net debt to EBITDA at 1.3 times, the lowest in  balance sheet continues to secure long-term strategic and financial flexibility. During the year, the Group published its first Green Bond Allocation and Impact Report, which provides details on the use of proceeds of its inaugural €1 billion dual-tranche Green Bond issued in September 2021. With interest rates of 0.5% and 1.0% respectively for 8 and 12 year maturities, these coupons were not  the lowest achieved for a corporate issuer in our rating category. #### Sustainability The Group began 2022 strongly with the announcement of SBTi validation of its emissions reduction targets being consistent with levels required to meet the goals of the Paris Agreement and we continued to make strong progress across our sustainability targets throughout the year. The progress made was built upon the achievements outlined in our 2021 annual Sustainable Development Report published in April 2022  objective to drive change and nurture a greener and bluer planet through the three key pillars of Planet, People and Impactful Business. In June 2022, the Group reached another important milestone with the completion of a large-scale sustainability project in our Zülpich mill in Germany, which significantly  2 emissions by 55,000  The Group also invested US$23.5 million to upgrade its Nuevo Laredo sheet plant in Mexico to become a fully integrated corrugated plant. The investment includes a state-of-the-art corrugator and extension of the building. The new machine will double production capacity while also reducing CO 2 emissions by up to 40% at the plant. In August 2022, following on from the €134 million installation of a heat recovery  in Austria, which reduced emissions by 40,000 tonnes, the mill launched a sustainable district heating project. The production process will generate up to 25 megawatts of heat that will save approximately 21,000 tonnes of CO 2 while also providing heat to local businesses and schools and benefit 20,000 homes across three communities. In October 2022, the Group announced an almost US$100 million investment in a sustainable biomass boiler at our paper mill in Cali, Colombia, which will reduce our global Scope 1 and Scope 2 CO 2 emissions by approximately 6%. This ambitious project is the latest example of the circularity that  operations as we find another use for our own organic waste and transition away from fossil fuels. Throughout 2022, we have continued to focus our efforts on delivering a positive impact for our customers and other stakeholders and on playing our part in having a positive impact on the planet. Our stated ambitions and specific and measurable goals continue to underpin our leadership in sustainability. Further details on the progress, developments and investments in sustainability in 2022 are outlined throughout this Annual Report and in the Sustainability section on pages 50 to 85. #### Commercial Offering and Innovation  unrivalled market offering is a defining characteristic of our business. With over 1,000 designers across the Group, supported by a network of laboratories, design facilities and unique applications, we continued to deliver the most innovative and sustainable #### Group Chief Executive Officer’s Statement continued Case Study #### Investing in Morocco Smurfit Kappa is investing €35 million for the construction of a new packaging plant in Morocco. Located in Rabat and covering an area of 25,000m 2 , it will enable us to supply innovative and sustainable packaging solutions quickly and efficiently to local customers. Construction of the state-of-the-art plant began in May 2022 when the first stone of the foundations was laid at an official ceremony. The plant will create packaging for sectors including industrial, agriculture, FMCG, automotive, pharma and ceramics and serve both local customers and multinationals based in Morocco. In a market where the demand for corrugated packaging currently exceeds supply, the new plant will play an important and strategic role. ![]() 23Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information packaging solutions for our customers, helping them to increase sales, reduce costs, eliminate plastics and other less sustainable substrates, protect their brand and mitigate risk in their supply chains. The Group demonstrated this leadership by winning eight WorldStar awards across a host of categories including e-commerce solutions, bag-in-box, transport packaging with plastic protection replacement and innovative food and beverage packaging with the winning products originating from the Czech Republic, Poland and Spain. During the year, the Group launched our new Design2Market Factory, which provides customers with a tangible packaging prototype that can be tested with consumers and subsequently refined and honed before moving to large-scale production. Continuing to innovate for our customers, the Group developed and launched AquaStop ™ , a sustainable water-resistant paper. Designed to withstand exposure to water without being damaged, it is suitable for the more complex and demanding supply chains and can be recycled in the same way as standard paper-based packaging. The Group also launched the child-proof TopLock Box for detergent pods and capsules, offering a 40% carbon footprint reduction compared to the traditional rigid plastic alternative. Additionally, the Group launched two unique e-commerce portfolios to capitalise on the growth of the online sale of flowers and wine. The eFlower portfolio is a fully customisable collection of nine packaging solutions ideal for shipping bouquets and potted plants, offering full protection for the delicate contents and a unique unboxing experience. The wine sector has also seen a significant increase in online sales since the beginning    certification, was introduced to reduce over-packing, improve the consumer experience and enhance sustainability. The Group won 21 awards for its creative and   awards. Since 2013, Smurfit Kappa has received over 130 FIA awards, consolidating its industry-leading position in the packaging sector. Furthermore, the Group was recognised as a top employer again in 2022 and achieved various honours for its environmental credentials alongside awards for packaging design, innovation and sustainability, with 74 awards in total in 2022. The Group continues to experience intense levels of pipeline development across our business as customers strive for more sustainable packaging solutions. #### Our People Our people are, and always will be, at the heart of our performance. In 2022, we have again delivered against all key performance measures. This is due to our dedicated and loyal employees who strive to deliver successfully for all our stakeholders. The commitment of our people to our core values of safety, loyalty, integrity and respect is what we believe truly differentiates our Company from all others in the sector. The average tenure amongst our senior management team is 22 years, which demonstrates their experience and commitment to the Group, but this is a two-way commitment. We continue to put in place the most advanced bespoke programmes for training and development to ensure that our people become part of the culture that differentiates us. As a company, we are passionate about maintaining our culture through openness and meritocracy. We are immensely proud of the work of the Group and its employees in supporting many different social programmes across the world. This includes our support for the Ukrainian people both within and outside of Ukraine. When the war in Ukraine began in early 2022, we immediately focused our attention on helping colleagues directly impacted by the conflict, as well as the wider population affected in Ukraine. We donated almost €2.4 million to fund various local initiatives including re-location and accommodation of our employees who are Ukrainian and their families. We also supported local charities involved in the humanitarian efforts and provided funds to the International Red Cross. Additionally, we continue to invest in the communities in which we operate through programmes in health, education and environmental protection while our employees devote time and energy to social projects. I would like to acknowledge the effort and commitment of all our employees in the 36 countries in which we operate for their significant contribution to the results achieved in 2022. We look forward to continuing our efforts to make SKG the safest and most customer-focused company in which to work in our industry and to delivering for all our stakeholders. I would also like to take this opportunity to acknowledge the support of the Board for the continuing development of the Group. Equally, I would like to recognise our shareholders support over the last number of years. Tony Smurfit Group Chief Executive Officer Saverio Mayer, CEO of Smurfit Kappa Europe, said: “We are very proud to announce the construction of this advanced new facility, the first of its kind owned by the company in Morocco. It will be located in an area with significant growth potential and create 300 direct and indirect jobs in the region.” Ignacio Sevillano, CEO of Smurfit Kappa Spain, Portugal and Morocco, added: “We are delighted that the first stone has been laid – an important milestone for the project. This investment is a reflection    “The new plant will also incorporate an Experience Centre, our 30 th worldwide, which will foster enhanced collaboration with our customers and provide creative ideas and insights.” The new facility is expected to be operational in early 2023. ![]() 24 Smurfit Kappa Annual Report 2022 #### End-to-End Sustainability From procurement and working with our suppliers, to production and product delivery to our customers, our economic goals are aligned with our social, community and environmental responsibilities. Working within a circular economy, our embedded Chain of Custody ensures that close to 100% of our raw material comes from sustainable and/or certified sources regardless of whether it is virgin or recycled. As a leader in sustainable packaging, we have a responsibility to respond to the challenge the world faces with litter and inefficient use of materials. We are addressing this with our Better Planet Packaging initiative. Read more in our Sustainability section on pages 50 to 85 #### Recovered #### paper #### facilities #### Distribution #### andconsumption #### Recovered #### paper/virgin #### paper fibres #### Fibres #### sustainably #### sourced from #### old corrugated #### containers andforests #### Our Integrated Model We have an integrated system of containerboard mills and corrugated box plants. Our recycling, wood procurement and forestry operations provide raw material to our containerboard mills, who produce a full line of containerboard which is converted into corrugated containers. Our vertical integration is key to guaranteeing security of supply for our customers and enabling us to drive efficiencies across the whole supply chain with technological advances, paper machine optimisation and logistics management, which in turn means we can offer optimal paper design, quality and logistics. We have lower exposure to volatility in containerboard prices and our integrated structure ensures that we provide a stable outlet for our product through the uncertainty of market falls and rises. #### We are a packaging leader #### in a growth industry #### We design, manufacture and supply sustainable and innovative #### packaging solutions to promote and protect our customers’ products. You can read more about this in the Stakeholder Engagement section on page 42 #### Customers Employees Investors Suppliers Communities You can read more about our Strategic Framework on pages 2 to 3 #### Safety Integrity Loyalty Respect #### Our Business Model #### Value Delivered for our Stakeholders #### Our Values #### Underpinning our business model are our #### four values which guide the decisions we make. ![]() 25Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Innovation We are a highly innovative, design-led company. Our approach to  challenges, whether through product promotion, process improvement, carbon reduction or optimising supply chain efficiency.  us to create the optimal fit-for-purpose packaging solutions for our customers. Our unique approach to innovation for business success is based on combining science, experience, geographic diversity, big data and creativity on a scale and with a depth not seen elsewhere in the industry. Read more about our Innovative Solutions on pages 10 to 13 Production of #### containerboard #### Conversion #### into corrugated #### board sheets Conversion into #### packaging #### solutions #### Customers You can read more about this in the Stakeholder Engagement section on page 42 #### Customers Employees Investors Suppliers Communities You can read more about our Strategic Framework on pages 2 to 3 #### Safety Integrity Loyalty Respect ![]() 26 Smurfit Kappa Annual Report 2022 Strategic Priorities #### Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation Description #### Expand our market positions #### in Europe and the Americas #### through selective focused #### growth. #### Become the supplier/ #### partner of choice. #### Enhance our operational excellence through the continuous upgrade of #### our customer offering. Recruit, retain, develop and #### motivate the best people. #### Maintain a disciplined approach to capital allocation and #### maintain the focus on #### cash generation. Objectives • Organic growth from increased market share through developing innovative solutions in areas such as Better Planet Packaging and e-commerce; and • Pursuit of accretive acquisitions in higher growth markets such as Eastern Europe and Latin America. Read more in the Group Chief Executive Officer’s Statement on pages 20 to 23 • Deepening our understanding of our  initiatives to improve their offering; • Constantly innovating our products, service, quality and delivery in order to develop and/or maintain preferred supplier status; and • Pursuing superior performance measured against clearly defined metrics in all aspects of our business and at all levels in our organisation. Read more in Our Innovative Solutions on pages 10 to 13 • Improving the output from our high quality asset base through judicious capital investment, continuous improvement programmes, transfer of best practice, industrial engineering and other progressive initiatives; • Increasing the proportion of differentiated ideas, sustainability initiatives, products and services on offer to our customers  and technology centres, our sustainability credentials and our innovation tools; and • Ensuring that the driving force behind all our operations is one of customer satisfaction and excellence in the marketplace. Read more in the Group Chief Executive Officer’s Statement on pages 20 to 23 • High quality graduate and other recruitment initiatives, progressive goal setting, and performance appraisal programmes; • Focused job training and coaching; • Cross-divisional in-house development programmes; and • Selective executive development programmes. Read more in the People section on pages 86 to 97 • Maintaining investment grade credit ratings; • Capital spending to facilitate organic growth, optimise our asset base and enhance operating efficiency; • Acquiring strategically attractive and accretive assets; and • Progressive dividend supported by strong free cash flow. Read more in the Finance Review on pages 37 to 41 #### Our Strategy #### We deliver a strong #### return on capital Our vision is to be a globally admired business, dynamically and #### sustainably delivering secure and superior returns for all stakeholders. Case Study page 98 #### Expanding Operations in Brazil #### Our Strategy in Action Case Study page 15 #### Strategic Investment in the UK ![]() 27Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information The Group’s objective is to develop long-term customer relationships by providing customers with innovative, sustainable packaging solutions that enhance the customers’ prospects of success in their end markets. Strategic Priorities #### Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation Description #### Expand our market positions #### in Europe and the Americas #### through selective focused #### growth. #### Become the supplier/ #### partner of choice. #### Enhance our operational excellence through the continuous upgrade of #### our customer offering. Recruit, retain, develop and #### motivate the best people. #### Maintain a disciplined approach to capital allocation and #### maintain the focus on #### cash generation. Objectives • Organic growth from increased market share through developing innovative solutions in areas such as Better Planet Packaging and e-commerce; and • Pursuit of accretive acquisitions in higher growth markets such as Eastern Europe and Latin America. Read more in the Group Chief Executive Officer’s Statement on pages 20 to 23 • Deepening our understanding of our  initiatives to improve their offering; • Constantly innovating our products, service, quality and delivery in order to develop and/or maintain preferred supplier status; and • Pursuing superior performance measured against clearly defined metrics in all aspects of our business and at all levels in our organisation. Read more in Our Innovative Solutions on pages 10 to 13 • Improving the output from our high quality asset base through judicious capital investment, continuous improvement programmes, transfer of best practice, industrial engineering and other progressive initiatives; • Increasing the proportion of differentiated ideas, sustainability initiatives, products and services on offer to our customers  and technology centres, our sustainability credentials and our innovation tools; and • Ensuring that the driving force behind all our operations is one of customer satisfaction and excellence in the marketplace. Read more in the Group Chief Executive Officer’s Statement on pages 20 to 23 • High quality graduate and other recruitment initiatives, progressive goal setting, and performance appraisal programmes; • Focused job training and coaching; • Cross-divisional in-house development programmes; and • Selective executive development programmes. Read more in the People section on pages 86 to 97 • Maintaining investment grade credit ratings; • Capital spending to facilitate organic growth, optimise our asset base and enhance operating efficiency; • Acquiring strategically attractive and accretive assets; and • Progressive dividend supported by strong free cash flow. Read more in the Finance Review on pages 37 to 41 #### Outlook Driven by strong secular trends such as e-commerce and sustainability, the outlook for our industry remains positive. SKG has positioned itself as the leading company within the industry, with great people, providing our customers with unique packaging solutions centred around innovation, efficiency and sustainability. The inherent strength of our business provides us with an unrivalled platform to accelerate our vision and the  Going forward, we will continue to implement our strategy, creating a sustainable business that builds on our strengths and will generate value for all stakeholders over the long-term. We will continue to lead in innovative, sustainable packaging solutions for our  initiative which provides our customers with sustainable solutions today, ready for the challenges of tomorrow. We continue to build a platform for durable growth to meet customer demand. We remain relentlessly focused on attracting, developing, motivating and retaining employees to ensure delivery of all our strategic ambitions and to help our people reach their full potential within the organisation. Our strategy remains flexible and agile and we maintain a disciplined, returns focused approach to capital allocation. Case Study page 224 #### A Circular Approach Case Study page 148 #### Reduce Emissions in Colombia ![]() 28 Smurfit Kappa Annual Report 2022 #### EBITDA \* #### (million) €2,355 2021: €1,702 €1,702 €2,355 2021 2022 #### Description EBITDA is the key performance measure  appropriate and useful measure used to compare recurring financial performance between periods. #### Performance EBITDA for 2022 was €2,355 million, €653 million up on 2021. The result reflects the strength of the integrated model, the quality of our business, our operational efficiency and increasing geographic and product diversity. #### Net Debt to EBITDA \* #### (times) 1.3x 2021: 1.7x 1.7x 1.3x 2021 2022 #### Description Leverage (ratio of net debt to EBITDA) is an important measure of our overall financial position. #### Performance With net debt of €2,992 million and EBITDA of €2,355 million, our leverage ratio was 1.3 times at December 2022 compared to 1.7 times at December 2021. The Group is operating below its target leverage range of 1.5x to 2.0x. #### Strategic Priorities #### Strategic Priorities #### EBITDA Margin \* (%) 18.4 2021: 16.8 16.8 18.4 2021 2022 #### Description EBITDA margin is a measure of profitability by taking our EBITDA divided by revenue. #### Performance EBITDA margin was 18.4% in 2022 compared to 16.8% in 2021. In Europe, our overall margin increased from 16.6% in 2021 to 18.6% in 2022. In the Americas, our margin decreased from 19.5% in 2021 to 19.0% in 2022. #### Return on Capital Employed \* #### (‘ROCE’) (%) 21.8 2021: 16.0 16.0 21.8 2021 2022 #### Description ROCE is an effective measure of ensuring that we are generating profit from the capital employed. #### Performance ROCE at December 2022 was 21.8%. With a higher level of operating profit partially offset by a higher level of average capital employed, our ROCE increased from 16.0% at December 2021. #### Link to Remuneration See Remuneration Report for PSP metrics, pages 117 to 136. #### Strategic Priorities #### Strategic Priorities #### Net Debt \* #### (million) €2,992 2021: €2,885 €2,885 €2,992 2021 2022 #### Description Net debt comprises borrowings net of cash and cash equivalents and restricted cash. We believe that this measure highlights the overall movement resulting from our operating and financial performance. #### Performance Net debt amounted to €2,992 million at December 2022 compared to €2,885 million at December 2021. The year-on-year increase of €107 million reflected free cash flow of €545 million for the year, more than offset by outflows in respect of dividend payments, the purchase of businesses, the impairment of cash balances in our Russian operations, the share buyback and negative currency translation adjustments. #### Free Cash Flow \* #### (‘FCF’) #### (million) €545 2021: €455 €455 €545 2021 2022 #### Description FCF is the result of the cash inflows and outflows from our operating activities, and is before those arising from acquisition and disposal activities. We use FCF to assess and understand the total operating performance of the business and to identify underlying trends. #### Performance FCF of €545 million in 2022 was €90 million higher than the €455 million reported in 2021. EBITDA growth of €653 million, combined with a lower outflow for changes in employee benefits and other provisions, was partly offset by a higher working capital outflow, higher capital outflows, a higher cash interest expense and higher tax payments. #### Link to Remuneration See Remuneration Report for Annual Bonus metrics, pages 117 to 136. #### Strategic Priorities Strategic Priorities #### Key Performance Indicators #### Measuring #### our progress #### The Group has a range of Key Performance Indicators (‘KPIs’) #### which we use to monitor our performance and measure progress. #### Financial KPIs \* Information in relation to the definition and calculation of these Alternative Performance Measures is included in the Supplementary Information section on pages 226 to 231. ![]() 29Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### EBITDA \* #### (million) €2,355 2021: €1,702 €1,702 €2,355 2021 2022 #### Description EBITDA is the key performance measure  appropriate and useful measure used to compare recurring financial performance between periods. #### Performance EBITDA for 2022 was €2,355 million, €653 million up on 2021. The result reflects the strength of the integrated model, the quality of our business, our operational efficiency and increasing geographic and product diversity. #### Net Debt to EBITDA \* #### (times) 1.3x 2021: 1.7x 1.7x 1.3x 2021 2022 #### Description Leverage (ratio of net debt to EBITDA) is an important measure of our overall financial position. #### Performance With net debt of €2,992 million and EBITDA of €2,355 million, our leverage ratio was 1.3 times at December 2022 compared to 1.7 times at December 2021. The Group is operating below its target leverage range of 1.5x to 2.0x. #### Strategic Priorities #### Strategic Priorities #### EBITDA Margin \* (%) 18.4 2021: 16.8 16.8 18.4 2021 2022 #### Description EBITDA margin is a measure of profitability by taking our EBITDA divided by revenue. #### Performance EBITDA margin was 18.4% in 2022 compared to 16.8% in 2021. In Europe, our overall margin increased from 16.6% in 2021 to 18.6% in 2022. In the Americas, our margin decreased from 19.5% in 2021 to 19.0% in 2022. #### Return on Capital Employed \* #### (‘ROCE’) (%) 21.8 2021: 16.0 16.0 21.8 2021 2022 #### Description ROCE is an effective measure of ensuring that we are generating profit from the capital employed. #### Performance ROCE at December 2022 was 21.8%. With a higher level of operating profit partially offset by a higher level of average capital employed, our ROCE increased from 16.0% at December 2021. #### Link to Remuneration See Remuneration Report for PSP metrics, pages 117 to 136. #### Strategic Priorities #### Strategic Priorities #### Net Debt \* #### (million) €2,992 2021: €2,885 €2,885 €2,992 2021 2022 #### Description Net debt comprises borrowings net of cash and cash equivalents and restricted cash. We believe that this measure highlights the overall movement resulting from our operating and financial performance. #### Performance Net debt amounted to €2,992 million at December 2022 compared to €2,885 million at December 2021. The year-on-year increase of €107 million reflected free cash flow of €545 million for the year, more than offset by outflows in respect of dividend payments, the purchase of businesses, the impairment of cash balances in our Russian operations, the share buyback and negative currency translation adjustments. #### Free Cash Flow \* #### (‘FCF’) #### (million) €545 2021: €455 €455 €545 2021 2022 #### Description FCF is the result of the cash inflows and outflows from our operating activities, and is before those arising from acquisition and disposal activities. We use FCF to assess and understand the total operating performance of the business and to identify underlying trends. #### Performance FCF of €545 million in 2022 was €90 million higher than the €455 million reported in 2021. EBITDA growth of €653 million, combined with a lower outflow for changes in employee benefits and other provisions, was partly offset by a higher working capital outflow, higher capital outflows, a higher cash interest expense and higher tax payments. #### Link to Remuneration See Remuneration Report for Annual Bonus metrics, pages 117 to 136. #### Strategic Priorities Strategic Priorities #### Key for Strategic Priorities Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation ![]() 30 Smurfit Kappa Annual Report 2022 #### Key Performance Indicators continued #### Financial KPIs continued #### Non-financial KPIs #### Earnings per Share #### (‘EPS’) (cent) #### Pre-exceptional Basic EPS \* 444.1 2021: 274.5 274.5 444.1 2021 2022 #### Basic EPS 365.3 2021: 263.9 263.9 365.3 2021 2022 #### Description EPS serves as an effective indicator of a  with other metrics such as ROCE, is a  The calculation of EPS is shown in Note 9 to the Consolidated Financial Statements. #### Performance Our pre-exceptional basic EPS in 2022 increased by 62% from 274.5 cent in 2021 to 444.1 cent, reflecting a higher pre-exceptional profit attributable to owners of the parent of €1,147 million in 2022 compared to €706 million in 2021. Basic EPS increased to 365.3 cent in 2022 compared to 263.9 cent in 2021. This was mainly due to a higher operating profit partly offset by a higher exceptional charge in 2022 resulting in a profit for the financial year attributable to owners of the parent of €944 million, compared to €679 million in 2021. #### Link to Remuneration See Remuneration Report for PSP metrics, pages 117 to 136. #### Strategic Priorities #### Health and Safety (TRIR) 0.51 2021: 0.59 0.0 0.1 0.2 0.3 0.4 0.5 0.6 2021 0.59 2022 0.51 #### Description A safe and healthy workplace is a fundamental right for every person at Smurfit Kappa, and is a business imperative for the Group. We are committed to maintaining a productive and safe workplace in every part of our Company by minimising the risk of accidents, injury and exposure to health hazards for every employee and all sub-contractors. #### Performance We have committed to a 5% annual reduction  Our result for the year 2022 was 0.51, a reduction of 13.6% on 2021 (0.59). #### Link to Remuneration See Remuneration Report for Annual Bonus metrics, pages 117 to 136. #### Strategic Priorities \* Information in relation to the definition and calculation of these Alternative Performance Measures is included in the Supplementary Information section on pages 226 to 231. ![]() 31Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Key for Strategic Priorities Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation #### Non-financial KPIs continued CO 2 #### Emissions Reduction (%) 43.9 2021: 41.3 0 10 20 30 40 50 2021 41.3 2022 43.9 #### Description Although our industry is energy intensive, it is also one of the most energy efficient and is among the most significant users of renewable energy. Climate change impacts everyone, and in our case it stimulates product design improvements to lower customer carbon footprints, encourages production efficiency and informs how we invest for the long-term. We are reducing the carbon intensity of our energy mix by reducing the use of fossil fuels and promoting renewable sources where economically viable. We are also saving energy by closing loops in our production process. We make a significant impact in the value chain through smart packaging solutions that can significantly lower customer emissions. We help them optimise their packaging to avoid product waste, minimise over-specified packaging and increase recycling. #### Performance We have committed to a 55% reduction in Scope 1 and 2 fossil fuel based CO 2 emissions in our mill system compared to 2005 levels by 2030 and we are targeting to reach at least net zero CO 2 emissions by 2050. In 2022, we reached a reduction of 43.9% compared to 41.3% in 2021. #### Link to Remuneration See Remuneration Report for PSP metrics, pages 117 to 136. The first award including this metric was the 2021 PSP award which has a performance period ending 31 December 2023. #### Strategic Priorities #### Chain of Custody (%) 94.3 2021: 93.45 0 20 40 60 80 100 2021 93.45 2022 94.3 #### Description Although recovered fibres are our primary raw material, we are also a significant user of wood fibre and we take responsibility to ensure its origin is sustainable. The recyclability of paper fibres is another important factor in the sustainability of our products, and we apply a balanced approach to the use of both virgin and recycled fibres. We manage our forest holdings based on three sustainable development principles: to promote economic growth, responsibly use natural resources and foster social equity wherever our plantations and forests are located. We have certified all our plantations and forest holdings to FSC and/or PEFC where practical. Independent third party certification is the most reliable means to promote sustainable forest management and combat deforestation. To extend our approach to our customers, we have committed to selling our packaging solutions as Chain of Custody certified.   to the end consumer. #### Performance We have committed to selling over 95% of our products as Chain of Custody certified to our customers. We reached an initial target level of 90% in 2016 and increased our ambition to 95% in 2020. Our result for the full year 2022 was 94.3%. #### Strategic Priorities 32 Smurfit Kappa Annual Report 2022 #### Risk Report Risk identification, #### assessment and management The Board determines the nature and extent of the principal risks it is willing to accept to achieve its strategic objectives. Risks are identified and evaluated and appropriate risk management strategies are implemented at each level in the organisation. Risk Management and #### Internal Control The Board has overall responsibility for  and internal control and for monitoring and reviewing its effectiveness, in order to   manage rather than eliminate the risk of failure to achieve business objectives and can therefore only provide reasonable and not absolute assurance against material misstatement or loss. The Board carries out  risk management and internal control systems at least annually. Group executive management is responsible for implementing strategy and for the  operations within parameters set down by the Board. Day-to-day management of the  management within clearly defined authority limits and subject to timely reporting of financial performance. Management at all levels is responsible for internal control over the respective operations that have been delegated to them. As such, the system of  operations ensures that the organisation is capable of responding quickly to evolving operational and business risks and that significant internal control issues, should they arise, are reported promptly to appropriate levels of management. The Board is responsible for determining the nature and extent of the principal risks it is willing to accept to achieve its strategic objectives. Risk assessment and evaluation is an integral part of the management process throughout the Group. Risks are identified and evaluated, and appropriate risk management strategies are implemented at each level. The key business risks are identified by the Executive Risk Committee. The Audit Committee and the Board in conjunction with senior management, review the key business risks faced by the Group and determine the appropriate course of action to manage these risks. The Audit Committee is responsible for reviewing the effectiveness of  risk management on behalf of the Board and reports to the Board on all significant matters. During 2022, the ongoing evolution of the Group Risk Framework continued. Formal risk appetite statements and the associated KPIs for each of the principal risks of the Group were approved by the Board in early 2022. The risk appetite reporting was integrated into the periodic risk reporting to the Audit Committee and the Board during the year. In addition, the process undertaken to consider the interconnectivity of risk was presented to the Board and is an area that will be further considered during 2023. #### Risk Register Process  upon a Group standardised approach to risk identification, assessment and review with a clear focus on mitigating factors and assignment of responsibility to risk owners. The risk registers incorporate risk profiling against Group defined risk categories which include; strategic, operational, environmental, legal, economic/political/ market, technological and financial risks. Each individual risk identified is assessed based upon potential impact and likelihood of occurrence criteria. New or emerging risks are added to the risk registers as they are identified and assessed accordingly. Divisional management is responsible for reviewing the Country/Cluster risk registers and updating the Divisional risk registers accordingly, which are reviewed and approved by the Divisional risk committees. The Group Risk Register is updated to reflect any significant changes in the Divisional registers or Group level risks following  experts. The Executive Risk Committee reviews and assesses the Group Risk Register and identifies the principal risks. The Group Risk Register is then reviewed by the Audit Committee and the Board. Formal risk reporting timetables and structures are in place across the Group and are adhered to by Country/Cluster, Divisional and Group senior management. #### Viability Statement The Directors have assessed the prospects of the Group over a three-year period. The Directors consider this period to be  plan is devised and assessed over a three-year period in line with the cyclical nature of the business in which the Group operates. A three-year consolidated financial model was built using a bottom-up approach reflecting  annual budgeting, medium-term planning,  profitability, taking into account a number of factors including the budget, external economic factors and assumptions as appropriate (including the OECD expectations on GDP growth and the Fastmarkets RISI paper packaging forecast). The model incorporates and considers the important indicators of performance of the operations of the Group; EBITDA, EBITDA margin, free cash flow, net debt, net debt to EBITDA, return on capital employed and earnings per share. The Directors have undertaken a robust assessment of the principal risks facing the Group, as detailed in this section, which  future performance, solvency or liquidity. Using the principal risks identified, stress test scenario analysis has been applied to the   underlying performance. In the scenarios reviewed including reverse stress testing, the Group continues to have significant headroom in relation to its financial covenants. Based on the results of this analysis, the Directors confirm they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the three-year period of their assessment. ![]() 33Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Going Concern After making enquiries, the Directors have a reasonable expectation that the Company and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Consolidated Financial Statements. See Note 2 Summary of Significant Accounting Policies on page 165 for further detail on Going Concern. #### Emerging Risks Emerging risks are considered as part of the Group risk process. All identified emerging risks are monitored and reported to the Audit Committee and the Board. Following consideration of emerging risks as part of the risk process for 2022, there were no significant emerging risks identified that require disclosure. #### Risk Management Framework  is embedded within our organisational structure. Risk management is owned by management at each reporting level and is evaluated and reviewed on a continuous basis. Our risk management framework comprises: operational management, who have responsibility for identifying, managing and mitigating risk within their local operations on a day-to-day basis; Country/Cluster and Divisional management who are responsible for oversight and monitoring; and the Executive Risk Committee who are responsible for oversight together with the identification, management and mitigation of Group level risks. Group Internal Audit acts as an independent assurance provider over certain principal risks. Audit Committee SKG plc Board of Directors Group Excomm Executive Risk Committee Group Risk Register Group Internal Audit Group Internal Audit Report Group Senior Management Operational and Divisional Management Subject Matter Experts External Advisors ![]() 34 Smurfit Kappa Annual Report 2022 #### Risk Report continued Risk Description Mitigation #### Economic If the current economic climate were to deteriorate, for example as a result of geopolitical events or uncertainty, trade tensions and/or a pandemic, it could result in an economic slowdown which, if sustained over any significant length of time, could adversely affect the  • As a highly integrated player, we are better able to cope with the effects of an economic downturn than a pure paper or corrugated producer. • The Group supplies approximately 70% of its packaging to FMCG customers whose consumption volumes remain relatively stable through market downturns. •  36 countries across multiple industries. • The Group could significantly curtail capital expenditure and take additional cost cutting measures within a relatively short period as we have done in the past. • Stress testing for the Viability Statement indicates we will continue to have significant headroom on our covenants even in a sustained downturn. • The Group is considered an essential business as our packaging serves many vital supply chains including medical equipment, pharmaceutical, food and sanitation products. #### Strategic Priorities Trend #### Pricing The cyclical nature of the packaging industry could result in overcapacity and consequently threaten the  • As a highly integrated player, we are better able to cope with the effects of cyclicality and capacity additions than a pure paper or corrugated producer. • Our differentiation programmes ensure we are at the forefront of the industry in developing cost-efficient solutions for our customers through performance packaging, quality management, supply chain optimisation and strong sustainability credentials. This service offering distinguishes the Group from pure commodity suppliers, providing a support for more stable pricing. • Our continuous investment programmes in our operations ensure we remain competitive and have low cost mill system. In an environment of overcapacity, our well invested, low cost mill system will enable the Group to continue economic production through a period of lower prices while higher cost mills will be forced to shut. #### Strategic Priorities Trend #### Business Interruption  its key mills) were interrupted for any significant length  position and results of operations. • The Group ensures that all facilities have adequate insurance to mitigate the impact of significant interruption. • Operational contingency plans are in place for all mills and plants in the event of a shutdown, including damages caused by climate change related to extreme weather patterns, which have been demonstrated to work during shorter interruptions in the past. • In Europe, the Group has a network of operations which can facilitate the transfer of significant volume to other mills in the event of a shutdown. Furthermore, our European Paper Sourcing operation centrally coordinates all external paper purchases for the European operations. This was strengthened by the acquisition of the Verzuolo mill in Italy in the second half of 2021. • There is continuous investment in a rigorous programme of preventative maintenance for all key mills and other plants. #### Strategic Priorities Trend #### Key to Strategic Priorities Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation #### Key to Risk Trend Increased Reduced No change ![]() 35Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Risk Description Mitigation #### Raw Materials and Other Input Costs Price fluctuations in energy and raw materials costs  • The Group maintains a dedicated purchasing function which has responsibility for all input costs and ongoing cost reduction programmes. • The Group maintains a strong supply arrangement for approximately 76% of its recovered fibre requirements which provides it with security of supply for its primary raw material while maintaining an optimum level of flexibility with respect to pricing. • In line with the usual time lag, the Group would expect implemented container board price increases to support corrugated price recovery of increased input costs. • A proactive energy risk policy of forward pricing is in place which is designed to minimise, where possible, material short-term volatility in energy price risks within approved parameters. • The Group continually invests in a range of cost reduction projects, primarily in the areas of energy and raw material efficiency that can deliver demonstrable economic returns. #### Strategic Priorities Trend #### Currency The Group is exposed to currency exchange rate fluctuations. • The Group ensures that short-term trading exposures are hedged and, where practical, local operations are financed as much as possible in local currency. • The Group continually monitors and manages its foreign currency exposures for all countries and constantly seeks opportunities to reduce these exposures. The Group Treasury Policy sets out rules and guidance for managing this area. #### Strategic Priorities Trend #### Talent Management and the Workplace The Group may not be able to attract, develop and retain suitably qualified employees as required for its business. • Continuous development by our HR department of a People Strategy to attract, engage, train, motivate and retain our people, to meet emerging talent expectations and to ensure talent competitiveness. • Periodic MyVoice surveys and workforce engagement initiatives are undertaken to measure employee engagement and set future priorities as well as programmes to increase engagement and recognition. • Processes are in place to identify and develop our high potential people, together with a continuous focus on leadership training and succession planning, including the launch of MyHub Human Resource Information System during 2022. • Development of our existing competitive remuneration and recognition packages and review processes. • Reinforcement of our talent recruitment strategy (universities, graduate programmes, etc.), to attract highly talented people with the potential to become the future leaders of the Group. #### Strategic Priorities #### Trend #### Health, Safety and Wellbeing Failure to maintain good health and safety and employee wellbeing practices may have an adverse effect on the  • Health, safety and employee wellbeing are core considerations in all management reviews. The protection of the health, safety and wellbeing of the workforce is a continual focus in an industry with a broad profile of hazards. • Increased focus is given to the strict adoption of good management, employee practices and a mind-set that complements existing risk mitigation measures. Divisional Health and Safety managers are in place with responsibility for enforcing good health and safety standards across their respective regions. • The Group has an established formal practice of investigating accidents and preparing safety bulletins which are shared across divisions. • A Group wide auditing process based on current high risk activities. • Annual safety improvement planning is undertaken. • A Group wide health and safety management system is in place to efficiently and effectively track, report and analyse data. #### Strategic Priorities Trend ![]() 36 Smurfit Kappa Annual Report 2022 Risk Description Mitigation #### Legislation and Regulation – Environmental The Group is subject to a growing number of environmental and climate change laws and regulations, and the cost of compliance or the failure to comply with current and future laws and regulations may negatively  •  manager who is responsible for environmental issues including monitoring air, noise and water emissions and ensuring that the site is running within its permits. •  authorities and environmental upgrades are made in consultation with them. • All our paper and board mills are operated under an EMS (Environmental Management System) (ISO 14001). • We continuously invest in our operations, to ensure compliance with environmental legislation. • The Group has an IT reporting system in over 300 sites ensuring environmental data is reported on a regular basis. • The Group has centralised co-ordination of all environmental activity providing a key interface to the EU, supported by a committee of senior executives who meet regularly to review such issues, and report directly to the Group CEO. • For newly acquired entities robust environmental due diligence is performed. #### Strategic Priorities Trend #### Legislation and Regulation – Anti-trust The Group is subject to anti-trust and similar legislation in the jurisdictions in which it operates. • A comprehensive Group Competition Law Compliance Policy is in place and communicated to all employees. All managers and market-facing employees are required to formally confirm adherence to the policy for the preceding calendar year by signing a Competition Law Compliance Certificate on an annual basis. • Group General Counsel advises and supports employees and management in this area. • 28 competition law ambassadors have been appointed at cluster level to assist with competition law compliance initiatives including regular communication and promotion to staff and local management. • Continuous process to ensure understanding of issues and implications of regulatory practice and legislative amendments. • Contracts with competitors are recorded in an online register. • Reduced trade association participation. #### Strategic Priorities #### Trend #### Cyber and Information Security The Group, similar to other large global companies, is susceptible to cyber-attacks with the threat to the confidentiality, integrity and availability of data in its systems. • Formally documented policies in relation to information security including cyber security are in place. • The Group maintains a framework to ensure awareness at each level of the organisation with regard to the implementation of cyber security. This framework is regularly tested. • Specific controls are in place to prevent and detect security issues relating to business critical systems. • External Penetration testing is completed on an annual basis by specialist third parties with any issues remediated in accordance with formal procedures. • Defined business continuity and IT disaster recovery plans are in place and are frequently tested. • The Group is committed to ongoing capital expenditure as appropriate to continually enhance the IT infrastructure. • The Group continues to increase employee communications relating to cyber security including the introduction of specific cyber and information security campaigns to ensure vigilance is maintained. • Cyber security training is mandatory for all employees. #### Strategic Priorities #### Trend #### Climate Change The global impact of climate change in the long-term  of operations. • Continuous reduction of Scope 1 and 2 emissions through specific investments in energy generation, energy reduction and non-fossil fuel based energy sources (including renewables). • Climate scenario analysis conducted during 2021 indicates that the proportion of asset value at risk is low. The scenario analysis is in the process of being completed and assessed again. •  customers that can demonstrably reduce their carbon footprint. •  and in line with the Paris Agreement. #### Strategic Priorities Trend #### Risk Report continued ![]() #### Finance Review 37Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Finance Review ### The strength ### of our balance sheet ### provides SKG with ### significant strategic ### and financial flexibility In 2022, we invested close to €1 billion to support our customers and capitalise on long-term demand growth drivers. We also continue to make progress towards our sustainability goals and help our customers achieve their own carbon reduction and sustainability goals. #### Ken Bowles #### Group Chief Financial Officer 38 Smurfit Kappa Annual Report 2022 #### Finance Review continued #### Results Revenue for 2022 was €12,815 million, 27% up on 2021 on a reported basis and 23% on an underlying basis. Revenue in Europe was up 26%, driven primarily by input cost recovery through progressive box price increases. On an underlying basis, revenue in Europe was up 24%. In the Americas, revenue was up 29% on 2021, or 16% on an underlying basis. European revenue rose by €2,053 million to €9,900 million in 2022, with an underlying increase of €1,911 million and net positive currency movements and hyperinflationary adjustments of €25 million, along with a net contribution of €117 million from acquisitions and disposals. The increase in underlying revenue of 24% reflected continued input cost recovery in corrugated pricing. Revenue in the Americas increased by €655 million in 2022 to €2,915 million, with underlying growth of €362 million, equating to 16%, and a net impact of €93 million from acquisitions and disposals, along with net positive currency and hyperinflationary movements of €200 million. The underlying increase was mainly driven by higher box prices. EBITDA for 2022 was €2,355 million, an increase of 38% on 2021. The result reflects not only the essential nature of our products but the demand from our customers for the most sustainable, reliable and innovative packaging solutions. The result also demonstrates the  pressure, the benefits from our investment programmes and the dedication of our 48,000 employees. On an underlying basis, Group EBITDA was up 34% on 2021, with Europe up 41% and the Americas up 13%. At €1,846 million, EBITDA in Europe was €544 million higher than in 2021 on a reported basis with an underlying increase of €529 million and a net contribution of €17 million from acquisitions and disposals, partly offset by negative currency movements of €2 million. The increase was driven by higher paper and corrugated prices partly offset by higher energy, recovered fibre, labour, distribution and other raw material costs. Corrugated box volumes were down 2% in 2022 against a strong prior year comparative, with a slowdown in our German and UK markets in particular, being partly offset by a more robust performance in countries such as France and Spain. Our European business continued to build on its strong operating platform in 2022 with a number of projects across our paper and corrugated divisions. In our paper division, we have approved projects in our Facture, Nettingsdorf, Parenco, Piteå and Verzuolo mills which will reduce cost, increase  sustainability footprint. In our corrugated division, we are investing across the region in the latest high-tech and energy efficient machinery, including new corrugators, converting machines and facility expansion projects, which will allow us to increase production, reduce our environmental footprint and expand the range of high-value, innovative and sustainable packaging solutions that we offer our customers. The Group also announced an investment in its first Moroccan facility along with the acquisition of a corrugated business in the UK and a bag-in-box plant in Spain. Pricing for European containerboard continued an upward trend in the first half of the year supported by rising recovered fibre and energy prices and modest corrugated demand growth. In the second half of the year there was a slowdown in demand for containerboard with little support from export channels, combined with a subsequent sharp decline in recovered fibre prices and a reversal in energy prices in the latter part of the fourth quarter. The price of testliner, having increased by €100 per tonne in the first half of the year, reduced by €160 per tonne from the high of June 2022 to January 2023. The price of kraftliner, having risen by €60 per tonne in the first half of the year, fell by €120 per tonne from the high of September 2022 to January 2023. Given the lower levels of demand and the rise in containerboard inventories, the total commercial downtime taken by our European mills was approximately 260,000 tonnes in the second half of 2022. Compared to 2021, the overall increase in recovered fibre prices in 2022 have cost the Group an additional €74 million while the increase in energy prices have cost the Group an additional €592 million. At €553 million, reported EBITDA in the Americas was €112 million higher than in 2021. With net positive currency and hyperinflationary movements of €33 million, along with a contribution of €21 million from acquisitions, the underlying year-on-year move in earnings was an increase of €58 million. The underlying increase was mainly driven by higher box prices, partly offset by higher labour, distribution, energy and other raw material costs. Box volumes, excluding acquisitions, were broadly flat year-on-year, compared with a very strong prior year comparative. The Group continued to invest in its Americas business in 2022 with significant capacity and sustainability related investments in the corrugated, containerboard and speciality businesses in Central America, Argentina, Colombia, Mexico and the US. In our paper division, we announced a large-scale investment in a biomass boiler at our Cali paper mill in Colombia which will reduce the  2 emissions by approximately 6%. In our corrugated division, we are expanding capacity and investing in state-of-the-art converting equipment across the region and in our specialties business we are expanding our portfolio in paper sacks and bag-in-box. During the year, we also acquired corrugated packaging plants in Argentina and Brazil, expanding both our footprint and customer offering in these attractive growth markets. Allowing for a net positive impact from acquisitions and disposals of €38 million and net positive currency and hyperinflation movements of €31 million, the underlying year-on-year increase in EBITDA for the Group was €584 million, equating to 34%.  exceptional items increased by €589 million from €1,073 million in 2021 to €1,662 million in 2022 mainly due to the progress on box price increases, partly offset by higher year-on-year energy, labour, distribution and raw material costs. Pre-exceptional net finance costs at €149 million were €18 million higher in 2022 primarily as a result of an increase in cash interest of €23 million predominantly due to the relative increase in interest rates in currencies where we are in a net debt position compared to those where we are in a net cash position. Additionally, our variable rate borrowings in Latin American countries, such as Brazil and Colombia have seen large interest rate increases during the year, leading to a higher cash interest expense. Non-cash costs were €5 million lower, which was mainly due to a positive swing of €6 million from a fair value loss on derivatives in 2021 to a gain in 2022 and a positive swing of €12 million from a net monetary loss on hyperinflation in 2021 to a net gain in 2022, partly offset by an €8 million increase in the foreign currency translation net loss on debt and a negative swing of €4 million from a fair value gain on financial assets/liabilities in 2021 to a loss in 2022. With the €589 million increase in operating profit before exceptional items, combined with the €18 million increase in net finance costs, the pre-exceptional profit before income tax was €1,516 million, €572 million higher than in 2021. After exceptional items of €223 million, the profit before tax for 2022 was €1,293 million compared to €913 million in 2021. The income tax expense was €348 million compared to €234 million in 2021, resulting in a profit of €945 million for 2022 compared to €679 million in 2021. Further information in relation to Alternative Performance Measures referenced in this Statement is included in the Supplementary Information section on pages 226 to 231. ![]() 39Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Exceptional Items Exceptional items charged within operating profit in 2022 amounted to €223 million, of which €128 million related to the impairment of assets in our Russian operations, €56 million and €11 million respectively for the impairment of goodwill in Argentina and Peru, €14 million for redundancy and reorganisation costs in the Americas along with €14 million for the impairment of property, plant and equipment in our North American operations. There were no exceptional items charged within operating profit in 2021. There were no exceptional finance items charged in 2022. Exceptional finance costs of €31 million in 2021 represented a redemption premium of €28 million together with the related accelerated write-off of unamortised debt issue costs of €3 million due to the early redemption of bonds. #### Profit Before Income Tax  before income tax amounted to €1,293 million in 2022, comprising the pre-exceptional profit of €1,516 million and an exceptional charge of €223 million. In 2021, the profit before income tax was €913 million, comprising the pre-exceptional profit of €944 million and an exceptional charge of €31 million. #### Income Tax Expense The income tax expense in 2022 was €348 million (comprising a current tax charge of €349 million and a deferred tax credit of €1 million) compared to €234 million (comprising a current tax charge of €265 million and a deferred tax credit of €31 million) in 2021. There was a net €84 million increase in current tax. The net increase is mainly due to higher profitability, its geographical mix and the impact of non-recurring items. There was a €30 million reduction in the deferred tax credit compared to 2021. The movement is largely due to the reversal of timing differences on which deferred tax was previously recognised, offset by the recognition of other tax benefits and credits. There was a tax credit of €20 million on exceptional items in 2022 compared to a €4 million tax credit in 2021. #### Earnings per Share Basic EPS amounted to 365.3 cent in 2022 compared to 263.9 cent in 2021. On a diluted basis, our EPS in 2022 amounted to 361.8 cent compared to 261.1 cent in 2021.  basic EPS reflected the strong growth in pre-exceptional operating profit, partly offset by higher exceptional charges (net of tax), an increase in income tax expense and an increase in net finance costs. On a pre- exceptional basis, our EPS in 2022 increased by 62% from 274.5 cent in 2021 to 444.1 cent. #### Cash Flow Free cash flow in 2022 was €545 million compared to €455 million in 2021, an increase of €90 million. EBITDA growth of €653 million, combined with a lower outflow for the change in employee benefits and other provisions, was partly offset by a higher working capital outflow, higher capital outflows, a higher cash interest expense and higher tax payments. Cash interest was €132 million in 2022 compared to €109 million in 2021. The year-on-year increase is primarily due to the relative increase in interest rates in currencies where we are in a net debt position compared to those where we are in a net cash position. Additionally, our variable rate borrowings in Latin American countries, such as Brazil and Colombia have seen large interest rate increases during the year, leading to a higher cash interest expense. The working capital outflow in 2022 was €358 million compared to €114 million in 2021. The outflow in 2022 was a combination of a significant increase in debtors and stock, partly offset by an increase in creditors. These increases reflect the combination of higher box prices, higher paper prices and considerably higher energy costs along with higher other raw material and recovered fibre costs. Working capital amounted to €1,027 million at December 2022, representing 8.3% of annualised quarterly revenue compared to 5.7% at December 2021. Capital expenditure in 2022 amounted to €970 million (equating to 155% of depreciation) compared to €693 million (equating to 124%) in 2021. Tax payments in 2022 of €321 million were €82 million higher than in 2021 with higher payments in both Europe and to a lesser extent in the Americas. The change in employee benefits and other provisions was an outflow of €25 million in 2022 compared to €81 million in 2021. The decrease is primarily due to a positive swing in both current provisions and deferred creditors from an outflow in 2021 to an inflow in 2022.  compared to €3 million in 2021. The inflow in 2022 primarily represented a hyperinflationary adjustment inflow, the sale of property, plant and equipment and right-of-use asset modifications. The inflow in 2021 mainly represented a hyperinflationary adjustment inflow and the sale of property, plant and equipment partly offset by right-of-use asset modifications. Driven by the purchase of businesses, investments and non-controlling interests  of €333 million, investment and financing cash flows for the year 2022 amounted to €561 million compared to €879 million in 2021. Other outflows mainly comprised €50 million for the impairment of cash balances held in our Russian operations, €41 million for the share buyback and €28 million for the purchase of shares under the Deferred Bonus  The outflow of €110 million in 2022 for the purchase of businesses, investments and NCI mainly comprised the acquisitions in Argentina, the UK, Spain and Brazil along with €11 million for the payment of the deferred consideration for the Serbian acquisition. The net outflow of €879 million in 2021 was driven by the purchase of businesses, investments and NCI of €449 million, dividend payments of €302 million and the payment of the Italian Competition Authority fine of €124 million. Other outflows comprised of €22 million for the purchase of shares under the DBP and €28 million of a redemption premium for the early repayment of bonds. Investment and financing inflows of €46 million related to the sale of businesses and investments of €37 million along with net derivative termination receipts of €9 million. The outflow of €449 million in 2021 for the purchase of businesses, investments and NCI related mainly to the acquisitions in Italy, Mexico and Peru along with the payment of the deferred consideration on the exercise of the call option in relation to the Serbian acquisition. With our free cash flow of €545 million in 2022 more than offset by the net investment and financing outflows of €561 million, the result was a net cash outflow of €16 million compared to €424 million in 2021. After the amortisation of deferred debt issue costs of €7 million, net negative currency translation adjustments of €81 million and net debt acquired of €3 million, net debt increased by €107 million to €2,992 million at December 2022 from €2,885 million at December 2021. The net negative currency translation adjustment of €81 million in 2022 mainly related to the US dollar and Swedish krona. The US dollar strengthened from US$1.13/euro at December 2021 to US$1.07 at December 2022, resulting in a negative currency translation adjustment of €34 million. The Swedish krona weakened from SEK10.25/euro at December 2021 to SEK11.12 at December 2022, resulting in a negative currency translation adjustment of €17 million. 40 Smurfit Kappa Annual Report 2022 #### Finance Review continued The net negative currency translation adjustment of €50 million in 2021 mainly related to the US dollar and Sterling. The US dollar strengthened from US$1.23/euro at December 2020 to US$1.13 at December 2021, resulting in a negative currency translation adjustment of €42 million. Sterling strengthened from £0.90/euro at December 2020 to £0.84 at December 2021, resulting in a negative currency translation adjustment of €9 million. With net debt of €2,992 million and EBITDA of €2,355 million, our leverage ratio was 1.3 times at December 2022 compared to 1.7 times at December 2021. The decrease in our leverage was driven primarily by the increase in EBITDA partly offset by a higher level of net debt. #### Capital Resources and Liquidity Committed facilities (excluding short-term sundry bank loans and overdrafts) amounted to €5,045 million (2021: €5,006 million) of which €3,390 million (2021: €3,351 million) was utilised at 31 December 2022. The weighted average period until maturity of undrawn committed facilities is 3.2 years (2021: 4.2 years). The Group has a €1,350 million sustainability-  maturity of January 2026, which incorporates  objectives regarding climate change, forests, water, waste and people, with the level of KPI achievement linked to the pricing on the facility. Borrowings under the RCF are  requirements, capital expenditure and other general corporate purposes. At 31 December  US$8 million, at an interest rate of 5.024%. At 31 December 2022, the Group had outstanding €13 million variable funding  trade receivables securitisation programme maturing in November 2026 and €5 million VFNs issued under the €100 million trade receivables securitisation programme maturing in January 2026. Both these securitisation programmes  sustainability objectives regarding climate change, forests, water, waste and people, with the level of KPI achievement linked to the pricing on the programme. Net debt was €2,992 million at the end of December 2022, resulting in a net debt to EBITDA ratio of 1.3 times compared to 1.7 times at the end of December 2021. With net debt to   sheet continues to secure long-term financial and strategic flexibility. The Group remains strongly positioned within its BBB-/BBB-/Baa3 credit rating. In September 2022, the Group published its first Green Bond Allocation and Impact Report, which provides details on the use of the proceeds of its inaugural €1 billion dual-tranche Green Bond issued in September 2021. With interest rates of 0.5% and 1.0% respectively for 8 and 12 year maturities, these coupons were not only the lowest in the  for a corporate issuer in our rating category.  interest rate was 2.89% compared to 2.63% at 31 December 2021. The increase in our average interest rate was primarily driven by the significant increases in interest rates in certain of our variable rate debt environments, most notably Brazil and Colombia. At  gross borrowing were at fixed interest rates.  funding base and long dated maturity profile of 4.9 years (2021: 5.8 years) provide a stable funding outlook. At 31 December 2022, the Group had a strong liquidity position of approximately €2.44 billion comprising cash balances of €788 million, undrawn available committed facilities of €1,343 million on our sustainability-linked RCF and €312 million on our sustainability-linked securitisation facilities.  cash flow from operations and borrowings  are for funding day-to-day operations, capital expenditure, debt service, dividends and other investment activity including acquisitions. Market Risk and #### Risk Management Policies  and objectives, which include controls over the procedures used to manage financial market risks. These are set out in detail in Note 29 to the Consolidated Financial Statements. The Group is exposed to the impact of interest rate changes and foreign currency fluctuations due to its investing and funding activities and its operations in different foreign currencies. Interest rate risk exposure is managed by achieving an appropriate balance of fixed and variable rate funding. As at 31 December 2022, the Group had fixed an average of 97% of its interest cost on borrowings over the following 12 months.  €250 million 2.75% senior notes due 2025, US$292.3 million 7.50% senior debentures due 2025, €1,000 million 2.875% senior notes due 2026, €750 million 1.5% senior notes due 2027, €500 million 0.5% senior green notes due 2029 and €500 million 1.0% senior green notes due 2033.  in short-term interest rates on its floating rate borrowings and cash balances. If interest rates for these borrowings increased by one  increase, and income before taxes would decrease, by approximately €2 million over the following 12 months. Interest income on  approximately €8 million assuming a one percent increase in interest rates earned on such balances over the following 12 months. The Group uses foreign currency borrowings, currency swaps and forward contracts in the management of its foreign currency exposures. #### Sustainability  Focusing on delivering sustainable packaging solutions made in an increasingly sustainable way means that we also play an integral role  sustainability goals but also those of the end consumer. Smurfit Kappa began 2022 strongly with the announcement of SBTi validation of its emissions reduction targets being consistent with levels required to meet the goals of the Paris Agreement and we continued to make strong progress across our sustainability targets throughout the year. The progress made in 2022 was built upon the achievements outlined in our 15 th annual  was published in April 2022. It highlighted the  and nurture a greener and bluer planet through the three key pillars of Planet, People and Impactful Business. In this Annual Report, we have enhanced and developed our TCFD and EU Taxonomy disclosures and have included an outline of our Transition Plan to reach at least net zero CO 2 emissions by 2050. Our 2022 SDR will report in detail on our sustainability strategy and the progress made against our targets. In 2022, as outlined in the Sustainability section on pages 50 to 85, the Group made progress on a number of its key sustainability targets; 43.9% reduction in CO 2 emissions compared to our baseline year 2005, 94.3% of packaging solutions sold as Chain of Custody certified and a 13.6% reduction in Total  We continued delivering on our strategic plan by approving €230 million on sustainability focused projects to maintain our leadership position, improve our sustainability profile and help our customers improve their sustainability credentials. We announced the investment of almost US$100 million in a sustainable biomass boiler at our paper mill ![]() 41Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information in Cali, Colombia, along with the completion of a large-scale sustainability project in our Zülpich paper mill in Germany which  multi-fuel boiler to provide a more sustainable fuel source for the generation of steam and electricity which will reduce CO 2 emissions annually by 55,000 tonnes, a 2% reduction for the Group. We also announced the investment of US$23.5 million to upgrade our Nuevo Laredo sheet plant in Mexico which will reduce the CO 2 emissions by up to 40% at the  paper mill in Austria launched a sustainable district heating project, which will generate up to 25 megawatts of heat that will save approximately 21,000 tonnes of CO 2 while also providing heat to local businesses and schools and benefit 20,000 homes across three communities. During 2022, we redefined the purpose of the Smurfit Kappa Foundation expanding our grant giving to financially support sustainable projects that positively impact the lives of underprivileged people in the areas of health and nutrition, education and basic care. In 2022, the Smurfit Kappa Foundation donated over €2.7 million to more than 40 projects across 18 countries to improve basic care, education and health facilities to positively impact the lives of underprivileged people in the communities in which the Group operates. In Germany, over 60 employees volunteered their time to supplement the financial donation by the Foundation to construct a therapy riding arena for children. In Brazil, US$250,000 was donated to upgrade the infrastructure of a childcare facility and in Ukraine, a basement was refurbished to facilitate the safe schooling of young children in Kyiv. SKG was also further recognised for its strong ESG credentials and continued improvement by the leading research and analytics company, Sustainalytics. Following an analysis of more than 15,000 companies globally, SKG was named as an Industry Top Rated company where it ranked in the top percentile out of 99 companies, in addition to being awarded Regional Top Rated. The Group continues to be listed on various environmental, social and governance indices and disclosure programmes, such as FTSE4Good, the Green Economy Mark from the London Stock Exchange, Euronext Vigeo Europe 120, STOXX Global ESG Leaders and Solactive Europe Corporate Social Responsibility index. SKG also performs strongly across a number of third party certification bodies, including MSCI, ISS ESG and Sustainalytics. #### Conclusion 2022 was another strong year of continued delivery for the Group, both operationally and financially and also in terms of delivering on our sustainability targets. Our ESG agenda is clearly linked to our financial performance. As a circular economy business with an ever improving environmental footprint our leadership in sustainability is clear. Our overall performance in 2022, against every metric is a result of many factors not least the dedication and commitment of the 48,000 employees who work relentlessly. It is also a result of our multi-year investment programmes and the returns that we are evidently achieving. We aim to ensure that capital allocation takes into account all stakeholder groups. It is very much a returns focused allocation which continues to be a key underpin to our success. We believe that capital allocated to internal projects is central to this success. We are investing in our asset base to improve our environmental footprint, to take out costs and to capture the long-term growth opportunities  most sustainable packaging solutions. Our acquisitions completed in 2022 further strengthen our geographic network and enhance our product portfolio. The dividend is another cornerstone of our capital allocation strategy. Our policy is progressive and aims to ensure that the allocation of cash flows to the dividend is proportionate to other forms of allocated capital over the long-term. The 12% increase in the recommended final dividend for 2022 is an illustration of our continued belief in the future prospects and cash generation ability of SKG. The expansion of our capital allocation framework to now include buybacks underscores the flexibility and agility of this framework and ensures that all avenues to create and return value to our shareholders are considered and benchmarked against all options. Given the higher levels of capital the Group has deployed over recent years, we are especially pleased to have recorded our highest ever ROCE of 21.8% at the end of December 2022. With net debt to EBITDA at 1.3 times, the   long-term strategic and financial flexibility. With no near-term maturities, an average interest rate of less than 2.9% and over 95% of our gross borrowings at fixed interest rates,  stronger. Ken Bowles Group Chief Financial Officer #### Summary Cash Flow 2022 €m 2021 €m EBITDA 2,355 1,702 Exceptional items (3) – Cash interest expense (132) (109) Working capital change (358) (114) Capital expenditure (970) (693) Change in capital creditors (24) (14) Tax paid (321) (239) Change in employee benefits and other provisions (25) (81) Other 23 3 Free cash flow 545 455 Italian Competition Authority fine – (124) Impairment of cash balances held in Russia (50) – Share buyback (41) – Purchase of own shares (net) (28) (22) Sale of businesses and investments – 37 Purchase of businesses, investments and NCI (110) (449) Dividends (333) (302) Derivative termination receipts 1 9 Premium on early repayment of bonds – (28) Net cash outflow (16) (424) Acquired net debt (3) (25) Disposed net cash – (1) Deferred debt issue costs amortised (7) (10) Currency translation adjustments (81) (50) Increase in net debt (107) (510) A reconciliation of the Summary Cash Flow to the Consolidated Statement of Cash Flows, a reconciliation of Other Non-cash Movements to Note 21 to the Consolidated Financial Statements and a reconciliation of Free Cash Flow to Cash Generated from Operations are included in sections K and L in Alternative Performance Measures in the Supplementary Information section on pages 229 to 231. ![]() 42 Smurfit Kappa Annual Report 2022 #### Stakeholders #### Engaging with #### our stakeholders We want to build a culture that fosters engagement and enables us to build and maintain successful relationships with our stakeholders. In line with the UK Corporate Governance Code, Smurfit Kappa strives to understand the views and interests of all stakeholders. Feedback from all engagement activities is considered by the Board as part of its decision-making processes and we believe that effective engagement helps us in understanding the impact our decisions have on all our stakeholders and improves and fosters our relationships with them. #### Our Key Stakeholder Groups #### Customers Engaging with our customers allows critical information flow about supply chain management, packaging requirements and sustainability goals, enabling us to balance  long-term resilience. #### Employees Our people are at the centre of everything we do. We want to be recognised as a globally admired company, a great place to work and an employer of choice. #### Investors We engage with our investors, to build and maintain confidence and support from those that invest in and lend to Smurfit Kappa. #### Suppliers Our sustainable and responsible sourcing programme ensures that we partner with suppliers who have compatible goals and practices. #### Communities We are proud to support the communities in which we operate and make positive, long-lasting changes. ![]() 43Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Ongoing Customer Engagement While there had been signs of easing supply chain disruption earlier in 2022, evolving global factors and geopolitics continued to bring new risks and pockets of stress for our customers. Many customers are focused on building supply chain resilience and balancing that with meeting their sustainability targets.  end-to-end control of the value chain gives  resilience and ability to keep their products on the shelf and reputation intact. Across Europe and the Americas, our sales teams continue to play a vital role in  and translating opportunities into tangible and commercially impactful solutions. #### Virtual Events On 25 May 2022, we hosted our biggest ever  vision for packaging to be truly circular. The purpose of this event was to help our customers understand the steps involved in effectively transitioning to circular packaging and how to align their packaging decisions with specific EU Green Deal packaging commitments. As part of the event, we showcased our extensive Better Planet Packaging range which demonstrates how Smurfit Kappa is leveraging the power of design to make packaging for a circular future. Over 2,000 people attended the event. #### Finding New Ways to Collaborate with #### Customers – Design2Market Factory  is our most recent innovation in process. The unique facility creates a fast and seamless development process, from packaging design through to market launch. The D2M Factory uses a digital printer and die cutter to provide rapid prototyping for pilot production, industry-leading packaging performance analysis and field-lab facilities, all operating from one location. D2M Factory has redefined how we collaborate with our customers. A key benefit of corrugated over other packaging materials is the speed at which it can be prototyped, a couple of hundred samples can be produced in a very short space of time, meaning product innovation and development can be an organic process where the customer learns by doing, testing and refining the pack before a large-scale roll out and investment. This whole process can be achieved in as little as a week. #### Customer Surveys In 2022, SKG conducted an in-depth survey with target customers across Europe and Latin America. This survey forms part of our ongoing effort to better understand our customers world and add value in key areas such as supply chain, innovation and sustainability. The results of the survey captured the big issues impacting our  for Smurfit Kappa to future-fit their operations. Our focus is on bringing that insight into creating attractive value propositions and creating long-term value. #### Award Winning – #### Better Planet Packaging During 2022, we received 74 awards, for packaging design, innovation and sustainability. These awards included eight WorldStar awards across a host of categories including e-commerce solutions, Bag-in-Box ® , transport packaging with plastic replacement and innovative food and beverage packaging and 21 awards for creative and innovative packaging solutions won by the Group at the annual Flexographic Industry Association UK awards. This is great recognition of our innovative capabilities and what collaboration brings. We also continued our collaboration with new start-ups, and extended our  reflect the continued growth in e-commerce. eFlower is our latest Better Planet Packaging portfolio and joins; eBottle, eFashion, eHealth and Beauty, punnets and buffers. #### Case Study #### Helping Walkers Switch to Sustainable Packaging Walkers, owned by PepsiCo, a leading UK crisp brand, wanted to reduce the 660 million plastic pack bags it produces per year by replacing the outer plastic packaging on certain large multi-packs with a new sustainable alternative. Our Better Planet Packaging design team and technical experts worked collaboratively with PepsiCo and their machine manufacturers to develop a 100% paper-based concept. We carried out a full supply chain analysis using our SupplySmart service to calculate the logistical benefits of moving to the new corrugated pack. Walkers removed 250 tonnes of plastic from its supply chain each year with our paper-based solution. Added benefits included an increased pallet load and a faster and more efficient process. The new sustainable solution has improved visual impact in store, strengthened Walkers sustainable brand image, and has received positive engagement through social media. 250 tonnes of plastic eliminated per year #### Customers #### How we Engaged #### Delivering on our Strategic Priorities ![]() 44 Smurfit Kappa Annual Report 2022 #### Stakeholders continued #### Enhancing Our Employee Experience #### and Workforce Engagement 2022 The Sustainability Committee of the Board  engagement with the workforce on behalf of the Board. #### Employee Meetings It is important to our Board of Directors that they are actively engaged with our diverse workforce right across the Group. We all value a two-way dialogue, which is open, honest and covers a breadth of topics that matter to our employees. Open channels of communication and a good pulse on employee sentiment allows us to understand the engagement levels, motivation, trust, and values that our employees feel in Smurfit Kappa. The role of the Committee is to report to the Board on matters such as employee sentiment, views and overall areas of interest for employees across the year. In 2022, the Committee further evolved its engagement by attending several meetings and interactions with employees (as can be seen in the following photographs) in addition to ongoing indirect engagement. These meetings focused on ensuring positive support and engagement with our workforce on a number of topics which included: Health, Safety and Wellbeing; Female Engagement; Inclusion,  Satisfaction and Career Development. #### Global Survey In April 2022, our entire workforce was invited to participate in EveryOne Discovery, a Global online confidential employee Inclusion, Diversity and Equality survey. This initiative, which was deployed in 21 languages across all the countries we operate in, provided us with real time feedback from employees across our five ID&E communities: Disability; Family & Age; Gender; LGBTQ+ & Allies and Origin, Race & Ethnicity. Participation in the survey was voluntary with almost 8,000 respondents taking part and providing us with over 9,000 comments, which will help drive our ID&E strategy into the future. 2022 Key Themes: #### The key themes emerging from the workforce engagement meetings and interactions during 2022 were: 1 The importance of ID&E in our organisation; 2 The continued COVID-19 considerations and support of employee vaccination programmes; 3 The employee alignment with our Purpose – to create, protect and care; 4 The positive consequence of investment in our people – employee assistance programmes, mental health, wellbeing and learning and development; 5 The significance of talent development and career planning for succession management; 6 The enhanced focus on employee communications, and overall engagement; 7 Recognition of the unique culture at Smurfit Kappa, and our lived values of Safety, Loyalty, Integrity and Respect; 8 The enhanced focus on our communities during these unprecedented times; 9 The understanding of our Code of Conduct’s compliance with the law and ethical behaviour ensuring an open and safe place to work; and 10 The value of rewards and recognition programmes. #### Employees #### How we Engaged #### Delivering on our Strategic Priorities ![]() 45Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Update from the Chair of the Sustainability Committee, Jørgen Buhl Rasmussen and insights on the Committee’s role in Workforce Engagement My role as Chair of the Sustainability Committee is to ensure the Committee acts as a communications champion for all colleagues including Board members across the business, to understand the employee voice and to ensure that voice is heard in the boardroom and represented in a manner that is inclusive and fair. With the support and partnership of the Group VP of Human Resources, I have kept the Board informed and have taken into consideration the interests of the workforce on a very broad range of topics that matter to our people. As a Board, we have always understood the importance of maintaining a strong people centric culture and recognise the value of engaging and listening to the diverse views of colleagues across the global organisation. During 2022, the Committee including the wider Board, had the opportunity to meet colleagues face-to-face, and we were delighted to be able to do so again. During the year, we regularly reviewed employee sentiment indirectly via people data from employee engagement surveys such as the ID&E Discovery survey; we reviewed all feedback on subjects such as ethics and health, safety and wellbeing, while we also took into account employee turnover. In June, the Committee attended an engagement workshop and team dinner  Development cohorts for both 2021 and 2022. During the month of July, the Board visited a number of plants in Colombia. The first visit was to our Corrugated plant in Bogota, then to the Palmira sack plant and finally to the corrugated plant and mill in Cali. During these visits, we met with many colleagues and employees at each of these locations. The Chair, Irial Finan, attended two regional conferences in Miami and Vienna in September, both attended by over 500 people collectively, representing the leadership communities for each region. At each conference he participated in a fire-side chat and a Q&A session with all of those in attendance. In October, the Board visited one of our newest acquisitions, Verzuolo in Italy. This state-of-the-art containerboard mill in Northern Italy, employs over 220 people. The visit provided an opportunity to see first-hand how the mill was integrating into the Group, as well as providing an understanding of: the employee engagement and interaction; health, safety and wellbeing; leadership and management; behaviours and culture; training and development, as well as the compensation and benefits in place. It also provided an opportunity to see the investments being made in the facility and the local community. The Group Vice President of Human Resources presented on four occasions to the Committee during the year, reviewing trends and evolving our workforce engagement methods. Those employees we have met during the year, have  engagement and support, and I would like to thank them for their time, openness, honesty and engagement during our visits.  workforce engagement, and the Committee is looking forward to a calendar of activities in the year ahead with further opportunities to meet colleagues and ensure the employee voice is heard and valued. Jørgen Buhl Rasmussen Sustainability Committee Chair ![]() 46 Smurfit Kappa Annual Report 2022 #### Ongoing Investor Engagement Our executive Directors together with the Investor Relations team maintain active engagement with the investment community. During 2022, the team met with over 400 analysts and portfolio managers from over 200 different investment funds. Conversations took place at various in-person and virtual investor conferences, ad hoc video and telephone calls, as well as a number of site visits to our operational facilities. During the year, we engaged with a third party service provider to carry out an investor perception study. The purpose of the study was to gain insight into how the Group is perceived by our investors, identify what our investors consider to be our most important value drivers, measure our progress since we first conducted similar studies in 2016 and 2018 and provide strategic guidance for  The survey was carried out in May and June of 2022 and involved confidential interviews with sell-side and buy-side analysts and portfolio managers of both current and target shareholders with varying approaches in investment style (growth/value/income) and from across Europe and North America. The overwhelming consensus was that support for Smurfit Kappa has improved significantly since the last study in 2018 and the majority of investment professionals surveyed believed that Smurfit Kappa was undervalued. SKG scored in the upper quartile on two of what are considered the most important drivers of investment decision making – faith in strategy and management credibility. The Group also scored well with  ability to deliver tangible shareholder value over the next 12 to 24 months. The survey also gave management indications  capital deployment. Organic reinvestment in the business was considered the preferred use of capital, followed by bolt on mergers and acquisitions. #### Annual General Meeting (‘AGM’) The Company held its AGM on 29 April 2022.  the opportunity to engage with and question the Chair of the Board, the Chairs of all Board Committees and all other Board members. The 2022 AGM was an in-person physical AGM after two years of closed meetings. Shareholders were also encouraged to submit a Form of Proxy appointing a proxy to attend, speak, ask questions and vote at the AGM on their behalf to ensure their votes could be represented at the AGM, if unable to attend the AGM in person. Shareholders were also invited to email any questions relating to the items on the agenda in advance of the meeting. The Notice of the AGM and related papers together with the Annual Report are sent to shareholders at least 20 working days before the meeting. In addition, the Group responds throughout the year to numerous queries from shareholders on a broad range of issues. #### Annual Report  smurfitkappa.com, provides the full text of this Annual Report (and including previous Annual Reports) and copies of presentations to analysts and investors. Press releases are also made available in this section of the website immediately after release to the stock exchanges. #### ESG Ratings by Rating Agencies SKG has recently been further recognised for its strong ESG credentials and continued improvement by the leading research and analytics company, Sustainalytics. Following an analysis of more than 15,000 companies globally, SKG was named as an Industry Top Rated company where it ranked in the top percentile out of 99 companies, in addition to being awarded Regional Top Rated. The Group continues to be listed on various environmental, social and governance indices and disclosure programmes, such as FTSE4Good, the Green Economy Mark from the London Stock Exchange, Euronext Vigeo Europe 120, STOXX Global ESG Leaders and Solactive Europe Corporate Social Responsibility index. SKG also performs strongly across a number of third party certification bodies, including MSCI, ISS ESG and Sustainalytics. #### Stakeholders continued #### Investors #### How we Engaged #### Delivering on our Strategic Priorities ![]() 47Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Compliance with Our Policies #### and Audits We are committed to working with our suppliers to ensure compliance with our Sustainable and Responsible Sourcing Policy and our Supplier Code of Conduct. These policies set out our sustainability standards and objectives including our requirements in relation to compliance, performance risk management, social responsibility, and governance. Suppliers are required to submit a declaration of compliance to our policies. During the year, we have continued to build and maintain transparent and long-term relationships with our suppliers. This partnership approach enables us to work together on sustainability improvement processes and provides the opportunity to carry out audits on compliance with our sustainable supply chain standards. Where any shortcomings are identified, we work together to improve sustainability in their business. We have observed that the audit process has motivated particularly our smaller suppliers, to build or improve their sustainability programmes and to align their programmes with our sustainability priorities; climate change, forest, water, waste, health and safety, people and communities. We are also encouraged to observe that our suppliers who have sustainability programmes in place for many years see their sustainability programmes as an investment rather than a cost. #### Training During the audit process, we provide training to our suppliers in relation to the different aspects of sustainability in our organisation and set out our expectations in terms of their deliverables as our suppliers. We explain the importance of supporting the SDGs where they can have an impact. We explain the future risks and opportunities for our industry going forward and the importance of our actions today for our future tomorrow. In addition, we provide our suppliers with specific training covering many topics including print technology and process improvement, as required. #### Standardisation We continue to standardise our capital equipment purchases for our corrugated plants. This allows our suppliers to achieve process and manufacturing economies of scale and to reduce their energy consumption and carbon footprint while simultaneously allowing our operations to reduce and share stocks of equipment parts and consumables. #### Supplier Collaboration When we enter strategic supplier relationships, we build a relationship based on trust and continuous operational excellence. We work with our suppliers to promote better health, safety and wellbeing and continuous improvement of the work environment. This partnership approach enhances mutual competitiveness as we work together to leverage supplier and operational knowledge. #### Innovation Innovation is in our DNA and we expect the same of our suppliers. Be it investing in shared technology, best-in-class procurement tools, or having close communication on process improvement, knowledge sharing and insights, innovation is always at the core. #### Sustainability We offer our suppliers the ability to collate shipments so that volumes can be optimised and the most sustainable transport options with lower emissions can be selected. This improves service levels and reduces costs. #### Suppliers #### How we Engaged #### Delivering on our Strategic Priorities ![]() 48 Smurfit Kappa Annual Report 2022 We remain deeply committed to our local communities and have always believed strongly in being part of, collaborating with, and giving back to the communities in which we are privileged to operate. Despite facing another challenging year, our teams across the world continued to donate their time, effort, and expertise to make a positive and lasting impact on their local communities. Through our operations, we actively support projects that help build a sustainable future for the communities in which we live and work. We engage with and support local economies and livelihoods by creating opportunities directly and indirectly for employment, investing in infrastructure, and contributing to community activities through our Open Community initiatives. In addition to the direct involvement by our operations in our local communities, the Group also provides all of the funding to the Smurfit Kappa  charity in Ireland, which focuses on delivering a positive impact on the lives of underprivileged people in the communities where we operate. Since being formed in 2011, the Foundation has supported a total of 200 projects with a social investment of over €12 million in 24 countries. During 2022, we redefined the purpose of the Foundation, so in addition to a focus on children, the Foundation also financially supports sustainable projects that positively impact the lives of underprivileged people in the areas of health and nutrition, education and basic care, thus helping to reduce inequalities that exist. Throughout 2022, over 40 projects were supported, donating over €2.7 million to charities with a focus on supporting mental health and wellbeing programmes, a continuous emphasis on the health and education of underprivileged people, as well as projects to support the inclusion of all in society. Using the United  a guide, we focused on delivering impact for six SDGs: No Poverty, Zero Hunger, Good Health and Wellbeing, Quality Education, Gender Equality and Reduced Inequalities. #### Ukraine Appeal The war in Ukraine and the people affected by this tragedy was a particular focus for our fundraising and volunteering hours during the year. Working with the International Red Cross and the Polish Medical Mission, the Smurfit Kappa Foundation, provided funding for life-saving humanitarian aid to the people of Ukraine fleeing the war in their country, as well as funding for the provision of medical aid for Ukrainians on the Polish border. In addition to the contribution made by the Foundation, colleagues across the world combined with the Group, who doubled their efforts, to raise a further €2.4 million to fund various local charities involved in the humanitarian efforts and provide funds to the International Red Cross. #### Purpose and Culture We are proud of all our community activities and believe these are a demonstration not only of our organisational culture but also of our essential and enduring purpose to create, protect and care. Our Open Community initiatives cover all aspects of our involvement with our communities worldwide, which are captured under four categories as outlined in the chart below. In 2022, 8,700 of our colleagues participated in 173 initiatives across 24 countries. We have committed to continuing this work as part of our Better Planet 2050 targets with our commitment to donate €24 million between 2020 and 2025. #### Our Open Community Initiatives 173 total projects Empowering Communities – 38% Encouraging Wellbeing – 36% Inspiring our Future – 19% Protecting our Planet – 7% 66 #### Empowering Communities projects 62 #### Encouraging Wellbeing projects 33 #### Inspiring our Future projects 12 #### Protecting our Planet projects #### Communities #### How we Engaged #### Delivering on our Strategic Priorities #### Stakeholders continued #### €2.4 million of local charity funding to Ukraine ![]() #### Helping the Environment 274,788 kg #### A total of 274,788 kg of waste was #### recycled across our environmental initiatives during 2022. Many #### colleagues participated in Earth Day #### events within their communities – #### tackling litter, recycling programmes #### and promoting and protecting local #### ecosystems. 49Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Total Distance Covered 40,115 km 2,354 of our colleagues walked, #### ran or cycled 40,115 km for charity #### to fundraise for Ukraine, raise awareness of climate change and #### to promote healthy lifestyles. #### Supporting Ukraine 213,136 #### A total of 213,136 Ukrainians benefited from the creative and #### committed efforts of Smurfit Kappa #### colleagues across the globe. #### Supporting Families 33,138 #### 33,138 families, including 67,682 #### children, were supported with educational workshops, access to development space, summer camps, #### school kits and after-school initiatives. #### Medical Treatment and Research 10,454 #### Our colleagues helped 10,454 people access medical treatment. We also supported medical research, healthcare, rehabilitation and #### mental health initiatives. ![]() 50 Smurfit Kappa Annual Report 2022 #### Sustainability Delivering the #### future together Sustainability is a key part of SKG’s strategy. As a customer-oriented, market-led company, the satisfaction of customers, personal development of employees and respect for local communities and the environment are all inseparable from our goal of creating value for all our stakeholders, guaranteeing them end-to-end sustainability through a circular business model. In their daily lives, people need food, clothing and household goods. Circular, fit-for-purpose packaging protects our customers product from damage and waste, while delivering them in an efficient and sustainable way. In response to longer term rising global economic and social development, e-commerce will change and worldwide demand for sustainable packaging goods and services will continue to grow. Sustainability is important to all our stakeholders as well as their stakeholders. Climate change, limited natural resources, littering, deforestation, a growing population and increased social inequality, are pressing global challenges that require forward thinking and a constructive response from the business community. At SKG, we respond to these challenges through our end-to-end approach to sustainability: from sustainable sourcing of our renewable and recyclable raw materials, to responsible production of sustainable and circular packaging products that help our customers and eventually consumers to lower their environmental footprint. At every important step in our value chain – including our governance, our people, our communities and the environment – we are always considering where we have a positive impact and we are constantly aligning our economic goals with our social, community and environmental responsibilities. This dedication to end-to-end sustainability, positions SKG to play its part in making the  a reality. In our materiality assessment we compare the SDGs against our business strategy and policies, as well as against stakeholder expectations. This allows us to strategically build on opportunities and minimise risks within the sustainability context and transparently report our progress  positively impacting the SDGs is covered both in this Annual Report and in our  Our Code of Conduct is the fundamental guideline for everybody at Smurfit Kappa from the Board of Directors, officers and employees, as well as all individuals, entities,  – and we also require the same from our suppliers. In environmental matters our starting point is that all our sites operate at least within their permits. We guarantee compliance by employing modern, low environmental impact equipment, monitoring our progress using our environmental data, including information on permits,incidents and fines to drive action and deliver impact. We continuously invest in our sites to keep them state-of-the-art, and proactively follow environmental legislative developments to ensure compliance. For details on the Non-Financial Key Performance Indicators reporting statement, SKG publishes its sustainability progress in the annual SDR, available at our website: smurfitkappa.com. Our 2022 SDR will be published simultaneously with this Annual Report at the end of March 2023 and all previous  SKG is committed to the principles of the UN Global Compact and reports in accordance  Standards and our sustainability data and reporting have been independently assured since 2009. This third party assurance guarantees our transparency and credibility to stakeholders, especially customers, investors, and the communities in which we operate. Transparency in our disclosures together with the third party assurance of our data  strategy. Our EU Taxonomy disclosure can be found in this Report on pages 60 to 67 and our Task Force on Climate-Related Financial Disclosures report can be found on pages 68 to 85. 43.9% CO 2 #### emissions reduction #### since 2005 SBTi- #### validated CO 2 #### reduction target validated #### by the SBTi Find out more about our commitment to sustainability in our Sustainability Development Report and Sustainability Development Goals, available on our website from the end of March 2023. ![]() 51Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Strategic Sustainability Priorities As a responsible company, operating globally, Smurfit Kappa has a product that is naturally sustainable and a circular process that is increasingly sustainable, driven by a culture with strong values of safety, loyalty, integrity and respect. SKG understands the challenges facing both our business and the planet and is committed to doing its part in resolving these critical issues. Therefore our ambition is to deliver sustainable growth for the benefit of all our stakeholders based on three pillars: Planet, People and Impactful Business. Within these pillars, our People and our Communities, Climate Change, Forest, Water and Waste are the main strategic environmental and corporate social responsibility priorities. We have set targets that focus on our strategic areas and that are designed to align the Group with the UN 2030 SDGs. Our approach to the three pillars is explained below: #### Planet #### A greener, bluer planet Climate Change/Forest/Water/Waste The circular economy is at the core of our business. We use renewable, recyclable, recycled and biodegradable materials to create new products and to help our customers deliver on their environmental strategies. #### Impactful #### business Delivering for #### all stakeholders Innovation/Governance and Human Rights/Sustainable Sourcing As a global group, our activities create sustainable value for our shareholders, customers, employees, suppliers and the communities where we operate. #### People #### Empowering people #### and communities People Values/People Strategy/ Communities/Health and Wellbeing Having engaged employees is critical for our business. We work safely with talented people in a global, culturally diverse organisation. ![]() 52 Smurfit Kappa Annual Report 2022 #### 8 million #### tonnes #### of primarily post-consumer #### recycled paper handled annually #### Sustainability continued #### Planet The circular economy is at the core of our business. We use renewable, recyclable, recycled and biodegradable materials to create new products and to help our customers deliver on their environmental strategies. #### A Greener, Bluer Planet We are committed to sustainability throughout our value chain. Our strategic environmental priorities are climate change, forest, water and waste. The circular economy is at the core of our business. We use renewable, recyclable, recycled and biodegradable materials to create sustainable packaging solutions and play a part in ensuring that at their end of life, our products are recycled. We seek circular synergies where we can both utilise our side streams and where this is not possible, we seek collaboration with partners. As part of our commitment, we have rigorously collected sustainability data on our operations for 15 years, and we have been independently assured since 2009. We use this information to continually improve the efficiency of our processes and use of resources, which helps us meet our sustainability targets, such as reducing CO 2 emissions. Forests where our virgin fibres come from are a closed loop from which we can positively benefit when they are managed and used sustainably. Within our industry, SKG has  certification, enabling us to sell over 94.3% of our packaging products as FSC ® , PEFC or SFI ® certified, driving a sustainable loop for our raw materials during 2022. Having integrated paper recycling operations in our business, we can efficiently manage the sustainable sourcing of our raw materials, ensuring good quality in each region. We take our producer responsibility seriously, having 100% renewable and recyclable fibre, and of our final packaging products, over 90% are recovered and brought back into the recycling loop. Sustainably sourcing our fibres benefits us and our stakeholders: with CoC certified raw material sourcing and production, we have traceability systems that comply with regulations, and with customer and investor requirements. We are resource efficient in our paper mills, using raw materials and their by-products to their fullest. Our Nettingsdorf mill in Austria, Piteå mill in Sweden, Parenco mill in the Netherlands and our three Brazilian paper mills Bento, Pirapetinga and Uberaba are examples of some of the mills that run almost entirely on biofuels derived from the wood-pulping process. In many mills, biogases from waste water treatment are fuel for heat and power production, and our Roermond mill in the Netherlands has been internationally recognised for finding circular economy synergies by collaborating with local partners. Building on our objective to dynamically and sustainably deliver in 2022, the Group reached another important milestone with the completion of a large-scale sustainability project at its Zülpich paper mill in Germany,  CO 2 emissions. Reduction in CO 2 Emissions Compared to its Baseline Year of 2005 (%) 43.9 2021: 41.3 0 10 20 30 40 50 2021 41.3 2022 43.9 Packaging Solutions Sold as CoC Certified (%) 94.3 2021: 93.45 0 20 40 60 80 100 2021 93.45 2022 94.3 94.3% #### packaging sold as #### CoC certified in 2022 ![]() 53Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Case Study #### Walmart Sustainable Supplier of the Year #### Mexico  for recycling. Unfortunately, a significant amount of waste ends up in landfill, but Walmart and Smurfit Kappa are working to change that. Sharing sustainable values is the reason why the relationship between both companies has become closer over the years. We are committed to minimising our environmental impact and maximising our social contribution while creating  manager in Mexico. Since then, more than 3,000 stores across the country have been involved in the tailor-made plan, which includes collection, transportation, and recycling services. The success of the partnership was recently recognised when Smurfit Kappa Mexico was awarded the . The partnership continues to evolve and through seeking to create greater social  a new recycling programme. This will provide facilities for consumers to deposit all sorts of recyclable material including paper, carton, plastic and aluminium. “We have a close partnership that began more than 20 years ago, with just one store in Mexico City”, says Andres Marein Efron, General Manager, Recycling  sustainability goals of both companies.” ![]() 54 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### Planet Climate Change Forest Water Waste #### Priorities Climate change is the most pressing issue of our time. To counter rising global temperatures, carbon neutrality by the mid-century is vital. Paper making with current available technology is still energy intensive. We are achieving CO 2 emission reductions by improving our energy efficiency, as well as by changing from fossil fuels to low or CO 2 neutral energy sources. Promoting sustainable forest management involves managing supplies of sustainable, renewable fibre, while protecting ecosystems and creating employment in rural areas. Virgin wood fibres will always be needed for paper production to maintain quality. Fibre can be recycled at least eight times  producing paper-based packaging products. It is why using renewable wood fibre, paper recovery and fibre recycling is at the core of our circular economy approach. Furthermore, as our stakeholders, customers and investors expect, we communicate our impact in a transparent way. Clean fresh water is an increasingly scarce commodity, and often cited by our stakeholders as an important sustainability issue. We process large volumes of fresh water to produce our products, and even though we are not a large consumer of water – we release over 90% of the water we take in back to the environment with the balance released back into the atmosphere as steam – availability of fresh water is still essential to us. Increasing scarcity of resources demands responsible production and consumption. Avoidance of waste is a key issue for all our stakeholders. Our products are specifically designed to prevent loss and damage to the goods they protect. Our process itself is circular by nature. The fibres our products are made from are renewable, recyclable, recycled and biodegradable. 76% of our raw material is derived from recycled fibre and the remainder is from sustainable sources. Our production process itself generates almost no waste. #### Risks and Opportunities Climate change poses different risks and opportunities within the value chain. Risks vary from extreme weather affecting our sites, to increasing costs for the emission of CO 2 and pressure on availability of raw materials. The circular economy is also an opportunity for our business as we seek to use resources efficiently. We are also investing in technology to reduce our energy demands. Finally, we are improving resource and energy efficiency when producing paper products and optimising the use of raw material residual streams, such as black liquor, in bioenergy production. As growing consumption increases pressure on resources, society places increased value on sustainable consumption and production, integrity of origin, recycling and avoiding litter and packaging waste. Fit-for-purpose packaging has never been more important. We are implementing forest certification and CoC certification to guarantee origin traceability. Using both recycled and virgin fibres in production, we intend to use this opportunity to deliver fit-for-purpose packaging with the best overall environmental footprint for each product. Our global assessment shows that only 12% of our paper production takes place in areas of fresh water scarcity, representing 4% of our water intake. The discharge of our water before or after treatment  To help ensure that our water use is correctly understood, we became a signatory to the CEO Water Mandate, and strive to understand local water related risks and needs so we can address them. Avoiding packaging waste by simply focusing on packaging weight might be seen as a quick way to decrease landfill. This, however, can lead to more waste resulting from greater damage to goods or poor material choices. We see an opportunity to create fit-for-purpose, sustainable packaging with mono-material solutions designed for optimal performance and recyclability. We are also working with the recycling and paper producing industries to keep our raw materials in the recycling loop. #### Our Commitments Our approach to the challenges of climate change and energy efficiency sets out to achieve more energy efficient production at our sites, lower energy use in manufacturing and a switch from fossil fuels to renewable and green sources wherever feasible. Our success is measured by our reduction in CO 2 emissions – we have targeted to reach net zero carbon emissions by 2050 and we have committed to a 55% reduction in Scope 1 and 2 fossil fuels based on CO 2 emissions in our mill system compared to 2005 levels by 2030. Our CO 2 emissions reduction  verified and we are committed to report in line with the TCFD recommendations, read more in the TCFD section on pages 68 to 85. At Smurfit Kappa, we have committed to promoting sustainable forest management at our sites and throughout our value chain. This means producing and sourcing our fibres, virgin or recycled, as CoC certified. We have committed to delivering over 95% of our packaging solutions sold as CoC certified to customers by 2025. As a processor of water, our focus is on the long-term improvement of the quality of water we discharge, and understanding the risks associated with water availability and its use in the areas where we operate. To increase our global and local impact, we will continue to invest in water treatment facilities and require the same standards from all our paper mills, regardless of their location. In 2020, next to  discharge intensity by 60% by 2025 compared to 2005, we also introduced an annual water intake reduction target of 1% annually. We have a strong focus on innovation. Our Better Planet Packaging initiative drives new efficiency solutions for our raw materials while keeping them in the recycling loop. As a significant operator in the circular economy in Europe and the Americas, we receive non fibre-based waste from the collection of  we work on recovering energy where a circular option cannot be found and as a final resort, landfill, with a target to have 30% less waste to landfill by 2025, compared to the reference year 2013. #### Highlights in 2022 #### Climate Change We continued investing in energy efficiency and CO 2 reduction during 2022. In October 2022, we announced an almost US$100 million investment in a sustainable biomass boiler at our paper mill in Cali, Colombia. This investment will lead to approximately a 6% reduction in CO 2 emissions for the Group globally. #### Forest In Q4 2022, we reached our target level of over 95% of our products sold as CoC certified for the first time and achieved a level of 94.3% for the full year. #### Water Four major water treatment plant investment projects in the Americas (Barbosa and Barranquilla in Colombia, Cerro  and helping to deliver against our 60% COD reduction target. We achieved a 36.9% global reduction of COD since 2005. #### Waste We handled a record volume of eight million tonnes of primarily post-consumer recycled paper at our recycling paper operations in 2022. Our collection rate of used products is 100% globally and our recycling rate at our mills is 88%. ![]() 55Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Planet Climate Change Forest Water Waste #### Priorities Climate change is the most pressing issue of our time. To counter rising global temperatures, carbon neutrality by the mid-century is vital. Paper making with current available technology is still energy intensive. We are achieving CO 2 emission reductions by improving our energy efficiency, as well as by changing from fossil fuels to low or CO 2 neutral energy sources. Promoting sustainable forest management involves managing supplies of sustainable, renewable fibre, while protecting ecosystems and creating employment in rural areas. Virgin wood fibres will always be needed for paper production to maintain quality. Fibre can be recycled at least eight times  producing paper-based packaging products. It is why using renewable wood fibre, paper recovery and fibre recycling is at the core of our circular economy approach. Furthermore, as our stakeholders, customers and investors expect, we communicate our impact in a transparent way. Clean fresh water is an increasingly scarce commodity, and often cited by our stakeholders as an important sustainability issue. We process large volumes of fresh water to produce our products, and even though we are not a large consumer of water – we release over 90% of the water we take in back to the environment with the balance released back into the atmosphere as steam – availability of fresh water is still essential to us. Increasing scarcity of resources demands responsible production and consumption. Avoidance of waste is a key issue for all our stakeholders. Our products are specifically designed to prevent loss and damage to the goods they protect. Our process itself is circular by nature. The fibres our products are made from are renewable, recyclable, recycled and biodegradable. 76% of our raw material is derived from recycled fibre and the remainder is from sustainable sources. Our production process itself generates almost no waste. #### Risks and Opportunities Climate change poses different risks and opportunities within the value chain. Risks vary from extreme weather affecting our sites, to increasing costs for the emission of CO 2 and pressure on availability of raw materials. The circular economy is also an opportunity for our business as we seek to use resources efficiently. We are also investing in technology to reduce our energy demands. Finally, we are improving resource and energy efficiency when producing paper products and optimising the use of raw material residual streams, such as black liquor, in bioenergy production. As growing consumption increases pressure on resources, society places increased value on sustainable consumption and production, integrity of origin, recycling and avoiding litter and packaging waste. Fit-for-purpose packaging has never been more important. We are implementing forest certification and CoC certification to guarantee origin traceability. Using both recycled and virgin fibres in production, we intend to use this opportunity to deliver fit-for-purpose packaging with the best overall environmental footprint for each product. Our global assessment shows that only 12% of our paper production takes place in areas of fresh water scarcity, representing 4% of our water intake. The discharge of our water before or after treatment  To help ensure that our water use is correctly understood, we became a signatory to the CEO Water Mandate, and strive to understand local water related risks and needs so we can address them. Avoiding packaging waste by simply focusing on packaging weight might be seen as a quick way to decrease landfill. This, however, can lead to more waste resulting from greater damage to goods or poor material choices. We see an opportunity to create fit-for-purpose, sustainable packaging with mono-material solutions designed for optimal performance and recyclability. We are also working with the recycling and paper producing industries to keep our raw materials in the recycling loop. #### Our Commitments Our approach to the challenges of climate change and energy efficiency sets out to achieve more energy efficient production at our sites, lower energy use in manufacturing and a switch from fossil fuels to renewable and green sources wherever feasible. Our success is measured by our reduction in CO 2 emissions – we have targeted to reach net zero carbon emissions by 2050 and we have committed to a 55% reduction in Scope 1 and 2 fossil fuels based on CO 2 emissions in our mill system compared to 2005 levels by 2030. Our CO 2 emissions reduction  verified and we are committed to report in line with the TCFD recommendations, read more in the TCFD section on pages 68 to 85. At Smurfit Kappa, we have committed to promoting sustainable forest management at our sites and throughout our value chain. This means producing and sourcing our fibres, virgin or recycled, as CoC certified. We have committed to delivering over 95% of our packaging solutions sold as CoC certified to customers by 2025. As a processor of water, our focus is on the long-term improvement of the quality of water we discharge, and understanding the risks associated with water availability and its use in the areas where we operate. To increase our global and local impact, we will continue to invest in water treatment facilities and require the same standards from all our paper mills, regardless of their location. In 2020, next to  discharge intensity by 60% by 2025 compared to 2005, we also introduced an annual water intake reduction target of 1% annually. We have a strong focus on innovation. Our Better Planet Packaging initiative drives new efficiency solutions for our raw materials while keeping them in the recycling loop. As a significant operator in the circular economy in Europe and the Americas, we receive non fibre-based waste from the collection of  we work on recovering energy where a circular option cannot be found and as a final resort, landfill, with a target to have 30% less waste to landfill by 2025, compared to the reference year 2013. #### Highlights in 2022 #### Climate Change We continued investing in energy efficiency and CO 2 reduction during 2022. In October 2022, we announced an almost US$100 million investment in a sustainable biomass boiler at our paper mill in Cali, Colombia. This investment will lead to approximately a 6% reduction in CO 2 emissions for the Group globally. #### Forest In Q4 2022, we reached our target level of over 95% of our products sold as CoC certified for the first time and achieved a level of 94.3% for the full year. #### Water Four major water treatment plant investment projects in the Americas (Barbosa and Barranquilla in Colombia, Cerro  and helping to deliver against our 60% COD reduction target. We achieved a 36.9% global reduction of COD since 2005. #### Waste We handled a record volume of eight million tonnes of primarily post-consumer recycled paper at our recycling paper operations in 2022. Our collection rate of used products is 100% globally and our recycling rate at our mills is 88%. ![]() 56 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### Empowering People and Communities SKG aims to keep attracting and retaining the best employees. We have found that within our global organisation, people of different backgrounds and experiences will have different skills, perspectives and solutions, which in turn delivers better solutions and strategies for long-term business success. SKG is committed to managing its business in accordance with its declared values which recognise that good social citizenship, reflected in the manner in which it interacts with its employees, business partners and local communities, is an essential ingredient in creating and maintaining a sustainable future. SKG invests in employee empowerment ensuring human rights and dignity at work, through freedom of association, fair compensation and promotion of diversity in age, gender, sexual orientation, ethnic origin, disability or nationality. We take care that people from all these groups are attracted and retained, and we recruit and promote on merit. SKG values open, constructive, regular and timely dialogue with its employees and their representatives, particularly in all matters related to the business and the work environment including safety, working conditions, profitability, business outlook, investment decisions or the terms and conditions of employment. The European  assist in the development of an open two-way communication process for all employees and unions on all such matters, had three meetings during the year, with additional meetings held with the Select Committee of the EWC. Matters typically discussed at the EWC include employment opportunities, financial status, projected developments, business conditions, relocation, curtailment or business closures and health and safety.  the responsibility of line management who are supported by the Human Resource Managers at country, segment and Group level. #### Health, Safety and Wellbeing SKG has made the health and safety of its workforce an overriding value. We promote a health and safety culture founded on understanding, responsibility and accountability. We aim to continually improve our performance by adopting a structured systematic approach to the management of health and safety aspects supported by continual improvement of our systems. We regularly perform comprehensive health and safety verification and audit processes tailored specifically to our global operations.  and safety policies are consistent with those of the internationally recognised OHSAS 18001 occupational health and safety system specification. Every facility in SKG adopts a suite of good health and safety management systems designed to protect employees, visitors to its sites, contractors and the public at large from injury and ill-health. All performance reviews at plant, country, division and regional level include a review of recent health and safety performance. On a quarterly basis, the Board receives a progress report outlining key health and safety developments. #### Communities Beyond our employees, we have a deep commitment to our responsibilities to help the local communities in which we live and work, and by behaving as a good corporate citizen in accordance with the UN Declaration of Human Rights, and the Fundamental Principles and Rights at Work. By supporting local education, income generation, collaboration and participation, we can help to strengthen our communities. This is especially true in remote areas with limited opportunities for work. SKG is focused on breaking the cycle of poverty in the communities in which we are located. Using the UN SDGs as a guide, through our Open Community initiative and aligned to the Smurfit Kappa Foundation, we want to break down the barriers which lead to people in these areas being disadvantaged and remaining in poverty. We work to improve their situation through the lens of health and nutrition, basic care, and education. We believe, by working with key organisations in these areas, we can break the cycle of disadvantage, and help to change the expectations of underprivileged people. In addition to the direct involvement in our local communities by our operations, the Group provides all of the funding to the Smurfit Kappa Foundation. The vision for the Foundation is to positively impact the lives of underprivileged people in the communities where the Group operates, whilst ensuring our employees are involved from an early stage. We are proud of our 8,700 colleagues who were actively involved in supporting 173 initiatives across 24 countries during 2022, and who joined together to show how our purpose and culture can inspire a better tomorrow. #### Sustainability continued #### People Having engaged employees is critical for our business. We work safely with talented people in a global, culturally diverse organisation. ![]() 57Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### People Employee Strategy Health, Safety and Wellbeing Communities #### Priorities Smurfit Kappa unites some 48,000 people around the globe. Our people are at the heart of all our operations which includes those for whom we directly and indirectly create jobs, as well as those whose lives we impact. We can only achieve sustainable long-term success by developing  innovation. Our stakeholders expect us to provide a safe and healthy working environment and promote a healthy and safe lifestyle. We are committed to maintaining a safe and productive workplace in every part of our Company by minimising the risk of accidents, injury and exposure to health hazards for everyone on our sites. Our impact is not only on the people we work with. Our responsibilities extend beyond, to supporting local economies and livelihoods, especially in areas with limited opportunities for work and where we are significant employers. Risks and #### Opportunities A key challenge is attracting the right talent to ensure succession planning and leadership continuity, particularly for sites in rural locations, where the education needed may not be provided. Although one of the best known brands and top performers within our market, our awareness among the wider public to attract top talent is limited. This makes it even more important to gain recognition for our efforts in all aspects of sustainability: environmental responsibility, human rights, equal opportunities and fair pay – all important elements for us to be seen as a responsible, attractive employer for the best talent. As an industrial business operating in 36 countries, we are responsible for the health and safety of a large number of people. Our size creates a challenge to maintain the same standards for all. At Smurfit Kappa, we believe that health and safety extends from work to home, creating an opportunity to be acknowledged as a responsible employer. We engage our employees with policies and procedures to deliver, innovate and produce in a safe environment, and pay specific focus to changing behaviours.   we are privileged to operate. All around the world we actively support positive and lasting changes. If we were not concerned about our locations, we would risk damaging our license to operate. By supporting local education, income generation, collaboration and participation, we can strengthen communities and keep them attractive to our future workforce. The opportunity is to positively participate in communities, making it attractive for the best talent to join us. #### OurCommitments We want to empower all employees to help us achieve our business objectives. We therefore: • Offer employees at all levels the chance to broaden their skillsets and knowledge, fulfil their potential and improve their career prospects; • Stimulate and encourage employee engagement through regular, company-wide surveys and follow-up; • Compensate fairly, review performance regularly and offer gender neutral career opportunities and pay; and • Maintain a good faith  any unethical or illegal conduct. We are committed to maintaining a productive and safe workplace by minimising the risk of accidents, injury and exposure to health hazards for every employee and all sub-contractors. To measure our success, we have committed to reducing our TRIR by 5% annually. Across Smurfit Kappa, we are committed to the communities in which we operate, and our Foundation empowers people to improve their lives. Where the cycle of poverty and dependence is an issue, we aim to help end this, strengthening communities around the world. Between 2020 and 2025, we will donate €24 million to support social, environmental and community initiatives. As a responsible business, we support global human rights and labour standards, and check that our suppliers do so too. We are committed to ethical business standards; we work against corruption in all its forms, including extortion and bribery   #### Highlights in 2022 #### Employee Strategy We launched multiple initiatives to support Inclusion, Diversity and Equality in our Group during 2022, including an ID&E survey which resulted in receiving over 9,000 comments from our employees. #### Health, Safety and Wellbeing We continued a steady progress against our annual TRIR reduction target, achieving a 13.6% reduction in 2022 and a TRIR of 0.51. #### Communities We invested over 6,300 hours in volunteering and reached over 109,000 people through our social investments. ![]() 58 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### Impactful business #### Delivering to all Stakeholders SKG has specific policies on key areas of sustainability which are integral in improving future performance. These cover the Environment, Sustainable Forestry, Sustainable and Responsible Sourcing, Social Citizenship, and Health and Safety. These policies complement other policies in place, including: Code of Conduct incorporating the Speak Up Policy, Code of Ethics for Senior Financial Officers, Group Financial Reporting Guide, Group Treasury Policy, Financial Monitoring Policy, Treasury Compliance Programme and Competition Compliance Programme. #### Governance and Human Rights A report on Corporate Governance is detailed on pages 104 to 112 of this Annual Report and a Sustainability Governance review will be available in the Governance and Human Rights section of the 2022 SDR. SKG maintains a zero-tolerance policy regarding acts of bribery and corruption. We comply with all anti-bribery and anti-corruption laws in the countries where we conduct business, not only because it is our legal duty to do so, but also because it supports the commitment we make to conducting business ethically and honestly. SKG is subject to the provisions of the UK Modern Slavery Act. In keeping with the United Nations Guiding Principles on Business and Human Rights and the Fundamental Principles and Rights at Work developed by the International Labour Organisation, we are committed to the principles of respect, diversity, working fairly, fair pay, compensation and benefits which are also applied to our acquisition practices. They are maintained in every country in which we have a presence and are set out in our Code of Conduct, our Social Citizenship Policy Statement and our SDR. #### Innovation Our products are designed to prevent wastage  chains. We are committed to continually reducing waste and finding circular uses for our side-streams. Product development and innovation at SKG is data driven, with a proven scientific approach informing good business decisions. Data collected from our operations is combined with ongoing research and analysis of customer challenges and specific markets.  uniquely exclusive to SKG, enabling us to create the optimal fit-for-purpose paper-based packaging solutions for our customers, thereby adding value and helping them deliver on their sustainable goals. Furthermore,  value-added services: SupplySmart; ShelfSmart; and eSmart in the areas of supply chain optimisation, brand growth and e-commerce. #### Sustainable and Responsible Sourcing We want to sustainably grow our business and value chain. That means our materials, goods and services not only have the right quality and cost, but also must be sourced securely in a sustainable and responsible way as described in our Sustainable and Responsible Sourcing Policy and in alignment with the objectives of the 2030 UN SDGs. By developing more sustainable supply chains in collaboration with our suppliers, we can manage risks and costs, develop new revenue streams and add value across our stakeholder base. We have a sustainable and responsible audit programme which is an integral part of our sustainability strategy, covering areas of compliance, performance risk management, social responsibility and governance. SKG has thousands of suppliers globally and we consider that our suppliers are an integral part of the value chain of our business. We are committed to working with our suppliers in accordance with our sustainability principles and objectives. Maintaining transparent and long-term relationships with suppliers is essential for our business. This partnership approach ensures we can audit suppliers on their compliance with our sustainable supply chain standards and, where they fall short, work with them to improve sustainability in their business. By collaborating across our value-chain, we can deliver on our long-term sustainability commitments and our suppliers are key in achieving this. In recognition of the nature and concern about modern slavery, we expect our suppliers to ensure compliance with the Modern Slavery regulations. As a global group, our activities create sustainable value for our shareholders, customers, employees, suppliers and the communities where we operate. ![]() 59Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Impactful #### Business Governance and #### Human Rights Innovation Sustainable and #### Responsible Sourcing #### Priorities We operate in an environment with diverse legislation, regulations and cultures. Our Code of Conduct is the fundamental guideline for everybody at Smurfit Kappa from the Board of Directors, officers and employees as well as individuals, entities, agents  behalf – and we require the same from our suppliers. Our Code of Conduct expects adherence to ethical standards and commitment to quality and service. We have a responsibility to respond to the challenge facing the environment and society today – to inspire more sustainable packaging solutions. With circularity in mind at the design stage, and by optimising both primary and secondary packaging, we can deliver efficiencies in transport, emissions reductions, replace unsustainable packaging materials, storage and display and ultimately ensure recovery and recycling of our packaging products in recycling channels. Our value chain impact goes beyond SKG and we must extend our ethical and sustainable manner of conducting business to our supply chains, and to require our suppliers to continually improve their sustainable footprints. Risks and #### Opportunities Strong governance and a respect for human rights are key factors for our stakeholders when choosing investments, suppliers and employers. By complying with regulations, having effective corporate governance and a respect for human rights we can remain a reliable partner of choice for all our stakeholders. In addition it enables us to have a positive impact in the communities in which we operate. Lightweighting packaging is not always the most sustainable solution for our customers, and if done incorrectly can lead to more waste. We convert our data into intelligent design tools that help us measure the environmental impact of the product designs we offer to our customers. We see an opportunity to create fit-for-purpose, sustainable packaging with mono-material solutions designed for optimal performance and recyclability. We are also working with the recycling and paper producing industries to keep our raw materials in the recycling loop. In order to sustainably grow our business and attract customers and investors, our sourcing of material, goods and services must have the right quality and cost, but also be ethically and sustainably sourced. Working with and learning from our suppliers as well as sharing our sustainability knowledge, experience and expertise increases the sustainability of the whole value chain. #### OurCommitments We are committed to maintaining a strong governance framework by: • Making our Code of Conduct accessible for all stakeholders; • Ensuring our stakeholders adhere to the principles of the Code; and • Offering an independent and unbiased channel to raise concerns about breaches to the Code. We are committed to inspire more sustainable packaging through: • The development of our Better Planet Packaging initiative; • Using our data to improve our processes, products, supply chains, logistics and markets; and • Optimising the use of our InnoTools to support our innovation and design and leverage our global ideas. We are committed to working with our suppliers that adhere to our: • Sustainable and Responsible Sourcing Policy and Supplier Code of Conduct, are CoC certified  • Commit to our Modern Slavery Statement. We regularly audit our suppliers to ensure adherence to our key Sustainable and Responsible Sourcing principles. #### Highlights in 2022 Governance and #### Human Rights We introduced a new web design that makes our website more accessible for users with disabilities and impairments. #### Innovation In May 2022, we hosted a customer event on sustainable packaging, over 2,000 people attended the event. Sustainable and #### Responsible Sourcing We performed 121 sustainable sourcing auditing activities during 2022. ![]() 60 Smurfit Kappa Annual Report 2022 #### EU Taxonomy The European Commission presented a growth strategy based on environmental and sustainable development, the Green Deal in 2019. To direct investments towards sustainable projects and activities, the EU   to report on their Taxonomy-eligible activities in their 2021 reporting and to expand this for Taxonomy-aligned activities in their 2022 reporting. The first set of sustainable activity classification criteria, The Delegated Act on Sustainable Activities for climate change mitigation and adaptation, was published and adopted in 2021 and a Complementary Delegated Act was formally adopted on 9 March 2022 by the European Commission introducing further activities in certain   The Climate Delegated Act focuses on those economic activities and sectors that have the greatest potential to achieve the objective to mitigate and adapt to climate change. The four remaining environmental objectives are expected to be published in 2023. These are; sustainable use and protection of water and marine resources, transition to a circular economy, pollution prevention and control, and protection and restoration of biodiversity and ecosystems. The current Taxonomy classification criteria does not yet cover the core business activities of the Group. In producing paper-based packaging solutions and having 76% of its raw material from recycled sources, SKG has a strong position in the circular economy. We expect to be well positioned as the scope of the EU Taxonomy is widened to include further activities contributing towards this environmental objective. The information below is disclosed based on the information available in relation to the Taxonomy to date. The information is subject to refinement as the Taxonomy develops further, as practice emerges, as it is embedded within the Group and as we work through the other environmental objectives throughout 2023, when published. In its sustainable activity eligibility assessment, SKG has taken a careful approach and followed the best interpretation of the currently available guidelines of the European Commission. We acknowledge that the interpretation may change as common practice brings clarity to definitions on activities and the amount of eligible activities may grow. #### Taxonomy-Eligible #### and Aligned Activities In accordance with Article 8 of the Taxonomy Regulation, non-financial undertakings shall report on their EU Taxonomy-aligned activities for their reporting period 2022. The following  activities in accordance with the Taxonomy Regulation as either Taxonomy-non-eligible, Taxonomy-eligible but not aligned or Taxonomy-aligned: • Taxonomy-non-eligible economic activity: any economic activity that is not described in the Climate Delegated Act; • Taxonomy-eligible but not aligned economic activity: an economic activity that is described in the Climate Delegated Act and does not meet any or all of the technical screening criteria laid down in the Climate Delegated Act; and • Taxonomy-aligned (a sustainable activity): an eligible economic activity which meets three requirements: 1 Contributes substantially to one of the six environmental objectives. This means complying with technical criteria which measure the environmental performance of the activity. 2 Do no significant harm to any other  This means complying with criteria which measure the negative impact of the economic activity with respect to the other five environmental objectives.   This means that the economic activity complies with minimum safeguards related to the topics of human rights  corruption and bribery, taxation and fair competition. #### Taxonomy-Eligible Activities We have undertaken a thorough review involving all relevant divisions and functions through our full value chain. We concluded that our activities of providing paper-based packaging solutions are not covered by the Climate Delegated Act and consequently are Taxonomy-non-eligible. All other business activities have been assessed in line with the Climate Delegated Act and the outcome can be seen in the table on page 61. As our business practices are currently focused toward pursuing the environmental objective of climate change mitigation and to contribute substantially to the stabilisation of greenhouse gas emissions by avoiding or reducing them or by enhancing greenhouse gas removals, our assessment was focused on the Climate Delegated Act Annex I, climate change mitigation. By attributing our activities to one environmental objective only, we avoid double counting between multiple environmental objectives. #### Taxonomy-Aligned Activities SKG has further assessed each of its Taxonomy-eligible activities against the technical screening criteria and the minimum safeguard requirements and concluded that for 2022 the following activities are Taxonomy-aligned: • 1.3 Forest management; and • 5.5 Collection and transport of non- hazardous waste in source segregated fractions. The remainder of the activities are Taxonomy-eligible but not Taxonomy-aligned. Further details on the alignment assessments for the two aligned activities are outlined below. #### Substantial Contribution In order to determine if an economic activity is Taxonomy-aligned, it must contribute substantially to one or more of the environmental objectives. Our Colombian forestry operations, have met the substantial contribution criteria consisting of five sub criteria, including having an FSC ® certified Forest Management plan in place. Our recycling operations meet the substantial contribution criteria to the extent that all separately collected and transported non-hazardous waste segregated at source is intended for preparation for reuse or recycling operations. #### Do No Significant Harm For both activities a physical climate risk and vulnerability assessment was carried out pursuant to Appendix A of the Climate Delegated Act in line with the DNSH criteria for climate change adaptation. For each of the sites we conducted a preliminary screening of the climate-related risk hazards as mapped in Appendix A of the Climate Delegated Act. Those risks, which were found to be relevant, were further analysed in a climate risk and vulnerability assessment. In 2021 we carried out an extensive climate risk and opportunity assessment and its results have been further discussed in our TCFD report on pages 68 to 85. The project was supported by an expert third party, reviewing climate risks and opportunities for Smurfit Kappa and utilising a climate scenario modelling tool provided by TCS, Climanomics. #### Sustainability continued ![]() 61Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Sector Eligible Economic Activity Description of SKG Activities NACE Codes Forestry 1.3 Forest management Smurfit Kappa owns 68,000 hectares of forest of which 46,000 hectares are in commercial forestry use, and the remaining 22,000 hectares are dedicated for forest conservation. NACE A02.10 A02.20 A02.40 Energy 4.2 Electricity generation using  Smurfit Kappa corrugated sites are increasingly installing solar panels on their sites and operating them as part of their electricity mix. NACE D35.11 F42.22 Energy 4.13 Manufacture of biogas and biofuels for use in transport and of bioliquids Smurfit Kappa Piteå paper mill manufactures tall oil for use in transport. D35.21 Energy 4.15 District heating/cooling distribution Smurfit Kappa Piteå and in the future Smurfit Kappa Nettingsdorf are part of the local, municipality district heating system and send their excess heat to the municipality system. NACE D35.30 Energy 4.20 Cogeneration of heat/cool and power from bioenergy Smurfit Kappa virgin paper mills produce their energy increasingly from bioenergy. Some recycled paper mills use the biogas from their biological waste water treatment as part of the gas mix for energy generation. NACE D35.11 Water supply, sewerage, waste management and remediation 5.3 Construction, extension and operation of waste water collection and treatment 29 of our 35 paper mills operate their own waste water treatment plant. NACE E37 Water supply, sewerage, waste management and remediation 5.5 Collection and transport of non-hazardous waste in source segregated fractions Smurfit Kappa recycling operations organise collection and transport of paper and paper packaging waste in single fractions aimed at recycling of fibres. NACE E38.11 Construction and real estate 7.3 Installation, maintenance and repair of energy efficiency equipment Smurfit Kappa continually invests in installation, maintenance and repair of energy efficiency equipment in its paper mills and corrugated plants. NACE C33.12 Construction and real estate 7.4 Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached  Smurfit Kappa updates its forklift systems on its operating sites with electric forklifts and their charging stations. NACE C17 The analysis was conducted across all  analysis and modelling was completed under different Representative Concentration   These model the potential impact on assets from physical and transitional risks in 10-year increments through to 2100. The analysis focused on the critical assets impacted across the RCP scenarios within the period 2030-2040 and 2040-2050, this period is most critical for decision making in the near to medium-term. We have been preparing for climate-related risks at our forestry operations for over 10 years. This includes research on natural forests and understanding how tree species adapt to changing climate patterns. This has been included in our FSC/PEFC certified long and short-term forest management plans. We manage our forest plantations against FSC certified Forest Management Plans that set the basis of sustainable forest management. A thorough assessment against the technical screening criteria, including DNSH on sustainable use and protection of water and marine ecosystems, transition to a circular economy, pollution prevention and control as well as protection and restoration of biodiversity and ecosystems concludes that the activity is Taxonomy-aligned. For the recycling operations, we have assessed the DNSH criteria for transition to a circular economy in addition to climate change adaptation. The assessment has been based on compliance with EN643:2014, the European list of standard grades of paper and board for recycling. #### Minimum Safeguards The minimum safeguards include all procedures implemented to ensure that economic activities are carried out in alignment with the OECD Guidelines for Multinational  Guiding Principles on Business and Human  and rights set out in the eight fundamental conventions identified in the Declaration of the International Labour Organization on Fundamental Principles and Rights at Work and The International Bill of Human Rights. In the absence of further guidance from the European Commission, we based our minimum safeguards assessment on the  published by the Platform on Sustainable  The scope of the minimum safeguards covers the topics of human rights (including labour  taxation and fair competition. We have implemented adequate policies and processes to prevent negative impacts. We also monitor to ensure whether our processes are effective. We disclose transparently on all these items in this Report as well as our separate Sustainable Development Report 2022 (to be published at  ![]() 62 Smurfit Kappa Annual Report 2022 #### Turnover, Capital Expenditure #### (‘CapEx’) and Operating Expenditure #### (‘OpEx’) KPIs and our Accounting #### Policies  include the turnover KPI, the CapEx KPI and the OpEx KPI. For the financial year ended 31 December 2022, the KPIs have to be disclosed in relation to our Taxonomy- aligned, Taxonomy-eligible but not aligned and Taxonomy-non-eligible economic activities as required by Annex II of the Disclosure Delegated Act. The specification of the KPIs is determined in accordance with Annex I of the Article 8 Delegated Act and presented in the tables on pages 62 to 67. As we are not performing any of the activities related to natural gas and nuclear energy, we are not disclosing the dedicated templates introduced by the Complementary Delegated Act. #### Turnover The turnover-aligned KPI is defined as   Similarly, the turnover-eligible but not aligned KPI is defined as Taxonomy-eligible but not    as reported in the Consolidated Income Statement. The accounting policy applicable for revenue recognition is addressed in detail in Note 2 to the Consolidated Financial Statements.  defined as the turnover derived from products and services associated with Taxonomy-aligned economic activities: • Activity 1.3 Forest management. We generate turnover from the sale of roundwood from forests owned by Smurfit Kappa Colombia to third parties. • Activity 5.5 Collection and transport of non-hazardous waste in source segregated fractions. We generate turnover from the sale of recovered fibre to third parties. Double counting was avoided by only allocating revenue from third parties once to an economic activity. #### Sustainability continued Proportion of Turnover from Products or Services Associated with Taxonomy-aligned Economic Activities – Disclosure Covering Year 2022 Economic Activities Code(s) Absolute Turnover Proportion of Turnover Substantial contribution criteria DNSH criteria (‘Does Not Significantly Harm’) Minimum Safeguards Taxonomy-aligned Proportion of Turnover, 2022 Enabling/Transitional Activity Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems EUR million % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent E/T A. TAXONOMY-ELIGIBLE ACTIVITIES % A.1. Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 4 0.0% 100% N/A Y Y Y Y Y Y 100.0% Collection and transport of non-hazardous waste in source segregated fractions 5.5 219 1.7% 100% N/A Y Y 100.0% Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1) 223 1.7% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Electricity generation using concentrated solar power (CSP) technology 4.2 0 0.0% Manufacture of biogas and biofuels for use in transport and of bioliquids 4.13 0 0.0% District heating/cooling distribution 4.15 0 0.0% Cogeneration of heat/cool and power from bioenergy 4.20 0 0.0% Construction, extension and operation of waste water collection and treatment 5.3 0 0.0% Installation, maintenance and repair of energy efficiency equipment 7.3 0 0.0% Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 0 0.0% Total (A.1 + A.2) 223 1.7% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activities (B) 12,592 98.3% Total (A + B) 12,815 100.0% ![]() 63Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Proportion of Turnover from Products or Services Associated with Taxonomy-aligned Economic Activities – Disclosure Covering Year 2022 Economic Activities Code(s) Absolute Turnover Proportion of Turnover Substantial contribution criteria DNSH criteria (‘Does Not Significantly Harm’) Minimum Safeguards Taxonomy-aligned Proportion of Turnover, 2022 Enabling/Transitional Activity Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems EUR million % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent E/T A. TAXONOMY-ELIGIBLE ACTIVITIES % A.1. Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 4 0.0% 100% N/A Y Y Y Y Y Y 100.0% Collection and transport of non-hazardous waste in source segregated fractions 5.5 219 1.7% 100% N/A Y Y 100.0% Turnover of environmentally sustainable activities (Taxonomy-aligned) (A.1) 223 1.7% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Electricity generation using concentrated solar power (CSP) technology 4.2 0 0.0% Manufacture of biogas and biofuels for use in transport and of bioliquids 4.13 0 0.0% District heating/cooling distribution 4.15 0 0.0% Cogeneration of heat/cool and power from bioenergy 4.20 0 0.0% Construction, extension and operation of waste water collection and treatment 5.3 0 0.0% Installation, maintenance and repair of energy efficiency equipment 7.3 0 0.0% Turnover of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 0 0.0% Total (A.1 + A.2) 223 1.7% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Turnover of Taxonomy-non-eligible activities (B) 12,592 98.3% Total (A + B) 12,815 100.0% ![]() 64 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### CapEx The CapEx-aligned KPI is defined as   the CapEx-eligible but not aligned KPI is defined as Taxonomy-eligible but not aligned    to tangible and intangible assets before depreciation, amortisation and any re- measurements, including those resulting from revaluations and impairments and excluding fair value changes. It includes acquisitions of tangible fixed assets, intangible fixed assets, biological assets and right-of-use assets. Additions resulting from business combinations are also included. Goodwill is not included in CapEx. For further details on our accounting policies regarding CapEx, see Note 2 to the Consolidated Financial Statements. Our total CapEx can be reconciled to our Consolidated Financial Statements, see the additions and acquisitions lines, excluding additions to goodwill, in Notes 11, 12, 13 and 16 to the Consolidated Financial Statements. For the eligibility assessment of CapEx, we have identified the relevant purchases and allocated them to only one economic activity in the Climate Delegated Act ensuring no capital expenditure is considered more than once. The numerator consists of the following categories of Taxonomy-eligible CapEx: a. CapEx related to assets or processes that are associated with Taxonomy-aligned  We consider that assets and processes are associated with Taxonomy-aligned economic activities when they are essential components necessary to execute an economic activity. In the financial year ended 31 December 2022 all CapEx related to the following areas is considered in the numerator of the CapEx KPI: • Activity 1.3. Forest management. The CapEx is linked to investments related to sustainable forest management, infrastructure and research. • Activity 5.5. Collection and transport of non-hazardous waste in source segregated fractions. The CapEx is linked to investments in recovered paper collection infrastructure. b. CapEx that is part of a plan to upgrade a Taxonomy-eligible economic activity to become Taxonomy-aligned or to expand a Taxonomy-Aligned economic activity  31 December 2022 we had no CapEx plans as defined by the Taxonomy Regulation and therefore no amounts from this category are allocated to the numerator. c. CapEx related to the purchase of output from Taxonomy-aligned economic activities and individual measures enabling certain target activities to become low-carbon or to   CapEx spend such as solar panels and the upgrade of waste water treatment plants and bio-mass boilers. Proportion of CapEx from Products or Services Associated with Taxonomy-aligned Economic Activities – Disclosure Covering Year 2022 Economic Activities Code(s) Absolute CapEx Proportion of CapEx Substantial Contribution Criteria DNSH Criteria (‘Does Not Significantly Harm’) Minimum Safeguards Taxonomy-aligned Proportion of CapEx, 2022 Enabling/Transitional Activity Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems EUR million % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent E/T A. TAXONOMY-ELIGIBLE ACTIVITIES % A.1. Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 13 1.2% 100% N/A Y Y Y Y Y Y 100.0% Collection and transport of non-hazardous waste in source segregated fractions 5.5 12 1.1% 100% N/A Y Y 100.0% Capex of environmentally sustainable activities (Taxonomy-aligned) (A.1) 25 2.3% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Electricity generation using concentrated solar power (CSP) technology 4.2 1 0.1% Manufacture of biogas and biofuels for use in transport and of bioliquids 4.13 9 0.8% District heating/cooling distribution 4.15 0 0.0% Cogeneration of heat/cool and power from bioenergy 4.20 6 0.5% Construction, extension and operation of waste water collection and treatment 5.3 16 1.5% Installation, maintenance and repair of energy efficiency equipment 7.3 14 1.3% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0 0.0% Capex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 46 4.2% Total (A.1 + A.2) 71 6.5% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Capex of Taxonomy-non-eligible activities (B) 998 93.5% Total (A + B) 1,069 100.0% ![]() 65Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Proportion of CapEx from Products or Services Associated with Taxonomy-aligned Economic Activities – Disclosure Covering Year 2022 Economic Activities Code(s) Absolute CapEx Proportion of CapEx Substantial Contribution Criteria DNSH Criteria (‘Does Not Significantly Harm’) Minimum Safeguards Taxonomy-aligned Proportion of CapEx, 2022 Enabling/Transitional Activity Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems EUR million % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent E/T A. TAXONOMY-ELIGIBLE ACTIVITIES % A.1. Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 13 1.2% 100% N/A Y Y Y Y Y Y 100.0% Collection and transport of non-hazardous waste in source segregated fractions 5.5 12 1.1% 100% N/A Y Y 100.0% Capex of environmentally sustainable activities (Taxonomy-aligned) (A.1) 25 2.3% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Electricity generation using concentrated solar power (CSP) technology 4.2 1 0.1% Manufacture of biogas and biofuels for use in transport and of bioliquids 4.13 9 0.8% District heating/cooling distribution 4.15 0 0.0% Cogeneration of heat/cool and power from bioenergy 4.20 6 0.5% Construction, extension and operation of waste water collection and treatment 5.3 16 1.5% Installation, maintenance and repair of energy efficiency equipment 7.3 14 1.3% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0 0.0% Capex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 46 4.2% Total (A.1 + A.2) 71 6.5% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Capex of Taxonomy-non-eligible activities (B) 998 93.5% Total (A + B) 1,069 100.0% ![]() 66 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### OpEx The OpEx-aligned KPI is defined as   Similarly, the OpEx-eligible but not aligned KPI is defined as Taxonomy-eligible but not   The OpEx denominator consists of direct non-capitalised costs that relate to research and development, building renovation measures, short term leases, repair and maintenance and upkeep relating to the day-to-day servicing of assets of property, plant and equipment. This does not include the expenditure relating to the day-to-day operation of property, plant and equipment such as: raw materials, cost of employees operating the machine and the cost of energy. The cost includes: • Research and development expenditure recognised as an expense during the reporting period and disclosed in Note 5 to the Consolidated Financial Statements. This includes all non-capitalised expenditure that is directly attributable to research or development activities. • The amount of non-capitalised short-term leases as disclosed in Note 12 to the Consolidated Financial Statements. • Maintenance and repairs and other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment. This also includes building renovation costs. See Note 5 to the Consolidated Financial Statements. With regards to the numerator, we refer to the explanation provided under CapEx on page 64. Proportion of OpEx from Products or Services Associated with Taxonomy-aligned Economic Activities – Disclosure Covering Year 2022 Economic Activities Code(s) Absolute OpEx Proportion of OpEx Substantial Contribution Criteria DNSH Criteria (‘Does Not Significantly Harm’) Minimum Safeguards Taxonomy-Aligned Proportion Of OpEx, 2022 Enabling/Transitional Activity Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems EUR million % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent E/T A. TAXONOMY-ELIGIBLE ACTIVITIES % A.1. Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 4 0.8% 100% N/A Y Y Y Y Y Y 100.0% Collection and transport of non-hazardous waste in source segregated fractions 5.5 9 1.5% 100% N/A Y Y 100.0% Opex of environmentally sustainable activities (Taxonomy-aligned) (A.1) 13 2.3% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Electricity generation using concentrated solar power (CSP) technology 4.2 0 0.0% Manufacture of biogas and biofuels for use in transport and of bioliquids 4.13 0 0.0% District heating/cooling distribution 4.15 0 0.0% Cogeneration of heat/cool and power from bioenergy 4.20 3 0.5% Construction, extension and operation of waste water collection and treatment 5.3 4 0.7% Installation, maintenance and repair of energy efficiency equipment 7.3 1 0.2% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0 0.0% Opex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 8 1.4% Total (A.1 + A.2) 21 3.7% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Opex of Taxonomy-non-eligible activities (B) 534 96.3% Total (A + B) 555 100.0% ![]() 67Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Proportion of OpEx from Products or Services Associated with Taxonomy-aligned Economic Activities – Disclosure Covering Year 2022 Economic Activities Code(s) Absolute OpEx Proportion of OpEx Substantial Contribution Criteria DNSH Criteria (‘Does Not Significantly Harm’) Minimum Safeguards Taxonomy-Aligned Proportion Of OpEx, 2022 Enabling/Transitional Activity Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems Climate Change Mitigation Climate Change Adaptation Water and Marine Resources Circular Economy Pollution Biodiversity and Ecosystems EUR million % % % % % % % Y/N Y/N Y/N Y/N Y/N Y/N Y/N Percent E/T A. TAXONOMY-ELIGIBLE ACTIVITIES % A.1. Environmentally sustainable activities (Taxonomy-aligned) Forest management 1.3 4 0.8% 100% N/A Y Y Y Y Y Y 100.0% Collection and transport of non-hazardous waste in source segregated fractions 5.5 9 1.5% 100% N/A Y Y 100.0% Opex of environmentally sustainable activities (Taxonomy-aligned) (A.1) 13 2.3% A.2 Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) Electricity generation using concentrated solar power (CSP) technology 4.2 0 0.0% Manufacture of biogas and biofuels for use in transport and of bioliquids 4.13 0 0.0% District heating/cooling distribution 4.15 0 0.0% Cogeneration of heat/cool and power from bioenergy 4.20 3 0.5% Construction, extension and operation of waste water collection and treatment 5.3 4 0.7% Installation, maintenance and repair of energy efficiency equipment 7.3 1 0.2% Installation, maintenance and repair of charging stations for electric vehicles in buildings (and parking spaces attached to buildings) 7.4 0 0.0% Opex of Taxonomy-eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (A.2) 8 1.4% Total (A.1 + A.2) 21 3.7% B. TAXONOMY-NON-ELIGIBLE ACTIVITIES Opex of Taxonomy-non-eligible activities (B) 534 96.3% Total (A + B) 555 100.0% ![]() 68 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD Climate change is one of the greatest challenges facing society. We understand the challenges and the changes that need to be made and we are strongly committed to making a positive contribution, building on our well-established climate-related actions and disclosures. Reporting in line with the TCFD framework is now an established part of our public disclosure. As recommended by the TCFD, we use climate change risk assessment and scenario analysis as tools to better understand the potential impact of climate risks and opportunities on our business. SKG puts sustainability at the heart of how we think and act in everything we do, driven by our values, vision and our purpose, to create, protect and care. We use a combination of long-term targets, interim targets and continued action today. This multi-horizon approach ensures we look beyond our continued delivery today and also think and act strategically on what is required to deliver a just transition to a low-carbon, circular economy in line with the Paris Agreement. Our ambition is to have at least Scope 1, 2 and 3 net zero emissions by 2050, with a 55% reduction in relative CO 2 emissions in Scope 1 and 2 by 2030. The challenge of achieving the Paris Agreement and the UN 2030 Sustainable Development Goals will require strong and concerted action to deliver on the increasing levels of commitments across all sections of society. 2022 saw a heightened focus on climate, with many parts of the world experiencing once-in-a-lifetime floods, droughts and record breaking temperatures together with a global energy crisis. These events all confirm the need for solutions and were underlined by the recent Inter Governmental Panel on Climate  working groups reports published in February and April of 2022. The working groups covered areas such as ecosystems, biodiversity, and human communities at global and regional levels. They reviewed the vulnerabilities, capacities and limits of the natural world and human societies ability to adapt to climate change. The reports also provided an updated global assessment of climate change mitigation progress and pledges. Both  demonstrating Society is not doing enough to deliver on its commitments. Since May 2020, SKG has been a supporter of the TCFD and we included our first TCFD disclosures in the 2020 Annual Report. In 2021 and 2022 we have significantly developed our disclosure as outlined below which is in line with recent legislative updates in the UK and is consistent with all the TCFD recommendations and recommended disclosures. In completing this disclosure, we have provided the recommended disclosures in terms of: •  •  •  •  Our disclosures below should be read in conjunction with the 2022 SDR, the publication of which is aligned with this Annual Report and our Carbon Disclosure  made by the Group in 2022. Further information can be found on our website at smurfitkappa.com/sustainability. Our progress and evolution of reporting in line with the TCFD recommendations includes but is not limited to: • Increasing the understanding across our business of climate risks and opportunities; • In 2022, we commenced a process to complete additional scenario analysis with an expectation to have the output data for review in 2023; • During 2022, we initiated our multi-year water risk assessment process, which will help us develop our understanding of the risks specific to water and also improve our water stewardship;Our plans for beyond 2030 advanced with progress across a number of exciting collaborative projects such as the successful trial of hydrogen in France and the continued investigation of geo-thermal energy in the Netherlands; • In this Annual Report, we are disclosing our taxonomy alignment, building on the taxonomy eligibility we disclosed in our 2021 report; and • We also commenced our double materiality assessment project. This will allow the Group to have a greater understanding of the impact of environmental issues on  environment and we expect this to be finalised before the reporting obligations of the EU Corporate Sustainability Reporting Directive comes into effect. In addition, as part of our reporting process, we have considered the recommendations outlined in the FRC report, “CRR Thematic review of TCFD disclosures and climate in the financial statements”. We expect that certain aspects of our disclosure will further develop and evolve over time. We expect over the course of 2023 and beyond to: • Continue to develop our strategy towards net zero; • Carry out additional scenario analysis using new and improved approaches and datasets; • To incorporate insights from water risk assessments carried out during the year; • Initiate the project of aligning our Science  • Continued evolution of our Scope 3 understanding and strategy. #### Task Force on #### Climate-Related Financial #### Disclosures (‘TCFD’) ![]() 69Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Board Oversight on Climate Change #### Board Level The Board is primarily responsible for the long-term success of the Group, for setting  and control of the Group and for reviewing  risk management. The consideration of sustainability, including climate change, is continuously developing as the focus on climate change increases. Given the nature of our business and our strong sustainability credentials, this has been a consideration of the Board for many years. More recently this has evolved further with specific consideration given to climate change. In recognition of the importance of sustainability in general and climate change in particular, the Board formed a dedicated Sustainability Committee in 2019, the responsibilities of which are outlined on pages 70 and 141. During 2022, the Board was engaged across a number of strategic investments including the largest CO 2  history in Cali, Colombia. This investment of almost US$100 million will significantly reduce emissions in Colombia through a sustainable biomass boiler which will reduce  2 emissions by approximately 6%. The Board of Directors visited the site of this investment during 2022 prior to its announcement. This project  to acting now to deliver on our longer-term commitments. As a principal risk for the Group, climate change is reviewed regularly at both Board and Executive level. Climate change has been recorded as a material topic for the Group  competence in climate change in recent years has resulted in the development of a Group climate change risk register, detailed scenario analysis and an ongoing development of the awareness across the business of both climate change risks and opportunities. One of the key areas where we can manage our impact on climate change is through mitigating actions which are focused predominantly on CO 2 emission reductions. This can be achieved by using energy more efficiently, generating energy in a more efficient way, by investing in renewable energy and considering and trialling new and emerging technologies as we address the challenges of achieving net zero. This is a strategic issue and a standing item at operational review meetings. It is an important element considered in certain major capital expenditure projects and in our overall corporate strategy and business plans of relevant units. It is also part of our overall corporate purpose, vision and strategy which has sustainability at its core. We have set both interim and long-term targets related to climate change and our interim 2030 targets have been approved by the SBTi as in line with the Paris Agreement. As part of our equity raise in 2020 and its strategic planning, the Group identified significant investment opportunities to deliver on our interim sustainability KPIs and when relevant, the opportunity to reduce CO 2 emissions is considered as part of our acquisitions and divestitures processes.  sustainability credentials was demonstrated by the publication of our 15 th Sustainability Development Report in April and the publication of our first Green Bond Allocation and Impact Report, published in September, both independently assured.  independent externally facilitated evaluation of the Board and the Board Committees is required to take place every three years. #### Governance SKG plc Board of Directors Group Executive Committee Sustainability Committee Group Chief Sustainability Officer Remuneration Committee Executive Sustainability Committee Audit Committee Executive Risk Committee Nomination Committee #### Our Governance Structure Sustainability Working Group Board Level Executive Level Management Level #### Board level ![]() 70 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD continued An independent externally facilitated evaluation of the Board and its Committees, including the Sustainability Committee, was undertaken in 2022. Further details on this evaluation are included in the Sustainability Committee Report on page 143. The diagram on page 69 shows our governance structure, including sustainability which covers climate-related issues. #### Sustainability Committee The Sustainability Committee has responsibility for providing strategic guidance and support to management in the implementation of the Sustainability Strategy for the Group, which is based on three key strategic sustainability and corporate responsibility pillars; People, Planet and Impactful Business. The Sustainability Committee updates the Board at each meeting on the matters considered on their agenda, including climate change. In addition, the Committee is responsible for: • Reviewing and approving the annual Sustainable Development Report and the Sustainability section of the Annual Report; • Reviewing TCFD compliance and reporting of climate-related financial information; • Reviewing the climate risks and opportunities of the Group including consideration of emerging and mitigating actions; and • Engagement with the workforce on behalf of the Board as required by the UK  In 2022, the Committee met six times and covered a broad range of sustainability topics at these meetings. In addition, the Chair, the Group CEO and the Group CFO are regular attendees at meetings of the Sustainability Committee. The key topics included: a comprehensive review of climate change  progress on its key sustainability KPIs, workforce engagement, regulatory updates and our decarbonisation strategy which was supported by expert third parties. In 2021, building on the detailed review of the World   which highlighted key focus areas, the Group developed an action plan. During 2022, the Sustainability Committee reviewed the progress made against this action plan and it was further considered and updated. The Sustainability Committee receives updates from management on various matters relating to sustainability and climate change at each meeting.   relevant sustainability related matters are communicated and discussed at the Board committee level as appropriate. The Group CSO reports to the Group Chief Financial Officer  engagement across the Group, including the  management presentations and working groups. This interaction enables a greater understanding of both the opportunities and risks in sustainability and identification of areas that require support. The intention is to continue to build understanding across the leadership team and to cascade this knowledge and understanding throughout our operations. #### Non-executive Directors Non-executive Directors also engage with the Sustainability Committee. Since the formation of the Sustainability Committee, the Chair of the Board has been a regular attendee at meetings of the Sustainability Committee. #### Audit Committee The Audit Committee and the Board, in conjunction with senior management, review the key business risks faced by the Group. In reviewing and considering the principal risks of the Group, any emerging risk is also considered. Climate change was elevated to a principal risk of the Group having been an emerging risk for a number of years, as a result of changes in weather patterns which could result in catastrophic events which in turn could give rise to business interruption and increases in the cost of raw materials. #### Remuneration Committee The Remuneration Committee has responsibility for continually reviewing the ongoing appropriateness and relevance of the Remuneration Policy. At the last Remuneration Policy review in 2020, sustainability metrics were considered and included in the short-term and long-term incentives. The first vesting of the shares in relation to the long-term incentive plan, the Performance Share Plan, which has a number of climate-related performance measures, will occur in 2024. The ESG metrics within the Performance Share Plan will cumulatively constitute 15% of the targets for this award. As outlined in the Remuneration Report on page 121, these measures include CO 2 reduction, water discharge reduction and waste to landfill reduction targets. #### Nomination Committee The Nomination Committee is responsible for the succession planning of the Board, and as part of this process, experience and knowledge of sustainability is a consideration in new appointments. This was clearly evident in the appointments of Kaisa Hietala and Lourdes Melgar to the Board in 2020. #### Board Level Knowledge and Training At Board level, there is strong sustainability and climate-related expertise. Lourdes Melgar is recognised for her expertise in the areas of energy, sustainability and public policy. Kaisa Hietala has a wealth of strategic and operational experience and in particular a strong commitment to, and experience in, sustainability, helping companies to transform the challenges of environmental megatrends into business opportunities and growth.  the area of sustainability continue to bring additional strength to and complements the knowledge and international experience of Jørgen Buhl Rasmussen and Anne Anderson. It is the intention to continue to update the skills of the Board in the area of climate change. In 2022, third party experts presented to the Sustainability Committee on decarbonisation strategies for industrial companies, the potential routes available to the Group and provided examples of how other industrial companies had developed de-carbonisation strategies. The Sustainability Committee also has regular updates and presentations from the Group CSO on various matters including climate change and associated regulation. #### Board level continued ![]() 71Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Management Oversight #### on Climate Change #### Group Executive Committee The development and implementation of the  policies are managed by the Group Executive  CEO. A large part of the Excomm are also members of the Executive Sustainability Committee. #### Executive Sustainability Committee #### (‘the Sustainability Excomm’) The Sustainability Excomm consists of relevant members of the Excomm who have responsibilities directly connected to sustainability matters. This Sustainability Excomm ensures the delivery of the sustainability strategy of the Group throughout the business. The Sustainability Excomm is led by the Group CSO. Certain climate change related issues are governed by some of the members of this Committee as part of their direct operational responsibilities. In 2022, the Sustainability Excomm was extended to reflect a broader geographical representation with the addition of a member from the Americas operational Executive Committee. #### Executive Risk Committee This committee reviews and assesses the Group Risk Register and identifies the principal risks and emerging risks. The Group Risk Register is then reviewed by the Audit Committee and the Board. Climate change was elevated to a principal risk of the Group from an emerging risk. In addition, the growing number of environmental and climate change laws and regulations continues to be a principal risk of the Group. Details of these risks are included in the Risk Report on pages 32 to 36 and are subject to  #### Executive Directors The Group CEO through his overall responsibility for the day-to-day oversight of  of the Group strategy and policies is directly responsible for actions governing climate change. He is also responsible for ensuring  are instilled throughout the Group. The Group CEO is also a Director of the Board and leads the Excomm. In 2022, the Group CEO and Group CFO presented a number of climate change related projects to the Board, such as the Cali biomass project as well as projects aimed at meeting best practices in terms of water treatment and reduction of waste to landfill. The Group CFO is a member of Accounting  transform finance to make sustainable  and Group CFO are regular attendees of The Board Sustainability Committee. #### Group Chief Sustainability Officer The Group CSO is a member of the Excomm and is focused on delivering the sustainability strategy for the Group, maintaining our strong governance framework, and embracing new strategic opportunities from both a capital markets perspective and across all stakeholders. Climate change is a key element of all aspects of his role. During 2022, the Group CSO engaged with colleagues and presented on both the opportunities and risks of sustainability across the Group, with climate a key consideration.    and includes heads of sustainability from across industries and regions and where best practice is shared in the broader sustainability area.  sustainability team attended training provided by the United Nations Environmental Programme on TCFD reporting focused on ensuring best practice in reporting and disclosure. Greenhouse Gas  by members of the sustainability team on carbon accounting. #### Executive Level #### Management Level #### Sustainability Working Group The Sustainability Working Group consists of relevant representatives from operations and  expertise and stakeholder interaction relating to sustainability and climate change. The Sustainability Working Group monitors the progress and achievements of targets across all key areas, supports the Group operations in assessing and managing sustainability/climate change strategies and collects and analyses data. The group which is led by the Group CSO promotes our sustainability targets among our customers and suppliers. In addition, members of the group coordinate the sustainability roles with responsibility for local implementation of the sustainability strategy within our business operations. During 2022, it held four meetings, discussing topics such as: climate change, SBTi targets approval, EU Taxonomy, net zero transition planning, decarbonisation projects, emerging technologies, new regulations, human rights, CoC and supply chain and due diligence considerations. The expectations of our stakeholders is that we approach climate change responsibly and provide regular, detailed progress reports. Our management and workforce are aware of the areas that are important through our continual multi-level engagement with our customers, investors, employees, communities and other relevant stakeholders. Sustainable businesses encourage diverse views, and we provide opportunities for dialogue with the many stakeholders who impact our business. In our experience, this exchange of ideas and our end-to-end approach to sustainability delivers benefits for everyone. Our goal is to be the most sustainable paper-based packaging solutions company globally. To achieve this, we believe it is important to share our sustainability experience with our customers, suppliers and the wider industry. This engagement includes: • Organising meetings and round-table discussions on sustainability with our stakeholders; • Collaborating in research and development projects to decarbonise the industry such    • Participating in discussions within and outside our industry through our membership of Cepi, FEFCO, 4evergreen initiative and World Business Council for   Water Mandate; • Participating across external benchmarking bodies, such as CDP, EcoVadis, FTSE4Good and SEDEX surveys, and benchmarking against UN 2030 Sustainable Development Goals; and • Participating in the development of Forest Certification as a member of FSC and PEFC. ![]() 72 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD continued Our Investor Relations team are in continuous dialogue with our investors in relation to  priorities in this area. As part of this continuous dialogue with investors, we engage with shareholders (both current and   change and whether there are any areas of focus or improvement required. On an ongoing basis, discussions with investors provide guidance on areas requiring focus across the broader sustainability agenda. This has increasingly highlighted the need for emissions targets to be approved as science-based and has also highlighted the need for enhanced disclosure of our climate change risks and opportunities. In addition, we also perform regular desktop  agenda (e.g. letters from investors and investment managers about their expectations  The Group is aware that the investment community is facing pressure to eliminate green-washing and this often means requesting greater disclosure on the ESG impacts of their investments. Smurfit Kappa takes pride in its strong reporting credentials with 16 years of public disclosure and reporting on sustainability, independently assured since 2009. This is further supported by strong performances across third party rating companies such as MSCI, ISS ESG and Sustainalytics. Our emissions reduction targets have been validated by SBTi as in line with the Paris Agreement. We strive to be the sustainability leader in our sector and to match our long-term ambition with action and delivery today. Our customer facing teams regularly engage with our customers in relation to material sustainability challenges including climate change. For many of our customers their carbon footprint is primarily Scope 3 emissions and so we can often have significant impact on their decarbonisation strategies through our leading sustainable packaging solutions and through our own emissions reduction delivery. Our customers are increasingly looking for supply-chain partners to engage with them on delivering sustainable products with lower carbon footprints. Smurfit Kappa has a robust customer engagement process to assist in demonstrating the value of its sustainability approach and successes. We use data to generate accurate Life Cycle Assessments and generate the most sustainable packaging solutions for our customers. Similar to the approach with investors we generate greater understanding of our customers sustainability and climate needs through ongoing engagement and dialogue on data requirements and a focus on issues important to them. This all forms part of our broader stakeholder engagement. During 2022, we collaborated across our customer base on climate change related matters such as renewable energy and emerging technology for energy intensive industries. Delivering customer focused sustainability programmes such as the Better Planet Packaging event in May which had over 2,000 attendees. During 2022, the Group also engaged with the Consumer Goods Forum where many of our customers and their customers retailers convene. The Group expects to become a member of this forum in 2023 which will further enhance its understanding of its customers key business challenges. Key Milestones #### Our Sustainability #### Journey Smurfit Kappa continues to build on its many years of achievements. Set out below are examples, dating back to the first SDR in 2007,  objective to drive change and nurture a greener and bluer planet. 2005 Baseline of our CO 2 emissions target. 2007 First sustainability report. New biomass boiler in Sweden. 2008 Investments in CHP facilities and bio-fuel investments. New Black liquor recovery boiler installed in Cali, Colombia. 2009 External assurance of our annual SDR commenced. 2010 Set 2020 target of 20% reduction in relative CO 2  Commissioned biomass boiler in France. Globally our mill system cut relative CO 2 emissions by 5.4% year-on-year. 2011 Globally our mill system cut relative CO 2 emissions by more than 12% since 2005. This delivered against a backdrop of the EU publishing its roadmap towards a low-carbon economy by 2050. 2012 Globally our mill system cut relative CO 2 emissions by 3.1% year-on-year. Supported by investments such as a new shoe   2013 2020 target of 20% reduction achieved with a 21% reduction by the end of 2013. 2014 New relative emissions reduction target of 25% reduction set for 2020.  compared to 2005. 2015  for its first full year. Finalised certification of our production sites according to FSC/PEFC or SFI CoC standards. 2016   Globally our mill system cut relative CO 2 emissions by 22.9% against a 2005 baseline. #### Management Level continued ![]() 73Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Strategy – Climate Change #### Overview and Background SKG is committed to sustainability throughout our value chain. Our circular business model drives positive change from the responsible sourcing of renewable raw materials to the sustainable production of recyclable, biodegradable and fit-for-purpose packaging solutions. The strategic environmental priorities under our Planet pillar are climate change, forest, water and waste. Our decarbonisation strategy is focused on minimising energy use and moving from fossil fuels to low-carbon, renewable sources. Our focus is on increasing our own low-carbon and energy efficient production systems, increasing our use of low-carbon renewable  footprints and decreasing CO 2 emissions within our own supply chain through actions such as transport optimisation. These core elements are aimed at reducing our fossil emissions in line with the Paris Agreement, reaching at least net zero by 2050. See our net zero transition plan on pages 74 to 77 for more details. #### Climate Risks and Opportunities In 2021 we developed an enhanced risk identification methodology to assess climate change risk and opportunities, the output of  Risk and Opportunity register. This was reviewed in 2022 and will continue to be reviewed and updated as necessary each year. The tables on pages 79 to 81 outline some of the key transition and physical risks as well as opportunities which have been identified and assessed and which enable SKG to prioritise appropriately. A high level impact assessment has been used to measure inherent and residual risks based on identified mitigation, their timeframes, and their potential financial impact on our business. The timeframes used in the categorisation of risks are defined as: •  expenditure pay-back time and short-term time frame for climate change risks and opportunities; •  a strategic capital expenditure investment in Smurfit Kappa, and medium-term for climate change risks and opportunities; and •  to long-term time horizon, for example investment in paper manufacturing machinery is expected to be valid for some 30 years; it is the long-term time frame for climate change risks and opportunities. The risk identification process is designed to consider the risks and opportunities through the specific lens of climate change. This means that the climate risk register is considering risks across a longer time frame than the traditional risk assessment of principal risks. 2017 2020 target of 25% reduction achieved with a 26.1% reduction by the end of 2017. 2018 More ambitious relative emissions reduction target of 40% by 2030 set, reflecting the need for industry to act on the Paris Agreement. 2019 Approval of €134 million new recovery boiler  Globally our mill system cut relative CO 2 emissions by 32.9% against a 2005 baseline. 2020 Long-term target of at least net zero emissions by 2050 and increased the 2030 emissions reduction target to 55%. On deforestation and biodiversity, we announced a new alliance with the World Wildlife Fund Colombia to work together to promote sustainable practices within the forestry industry. We started reporting on the recommendations of the TCFD and the relevant SASB criteria. 2021 Globally, our mill system cut relative CO 2 emissions by 41.3% against a 2005 baseline. SBTi approval received for our emissions targets as being in line with the Paris  Launched Better Planet 2050 programme which enhanced existing targets or introduced new ones across water use, diversity and inclusion and communities. Successful launch of our Green Finance Framework and subsequent €1 billion of Green Bonds issuance. 2022 Achieved A- CDP Climate Change Response  Announced an investment of almost US$100 million in a sustainable biomass boiler in our paper mill in Colombia which will reduce our global Scope 1 and Scope 2 CO 2 emissions by approximately 6%. Announced a new sustainable district heating project in our paper mill Nettingsdorf, Austria, which will benefit 20,000 homes across three communities. Completion of Zülpich energy project, an €11.5 million investment reducing CO 2 emissions annually by 55,000 tonnes. Invested US$23.5 million to upgrade the Nuevo Laredo plant in Mexico which will have the two-pronged benefits of reducing CO 2 emissions by up to 40% and doubling production capacity. Successfully completed the first stage of the HYFLEXPOWER hydrogen project at our  first for a paper mill. ![]() 74 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD continued #### Our Ambition, Strategy and Accountability Our ambition is to have at least net zero emissions by 2050 across all 3 Scopes, with a 55% reduction in fossil fuel emissions intensity for Scope 1 and 2 by 2030. The strength of our approach is demonstrated through our: • History of delivery • Continued delivery today • SBTi approval for interim targets • Collaboration across the value-chain • Trialling emerging technology today #### Our Approach – Timelines Short-term: acting now with continued year-on-year reductions using best available technology and continuous improvement. Medium-term: Strategic investment projects to replace high emitting assets, continuous improvement, availing of best available technology, collaboration across the value-chain, all leading us to achieve our 55% reduction target. Long-term: Through collaborative projects, executing controlled trials of new/emerging technology today to understand the feasibility and cost of large-scale implementation beyond 2030. These plans are expected to be financed by a combination of both operational expenditure and capital expenditure. #### Our Strategy Across the Value-Chain #### Scope 1 and 2 Emissions #### Investing in Fossil CO 2 #### Reductions • Shifting to low or zero carbon fuels including CO 2 neutral energy sources: • Use of biofuels; and • Electrification. • Research and development into new and emerging technologies with controlled trials: • Hydrogen, geo-thermal and heat pump technology. #### Greening of Electricity Supply #### Reducing Energy Use • Investing in technologies that reduce energy consumption; and • Re-engineering our processes and implementing smart energy-efficient solutions. #### Investing in Efficient Energy-generation •  systems \* ; and • Improving the efficiency of our existing boilers. \* Note the hydrogen trials in our Saillat paper mill should facilitate the move from current energy efficiency outcomes to low or no carbon outcomes via the retro-fitting of existing CHP assets. #### Our Net Zero #### Transition Plan Our long-term ambition, third party validated targets and continued action today have us well positioned to deliver on our commitments ![]() 75Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Our Strategy Across the Value-Chain Our Governance and Accountability 16 years of public disclosure on sustainability activity, independently assured since 2009 Management incentives linked to delivery on key sustainability KPIs (including emissions reduction targets) Engaged Board with appropriate expertise SBTi validation of Group targets as being in line with the Paris agreement Cost of funding linked to delivery of key sustainability KPIs (including emissions reduction targets) Strong external recognition #### Scope 3 Emissions #### Supplier Engagement • Requesting SBTi commitment from strategic suppliers: • Expand beyond strategic suppliers in time. • Sustainable and Responsible Sourcing programme. #### Customers Engagement • Better Planet Packaging programme delivering lower CO 2 solutions for customers through: • Material design; • Packaging design; and • Supply chain optimisation. #### Transport • Modal shift: CO 2 reduction by shifting transport from road to lower emission transport models; • Operational efficiency: CO 2 reduction by optimising transport operations, sources and destinations; and • Fuel efficiency: CO 2 reduction by leveraging new technology, alternative fuels, engine efficiency. #### Supported by our end-to-end approach to circularity #### Residual Emissions While the Group is focused on its direct impact on emissions reductions across its value-chain, with significant scope well into the future, we acknowledge that as we approach 2050 we may have residual emissions which we cannot eliminate. In the event that this occurs, the Group would consider neutralising these emissions through appropriate and credible solutions. ![]() 76 Smurfit Kappa Annual Report 2022 Set target of 20% reduction in relative CO 2 emissions by 2020.  2020 target of 20% reduction achieved with a 21% reduction by the end of 2013. New relative emissions reduction target of 25% reduction set for 2020. 2020 target of 25% reduction achieved and more ambitious relative emissions reduction target of 40% by 2030 set. Approval of €134 million new recovery boiler in Nettingsdorf  Long-term target of at least net zero emissions by 2050 and increased the 2030 emissions reduction target to 55%. 2021: SBTi approval received for our CO 2 emissions target as  trajectory. Launched Better Planet 2050 commitments. 2022: 43.9% reduction in CO 2 emissions. Successfully trialled   US$100 million in a sustainable biomass boiler. 2023: Significant investment in our Hoya paper mill and board  2 emissions reduction of 5,500 tonnes per annum is expected. 2024: Contribution from a state-of-the-art sustainable biomass boiler at our paper mill in Cali, Colombia which will reduce our global Scope 1 and Scope 2 CO 2 emissions by approximately 6%. Reviews of our third party validation. Approximately 60 projects identified to implement until 2030 in order to achieve our 55% CO 2 emissions reduction target. Scaling new and emerging technologies, as they become available. Consideration of residual carbon neutralising solutions  1 10 11 12 13 14 5 6 7 8 9 2 3 4 #### Our Net Zero Transition Plan 1 2 3 4 5 6 7 Our starting point Our progress Our target Our commitment 100% 0% 2005 2010 2022 2030 2050 #### 2005 is thebaselineyear of ourCO 2 #### target 8 #### 55% reduction #### in relative CO 2 #### emissions by 2030 #### To have at least #### net zero emissions by 2050 9 10 11 14 12 13 % CO 2 emission reduction 2024-2030 Move strategically from relative to absolute emissions #### Sustainability continued #### TCFD continued #### Our Net Zero Transition Plan continued ![]() 77Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Acting Today Across our Value-chain Scope Time Horizon \* Action today Scope 1 and 2 Short-term • Year-on-year reductions towards our targets. In 2022, we achieved 43.9% reduction in CO 2 emissions. • Continuous improvement of our operations through the implementation of best operational practices, insulation of pipes, LED lights, monitoring and improving processes, using data, reuse of residual steam to reduce the need for fresh steam, using biogas from water treatment plants, efficiency improvement in operations and energy efficiency. • Using Digital Twin technology in our Townsend Hook mill to reduce steam consumption by approximately 5%. • Direct drive project in our Wrexen mill which has energy reduction as part of its projects benefits. • Nettingsdorf Biomass investment of €134 million completed in 2020 and now achieving its full run-rate of 40,000 tonnes of emissions reduction. • Investing €11.5 million in our Zülpich paper mill. A major redesign of the multi-fuel boiler provides a more sustainable fuel source for generating steam and electricity. The investment is set to deliver a reduction of 55,000 tonnes of CO 2 emissions. • Optimising starch use in our Hoya mill which requires less steam and energy to dry. •  capitalise on biogas from plants (CO 2  • Recent greening of energy supply in the Netherlands and UK. Scope 1 and 2 Medium-term • Around 60 projects planned between now and 2030 to deliver our interim target, reducing our emissions by 55% by 2030, including: • Investing almost US$100 million in a sustainable biomass boiler in our paper mill in Cali, Colombia which will reduce our global Scope 1 and Scope 2 CO 2 emissions by approximately 6%, planned to be operational by the end of 2024. • Controlled trialling of new/emerging technology and feasibility of large-scale implementation: •  •  Scope 1 and 2 Longer-term • Controlled trialling of new/emerging technology today for the future: • The HYFLEXPOWER consortium and SKG successfully completed the first stage of the HYFLEXPOWER hydrogen project, the first in the world for a paper mill and a truly collaborative project including suppliers, academia and government support; and • Geo-thermal being explored in our Parenco paper mill in the Netherlands. Scope 3 Short-term •  solution, an example, by working together with a customer in Switzerland, we reduced the CO 2 emissions in transport by switching from road to rail delivery. This reduced the transport emissions by approximately 600 tonnes of CO 2 . • Customers: Developing products such as top-clip and click-to-lock which reduces the carbon footprint of our customers packaging by over 30%. A number of customer examples are outlined in this Annual Report on pages 10 to 13 and in the 2022 SDR which will be published at the end of March 2023. • Engagement with Suppliers: In our Sustainable and Responsible Sourcing programme, we audit our suppliers on their energy reduction programmes and participation in commonly accepted best practice and certification schemes such as SBTi commitments and validation. Scope 3 Medium-term • Carrying out a more extensive Scope 3 inventory assessment, supported by GHG training. • Considering additional SBTi commitments. • Considering Scope 3 targets. • Internal: Trialled electric delivery vehicles in Germany and the Netherlands.    78 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD continued Understanding Climate Risks and #### Opportunities for Smurfit Kappa Climate Change risk is expected to present itself either through physical risks or transition risks. Physical risks are those arising from the increasing severity and frequency of climate and weather-related events such as flooding. Transition risks are those which could result from the process of adjustment towards a lower carbon economy such as the development of policy and regulation and shifting societal preferences. Transition and physical risks along with opportunities have been identified and assessed by the Group in conjunction with external advisors and climate scenario modelling partners. SKG has identified many opportunities arising out of climate change to leverage its full cycle value chain and global operating model. In line with the identified key risks, the opportunities represent areas of strategic, operational and financial focus for SKG in the medium to long-term. In several areas, the identification of the opportunity is linked to capital investment programmes and medium to long-term strategic planning. An example of how we consider climate in our financial planning was during our equity raise in 2020  markets that the equity raise would be used not just for higher return projects but also  significant sustainability impact. Whilst the continued delivery of strong financial returns remains a key focus for senior management, significant consideration for projects with strong sustainability credentials is fundamental to the Group delivering on its public targets. In many instances, the most efficient and effective sustainability projects deliver strong financial returns, enabling continued progress against our interim climate target, to reduce carbon emissions by 55% by 2030 compared to 2005. In our capital allocation plan, we take into account which investments will be needed to realise our strategic goal to decrease our fossil CO 2 emissions by 55% by 2030 compared to 2005. When we set the target of 55% in 2020, we completed a gap analysis of what was needed to come from a baseline level of  reach the 55% reduction level. Some of the key climate change risks and opportunities for Smurfit Kappa are outlined on pages 79 to 81, these are expected to evolve over time with the benefit of deeper insights and the ongoing changes and developments in this area. #### Disclosure of Impacts on #### and by the Business There are certain climate change related risks that could have an impact on our business including: • Extreme weather patterns may affect our operations and supply chain, potentially impacting forests, water, carbon regulation and taxation, and energy availability and affordability; and • Drought, flooding and local restrictions on water usage may limit our access to water and therefore water risk assessments are conducted on a periodic basis at our paper mills. Forests play an important role in environmental resilience. We therefore need to promote healthy forests and manage these resources sustainably. We source virgin fibres from certifiably well-managed forests, or at least of non-controversial origin, or certified recycled fibres. All materials must be delivered through a third party verified CoC certified supply chain. Our manufacturing sites are CoC certified, and over 99% of our fibres are sourced through CoC certified supply chains. Our commitment is to deliver over 95% of our sold products as CoC certified. Furthermore, paper manufacturing is energy intensive, with a risk of carbon leakage if emission policies are not consistently applied. We recognise that combatting climate change will only be achieved by a global effort, across societal stakeholders, and as we generate 77% of our revenue in Europe, we fully support the EU Green Deal. The Forest Fibre Industry 2050 Roadmap to a low-carbon bioeconomy shows a CO 2 reduction of 50%-60% compared with 1990 levels is possible for our sector, based on available and emerging technologies. To reach a reduction of 80% or more by 2050, breakthrough technologies must be available by 2030. We play our part as a leader in this area, for example, by testing new technologies, such as our hydrogen project in our Saillat paper mill in France and our geo-thermal project in the Netherlands. The Group has considered the impact of climate change in the application of its accounting policies, judgements, estimates and assumptions and the assessment concluded that climate change in the medium-term is not expected to have a material impact (for more information please reference Note 2 to the Consolidated   standardised approach to risk identification, assessment and review with a clear focus on mitigating factors and assignment of responsibility to risk owners. Each individual risk identified is assessed based upon potential impact and likelihood of occurrence criteria. The likelihood of occurrence is based upon the probability of the risk occurring using percentage thresholds from remote up to probable. The impact of risk on cost is measured based upon applicable percentage  EBITDA which for 2022 was €2,355 million. Reputational impact is also considered. Smurfit Kappa defines substantive impact as significant financial, strategic or reputational damage that forces us to change our business strategy significantly either locally or as a Group. This definition applies to both our direct operations and our supply chain. Business Resilience to Climate- #### related Risks and Opportunities As a leading paper-based packaging business, the Group understands the need to lead in the area of climate. Smurfit Kappa was the first in the broader paper and packaging sector to announce a target of at least net zero emissions by 2050 and was pleased to see its emissions reduction target approved as Science-based and in line with the Paris Agreement by SBTi in 2021. The targets covering greenhouse gas emissions from  are consistent with reductions required to  the Sectoral Decarbonisation Approach. In addition to assessing our own emission reduction targets and having them independently approved, we also carried out an extensive climate change risk and opportunity assessment as outlined above during 2021. The project was supported by an expert third party, reviewing climate risk and opportunity for Smurfit Kappa and utilising a climate scenario modelling tool.  operating assets, with the identification of impacts and high level mitigations also completed, when appropriate. The scenario analysis and modelling was completed under different Representative Concentration   These model the potential impact on assets from physical and transitional risks in 10-year increments through to 2100. The analysis focused on the critical assets impacted across the RCP scenarios within the period 2030-2040 and 2040-2050, which is the period most critical for decision making in the near to medium-term. The output of this assessment was positive, with the results indicating that the proportion of asset value at risk was low. The main physical risks highlighted within the portfolio are temperature extremes and wildfires. This is consistent with the location and type of assets analysed. ![]() 79Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Risk/Opportunity Type and Description Our Response #### Physical Risks #### Chronic Climate-related chronic shortages in availability or supply of key materials for its production process Link to Strategic Priority: Horizon: Long-term SKG business operations rely on raw materials that are key for the production of corrugated paper packaging, such as wood and starch. Climate change and abnormal weather patterns may create chronic shortages in availability or supply of such materials that could cause loss of yield, interruptions to business and constraints on the supply of these critical materials. Mitigation: • A multi-source strategy is in place that balances the local and global provision of materials to ensure constant availability of raw materials and increases supply resilience. •  raw material supply is under direct control of the Company. • Continuous process optimisation which in turn results in a lower material need. • Continuous research into alternative and/or new materials to use as substitutes for its key materials to ensure resilience of supply chain and business operations. •  #### Chronic Changes in climate reduce the product lifecycle and durability of key products Link to Strategic Priority: Horizon: Long-term Changing climate patterns such as changes in mean temperature, precipitation, humidity or increased  could ultimately lead to loss of customer revenue, require changes to production, lead to increased transportation or storage costs, further product development costs and research and development costs. Mitigation: • SKG has an active research and development strategy that reviews the performance requirements of  conditions could impact this performance. •  chain requirements of its customers. •  requirements and their respective supply chain challenges. • SKG employs a customer-led approach to understand the needs and requirements necessary to provide a sustainable, fit-for-purpose packaging solution. • Through continuous research and development in its products, the Group aims to continuously improve the durability and lifecycle of its products with innovation and research programmes. #### Key for Strategic Priorities Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation ![]() 80 Smurfit Kappa Annual Report 2022 Risk/Opportunity Type and Description Our Response #### Transition Risks #### Market Reduced energy grid stability/ power outages creating outages impacting product delivery Link to Strategic Priority: Horizon: Medium to Long-term Governmental regulatory decisions on alternative energy sources, prioritisation of energy security and/or lack of government investment in critical infrastructure could impact SKG operations. As a result, power-outages could cause issues with the effective running of its operations. These events could create business interruption or losses, supply continuity issues, risk of contract breaches, impact on plant maintenance costs and increased manufacturing costs. Mitigation: • SKG is focused on investing in new energy sources, energy reduction, and on the efficient generation of energy on site to avoid the potential impact of future interruption of the energy grid and resulting power outages. • SKG has increased its energy independence through on-site generation and a broadening of its green energy sourcing. • Continuous investment in lower emissions technologies. • Review and trial of alternative low carbon energy sources. •  at higher risks of energy interruptions. #### Policy and Legal External infrastructure and energy transition planning resulting in increased costs and requiring strategic capital investment Link to Strategic Priority: Horizon: Long-term The availability of low carbon and reliable energy sources for energy intensive assets such as paper mills,  the continuity of production, increase costs of energy sources and require extensive investment to ensure key assets have reliable, clean energy sources. Mitigation: • SKG has strategic planning in place to assist the Group in ensuring that its energy needs are met without interruption to its services and at optimal cost. • The SKG operational excellence team focuses on innovations that reduce energy consumption and  • SKG regularly monitors the regulatory and policy trends in the countries where it operates to identify  • The Group applies hedging of energy as appropriate to avoid energy price fluctuations. • SKG continually reviews, investigates and trials alternative, lower carbon energy sources. #### Opportunities #### Resilience/Resource #### Efficiency  sustainability credentials to promote SKG as an innovative, sustainable, future focused organisation to attract new talent and retain existing talent Link to Strategic Priority: The role of SKG as a sector leader in the packaging industry and in sustainability practices could be further promoted to attract new and retain existing talent. Action to Maximise: •  •  and story. • Increased collaboration with research institutions such as universities and think tanks can further increase the visibility of SKG as a leader in innovation and high-tech practices and in turn, an attractive place to work to attract the best talent. #### Sustainability continued #### TCFD continued #### Key for Strategic Priorities Market Position Partner of Choice Operational Excellence Investment in People Capital Allocation ![]() 81Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Risk/Opportunity Type and Description Our Response #### Opportunities continued #### Markets Identify and target new global markets based on sustainability focus and scale Link to Strategic Priority: SKG has the potential to use its position as a global leader in sustainable packaging solutions to identify new markets that are transitioning to more demanding sustainable packaging requirements driven by  presence in Europe and the Americas through selective and focused growth and could provide both revenue and margin opportunities. Action to Maximise: • Continue disciplined approach to consideration of possible acquisitions, investments and other opportunities. • SKG has the potential to use its global scale and ability to leverage best practice across its value chain. • Through its selective and focused growth the Group has the opportunity to develop and enhance its profile in new markets which can further attract new talent to SKG. #### Resource Efficiency  generate further control and efficiencies in the sourcing and consumption of energy, raw materials and operating costs Link to Strategic Priority:  raw materials, logistics and overall operating costs. Action to Maximise: • Through further integration of existing technologies and SKG intellectual property, the Group could develop new techniques and practices that would further enhance its operational performance. • SKG could further reduce its costs while increasing its position as an industry leader and innovator by increasing resource efficiency throughout its operations. • Maintain investment in research and development, process optimisation and product innovation. #### Energy Source Making decisions on future acquisitions or capital investments dependent upon reliable sustainable energy supply Link to Strategic Priority: Climate change transition towards cleaner and renewable energy presents SKG with the opportunity to focus the development and acquisition of paper mills and other energy intensive assets on the availability of reliable, sustainable energy. By accessing alternative low-cost sources of sustainable energy, SKG could increase its energy and asset resilience while ensuring continuity and reducing costs for its main assets.  sustainability goals. Action to Maximise: • Continue to consider local government policy on renewable energy and low carbon technology when considering acquisitions and internal investment. • Explore retro-fitting opportunities on existing assets. • Continued focus on clean and reliable energy supply to support the wider sustainability strategy of SKG. 82 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD continued #### Risk Management The output of the risk and opportunity assessment carried out in 2021 was a comprehensive climate change risks and opportunities register, which reflected a combination of existing risk controls and approaches and resulted in a register including the physical and transitional climate risks in addition to the opportunities. The process to develop the register involved input from Smurfit Kappa participants from across the business, with geographic and functional diversity. Interactive risk workshops and interviews were used to facilitate the identification of climate risks and opportunities, producing a climate risk register for the Group. During 2022, we carried out a review of our climate risks and opportunities and TCFD reporting with participants from across the business and the register is reviewed and updated as necessary on an ongoing basis. The physical and transition risk modelling considered; extreme temperature, drought, wildfire, flooding, tropical cyclone, water stress, reputational damage, new technology, markets carbon pricing, and current and emerging regulation. A summary of some of the key outputs from this process is included in the climate risk and opportunities table in the section on pages 79 to 81. In 2022, we commenced a process to have additional scenario analysis with an expectation to have output data for review in 2023. The Group has a formal and well established framework to determine the nature and extent of the principal risks it is willing to accept to achieve its strategic objectives with climate-related risk integrated into our overall risk management. The Board carries out a  management and internal control systems at least annually. The process involves the consideration of the existing risks to the Group and also emerging risks. Climate change was elevated to a principal risk for the Group. In addition, the growing environmental climate change laws and regulations has been a principal risk of the Group for some time. In addition, the Group has a Sustainable and Responsible Sourcing Audit Programme, which helps us deliver against our three pillars of sustainability: Planet, People and Impactful Business; through which it audits its principal suppliers on a number of sustainability criteria. Climate change criteria are part of the audit programme with an assessment of the climate change risk per supplier. By developing more sustainable supply chains in collaboration with our suppliers, we can manage risks and costs, develop new revenue streams, and deliver on our sustainability goals. #### Metrics and Targets Smurfit Kappa has ambitious sustainability targets which focus on a further reduction of our environmental footprint, increased support for the communities in which we operate and further enhancement to the lives of its employees. These targets, which were announced in February 2021, build upon the  record, on which it has been reporting since 2007, independently assured since 2009, and are contained in the Better Planet 2050 targets.  quantify our commitment to protect what we care about – our planet, our people, our business – through a set of ambitious goals, the sustainability targets will sustain thriving communities, support good business, and create a better planet.  across these targets, climate and sustainability in general, is evidenced on the tables on pages 8, 9 and 84. Further details will be presented in the 2022 SDR. The progress against our publicly stated targets and other key non-financial targets and metrics of the Group will be disclosed in the SDR, including the standards reference, Scope, boundary, and measurement methods applied. Certain key non-financial metrics are disclosed on pages 30 to 31 of this Annual Report. All our metrics and data are disclosed in our SDR including, Scope 1 and 2 emissions, electricity usage, grid supply and cogeneration, fossil fuel and biofuels consumption, water, waste, raw material, and social data. Read more in our 2022 SDR. For Scope 3 emissions, we currently cover transport in Europe and the Americas (having  We have continued our work on a comprehensive Scope 3 emissions assessment, building on our 2021 SBTi validation process. SKG focuses on Scope 1 and 2 as they are the most material emissions for the Company and this is also in line with the SBTi sectoral approach. As part of our SBTi submission, our initial estimates had Scope 3 at 30-39% of our total emissions. During 2022 and into 2023, we continue to make progress in understanding our Scope 3 emissions and we expect to report our progress in future disclosures. During 2022, to enhance the understanding of sustainability data and the accuracy of its reporting across our operations, we have added new requirements and explanations in our Internal Control Questionnaire which must be completed by all local plant managers. This further increases the importance, level of attention and need for careful review of non-financial data delivery. In addition, in our 2022 CDP response, within section C4. Targets and performance and section C6. Emission data, we have reported our metrics and targets related data, including the consideration and methodology implemented. The Group published its first Green Bond Allocation and Impact Report in September 2022. The report provides details on the use of the proceeds of its inaugural €1 billion dual-tranche Green Bond issued in September 2021. The 2022 report was independently  Finance Framework, which is aligned with the ICMA Green Bond Principles 2021 and the LMA Green Loan Principles 2021, and have been confirmed by ISS ESG in a positive Second Party Opinion. The proceeds of the Groups inaugural Green Bond were allocated to assets associated with the following two categories: 1 Circular economy adapted products, production technologies and processes and/or certified eco-efficient products  2 Environmentally sustainable management of living natural resources and land use  ![]() 83Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 15.2 20.7 21.6 22.6 22.9 26.1 29 32.9 37.3 41.3 43.9 % 0 20 5030 4010 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 In 2020, Smurfit Kappa incorporated five key ESG objectives into its financing through converting our €1.35 billion multi-bank RCF into a sustainability-linked loan. The margin on our RCF is linked to the achievement of our five key performance indicators on climate change, forest, water, waste and health and safety. All five targets need to be achieved in order to attain maximum margin benefit. We have included disclosures in the Consolidated Financial Statements prepared under IFRS to indicate where we have considered the financial impacts of climate change. Our entire SDR has been independently third party assured in accordance with the GRI Standards. This covers all material metrics, data and other reporting. For more information, see our Assurance Report of the Independent Auditor in the 2022 SDR. CO 2 #### Emissions Reduction (Scope 1 and Scope 2)  is reflective of the sustainable nature of its business model, with eligibility criteria that  operations and take into account its strong circular business practices. This is done by using sustainable raw materials, with post-consumer recovered paper, its main raw material, and implementing circular production processes that are subject to continuous improvement. Accordingly,  financing mirrors what the Group is: a global business which places sustainability firmly at the centre of its operating model. As noted within the governance section, the Remuneration Committee reviewed the Remuneration Policy for the Group in 2020. As a result, the long-term incentive plan for the Group, the Performance Share Plan has a number of climate-related performance measures with ESG metrics cumulatively constituting 15% of the targets for this award. As outlined in the Remuneration Report on page 121, these measures include CO 2 reduction, water discharge reduction and waste to landfill reduction targets. ![]() 84 Smurfit Kappa Annual Report 2022 #### Sustainability continued #### TCFD continued #### Smurfit Kappa’s Better Planet 2050 Targets Achievement in Key Area Targets Status \* 2022 2021 2020 2019 Climate Change A 55% relative reduction in Scope 1 and 2 fossil fuel based CO 2 emissions in our mill system compared with 2005 levels by 2030. Reach at least net zero by 2050 43.9% reduction in fossil fuel emissions intensity since 2005 41.3% 37.3% 32.9% Forest > 95% of our packaging is certified as CoC certified under FSC, PEFC or SFI 94.3% packaging solutions sold as CoC certified in 2022 93.45% 93.8% 92.1% Water Reduce the organic content of water returned to the environment from our  2005 levels by 2025 36.9% reduction in Chemical Oxygen Demand since 2005 38.5% 38.2% 35% At least 1% relative reduction annually of water intake by our global paper and board mill system with 2020 as reference year 2.1% reduction of our water usage annually 6.2% – – Waste Decrease the waste sent to landfill by 30% per tonne of product produced by our mill system compared with 2013 levels by 2025 24% reduction in waste to landfill since 2013 29.2% 23.7% 7.1% Health and Safety Reduce Total Recordable Injury Rate by at least 5% annually 13.6% reduction in Total Recordable Injury Rate in 2022 1.7% 29% 17% Significant improvement needed Improvement needed On track to achieve target Key \* See our 2022 SDR for more details. ![]() 85Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### TCFD Index Area Recommended Disclosures Source Page(s)/Section #### Governance Disclose the  governance around climate-related risks and opportunities.   climate-related risks and opportunities. AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 32-33, 69-71 SDR 2022 section: Governance and Human Rights CDP: Section C.1 Governance   and managing climate-related risks and opportunities. AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 32-33, 71-72 SDR 2022 section: Governance and Human Rights CDP: Section C.1 Governance #### Strategy Disclose the actual and potential impacts of climate-related risks and opportunities  businesses, strategy, and financial  such information is material.   opportunities the organisation has identified over the short, medium, and long-term. AR 2022 CDP Climate Change response 2022 AR: 73-81 CDP: Section C.2 Risk and Opportunities    businesses, strategy, and financial planning. AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 73-81 SDR 2022 section: Planet and Climate Change CDP: Section C.2 Risk and Opportunities and C.3 Business Strategy   strategy, taking into consideration different  or lower scenario. AR 2022 CDP Climate Change response 2022 AR: 73-81 CDP: Section C.3 Business Strategy #### Risk Management  the organisation identifies, assesses, and manages climate-related risks.   identifying and assessing climate-related risks. AR 2022 CDP Climate Change response 2022 AR: 32-33, 82 CDP: Section C.2 Risk and Opportunities   for managing climate-related risks. AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 32-33, 82 SDR 2022 section: Planet and Climate Change CDP: Section C.2 Risk and Opportunities   assessing, and managing climate-related  overall risk management. AR 2022 AR: 82 #### Metric and Targets Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities  information is material.   organisation to assess climate-related risks and opportunities in line with its strategy and risk management process. AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 31, 82-84 SDR 2022 section: Climate Change and Supporting Data CDP: Section C.4 Targets and Performance and Sections C.6 Emissions Data   appropriate, Scope 3 greenhouse gas  AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 31, 82-84 SDR 2022 section: Climate Change and Supporting Data CDP: Section C.4 Targets and Performance and Section C.6 Emissions Data   organisation to manage climate-related risks and opportunities and performance against targets. AR 2022 SDR 2022 CDP Climate Change response 2022 AR: 31, 82-84 SDR 2022 section: Climate Change CDP: Section C.4 Targets and Performance AR – Annual Report SDR – Sustainable Development Report CDP – Carbon Disclosure Project ![]() 86 Smurfit Kappa Annual Report 2022 #### People Our People’s resilience and #### adaptability has driven growth Our culture, together with our lived values have ensured that we continue to be successful.  agility and flexibility. Smurfit Kappa, like many other successful organisations has adapted well. We continue to focus on sourcing and developing talent through reskilling, upskilling, recruitment and engagement. We are focused on attracting the right talent for our organisation and are investing in retaining and motivating the amazing talent we already have. During 2022 we welcomed 600 new employees to the Smurfit Kappa family through our four acquisitions. Aligning the evolving needs of our people with the ambitious needs of our business is  strategy continues to evolve year-on-year and helps us achieve our ambitions and goals. Our People strategy has four core pillars, as outlined on the page opposite. Our pillars are underpinned by the foundations of our HR strategy, which includes our safety and wellbeing commitments, the legal framework that supports our business, including our Code of Conduct incorporating our Speak Up ethics service, our commitment to employee relations, the provision of a state-of-the-art HR Information Systems and our commitment to Internal Communications. You can read more about our people plans and activities over the following pages. All of this investment and commitment in our HR strategy is aimed at ensuring Smurfit Kappa is recognised as a globally admired employer of choice. I want to thank all my 48,000 colleagues, who again have demonstrated such resilience and adaptability during another challenging year which has included a war in Ukraine and cost of living challenges. You are all inspiring. Sharon Whitehead Group Vice President, Human Resources The past number of years have in many ways been about navigating unprecedented change. Much of this change was unexpected, but, as individuals and as a collective Smurfit Kappa family, we adapted, reacted, embraced the changes and evolved for the better. We learned to work differently, we collaborated better, and we innovated at pace. We became more agile and flexible. ![]() 87Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Our HR Strategy #### Health, Safety #### and Wellbeing #### Legal #### Framework #### Employee #### Relations #### HR Information #### Systems #### Internal #### Communications Read more on pages 88 to 89 Read more on pages 90 to 91 Read more on pages 92 to 93 Read more on pages 94 to 95 #### People #### Development #### and Talent #### Management Our Ambition: To help our people grow their careers and deliver on their potential, so we can realise our ambition for them and the organisation, as we move forward. Our Progress: Over the past year from a People Development and Talent Management perspective we continued to invest in our people, to ensure we have the right people, with the right skills, in the right places – to deliver on all our succession plans. We have continued with our various Learning Academy programmes, bringing forward our key learnings from COVID-19 to leverage a more hybrid approach. This has allowed us to include more colleagues and add new programmes to our offerings. We are developing our talent management strategies to ensure we have a pipeline of diverse talent, and as part of this journey we were pleased to host our first ever female only development programme, named SK Rise during the year. #### Employee #### Experience #### for Performance Our Ambition: To create a continuous two-way dialogue, to ensure our people understand our strategy and the role they play in its delivery and to inspire them to perform at their best every day. Our Progress: Employee communications and ongoing engagement ensures a two-way dialogue and an attentive listening strategy across our workforce. These have been critical components of our Employee Experience for Performance pillar. Following our last MyVoice survey in 2021, we systematically reflected and analysed over 40,000 employee feedback comments. This helped us evolve our HR Strategy for 2022 and provided direction for the areas our people wanted us to focus on, including providing a digital workplace with multi-lingual communications, while modernisation and simplification of our HR systems was also a key message. Inclusion, #### Diversity #### and Equality Our Ambition: To create an inclusive workplace where everyone has a real sense of belonging and can be their authentic selves at work everyday. Our Progress: In terms of our commitment to Inclusion, Diversity and Equality we know that diverse and inclusive teams work better. They excel at solving complex problems and make better decisions. We have worked hard in 2022 to accelerate the initiatives under our EveryOne programme, as well as progressing the diversity promises we made under our Better Planet 2050 commitments. As part of our commitment to driving Inclusion, Diversity and Equality within Smurfit Kappa we are striving to create a diverse workplace and ensure that female gender representation across the Group reaches over 30% over time. We are committed to Our Better Planet 2050 target to reaching 25% of our female workforce holding management positions by the end of 2024. #### Rewards and #### Recognition Our Ambition: To attract, retain and recognise our employees, through competitive work practices. Making sure that people are not just appropriately rewarded from a monetary perspective, but also see their achievements recognised and valued in the workplace. Our Progress: We have continued to build on our fair and competitive Rewards & Recognition philosophy to attract and retain our key talent, and to motivate employees at every level of the organisation to  objectives. Our resolute commitment to gender pay equality is continuing, and in December we voluntarily published our first Gender Pay Gap Report for Ireland. We have also invested in the digitisation of the Group rewards system and have started planning for a Group wide recognition programme which will be developed in 2023. ![]() 88 Smurfit Kappa Annual Report 2022 #### People continued Our talent agenda continues to focus on ensuring we have the right people in the right places and at the right stages of development to fill critical positions as they become available. Our talent cycle integrates talent identification, succession planning and talent development to ensure we invest in our people and support them to achieve their career ambitions. This year, for the second time, we undertook a full global talent planning cycle for our top  built on the exercise completed in 2020 and on the work we did in 2021, to focus on career development. Our focus on targeted talent development over the last two years has seen several successful moves of internal talent into key vacancies. The Smurfit Kappa Academy is an important source of development for our people and this year we expanded our offering, with a new programme in our curriculum to support female talent – SK Rise. We also leveraged our experience of virtual learning to redesign our programmes as hybrid experiences. Our programmes were carefully redesigned to make the most out of both a virtual environment where attendees could meet a broader set of people from across the business and an in-person experience, which focused on connection and interpersonal learning. We were also pleased to see four cohorts of Open Leadership (in partnership with  development programme, finally complete their programme following delays as a result of COVID-19. Additionally, we have embarked on a new partnership with Harvard Executive Education in Boston, where a select number of senior executives will attend executive development programmes in line with their development plans and succession planning requirements. This outline is just a snapshot of the work that is done to support the development of our people. Many other training and development programmes take place at regional, country and site level. These programmes delivered an average of 21 hours of career development for each of the permanent members of our workforce. Case Study #### RISE – Female Development Programme The programme, delivered by our learning partner, the Irish Management Institute, is made up of three modules, each with  focused on key learnings for female  an SK leader shared their experience of the  where group participants supported each other in small groups to work through their  session with a leader from the business. This year we were proud to add a new programme to our Smurfit Kappa Academy catalogue: SK Rise. Developed with feedback from female talent in the organisation, SK Rise is a programme for female employees, designed to support their career and personal aspirations. The programme was launched on  for self-nomination in April 2022. Almost 500 female employees applied for the programme, of which 32 were selected to participate. In addition to the SK Rise programme, we also completed a virtual workshop on resilience to support those who had not been selected to attend the programme in its first year. Their nominations will be considered for selection in 2023, when we will deliver two SK Rise programmes; a second English language programme and a Spanish language version. #### People Development #### and Talent Management Our Ambition: To help our people grow their careers and deliver on their potential, so we can realise our ambition for them and the organisation, as we move forward. ![]() 89Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 89Smurfit Kappa Annual Report 2022 Case Study #### Advanced Management Development (‘AMD’) – #### A Hybrid Approach to Talent Development For 21 years, our AMD programme has been a key part of the Smurfit Kappa Academy talent development programme. It supports high potential future leaders with the skills, knowledge and experience to accelerate their growth and take on more senior roles in the organisation. In 2021, due to the pandemic, the programme was run virtually, with great success. However, participants missed out on the opportunity to build their networks and on the informal learning from each other and senior leaders that takes place over coffee breaks and dinners. Therefore, the three-part programme was an ideal opportunity to trial a new hybrid approach. We took all the best components from a year of virtual learning to run Part One of the programme as an engaging and interactive virtual experience. Part Two took place in person in Dublin at our global headquarters, while Part Three was concluded in January 2023 in Amsterdam at our European headquarters. While this approach helps us to make the programme more sustainable from a travel perspective, it also makes the programme more inclusive for those who cannot spend too much time away from their personal responsibilities. This new approach has been a great success and has since been replicated across our other Academy programmes. ![]() 90 Smurfit Kappa Annual Report 2022 #### People continued #### Employee Experience #### for Performance Our Ambition: To create a continuous two-way dialogue to ensure our people understand our strategy and the role they play in its delivery. To inspire our talent to perform at their best every day. Our employee engagement levels have continued to grow year-on-year. We believe the reasons for these improvements have been the two-way dialogue and listening strategy we have employed. This was led by our MyVoice pulse and organisation wide surveys. The 40,000 comments received by colleagues as part of our MyVoice survey has given us a real focus for our HR strategy. #### Employee Two-way Dialogue Communicating with our 48,000 employees in 21 languages has become more the norm than the exception and ensures that all key business initiatives are communicated across every level of the organisation. This results in both office and site-based staff being informed of all key initiatives. We have further supported this multi-lingual approach by building new communication channels, both digital and traditional, to ensure our messages reach every part of the organisation. Additionally, we want to go further and offer even more communication channels. Over the past six months we have been working on the development of an employee app to give all colleagues instant access to timely communications in their respective languages. The selection of an employee app provider is now complete and we look forward to piloting this new channel during 2023. This will facilitate information flow at every level of the organisation at the touch of a button for our employees to access when and where it suits them. In quarter three of 2022, we launched MyHub, our first company-wide Human Resources Information System. MyHub is an online tool which will digitalise our key HR processes, helping us to provide a better employee experience. It will also facilitate better people decisions, to ensure we have the right people in the right place, to deliver for our business. #### Embracing our Future – #### Employee Engagement In September 2022, we held our first in-person Global Management Conferences in Miami and Vienna, since before the start of the COVID-19 pandemic, with the theme of Embrace our Future. As a management team, we connected on our strategy for the years ahead and we were unanimous in recognising the importance of making in-person connections. Our commitment to further developing our employee experience in Smurfit Kappa continues and as we step our way through this new world of work, we intend to double-down on our efforts to listen to what our people need to be successful. #### Engaging our Employees – #### the War in Ukraine When the war in Ukraine began in early 2022, we immediately focused our attention on supporting our employees who are Ukrainian, their families and communities directly impacted by the conflict, as well as the wider population affected in Ukraine. We donated almost €2.4 million to fund various local initiatives, including re-location and accommodation of a number of Ukrainian refugees, as well as our employees who are Ukrainian. We also supported local charities involved in the humanitarian efforts and provided funds to the International Red Cross. Colleagues across the globe also undertook various fundraising initiatives, including a 100-day, 6,500km bike ride across Europe, with all monies raised doubled by Smurfit Kappa, providing a further €105,000 to the International Red Cross. ![]() 91Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Case Study #### MyHub – Embracing a Digital HR Future As part of our global HR strategy and priorities, during 2022 we began designing and planning the launch of a new Group wide Human Resources Information System for Smurfit Kappa, called MyHub. Our aim was to design a system which would enhance our overall employee experience by empowering our managers to manage and plan for performance, talent, compensation, engagement and learning. It is also to give our employees autonomy over their workplace experience, enabling them to plan for their careers no matter where they are in their journey, or career stage. Following the launch of this new platform, superior data reporting will be available, including standardised dashboards and KPIs, which will enable us to make data driven decisions for the benefit of all stakeholders. Our goal is to deliver excellent HR services that drive the right behaviours in our business and deliver an excellent employee experience. This new platform will enhance  on its people strategic agenda. #### MyLearning #### MyPerformance #### MyRewards #### MyTalent ![]() #### People continued 92 Smurfit Kappa Annual Report 202292 Smurfit Kappa Annual Report 2022 O R I G I N , R A C E & E T H N I C I T Y D I S A B I L I T Y L G B T Q + & A L L I E S G E N D E R F A M I L Y & A G E A P P R E C I A T E R E S P E C T L E A R N L I S T E N B E O P E N A S K #### Inclusion #### Diversity #### Equality #### People continued #### Inclusion, Diversity #### and Equality Our Ambition: To create an inclusive workplace where everyone has a real sense of belonging and can be their authentic selves at work every day. One of the key evolutions of our EveryOne programme was the creation and introduction of five communities where we will continue to focus our Inclusion, Diversity and Equality  These communities are: Disability, Family & Age, Gender, LGBTQ+ & Allies and Origin, Race & Ethnicity. Our five diverse communities were chosen to reflect and represent our colleagues across Smurfit Kappa. It is our ambition to focus on these five communities and support each of them with a programme of learning and activity over the coming years. With our ambitious plans for ID&E at the forefront of our minds, we have been on an accelerated journey to step change many of the initiatives within our EveryOne programme. Working together, with significant commitment and effort from our teams across the world, many of the key ID&E focus areas over the past few years have been collectively achieved. Some examples include formation of the Group Executive ID&E Council, establishing and defining our five diverse communities, enhanced ID&E communications and employee engagement, and the completion of our recent EveryOne ID&E Discovery insights survey. The survey was conducted across the organisation and was a voluntary survey which attracted almost 8,000 respondents with over 9,000 employee comments. The key highlights are outlined on the graphic opposite. Real impact is in the way we will use this feedback to inform the next phase of our Smurfit Kappa EveryOne journey. Based on the feedback received, we have created a three-year roadmap to continue to advance our ID&E journey. We now have four key focus areas: 1 ID&E education and awareness programme of events 2 Inclusive infrastructure 3 Inclusive recruitment 4 Smart Working – the future of work During the year, we came together to celebrate a series of Inclusion, Diversity and Equality      Case Study #### Development of our EveryOne (ID&E) #### Programme – Discovery Survey 2022 Since the introduction of our five community pillars to our EveryOne programme in 2021, we have continued to deliver our ambitious plans for ID&E in Smurfit Kappa. Right across the organisation we have a strong and ambitious commitment to ID&E, with a clear strategy and senior sponsorship in place. Our EveryOne approach has been built from the bottom up, with the voice of our colleagues. ![]() 93Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Celebrating these events helps us raise awareness of our equality programmes, while educating and inspiring everyone to focus and participate in our wider ID&E agenda. Each of these events were celebrated across the organisation with many local activities. We also launched and hosted SK Rise, our first ever female development programme. #### Update on Gender Balance In terms of the gender diversity goals we set as  female employees currently represent 20% of our total workforce. Additionally, our manager population and Group Executive Committee female representation has increased to 23.5% and 38.5% at the end of 2022, respectively. At Board level, female representation is now at 38.5%, demonstrating progress on our journey to achieve a better gender balance. During the year, we also continued our work with our strategic Inclusion, Diversity and Equality partners, such as The Valuable 500, the Trinity Centre for People with Intellectual Disabilities, the Employers Network for Equality and Inclusion, the Business Disability Forum, and the 30% Club. One of our key focus areas for 2022 was to really understand how our diverse employees felt about inclusion in the workplace. Seeking employee views and feedback was important, so we embarked on a listening strategy across the organisation by developing a confidential and anonymous Inclusion, Diversity & Equality survey – called EveryOne Discovery. This was the first time in Smurfit Kappa such an initiative had taken place, and it was welcomed by our employees as it provided them with an opportunity to express their views and feelings. Over a period of three weeks last May, almost 8,000 colleagues participated in this voluntary discovery process, and reported over 9,000 employee comments to help us plan our three-year roadmap for ID&E in Smurfit Kappa. As a result of the feedback, we created plans to advance our ID&E journey with our employees involved which will focus on four key areas initially: 1 ID&E education and awareness programme of events 2 Inclusive infrastructure 3 Inclusive recruitment 4 Smart Working – the future of work ![]() #### People continued 94 Smurfit Kappa Annual Report 2022 #### People continued Rewards and #### Recognition Our Ambition: To attract, retain and recognise our employees through competitive work practices. Ensuring our people are appropriately rewarded and their achievements are valued in the workplace. In 2022, we continued to challenge ourselves to ensure the compensation and benefits we offer at every level of our organisation in terms of our Rewards and Recognition packages are fair, competitive and compare favourably with the market. It is also critical that our Rewards and Recognition programmes are aligned to ensure our people can see a clear link between their compensation package and their performance, particularly when they perform above and beyond what is expected. In setting our reward packages, Smurfit Kappa takes into  external benchmark data for their role in companies of similar size and scope, while also ensuring internal equity within the Group. This year we began digitalising our Rewards and Recognition processes. Our leaders will complete all the necessary details for these processes in the new Human Resources Information System, MyHub. This pilot will provide the organisation with a scalable approach to the process, while maintaining confidentiality and confidence. As an organisation, we are committed to gender pay equality and we continue to proactively monitor the pay of male and female colleagues in similar roles, to ensure it is comparable. For several years under UK legislation, employers with more than 250 employees are required to publish key metrics on their gender pay gap and our business continues to show improvement. Additionally, by December 2022 it became a requirement for organisations with 250 or more employees to publish gender pay gap metrics in Ireland. While not a requirement for Smurfit Kappa, as none of our companies in Ireland have more than 250 employees, we have voluntarily published our first Gender Pay Gap Report, which has shown that across  gender pay gap of 1.6%. This means that the   of women by 1.6%. Our mean pay gap of 1.6% compares favourably with the wider marketplace. We recognise that industries such as the one we operate within, have historically attracted a lower number of female colleagues. In that light, it is positive to be able to demonstrate a very limited gender pay gap within Smurfit Kappa Ireland. However, a number of measures we have or are planning to put in place to address this gap are outlined in our Smurfit Kappa Ireland Gender Pay Gap Report 2022, which can be found on our website: smurfitkappa.com. The Group is also very focused on ensuring that positive employee and trade/labour union relations are maintained to the highest of standards, to ensure fair and sustainable Collective Labour Agreements. #### Create a framework #### to enable the Group #### to attract and retain #### talented employees #### Motivate employees at every level of the #### organisation to achieve #### the Group’s strategic #### objectives #### Provide competitive #### rewards and benefits #### that are clearly linked #### to performance Digitalisation of #### our key processes #### Our Rewards Policy The objectives of our Rewards Policy are to: ![]() Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 95Smurfit Kappa Annual Report 2022 #### Diversity of the Executive Team 38.5% Women on SKG plc Board \*\* 33.7% Female Executive Committee and direct reports \* Board of Directors \*\* (Gender split out of 13) Male – 61.5% Female – 38.5% \* As reported in the FTSE Women Leaders Review. \*\* Includes Mary Lynn Ferguson-McHugh appointed on 5 January 2023. Regional Executive Committees (Gender split) Male – 85% Female – 15% Executive Committee (Gender split out of 13) Male – 61.5% Female – 38.5% Total Permanent Employees (Gender split) Male – 80% Female –20% We take part in the FTSE Women Leaders Review which sets out recommendations for FTSE 350 companies to improve the representation of women, both on their executive committee and the direct reports to this committee. We also note the Financial  executive committees to have at least 40% female representation on boards for financial years starting on or after 1 April 2022. The Board expects to be in line with the new target following the AGM in April 2023, with 45% female representation on the Board. This follows the recent appointment of Mary Lynn Ferguson-McHugh and the announcement in December 2022 that John Moloney and Gonzalo Restrepo will retire from the Board at the conclusion of the forthcoming AGM. ![]() 96 Smurfit Kappa Annual Report 2022 #### People continued #### Our Six High-risk Areas #### Health, Safety #### and Wellbeing One of the most important achievements of our Health, Safety and Wellbeing programme is the continued positive performance in our TRIR trends. We challenge ourselves to improve TRIR by at least 5% per year. Using 2018 as a baseline year for our five year strategy, we have actually improved TRIR by 50%, substantially exceeding our target. However, sadly, we had one subcontractor fatality in 2022, but we will not rest until we deliver zero incidents on an ongoing basis. To continue to improve our health and safety outcomes and to make every effort to make our workplace safe for all, this year we launched a new five-year strategy to continue our positive trajectory. This is focused on four key areas: 1 High risk management 2 Behavioural based safety 3 Implementation of a Group wide safety management tool 4 Health & Wellbeing In order to deliver against these key strategic areas in our plants and mills across the world, we have designed, built and commenced the implementation of a new health and safety management system. This tool is designed to support supervisors, managers and our health and safety teams with their daily responsibilities. It makes it easy to track and report safety data, analyse trends and draw insights, meet compliance requirements and reduce administrative work. It will also help to increase visibility and continue to promote a safety culture across our organisation. We also celebrated and implemented the following activities as part of our Annual Safety Improvement Plans to continue to drive awareness and keep attention on this key topic as outlined on the following page. Our health, safety and wellbeing culture is founded on authenticity, empowerment and accountability, with our attention focused on our six high-risk areas, while safety is one of our core values. ![]() 97Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information M e n t a l F i n a n c i a l S o c i a l P h y s i c a l #### Wellbeing #### for life. #### Do theright thing! Protect yourself and the company by speaking up. Visit: skgconduct-training.myentras.com/US or scan the QR code > I suspect misuse of company assets I’m worried a gift is too expensive I feel discriminated against or harassed Is this fraud? I suspect prices or supply is being competitors I suspect bribes are being paid Want to know how? #### Take the training #### programme. MINS   launched an initiative on hand safety under the strapline . 2 Through our free and confidential , we continued to provide support to our employees and their family members to cope with any work, life or health concerns. The service offers help to deal with any tough situation that our people and their families are not quite sure how to handle. It is easy-to-access and is available 24/7. 3 We undertook a summer health and safety campaign, under the banner of  Thinking Safety  including contractors. This is built on our  and continued to use our Safety for Life branding. 4 We continued with our Safety for Leaders programme, which we had begun to roll out during the pandemic via MS Teams. In 2022 in Europe, it became a significant face-to-face training programme to further support our managers with their health and safety responsibilities. 5 We further developed our health and safety processes with a particular focus on our Energy & Machinery Isolation Policy, (lock out, tag out, try out – LOTOTO). 6 Our Health, Safety and Wellbeing agenda gathered further momentum with the implementation of our Health & Wellbeing framework. This has been supported with regular activities such as   7 We implemented a new case management process, so that where serious injuries occur, we have a support system in place for those involved. 8 Three new Policies  Change, Workplace Inspection and Confined Space Entry) were developed and deployed in the final quarter of the year. 9 In order to focus on incident causation, we continue with our Behavioural based safety training as well as Human Reliability training for front line leaders. This is a long-term safety training plan that will result in better safety performance in the coming years. Also, we developed our  Steps for Safety for Life to reinforce  statement. A Safety culture based on authenticity, empowerment and accountability, highlights that Health, Safety and Wellbeing is a collective responsibility, everyone has a part to play. Code of Conduct and #### Speak Up E-Learning Programme During 2022, we continued to build awareness  Speak Up service. The Code of Conduct  providing a guide to the legal and ethical responsibilities we share as members of the Smurfit Kappa family. Since early 2020, when the worldwide launch of our Speak Up reporting system took place, we have sought to encourage transparency and drive accountability and governance at every level of the organisation. In May 2022, to ensure that every employee fully understands their responsibilities and expected conduct as responsible corporate citizens, we launched a new online e-learning programme to support the Code of Conduct and Speak Up service. This programme guided employees through the elements of the Code relevant to them and ended with a knowledge quiz to test understanding. It will be repeated across the Group for the next two years, with updates to include any new requirements. #### Our Wellbeing Pillars Our HR Strategy For more information on our strategy see page 87 ![]() 98 Smurfit Kappa Annual Report 2022 ## Expanding ## operations ## in Brazil The acquisition of PaperBox expands both our presence in Brazil and our product portfolio to meet the growing demand for sustainable packaging. PaperBox is a packaging plant located in Saquarema, 70km east of Rio de Janeiro. Brazil is the largest corrugated cardboard market in Latin America, with 7.4 billion sq m produced annually, and the Southeast region, where PaperBox is located, equates to 46% of this volume. This acquisition represents a further expansion  operate in three other states: Minas Gerais, Rio Grande do Sul and Ceará. “We are very proud to have expanded our footprint in Brazil to meet the growing demand for innovative and sustainable packaging. This acquisition will broaden and strengthen our presence in the country, improve our production capabilities and enable us to continue to create new opportunities and form new partnerships with customers,” said Laurent Sellier, CEO of Smurfit Kappa in the Americas. Manuel Alcalá, CEO of Smurfit Kappa in Brazil, added: “Smurfit Kappa believes in Brazil and in the opportunities to  business. PaperBox has a distinguished history in the region and a special commitment to all stakeholders. This is a legacy that Smurfit Kappa will build upon.” #### Delivering on our Strategic Priorities ![]() 99Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information “We are very proud to expand our footprint in Brazil to meet the #### growing demand for innovative #### and sustainable packaging.” #### Governance 98-147 Board of Directors 100 Corporate Governance Statement 104 Audit Committee Report 113 Remuneration Report 117 Nomination Committee Report 137 Sustainability Committee Report 141     ![]() 100 Smurfit Kappa Annual Report 2022 #### Board of Directors Irial Finan, Chair Nationality: Irish Committee Membership: Ken Bowles, Group Chief Financial Officer #### Nationality: Irish Anthony Smurfit, Group Chief Executive Officer #### Nationality: Irish #### Term of Office Irial Finan joined the Board in February 2012. He was appointed Chair in May 2019. #### Independent Yes. \* #### Key External Appointments Listed: Board member of Coca-Cola Bottlers Japan Holdings Inc. and Fortune Brands Home & Security, Inc. #### Experience Irial Finan joined the Board in February 2012. He was appointed Chair in May 2019. He was Executive Vice President of The Coca-Cola Company and President of the Bottling Investments Group from 2004 until he stepped down from the role in December 2017 and retired in March 2018. Prior to this Irial served as Chief Executive Officer of Coca-Cola Hellenic Bottling Company SA. He joined the Coca-Cola System in 1981. #### Term of Office Ken Bowles was appointed Group Chief Financial Officer in April 2016 and was appointed a Director in December 2016. #### Independent No. #### Experience Ken Bowles joined the Group in 1994 and has occupied a number of finance roles in various parts of the Group. He was appointed Group Chief Financial Officer in April 2016, prior to which he was the Group Financial Controller  from 2007 to 2010 prior to which he was  Compliance in 2004. He is an associate member of the Institute of Chartered Management Accountants and holds a first class MBA from the UCD Graduate School of Business. #### Term of Office Anthony Smurfit has served as a Director of the Group since 1989 \*\* and was appointed Group Chief Executive Officer in September 2015. #### Independent No. #### Key External Appointments Non-Listed: Board member of CEPI (Confederation of European Paper Industries) and member of the European Round Table of Industrialists. #### Experience Anthony Smurfit has worked in various parts of the Smurfit Kappa Group both in Europe and the United States since he joined the Group. He was appointed Group Chief Executive Officer in September 2015, prior to which he was the Group Chief Operations Officer from November 2002. He was also Chief Executive of Smurfit Europe from October 1999 to 2002 prior to which he was Deputy Chief Executive of Smurfit Europe and previously Chief Executive Officer of Smurfit France. \* On his appointment as Chair in May 2019 Irial Finan was independent. \*\* For Smurfit Kappa Group plc or its predecessor companies, SKG returned to Euronext Dublin and the LSE on its IPO in March 2007. Board Committees Audit Remuneration Nomination Sustainability C Chair ![]() 101Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Anne Anderson, Non-executive Director Nationality: Irish Committee Membership: #### Term of Office Anne Anderson joined the Board in January 2019. #### Independent Yes. #### Key External Appointments Non-listed: Chair of the Board of Advisers at the Institute for the Study of Diplomacy at Georgetown University, Washington DC. Board member of the Druid Theatre Galway. Mary Lynn Ferguson-McHugh, Non-executive Director Nationality: American Committee Membership: #### Term of Office Mary Lynn Ferguson-McHugh joined the Board in January 2023. #### Independent Yes. #### Key External Appointments Listed: Molson Coors Beverage Company Non-listed: Board member of FJ Management Inc and GOJO Industries Inc. Frits Beurskens, Non-executive Director Nationality: Dutch Committee Membership: #### Term of Office Frits Beurskens has served as a Director of the Group since December 2005. \*\* #### Independent No. Carol Fairweather, Non-executive Director Nationality: British Committee Membership: C #### Term of Office Carol Fairweather joined the Board in January 2018. #### Independent Yes. #### Key External Appointments Listed: Non-executive Director of Segro plc. #### Experience Anne Anderson is an experienced international diplomat who most recently served as the Ambassador of Ireland to the United States from 2013 to 2017. She joined the Department of Foreign Affairs in 1972 and was appointed Assistant Secretary General in 1991 serving in this post  Representative to the United Nations in Geneva after which she became Permanent Representative of Ireland to the European Union in 2001. Following this she was appointed Ambassador of Ireland to France in 2005, where she served until 2009. In 2009, she became Permanent Representative of Ireland to the United Nations in New York. #### Experience Frits Beurskens joined the Kappa Group in 1990 and held various Managing Director positions until his appointment as its President and CEO in 1996 which he held until the merger with Smurfit. He is a former Chair of both the Confederation of European Paper Industries and the International Corrugated Cases Association and a former member of the Board of Sappi Limited. In December 2007, he was knighted and appointed by the Dutch Queen as Officer in the Order of Oranje Nassau. #### Experience Carol Fairweather was Chief Financial Officer and an executive Director of Burberry Group plc from July 2013 to January 2017. She joined Burberry in June 2006 and prior to her appointment as CFO, she held the position of Senior Vice President, Group Finance. Prior to joining Burberry, she was Director of Finance at News International Limited from 1997 to 2005 and UK Regional Controller at Shandwick plc from 1991 to 1997. Carol is a Fellow of the Institute of Chartered Accountants. #### Experience Mary Lynn spent over 35 years at Procter & Gamble, where she held a number of senior leadership positions, including her roles as Chief Executive Officer of Family Care (Paper Products) and P&G Ventures, positions she held since 2019 having served as Group President of Family Care (Paper Products) since 2014 and P&G Ventures since 2015. Prior to that, from 2011, she was based in Switzerland where she held the position of Group President Western Europe and then Group President Europe. ![]() 102 Smurfit Kappa Annual Report 2022 Kaisa Hietala, Senior Independent Non-executive Director Nationality: Finnish Committee Membership: Lourdes Melgar, Non-executive Director Nationality: Mexican Committee Membership: #### Term of Office Kaisa Hietala joined the Board in October 2020. #### Independent Yes. #### Key External Appointments Listed: Non-employee Director at Exxon Mobil Corporation and Non-executive Director of Rio Tinto. #### Experience Kaisa Hietala spent over 20 years at Neste Corporation, where she was a key architect in the strategic transformation of the company  renewable diesel and renewable jet fuel. She served as Executive Vice President, Renewable Products at Neste Corporation and was a member of the Neste Executive Board from 2014 to 2019. Prior to this she held a number of senior positions including VP, Renewable Fuels, Neste Oil Corporation. Kaisa was previously a Non-executive Director of Kemira Oyj from 2016 to 2021. #### Term of Office Lourdes Melgar joined the Board in January 2020. #### Independent Yes. #### Key External Appointments Listed: Board member of Banco Santander Mexico S.A. Non-listed: Research Affiliate at the Center  School of Management and an Independent Board member, Global Energy Alliance for People and Planet. #### Experience Lourdes Melgar is an academic and strategic advisor recognised for her expertise in energy, sustainability and governance. As former Vice Minister for Electricity from 2012 to 2014 and Vice Minister for Hydrocarbons from 2014 to 2016, she played a key role in the design,  2013 Energy Reform. Previously, as a career diplomat, she held various positions in  of Energy. James Lawrence, Non-executive Director Nationality: American Committee Membership: #### Term of Office James Lawrence joined the Board in October 2015. #### Independent Yes. #### Key External Appointments Listed: Non-executive Director of Avnet, Inc. and Aercap Holdings N.V. Non-listed: Chair of Lake Harriet Capital, LLC, an investment and advisory firm. #### Experience James Lawrence served as Chair of Rothschild North America from 2012 to 2015 and previously served as Chief Executive Officer of Rothschild North America from 2010 to 2012. Prior to this, he served as Chief Financial Officer and an executive Director of Unilever plc. He joined Unilever from General Mills where he was Vice-Chair and Chief Financial Officer. He previously also held senior positions with Northwest Airlines and PepsiCo Inc. #### Board of Directors continued Board Committees Audit Remuneration Nomination Sustainability C Chair ![]() 103Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information John Moloney, Non-executive Director Nationality: Irish Committee Membership: C #### Term of Office John Moloney joined the Board in December 2013. #### Independent Yes. #### Key External Appointments Non-listed: Board member of Shorla Pharma. Gillian Carson-Callan, Group Secretary #### Nationality: Irish #### Term of Office Gillian Carson-Callan was appointed Group Secretary in June 2020. #### Key External Appointments Non-listed: Board member of Smurfit Kappa Foundation. Jørgen Buhl Rasmussen, Non-executive Director Nationality: Danish Committee Membership: C #### Term of Office Jørgen Buhl Rasmussen joined the Board in March 2017. #### Independent Yes. #### Key External Appointments Non-listed: Chair of Uhrenholt A/S. Chair of the Executive Advisory Board in Blazar Capital. Gonzalo Restrepo, Non-executive Director Nationality: Colombian Committee Membership: C #### Term of Office Gonzalo Restrepo joined the Board in June 2015. #### Independent Yes. #### Key External Appointments Listed: Non-executive Director of Cardif Colombia Seguros Generales S.A. Non-listed: Board member Avianca S.A. Member of the Entrepreneurs Council of Proantioquia in Colombia. #### Experience John Moloney is the former Group Managing Director of Glanbia plc, a global performance nutrition and ingredients company. He served as Group Managing Director of Glanbia plc from 2001 until he retired from this position in November 2013. He joined Glanbia plc in 1987 and held a number of senior management positions before he was appointed Deputy Group Managing Director in 2000. John will retire from the Board following the conclusion of the Annual General Meeting on 28 April 2023 and therefore will not seek re-election. #### Experience Jørgen Buhl Rasmussen is the former Chief Executive Officer of Carlsberg A/S. He served as the Chief Executive Officer of Carlsberg A/S from 2007 until he retired from this position in 2015 having joined the company in 2006. He previously held senior positions in several global FMCG companies, including Gillette Group, Duracell, Mars and Unilever over the previous 28 years. He was a Board member of Novozymes A/S from 2011 and Chair from 2017 until March 2023. #### Experience Gonzalo Restrepo is the former Chief Executive Officer of Almacenes Exito SA, a leading retail company in Latin America and a subsidiary of the French company, Casino Group. He served as the Chief Executive Officer of Almacenes Exito from 1990 until he retired from this position in 2013. Gonzalo will retire from the Board following the conclusion of the Annual General Meeting on 28 April 2023 and therefore will not seek re-election. #### Experience Gillian joined the Group in 2009. She held roles within the Group Finance function before her appointment as Assistant Group Secretary in 2016. Gillian is a Fellow of the Institute of Chartered Accountants of Ireland and holds a Certificate in Company Secretarial Law and Practice. ![]() 104 Smurfit Kappa Annual Report 2022 #### Paper/Packaging #### FMCGFinance #### Executive Experience #### Corporate Governance Statement The Directors continue to be committed to maintaining the highest standards of corporate governance. This Corporate Governance Statement describes how throughout the financial year ended 31 December 2022, Smurfit Kappa Group plc applied the principles of the UK Corporate Governance Code (‘the Code’) published by the Financial Reporting Council (‘FRC’). #### Governance at a glance #### Gender Diversity As at 14 March 2023 Post-AGM 2023 #### Experience and Skills of the Non-executive Directors The range of key skills and experience includes the following: #### Operations #### International #### Sustainability #### Academic/Diplomacy #### Director Independence \* \* Excludes the Chair who was independent on appointment as Chair in May 2019. Male 61.5% Female 38.5% Independent 75% Non-independent 25% Male 55% Female 45% #### Nationalities American 2 British 1 Colombian 1 Danish 1 Dutch 1 Finnish 1 Irish 5 Mexican 1 ![]() 105Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information  framework. The value in developing corporate and Board culture is fully recognised in the knowledge that culture plays a fundamental role in the delivery of our strategy, stakeholder engagement and sustainability, which, as this report highlights, are critical for SKG as we continue to build a sustainable business, ensure compliance with the Code and meet best practice requirements. A copy of the  #### Compliance with the Code The Directors believe that the Group complies with the provisions of the Code, apart from Provision 19 for which an explanation has been provided in line with the Code. Please see Chair Succession on page 111. #### Stock Exchange Listings Smurfit Kappa Group plc, which is incorporated in Ireland and subject to Irish company law, has a premium listing on the London Stock Exchange and a secondary listing on Euronext Dublin. For this reason, Smurfit Kappa Group plc is not subject to the same ongoing listing requirements as those which would apply to an Irish company with a primary listing on Euronext Dublin. #### Board Leadership and Company Purpose #### Ensuring Long-term Success The Board is primarily responsible for the long-term success of the   control and risk management. There is a clear division of responsibilities within the Group between the Board and executive management. The Board retains control of strategic and other major decisions under a formal schedule of matters reserved to it which includes: •  • Board appointments including those of the Chair, Group Chief  •  • Agreement of terms of appointment of the Chair, Group Chief  •   •  •  •  • Approval of the Trading Statements, the Interim Report, the  • Establishment and review of corporate governance policy and  •   • Confirming that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the position and performance of the Group, its business model and strategy. The Board visited our containerboard mill in Verzuolo in October 2022. ![]() 106 Smurfit Kappa Annual Report 2022 #### Board Meetings The Board meets at least five times each year with additional meetings as required. The Board met eight times in 2022, six scheduled meetings and two additional ad hoc meetings to deal with specific matters of business. Details of the meetings held during the period are contained in the adjacent table, which also includes information on individual attendance. The Board usually holds at least one of its meetings each year at a Group operation site to give the Directors an opportunity to meet with a wider range  operating activities. Following the travel restrictions imposed in 2020 and 2021, the Board was very pleased to be in a position to hold two meetings at Group operation sites during 2022. The July Board meeting was held in Cali, Colombia. The October Board meeting was held in Northern Italy at our containerboard mill in Verzuolo. The Board is supplied, on a timely basis in advance of Board meetings, with a Board report comprising strategic updates, operational, financial, health and safety, and investor relations information together with Board papers on key issues, in a form and of a quality to enable it to discharge its duties effectively. At each Board meeting, the Chair of each Committee gives a report on major agenda items discussed at Committee meetings held since the last Board meeting. In addition, all Board members have access to all Board Committee papers and minutes. All Directors attended all scheduled meetings that they were eligible to attend during 2022. When Directors are unable to attend a meeting, having been advised by the Board papers circulated prior to the meeting of the matters to be discussed, they are given an opportunity to make their views known to the Chair or the Group Chief Executive Officer prior to the meeting. #### Attendance at Board Meetings During the Year #### to 31 December 2022 Scheduled Ad hoc Attendance Record A \* B \* C \*\* D \*\* I. Finan 6 6 2 2 A. Smurfit 6 6 2 2 K. Bowles 6 6 2 2 A. Anderson 6 6 2 2 F. Beurskens 6 6 2 2 C. Fairweather 6 6 2 2 ML. Ferguson-McHugh \*\*\* – – – – K. Hietala 6 6 2 2 J. Lawrence 6 6 2 1 L. Melgar 6 6 2 2 J. Moloney 6 6 2 1 J. Buhl Rasmussen 6 6 2 2 G. Restrepo 6 6 2 1 \* Column A indicates the number of meetings held during the period the Director was a member of the Board and was eligible to attend and Column B indicates the number of meetings attended. \*\* Column C indicates the number of ad hoc meetings held during the period the Director was a member of the Board and was eligible to attend and Column D indicates the number of ad hoc meetings attended. \*\*\* Mary Lynn Ferguson-McHugh joined the Board in January 2023. #### Communication with Shareholders The Board places a high level priority on effective communications with shareholders and recognises the benefits of shareholder  strategy and the views of major investors. On a day-to-day basis, contact with institutional shareholders is the responsibility of the Group Chief Executive Officer, the Group Chief Financial Officer and the Head of Investor Relations. There is regular dialogue with individual shareholders and the investment community. During the year, there was ongoing engagement with shareholders, various in-person and virtual investor conferences and roadshows, and numerous conference calls and presentations. This engagement takes place as and when is necessary, as well as at the time of the release of the Annual Report, preliminary and interim reports, and trading statements. The Chair, the Senior Independent Director and any other member of the Board are available to meet or virtually engage with investors if required. The Board reports provided in advance of Board meetings, include a comprehensive report summarising investor relations activity during the preceding period including contacts between executive management and current and prospective institutional shareholders. The Group issues its Annual Report, preliminary and interim reports, and trading statements promptly to shareholders and also publishes  investor relations section on the website, which in addition to the above reports and statements, contains investor presentations and all press releases immediately after their release to the relevant Stock Exchanges.  the opportunity to engage with and question the Chair of the Board, the Chairs of all Committees and all other Board members. The 2022 AGM marked a return to an in-person physical AGM, following a closed meeting in 2020 and a virtual meeting in 2021. Shareholders were encouraged to submit a Form of Proxy appointing a proxy to attend, speak, ask questions and vote at the AGM on their behalf to ensure their votes could be represented at the AGM, if they were not attending the AGM in person. Shareholders were also invited to email any questions relating to the items on the agenda in advance of the meeting. All resolutions proposed at the 2022 AGM were duly passed by way of a poll. The Notice of the AGM and related papers together with the Annual Report are sent to shareholders at least 20 working days before the meeting. In addition, the Group responds throughout the year to numerous queries from shareholders on a broad range of issues. #### Shareholder Meetings and Shareholder Rights    The Company is required to hold an AGM each year in addition to any other shareholder meeting in that year, and must specify whether the  notice calling such meeting. An EGM may be convened as provided by the Companies Act, including by Directors. Notice of a general meeting must be provided as required by the Companies Act. #### Corporate Governance Statement continued ![]() 107Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information At its general meetings, the Company proposes a separate resolution on each substantially separate issue and does not bundle resolutions together inappropriately. Resolutions on consideration of the Annual  Policy (on adoption or renewal) are put to shareholders at the AGM. The Chair of the Board or, in his absence, another Director nominated by the Directors, will preside as Chair of a general meeting. Ordinary Shares carry voting rights. Two members entitled to vote at the meeting present either in person or by proxy constitute a quorum. Votes may be cast either personally or by proxy. Under the Articles of Association, voting can take place either by a show of hands, where each shareholder has one vote, or by way of a poll, where each shareholder has one vote for each Ordinary Share held. The Companies Act provides for a number of key powers of general meetings, including the right to elect or re-elect a Director, the right to give authority to the Company to disapply pre-emption rights, the right to give authority to the Company to buy back shares and the right to amend the Memorandum and Articles of Association. The Companies Act also provides for a number of shareholder rights in respect of general meetings and the methods of exercising those rights, which are set out in the notes to the Notice of the AGM, including the right a) to table agenda items and resolutions for inclusion on the agenda of an AGM, b) to table a draft resolution in respect of an item already on the agenda of the general meeting, c) to ask questions in relation to an item on the agenda of a general meeting and d) to appoint a proxy electronically. The arrangements regarding the exercise of shareholder rights and voting rights apply to all dematerialised shares changed as a result of the migration to the Euroclear Bank central securities depository which took place in March 2021. To the extent that such shareholder rights are not facilitated under the Articles of Association, the rules of the Euroclear Bank system dictate how these shareholder rights can be exercised. Details of how shareholders holding dematerialised shares can exercise their voting rights will be contained in the notes to the Notice for the AGM. #### Sustainability In order to create long-term value, the Company has built its business on three pillars of sustainability – Planet, People and Impactful Business. This means respecting the social environment we are in and ensuring that the impacts on nature and natural resources do not exceed the needs of future generations. SKG manages its business in a way which recognises its key responsibilities in all material aspects of sustainability especially in the areas of Environment, Sustainable  Sustainability priorities are summarised on pages 54 to 55 and are described in detail in the Sustainable Development Report for 2022  The Board Sustainability Committee is responsible for providing strategic guidance and support to management in the implementation of the Smurfit Kappa Sustainability Strategy. Please see the Sustainability Committee Report on pages 141 to 143 for details on the role and activities of the Sustainability Committee during the year under review. #### Division of Responsibilities #### Board Committees As recommended by the Code, the Board has established three Committees to assist in the execution of specific matters within its responsibility. These are the Audit Committee, the Remuneration Committee and the Nomination Committee. In addition, there is a Sustainability Committee with responsibility to provide strategic guidance and support to management in the implementation of the Smurfit Kappa Sustainability Strategy. The Sustainability Committee is also responsible for engagement with the workforce on behalf of the Board as required by the Code. The responsibilities of each of these Committees are set out clearly in written terms of reference, which are reviewed annually and are  to the Board on the major agenda items discussed since the last Board meeting and the minutes of all Committee meetings are available to all of the Directors. The current membership of each Committee, details of attendance and  on pages 113 to 143. #### Roles and Responsibilities As recommended by the Code, the roles of Chair and Group Chief Executive Officer are held by separate individuals and the division of responsibilities between them is clearly established and has been set out in writing and approved by the Board. The Board has delegated responsibility for the day-to-day management of the Group through the Group Chief Executive Officer to executive management. The Board has also delegated some of its responsibilities to Committees of the Board. The powers of Directors are determined by Irish legislation and the Articles of Association. The Directors have access to independent  No such advice was sought by any Director during the year. The Board Committees are provided with sufficient resources to undertake their duties. The Board with the support of the Group Secretary is satisfied that it has the policies, processes, time and information to function effectively. #### Chair Irial Finan, as the Chair, is responsible for the leadership of the Board and the efficient and effective working of the Board. He sets and manages the Board agenda so that it (at appropriate times) addresses all matters reserved to the Board and ensures that adequate time is available for discussion on strategy and the strategic issues facing the Group. He ensures that the Directors receive accurate, timely and clear information, and that the Directors are updated periodically on the views or concerns of major investors. He also ensures that a culture of openness and debate is fostered to facilitate constructive Board relations and the effective contribution of the Non-executive Directors to the Board. Please see update on the Chair Succession on page 111 and on page 139 of the Nomination Committee Report. ![]() 108 Smurfit Kappa Annual Report 2022 #### Group Chief Executive Officer Tony Smurfit as the Group Chief Executive Officer has overall  the implementation of the Group strategy and policies as approved by  purpose, values and culture are instilled throughout the Group. Senior Independent Director  Independent Director on 10 October 2022. Her duties include being available to shareholders if they have concerns which cannot be resolved through the Chair or Group Chief Executive Officer or where contact with either of them is inappropriate. She is available to serve as an intermediary for other Directors where necessary. The Senior Independent Director also conducts an evaluation of corporate governance compliance, the operation and performance of the Board,  conjunction with the other Non-executive Directors on an annual basis except in the year when an externally facilitated evaluation takes place. #### Group Secretary The Directors have access to the advice and services of the Group Secretary who is responsible to the Board for ensuring that Board procedures are followed, applicable rules and regulations are complied with and that the Board is advised on its corporate governance obligations and developments in best practice. The Group Secretary is responsible for formal minuting of any unresolved concerns that any Director may have with the operation of the Company. During the year, there were no such unresolved issues. The Group Secretary also acts as secretary to all of the Board Committees. #### Audit #### Committee The Committee is responsible for: Providing oversight and assurance to the Board regarding; The integrity of the published financial statements and the significant financial reporting judgements; Internal financial controls and risk management and internal control systems; The Internal Audit function; The External Audit arrangements; and Whether the Annual Report taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. #### Remuneration #### Committee The Committee is responsible for: Determining the remuneration framework or broad policy for the Company’s Chair, Chief Executive Officer, Executive Directors and Group Secretary and other senior executives; Continually reviewing the ongoing appropriateness, competitiveness and relevance of the Remuneration Policy; Approving the design and determining targets for any performance related pay schemes; Determining the policy for and scope of pension arrangements for Executive Directors and other senior executives; Reviewing the workforce remuneration trends and related policies across the Group and the alignment of incentives and reward with the Company’s culture; Overseeing any major changes in employee benefits throughout the Group; and Ensuring effective engagement with relevant stakeholders in relation to remuneration and related policies and practices. #### Nomination #### Committee The Committee is responsible for: Leading the process for appointments to the Board and making recommendations to the Board; Evaluating the balance of skills, knowledge, experience and diversity, including geographical, gender, age and ethnic diversity, on the Board and its Committees to ensure they operate effectively; Setting measurable objectives and targets for diversity and inclusion for the Board and senior management: Preparing descriptions of the role and requirements for new appointees; and Giving full consideration to succession planning for Directors and senior management. #### Sustainability #### Committee The Committee is responsible for: Providing strategic guidance and support to management in the implementation of the Smurfit Kappa Sustainability Strategy; Reviewing and approving the annual Sustainable Development Report and the Sustainability section of the Annual Report; Reviewing of the Task Force for Climate-related Financial Disclosures compliance and reporting of climate related financial information; Reviewing the climate risks and opportunities of the Group including consideration of emerging trends and mitigating actions; and Engagement with the workforce on behalf of the Board as required by the Code.  Further details of the activities of the Audit Committee are set out in its report on pages 113 to 116  Further details of the activities of the Remuneration Committee are set out in its report on pages 117 to 136  Further details of the activities of the Nomination Committee are set out in its report on pages 137 to 140  Further details of the activities of the Sustainability Committee are set out in its report on pages 141 to 143 #### Board of Directors The Board is primarily responsible for the long-term success of the Group, for setting the Group’s strategic aims, for the leadership and control of the Group and for reviewing the Group’s system of internal control and risk management. There is a clear division of responsibilities within the Group between the Board and executive management. #### Group Chief Executive Officer The responsibilities of the Group Chief Executive Officer are set out below #### Corporate Governance Statement continued ![]() 109Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Composition, Succession and Evaluation, #### Membership and Board Size There are currently 13 Directors on the Board, comprising: a Non-executive Chair, two Executive Directors and 10 Non-executive Directors. Following a recruitment process in 2022, the Board appointed Mary Lynn Ferguson-McHugh as an independent Non-executive Director effective 5 January 2023. In December 2022, the Group announced that two independent Non-executive Directors, John Moloney and Gonzalo Restrepo, would not seek re-election at the AGM in April 2023 and would retire from the Board at that time. Therefore, subject to shareholder approval of the election of Mary Lynn and the re-election of all other Directors, the Board will comprise 11 Directors following the AGM in April 2023. The Board considers the size of the Board appropriate, that it is not so large as to be unwieldy and that the Directors, having a broad spread of nationalities, backgrounds and expertise, bring the breadth and depth of skills, knowledge and experience that are required to effectively lead the Group. The Board recognises the value of gender diversity to the Group and will have 45% female representation following the AGM in April 2023. Therefore, the Board expects to be in line with the FCA Listing Rules  representation in relation to gender diversity following the AGM. The Board also meets the requirements of the FCA Listing Rules and the recommendation of the Parker Review to have at least one Board member from an ethnic minority background. Following the appointment of Kaisa Hietala as Senior Independent Director of the Group, on 10 October 2022, the Group complies with the FCA Listing Rules requirement that a senior board position is held by a woman. The table below sets out the gender identity data in accordance with the FCA Listing Rules. The information presented below is as at 14 March 2023. As mentioned above, following the AGM in April 2023, the Board expects to be in line with the FCA Listing Rules and the FTSE  diversity. Number of Board members Percentage of the Board Number of senior positions on the Board (CEO, CFO, SID and Chair) Number of executive management\* Percentage of executive management\* Men 8 61.5% 3 8 61.5% Women 5 38.5% 1 5 38.5% \* Executive management is defined as our Group Executive Committee. The Board of Directors and their biographical details are set out on pages 100 to 103. The Group has an effective Board which provides the highest standards of governance to an internationally diverse business with interests spanning three continents and 36 countries and whose role is to promote the long-term sustainable success of the Company, generating value for shareholders and contributing to wider society. Each of the  business expertise and many have gained significant and relevant industry specific expertise over a number of years. The composition of the Board reflects the need, as outlined by the Code, for an effective  The experience of each Director is also set out in their biographies which are detailed on pages 100 to 103. The Board continues to include an appropriate balance of longer serving and more recently appointed Directors. In particular, a central aspect of maintaining Board effectiveness is an ongoing programme of Board refreshment to ensure robust debate, where challenge, support and teamwork are essential features and where the sharing of diverse perspectives in the boardroom and the generation of new strategies and business ideas is fostered. The Board, through the Nomination Committee, reviews the composition of the Board on an annual basis. This includes a review and refreshment of Board policies, Board diversity, including gender diversity and the skills, knowledge and experience of the Directors. #### Board Independence The Code recommends that, apart from the Chair, at least half of the Board of Directors of a listed company should comprise Non-executive Directors determined by the Board to be independent. During the year under review, the Company complied with the Code recommendation on composition and independence. The Board reviewed the current composition of the Board and determined that Anne Anderson, Carol Fairweather, Mary Lynn Ferguson-McHugh, Kaisa Hietala, James Lawrence, Lourdes Melgar, John Moloney, Jørgen Buhl Rasmussen and Gonzalo Restrepo are independent. In reaching that conclusion, the Board took into account the principles relating to independence contained in the Code and specifically whether any Non-executive Director: •  • Has or has had within the last three years, a material business  • Has received or receives remuneration from the Group apart from   •   • Holds cross-directorships or has significant links with other  •  • Has served on the Board for more than nine years from the date of their first appointment. The Board is satisfied that the independence of the relevant Directors is not compromised by these or any other factors. On 5 December 2022, John Moloney had served on the Board for nine years. In advance of this date the Board undertook a specific review  to independence contained in the Code as set out above. The Board concluded that John remains independent and continues to provide effective challenge, advice and support to management. John has indicated to the Board that he will not be seeking re-election at the  While Frits Beurskens was previously an employee of the Group and receives fees from a Group subsidiary, the Board does not believe these facts compromise his independence of judgement, his contribution to the Board or the quality of his oversight. Irial Finan, Chair of the Board, was independent on appointment. Please see Chair Succession on page 111. #### Executive and Non-executive Directors #### Experience and Skills Each of the Executive Directors has extensive experience of the paper-based packaging industry. Their knowledge is supported by the general business skills of the individuals involved and previous relevant experience. The Non-executive Directors use their broad based skills, their diverse range of business and financial experience and their international backgrounds in reviewing and assessing any opportunities or challenges facing the Group. These characteristics play an important role, enabling the Executive Directors to develop  110 Smurfit Kappa Annual Report 2022   companies either as an employee, director or stakeholder which complements the experience of the Executive Directors and which is a reason for the Board to continue to recommend Frits for re-election to the Board. The diversity of skills and experience are set out in the biographies of the Directors on pages 100 to 103 and in the Governance at a Glance on page 104. #### Appointments, Retirement and Re-election to the Board Any Director co-opted to the Board by the Directors is subject to election by the shareholders at the first AGM after their appointment and, pursuant to the Articles of Association, all Directors are subject to re-election at intervals of no more than three years. However, in accordance with the Code, the Directors individually retire at each AGM and submit themselves for re-election. The procedures governing the appointment and replacement of  Changes to the Articles of Association must be approved by the shareholders in accordance with Irish company law. The standard letter of appointment of Non-executive Directors will be available for inspection at the AGM and is available on request from the Group Secretary. Mary Lynn Ferguson-McHugh is offering herself for election, and other than John Moloney and Gonzalo Restrepo, each of the other Directors are offering themselves for re-election at the 2023 AGM. #### Induction and Development On appointment, all Non-executive Directors receive comprehensive briefing documents on the Group, its operations and their duties as a Director. They are also given presentations by the senior management team, external legal counsel and other advisors. In addition, they are encouraged to visit sites and meet with the local management. For both new and existing Non-executive Directors, the ongoing training and development programme continued in 2022 with sessions that included specific business areas, innovation, cyber security and governance. The Directors received their annual update on the Market Abuse Regulation (EU 596/2014) and SKG Code of Conduct training was also rolled out during the year. The Chair had the opportunity to visit many of our operations in Europe and the Americas during 2022, and reported back to the Board on his experiences including his engagement with employees. The July Board meeting was held in Bogota and Cali, Colombia and the October Board meeting was held at our Verzuolo mill in Northern Italy. The Board travelled to both of these meetings and fully availed of the  countries. As part of their visits the Directors met with management  these countries. Directors also receive regular briefings and presentations on a wide  and rating reports. In addition to the opportunities offered by SKG to director development, all Directors are encouraged to undergo training to ensure they are kept up to date on relevant legal developments or changes in best practice. #### External Directorships and Time Commitments The Board believe that there is benefit from the experience and perspective Non-executive and Executive Directors can bring to the Group from other appointments such as directorships of other companies they may hold. In addition, the Executive Directors are encouraged to accept a small number of external appointments as Non-executive directors on industry associations. In their roles, Directors are required to devote adequate time to perform their duties which includes attendance at the Board and Committee meetings, their preparation in advance of meetings, their attendance at training and development programmes and visits to the  a Committee and the Senior Independent Director, additional time is allocated and required to fulfil these roles. Prior to appointment, potential Non-executive Directors are required to disclose details of their other significant commitments to ensure that they have adequate capacity. For existing Directors, approval of the Board is required prior to accepting any significant additional roles or directorship. In considering additional roles consideration is given to factors including the factors set out in the Code, corporate governance requirements and the additional time commitment. The Board is satisfied that each Director has demonstrated that they have sufficient time to meet their Board responsibilities. #### External Board Evaluation In 2022, a Board effectiveness review was conducted by Ffion Hague  in accordance with the requirement to have an externally facilitated evaluation every three years under Provision 21 of the Code. The evaluation considered the performance of the Board, its committees, the individual Directors and the Chair. Neither Ffion Hague nor IBE has any other connection with the Company or any individual directors. A comprehensive brief was discussed with the assessment team at IBE by the Group Chair and the Group CEO. The review took the form of detailed interviews with each of the Directors and other key non-board contributors including members of senior management and certain external advisors including the auditor and remuneration advisor. All participants were interviewed thoroughly in accordance with a tailored agenda. The external evaluator observed the Board and each of the four Committee meetings that were held in November and December 2022. A review of agendas, minutes and papers from these meetings was also completed by the external evaluator. A report was compiled by the evaluation team based on the information and views supplied by those interviewed and observations from the Board and Committee meetings. Draft conclusions were discussed with the Group Chair and subsequently the whole Board, with Ffion Hague present. Feedback was also provided directly to each Committee Chair and  Senior Independent Director. In addition, the Group Chair received a report with feedback on the performance of each individual Director. The Board and each of the Committees discussed the output of the evaluations completed and identified actions to be implemented during 2023 as appropriate. Observations relating to the Committees are included within each of the Committee reports on pages 113 to 143. In relation to the Board, on an overall basis the feedback given to the evaluation team was very positive. The Board rates its own performance highly, noting the strength of the diversity on the Board and the broad range of skills and experience. This, together with a strong culture of integrity and a well-integrated board governance process, results in a professional, candid, engaged and highly functioning Board. The evaluation process is also an opportunity for further evolution and development. Following the presentation of the evaluation reports, there were certain actions and areas for consideration that were agreed by the Board. These include: additional structure to the Board #### Corporate Governance Statement continued ![]() 111Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information agendas with the inclusion of predefined, measurable, Board specific   comprehensive induction process to tailor it more specifically to individual non-executive director background and their specific role  of a mentor programme for new appointments to the Board or for new  Board refreshment and the planning of future appointments. These actions will be considered and implemented during the year. #### Internal Board Evaluation As an externally facilitated Board evaluation was completed in 2022, an internal Board evaluation was not carried out in 2022. Externally facilitated evaluations are conducted every three years in line with the Code. In the intervening years, the Senior Independent Director co-ordinates a rigorous annual evaluation of the operation and performance of the Board, the Directors, its Committees and the performance of the Chair. This is achieved through the completion of a detailed questionnaire by each Director and separate discussions with each Director. The Committees undertake an annual evaluation of their performance and report back to the Board. At least once a year the Chair meets with the Non-executive Directors. The Board discusses the results of its evaluations in order to identify and address areas in which the effectiveness of the Board might be improved. Following a comprehensive internal evaluation completed in 2021, the Board implemented actions arising from it during 2022. #### Succession Planning and Diversity The Board has a Board Diversity Policy in place and believes that, as a global business, inclusion, diversity and equality are integral to how we do business. The Board Diversity Policy recognises and supports the importance of these values throughout the organisation to building long-term success. The Board believes that a truly diverse Board includes varying perspectives and career experience as well as diversity of gender, ethnicity, nationality and age, all of which are considered in determining the optimum composition of the Board and wherever possible, are balanced appropriately. All Board appointments and succession plans are based on merit and against objective criteria, in the context of the appropriate balance of skills, diversity of knowledge and thinking, professional and geographic backgrounds and experience which the Board as a whole requires to be effective and to be essential aspects of diversity for a company with businesses in 36 countries worldwide. The Board recognises the need for orderly succession and has a comprehensive succession plan in place. During the year, the Nomination Committee evaluated the composition of the Board with respect to the balance of skills, knowledge, experience and diversity, including geographical, gender and ethnic diversity on the Board. The Board approved Kaisa Hietala as the successor to Gonzalo Restrepo as Senior Independent Director in October 2022. As announced in December 2022, John Moloney and Gonzalo Restrepo will not be seeking re-election at the forthcoming AGM and will retire from the Board on that date. As a result of these changes, the Board have approved the following Chair designates which will be effective from the conclusion of the AGM: Anne Anderson will succeed Gonzalo Restrepo as Chair of the Nominations Committee, Jørgen Buhl Rasmussen will succeed John Moloney as Chair of the Remuneration Committee and Kaisa Hietala will succeed Jørgen as Chair of the Sustainability Committee. Mary Lynn Ferguson-McHugh was appointed as an independent Non-executive Director of the Board with effect from 5 January 2023 following a recruitment process during 2022. Please see details of the process in the Nomination Committee Report on pages 137 to 140. #### Chair Succession #### Tenure Irial Finan joined the Board in February 2012 and was appointed Chair in May 2019. He was independent at the time of appointment, as recommended by the Code. He was appointed as Chair designate in October 2018 and became Chair at the conclusion of the AGM in May 2019. In 2021, as Irial had then exceeded nine years on the Board, a  consultation was conducted, which was led by Gonzalo Restrepo who was the Senior Independent Director at the time. In line with Provision 19 of the Code, a clear and detailed explanation was provided in the 2021 Annual Report (pages 84 and 85) outlining the conclusions of this review, the rationale for a proposed extension to the Chair tenure, and a recommendation to shareholders that the tenure of Irial be extended by a period of up to three years (or up to the 2025 AGM). In their decision to define a time period for the extension, the Board noted its belief that this would provide clarity and certainty for all stakeholders of the Group. This recommendation was strongly supported by the  re-election at the AGM in 2022. During the previous two years, internal evaluations conducted by the Senior Independent Director had included an evaluation of the Chair. These evaluations concluded that his performance was exceptional and that the Board were very satisfied with his support, leadership and independence as Chair. In addition to these internal evaluations, an externally facilitated evaluation of the Board including the Chair was conducted by Ffion Hague of Independent Board Evaluation during 2022. The feedback was highly positive with recognition of the interpersonal dynamics Irial has established in what is considered a  strong people, investor and customer focus as well as his notable understanding of our business. As a result, following consideration of the Code, the comprehensive review completed during 2021 and the externally facilitated evaluation conducted in 2022, the Board has concluded that it remains in the best interests of the Group and of all stakeholders that the tenure of Irial continue in line with the prior year recommendation. #### Succession Process As noted in the 2021 Annual Report, the Board is committed to ensuring that an orderly succession and transition of the Chair is conducted. As a result, progressing the process remains a priority for the Senior Independent Director who is leading the succession process. During 2022, Kaisa Hietala succeeded Gonzalo Restrepo as Senior Independent Director, and is now responsible for the succession process going forward. A comprehensive handover was conducted following her appointment as Senior Independent Director. In addition, due consideration has been given to the next steps required. During 2023, a detailed specification of the role will be prepared, and an independent external recruitment firm will be selected to work  as Chair of the Board. The Board will keep shareholders informed on the matter of the  engagement as appropriate. #### Recommendation  believes that it is in the best interests of the Company and its stakeholders that Irial remain as Chair for a period of up to two years (or up to the 2025 AGM). The Board is therefore recommending to shareholders the re-election of Irial at the forthcoming AGM in April 2023. 112 Smurfit Kappa Annual Report 2022 #### Audit Risk and Internal Control #### Risk Management and Internal Control  management and internal control and for monitoring and reviewing   Internal Control are included in the Risk Report on pages 32 to 36. The Directors confirm there is an ongoing process for identifying, evaluating and managing the emerging and principal risks faced by  Management, Internal Control and Related Financial and Business Reporting. This process has been in place throughout the accounting period and up to the date of approval of the Annual Report and Consolidated Financial Statements and is subject to regular review by the Board. The Directors confirm that they have carried out a robust assessment  future performance, solvency and liquidity. The Directors also confirm they have conducted an annual review of the effectiveness of  including the date of approval of the Annual Report and Consolidated Financial Statements. This review had regard to the emerging and  on pages 34 to 36), the methods of managing those risks, the controls that are in place to contain them and the procedures to monitor them. #### Financial Reporting As part of its overall system of internal control, the Group has in place   Consolidated Financial Statements. The requirements for producing  Guide and Financial Monitoring Policy which gives guidance on the maintenance of records that accurately and fairly reflect transactions, provide reasonable assurance that transactions are recorded correctly to permit the preparation of Consolidated Financial Statements in accordance with International Financial Reporting Standards and that require reported data to be reviewed and reconciled. These systems include the following financial reporting controls: access controls, reconciliations, verification controls, asset security controls and  management team review the results of the operations on a monthly  monthly reports from all operations and meet with segment management at least on a quarterly basis to review the year-to-date results against budget and rolling forecasts enabling them to monitor and challenge any variance against the expected financial outcome for the period. Internal Audit review financial controls in different locations on a test basis each year and report quarterly to the Audit Committee. Each operation through to segment level is required to self-assess on the effectiveness of its financial control environment. This includes the completion of an Internal Control Questionnaire which is reviewed by the Group Financial Controller and audited on a test basis by Internal Audit. Senior management representations with respect to the Group Consolidated Financial Statements showing a true and fair view are also required and supplied at year-end. #### Code of Conduct The Smurfit Kappa Code of Conduct includes principles of best practice  We also require individuals, entities, agents or anyone acting on the  Conduct incorporates the Speak Up Policy and is available on the   incorporating the Speak Up Policy e-learning programme and communicated this to all colleagues, both office and plant-based in local languages. #### Securities Dealing Code and Share Ownership The Group has a policy on dealing in SKG securities that applies to restricted persons comprising all Directors, senior management and certain other employees. Under this policy, restricted persons are required to obtain clearance from prescribed persons before dealing. Restricted persons are prohibited from dealing in SKG securities during designated closed periods and at any other time when the individual is in possession of Inside Information (as defined by the Market Abuse Regulation (EU 596/2014)).  #### Directors’ Report The Change of Control, Capital Structure and Purchase of Own Shares  part of this Corporate Governance Statement. Please see the Audit Committee Report on pages 113 to 116 for details on the role and activities of the Audit Committee during the year under review. #### Remuneration Details of remuneration paid to Directors, (Executive and Non-executive) are set out in the Remuneration Report on pages 133 to 136. As disclosed in previous years the Committee committed to aligning  workforce rate by means of a phased reduction. Effective 1 January  reduced to 10% of salary, which is aligned to the workforce rate. Non-executive Directors are paid fees for their services and none of their remuneration is performance related. They are not eligible to   The Remuneration Report will be presented to shareholders for the purposes of a non-binding advisory vote at the AGM on 28 April 2023. Please see the Remuneration Committee Report on pages 117 to 136 for details on the role and activities of the Remuneration Committee during the year under review. #### Corporate Governance Statement continued ![]() 113Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Audit Committee Report “Dear Shareholders, I am pleased #### to present the Audit Committee #### report for the 2022 financial year.” #### Carol Fairweather Chair of Audit Committee, #### 14 March 2023 #### Committee Members C. Fairweather (Chair) ML. Ferguson-McHugh K. Hietala J. Lawrence L. Melgar J. Moloney #### The Role of the Audit Committee The Committee is responsible for providing oversight and assurance to the Board regarding: • The integrity of the published financial statements and the  • Internal financial controls, risk management and internal control  •  •  • Whether the Annual Report taken as a whole, is fair, balanced and understandable and provides the information necessary for  business model and strategy. The role and responsibilities of the Committee are set out in its  smurfitkappa.com. The Terms of Reference were reviewed and updated in December 2022. Attendance Record A \* B \* Appointment Date C. Fairweather (Chair) 6 6 2018 ML. Ferguson-McHugh \*\* – – 2023 K. Hietala 6 6 2021 J. Lawrence 6 6 2015 L. Melgar 6 6 2020 J. Moloney 6 6 2014 \* Column A indicates the number of meetings held during the period the Director was a member of the Committee and was eligible to attend and Column B indicates the number of meetings attended. \*\* Mary Lynn Ferguson-McHugh was appointed to the Committee in January 2023. 114 Smurfit Kappa Annual Report 2022 This report provides an overview and detail on how the Committee has discharged its responsibilities together with the other areas we  for the year ahead. #### Membership of the Committee The Committee is currently comprised of six independent Non-executive Directors with Mary Lynn Ferguson-McHugh joining the Committee in January 2023. As announced in December 2022, John Moloney will not be seeking re-election at the forthcoming AGM and will retire from the Committee and the Board on that date. I would like to thank John on behalf of the Committee for his valuable contribution over the years and to formally welcome Mary Lynn to the Committee. Each Committee member has considerable commercial experience and Jim Lawrence and I bring recent and relevant financial experience. The biographical details of each member are set out on pages 100 to 103. #### Meetings The Committee met six times during the year under review. Details of the Committee members and meetings attended are provided in the table on the previous page. The Group Chief Financial Officer, the Group Head of Internal Audit and Risk, the Group VP Human Resources and senior members of the Group finance team normally attend meetings of the Committee. The Group Chief Executive Officer periodically attends meetings of the Committee. The External Auditor also attends all meetings and together with the Group Head of Internal Audit and Risk have direct access to the Committee Chair at all times. In advance of every meeting, the Committee Chair meets individually with the Group Chief Financial Officer, the Group Secretary, the Group finance team, the Group Head of Internal Audit and Risk, the External Auditor and the Group VP Human Resources. Committee papers and minutes are available to all members of the Board. #### Areas of Focus in 2022 The key focus of the Committee during the year continued to be the review and monitoring of the integrity of the financial statements    Statement and going concern recommendations to the Board remained  a whole is fair, balanced and understandable. More details on the work carried out in these areas are set out on the following pages. In addition, we spent time on the following: • Reviewing the work on the continued evolution of the Group Risk  •  • Considering the quarterly reports on cyber security and the continued investments in this area to respond to current trends  • Receiving an annual tax update covering tax strategy and  •  to property, business interruption, climate and cyber security  •  Law Compliance, Sanctions, Screening and Data Protection  • Receiving regular updates on cases raised via the Speak Up process  • Engaging with KPMG in relation to the selection of and transition arrangements for the lead audit partner in respect of the year  • Reviewing the accounting treatment and disclosures in relation   • Reviewing the proposed disclosures in the Annual Report against the recommendation of the Task Force on Climate-Related Financial  60 to 67. #### Committee Evaluation An independent externally facilitated evaluation of the Board and its Committees was conducted by Ffion Hague from Independent Board Evaluation, details of which are outlined in the Corporate Governance Statement on pages 110 to 111. Overall the Committee was considered to be operating effectively and efficiently. #### Priorities for the Year Ahead This year, we will focus on: • The progress on embedding the proposed evolution of the Internal  • Working closely with KPMG to ensure a smooth transition of the  • Continuing to follow developments on audit reform and evolving best practice, including climate change reporting, and considering any other new regulations, guidance or recommendations. Carol Fairweather Chair of Audit Committee #### Audit Committee Report continued ![]() 115Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Financial Reporting and Significant Matters Related #### to the Consolidated Financial Statements  Group finance team who have the appropriate level of qualifications and expertise. The Committee reviewed all published financial and narrative statements of the Group, including the annual and interim reports, preliminary results announcement and trading statements released during the year and reported its views to the Board to assist  The Committee assessed whether suitable accounting policies had been adopted and whether management has made appropriate  position in relation to the main significant matters and financial reporting judgements, as detailed below. The Committee also reviewed reports by the External Auditor on the hard-close and year-end audit procedures which highlighted any matters identified from the work undertaken on the external audit. #### Fair, Balanced and Understandable The Code requires that a fair, balanced and understandable  the Board and that they consider that the Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess  The Committee, on behalf of the Board, considered and discussed with management the key processes that they have in place for the preparation of the Annual Report including their comprehensive review procedures. This allowed the Committee to confirm to the Board that the Annual Report, taken as a whole, is fair, balanced and understandable and that it provides the necessary information for  model and strategy. In addition, the Committee noted the formal processes performed by KPMG in relation to the Annual Report. #### Viability Statement and Going Concern The Committee is responsible for ensuring that the process in place to allow the Board to provide the Viability Statement is robust. The Committee reviewed the process that had been followed and the stress  risks. The Committee confirmed to the Board that it was comfortable with the process that had been followed to provide the Viability Statement on page 32. The Committee reviewed and was comfortable with the recommendation setting out the support for adopting the going  statement on going concern is set out on page 33. #### Significant Matters Related to the Consolidated Financial Statements Significant Matter Action Taken/Conclusions Assessment of the Carrying Value of Goodwill The Group has goodwill of €2,455 million at 31 December 2022. The Group performs an impairment review at least annually and at any time an impairment is considered to exist. Through discussions with management and KPMG: •   the key assumptions (including future profitability and terminal value and discount rates) used in the  • The Committee considered a number of different scenarios to test the sensitivity of the model to changes in its key drivers and to understand the level of headroom available at a CGU level. The Committee was satisfied that the judgements made by management were reasonable and that following the €85 million impairment charge in relation to goodwill in Argentina, Peru and Russia, no further impairment to goodwill was required, and the disclosures in Note 13 to the Consolidated Financial Statements are appropriate. Valuation of Defined Benefit Obligations The Group has net defined benefit liabilities totalling €517 million at 31 December 2022. The Committee considered the key assumptions management used in determining the defined benefit liabilities (which included a full actuarial valuation of the unfunded liabilities undertaken by independent experts) and was satisfied that they were reasonable, appropriate and consistent with market practice. Exceptional Items The Group has recognised exceptional charges totalling €223 million in 2022.  exceptional charges which totalled €223 million, of which €128 million related to the impairment of assets in our Russian operations, €56 million and €11 million respectively for the impairment of goodwill in Argentina and Peru, €14 million for redundancy and reorganisation costs in the Americas, along with €14 million for the impairment of property, plant and equipment in our North American operations. The Committee was satisfied that the nature and size of the items included within the exceptional charge  #### Internal Audit The Group operates an internally resourced Internal Audit function which reports directly to the Committee. Following a comprehensive recruitment process a new Head of Internal Audit and Risk joined the Group in early 2022 allowing for a coordinated handover with the retiring incumbent. The Committee received and reviewed the quarterly reports from the Head of Internal Audit and Risk summarising audit findings, agreed actions and recommendations and reviewed progress on addressing the actions and recommendations. The Committee noted that remote auditing, as a result of pandemic related travel restrictions, continued in the early part of 2022 and did not impact significantly on the delivery of the Internal Audit Plan.  requirements, an independent review of the Internal Audit function must be conducted at least once every five years by a qualified assessor. The last independent review of Group Internal Audit took place in 2020 and was performed by EY. The assessment concluded 116 Smurfit Kappa Annual Report 2022 that the Internal Audit function was performing well in accordance with its current mandate but that there were opportunities to develop the mandate of Internal Audit. During 2022, the Internal Audit mandate was reviewed and considered and an evolved, broadened Audit Universe was approved by the Committee. The Internal Audit Plan for the coming year was developed using a risk-based approach taking into consideration the approved Audit Universe. The Committee reviewed and approved the Internal Audit Plan.  Audit function and was satisfied it was operating effectively within the current remit and is appropriate for the business. The Committee met privately with the Head of Internal Audit and Risk during the year with no significant matters of concern raised. #### Whistleblowing The Committee is responsible for ensuring that the Group maintains suitable whistleblowing arrangements. The Group has a Code of Conduct in place which incorporates the Speak Up Policy (Whistleblower Code). There is a Speak Up service which allows employees to raise concerns across all key communication channels which is available in 21 different languages and provides confidentiality and/or anonymity and assurance of non-retaliation (see page 97 for further details). The Committee received regular updates on cases raised via the Speak Up process from the Group VP Human Resources. No material cases were reported to the Committee during 2022. #### Risk Management and Internal Control  embedded within the organisation structure. The Committee is responsible for reviewing the adequacy and effectiveness of the internal control system and risk management on behalf of the Board. The Committee has reviewed the adequacy and effectiveness of the  including reviewing: • The effectiveness of its risk management processes including the  •   • The work undertaken by internal and external auditors in relation  • The regular reporting on any control, fraud related or whistleblowing issues.  of internal controls including risk management, the Committee confirms that it has not been advised of, or identified, any significant failings or weaknesses. The ongoing evolution of the Group Risk Framework continued during the year. The risk appetite statements developed during 2021 were embedded into the risk processes including the introduction of KPIs and reported to the Committee and the Board. In addition, a process was undertaken to consider the interconnectivity of risk and this will be further considered during 2023 as we continue to evolve this key area.  Control, please see the Risk Report on pages 32 to 36. External Auditor The Committee is responsible for overseeing the relationship with, and the performance of, the External Auditor. This includes making a recommendation on the appointment, reappointment and removal of the External Auditor, assessing their independence and effectiveness, involvement in fee negotiations and assessing their performance.  tender process. Prior to the commencement of the 2022 year-end audit, the Committee  and plan and agreed the scope of the audit, the key risks, the proposed audit fee and the terms of engagement. During the year, the Committee considered the effectiveness and independence of the External Auditor and confirmed its satisfaction on both. This review involved discussions with both Group management  consideration of the robustness of the audit process and the level of scepticism and challenge by the External Auditor particularly in   assurance review of KPMG. Following these considerations, the Committee has recommended to the Board that KPMG be proposed for reappointment at the forthcoming AGM. KPMG attended all of the Audit Committee meetings during the year and had a number of private meetings with the Committee during the year where no significant matters of concern were raised.  is required to rotate the audit partner responsible for the Group audit every five years. Roger Gillespie (who was appointed in 2018) acted as lead audit partner for the year ended 31 December 2022, his fifth and therefore final audit as lead audit partner. The Committee wishes to thank Roger for his engagement and contribution during his tenure.  the 31 December 2023 audit. #### External Auditor Non-audit Services The Committee recognises that the independence of the External Auditor is an essential part of the audit framework and the assurance that it provides. The Committee has adopted a policy which sets out the types of permitted and non-permitted non-audit services and those which require explicit prior approval. Non-audit services provided by the External Auditor must be considered by the Committee to be necessary in the interests of the business and by their nature, these services could not easily be provided by another professional auditing firm. The provision of tax advisory services and due diligence/transaction  The provision of internal audit services, valuation work and any other activity that may give rise to any possibility of self-review are not permitted under any circumstance. All contracts for non-audit services in excess of €50,000 must be notified to and pre-approved by the Chair of the Committee. Details of the amounts paid to the External Auditor during the year for audit and other services are set out in Note 5 on page 179. Fees paid to KPMG for non-audit work in 2022 amounted to €0.5 million and total 5% of the fees paid for the statutory audit (2021: 4%). During the year, there were no circumstances where KPMG was engaged to provide services which might have led to a conflict of interests or compromised their independence. #### Audit Committee Report continued ![]() 117Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Remuneration Report “Dear Shareholders, I present #### the Remuneration Report #### for the financial year ended #### 31 December 2022.” #### John Moloney Chair of Remuneration Committee, #### 14 March 2023 #### Committee Members J. Moloney (Chair) J. Buhl Rasmussen (Chair designate) C. Fairweather ML. Ferguson-McHugh G. Restrepo #### The Role of the Remuneration Committee • Determine the remuneration framework or broad policy for the   • Continually review the ongoing appropriateness, competitiveness  • Approve the design and determine targets for any performance  • Determine the policy for and scope of pension arrangements  • Review the workforce remuneration trends and related policies across the Group and the alignment of incentives and reward  • Oversee any major changes in employee benefits throughout  • Ensure effective engagement with relevant stakeholders in relation to remuneration and related policies and practices. The role and responsibilities of the Committee are set out in its  smurfitkappa.com. The Terms of Reference were reviewed and updated in December 2022. Attendance Record A \* B \* Appointment Date J. Moloney (Chair) 6 6 2015 J. Buhl Rasmussen 6 6 2017 C. Fairweather 6 6 2018 ML. Ferguson-McHugh \*\* – – 2023 G. Restrepo 6 6 2015 \* Column A indicates the number of meetings held during the period the Director was a member of the Committee and was eligible to attend and Column B indicates the number of meetings attended. \*\* Mary Lynn Ferguson-McHugh was appointed to the Committee in January 2023. ![]() 118 Smurfit Kappa Annual Report 2022 #### Remuneration Report continued I am pleased to report that the Group has delivered a very strong performance over the past year against a backdrop of significant cost inflation. Our talented people have continued to drive improvement in many areas of the business, providing the most innovative and sustainable packaging solutions and ensuring security of supply to our customers. #### Remuneration Policy Implementation  to shareholders at the AGM in 2021, where it received 94% support. For the current year, no changes are proposed to the implementation of the Policy. #### Remuneration in Context Over the course of 2022, the Remuneration Committee monitored the exceptional rise in inflation, including energy inflation and the cost of living in many of the countries in which the Group operates. As a result, during the financial year, the Committee supported management in their proposals to award the wider workforce, excluding management, with special one-off payments and other benefits as appropriate in the countries whose inflationary pressures, particularly energy inflation, were the greatest. In terms of the salary reviews of the wider workforce, the level of inflation in each of the countries varies, and on an overall basis the increases of the wider workforce were on average 6%. The Committee will continue to monitor the economic backdrop and take further steps that are deemed appropriate to ensure that our workforce   of our EAP (Employee Assistance Programme) and includes support for employees on their financial wellbeing in addition to overall physical health and mental wellbeing. #### Executive Director Salaries The review of the salaries for the executive Directors at the year-end considered the performance of the Group and the Directors, increases of the wider workforce and the macroeconomic environment. Following consideration, the Committee approved an increase of 4% for both the Group CEO and CFO from 1 January 2023 which is below  as outlined above. In addition, the Board, following an external review of fees, approved an increase in the fees of the Non-executive Directors and the Chair by 4% in line with the executive Directors and below the increase for the wider workforce. #### Executive Director Pensions In line with the requirements of the UK Corporate Governance Code and reflecting external sentiment on executive Director pensions, the Committee agreed with the executive Directors in 2020 that their pension contributions would be reduced on a phased basis to be in line with the workforce by the end of 2022 (i.e. effective 1 January 2023). The final reduction in their pension rates to 10% of salary was effective from 1 January 2023 and brought the contribution rate in line with the workforce. #### 2022 Performance and Incentive Out-turns Smurfit Kappa reported strong results for 2022, with adjusted EBIT of €1,645 million and a free cash flow of €545 million. In this context, the Committee reviewed performance against the metrics and the operational and strategic objectives under the annual bonus plan for 2022 and approved a bonus of 97.9% for the Group CEO and Group CFO, with 50% of the annual bonus being deferred into shares for three years, in line with the Policy. The Committee reviewed the outcome of the Performance Share Plan     paper and packaging peers in the TSR benchmark. Overall, the 2020 PSP award outcome was 75% of maximum, demonstrating the consistency of performance over the last three years. In determining the outcomes of the 2022 annual bonus and the 2020 PSP cycle (including the potential for windfall gains), the Committee was satisfied that the outcomes reflected the underlying performance of the Company and the experience of stakeholders, and therefore deemed it unnecessary to apply any discretionary overrides or adjustments. Further details on performance against the targets are set out on pages 128 to 130. #### 2023 Performance and Incentive plans There are no changes proposed to the operation of the annual bonus and PSP for 2023. The award levels and performance measures are consistent with those applied in 2022. Each year, the Committee reviews targets for the annual bonus and PSP to ensure that they continue to support the strategy and incentivise executives to deliver clearly defined and stretching goals. Performance targets for the 2023  medium-term strategic planning and Viability Statement processes, which consider a number of factors including external economic factors such as the OECD expectations on GDP growth. In line with previous years, targets for the annual bonus will be  Targets for the 2023 PSP award are set out on page 121. The Committee believes the proposed targets for the period are suitably stretching to reward out-performance whilst also incentivising the management team. The EPS targets are set on a cumulative basis and ROCE targets are set on a three-year average basis. In addition, the ESG metrics (CO 2 emission reduction, waste reduction and water reduction) which cumulatively constitute 15% of the targets for this award, are central  As ever, the Committee will use its judgement to review the formulaic outcomes across all the metrics, to ensure that vesting levels accurately reflect the underlying performance of the business and the experience of wider stakeholders. Any adjustment to the formulaic outcome will be communicated to investors at the end of the relevant performance period. #### Employee Engagement  goal of creating greater social, economic and environmental value, with metrics linked to these aims included in the incentive plans. As the Remuneration Committee is responsible for overseeing pay arrangements for all employees, the Committee recognises the need to engage with the wider workforce as part of its efforts to align with  We have already made good progress in this area, voluntarily adopting a number of the requirements of UK remuneration reporting regulations and in 2022 reporting on Gender Pay Gap for Ireland (as detailed further on page 94), in recognition of the importance of transparency around matters of pay. In 2022, the Board received wider workforce feedback on remuneration via the Sustainability Committee. In addition, the Sustainability Committee undertook a programme of employee engagement in 2022 with employees from across Europe and the Americas in a number of sessions promoting two-way dialogue, read more on pages 44 and 45. As market practice evolves, the Committee will continue to explore new ways of bringing the voice of the workforce into the boardroom, affirming our mission of being a sustainable company that builds excellent relationships with employees and other stakeholders. ![]() 119Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Committee Evaluation An independent externally facilitated evaluation of the Board and its Committees was conducted by Ffion Hague from Independent Board Evaluation, details of which are outlined in the Corporate Governance Statement on pages 110 to 111. Overall, the Committee was considered to be operating effectively and efficiently. #### Remuneration Policy Review  the remuneration arrangements during 2022, to ensure they remain competitive, and had expected to engage with shareholders in relation to this. Even though there is evidence that some areas of the senior executive remuneration package are below market, the Committee took the decision that the conclusion of the review would be deferred as a result of macroeconomic conditions. The Committee has an open approach to engagement and welcomes feedback from shareholders through the AGM process and at other points throughout the year as the need arises. The current Policy was  requirements, with which the Company voluntarily complies, the Committee intends to seek re-approval of the Policy at the 2024 AGM (i.e., after three years). The Committee will therefore conclude its review of the Policy during 2023 and engage with key stakeholders as part of this process. #### Conclusion As announced in December 2022, I will not be seeking re-election at the forthcoming AGM and will retire from the Board on that date. Jørgen Buhl Rasmussen has been appointed Chair designate and will succeed me as Chair of the Committee at the conclusion of the forthcoming AGM. I would like to thank shareholders, my fellow Board members and the senior management team for their support over the years and I wish SKG continuing success in the future. Finally, on behalf of the Committee, I hope that you will feel able to support the remuneration related resolution at the upcoming AGM. As ever, I welcome any comments you have. John Moloney Chair of Remuneration Committee #### Chair Designate Jørgen Buhl Rasmussen was appointed Chair designate of the Committee in December 2022 and will replace John Moloney as Chair of the Committee following the conclusion of the AGM in April 2023. Jørgen has been a member of the Committee since 2017. ![]() 0.0 412.5 825.0 1237.5 1650.0 2021 €1,080 m 2022 €1,645m 0.000000 183.333333 366.666667 550.000000 733.333333 916.666667 1100.000000 2021 818c 2022 1,014c 0 5 10 15 20 2021 16% 2022 18% 0.000000 91.666667 183.333333 275.000000 366.666667 458.333333 550.000000 2021 €455m 2022 €545m 100% 100% 100% 94% 100% EBIT (35%) FCF (35%) Health, Safety & Wellbeing (10%) People & ESG (10%) Personal/Strategic Goals (10%) 75% €3,153k €5,770k €3,153k €5,770k 120 Smurfit Kappa Annual Report 2022 #### Remuneration at a glance #### Our 2022 Performance Adjusted EBIT Adjusted Return on Capital Employed (three year average) Free Cash Flow Adjusted Pre-exceptional Basic EPS (cumulative over three years) #### Impact on Director Pay Annual Bonus Outcome Long-Term Incentive Plan (‘LTIP’) #### Total Remuneration A. Smurfit K. Bowles 8.33% 33.33% 33.33% The figure in brackets represents the performance metric weighting. The bonus outturn for the Group CEO and CFO was 146.9% of salary. Half of the bonuses were paid in cash and half are deferred under the Deferred Bonus Plan. Read more on pages 128 to 130 Read more on page 128 The figures in brackets represents the performance metric weighting. The outcome of the 2020 PSP award was 75% of the maximum as a result of the achievement of the relevant performance targets in the three-year period ended 31 December 2022. Read more on page 130 Overall outcome 75% ROCE 33.33% (33.33%) EPS 33.33% (33.33%) TSR 8.33% (33.33%) Basic Salary Pension Benefits Annual Bonus LTIP #### Remuneration Report continued ![]() 121Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Remuneration Policy (abridged) Including 2023 Implementation #### Executive Directors #### Component of Pay Implementation in 2023 Group Chief Executive Officer Group Chief Financial Officer #### Basic Salary The Group CEO’s and CFO’s salaries are being increased by 4% from 2023 which is below the increase for the wider workforce. A. Smurfit = €1,185,533 p.a. K. Bowles = €728,000 p.a. #### Benefits Market competitive benefits provided in line with Remuneration Policy. #### Pension A. Smurfit = 10% of salary (cash allowance) Reduced from 2022 rate of 15.5%. Aligned with workforce rate from 1 January 2023. K. Bowles = 10% of salary (cash allowance) Reduced from 2022 rate of 13.5%. Aligned with workforce rate from 1 January 2023. #### Annual Bonus Performance will be measured over one year against the following key financial, operational/strategic and individual performance metrics: Measure Weighting EBIT 35% Free Cash Flow 35% Health and Safety 10% People & ESG 10% Personal/Strategic Goals 10% In line with previous years, the actual targets have not been disclosed prospectively. The target setting process will be in line with the prior year and the targets will be published retrospectively in the Annual Report. 50% will be delivered in cash and 50% will be deferred into Company shares for three years. A. Smurfit (maximum) = 150% of salary K. Bowles (maximum) = 150% of salary #### Performance Share Plan Performance measured over three years against four quadrants. Awards are subject to a post-vesting holding period such that they are released following the fifth anniversary of the grant date. Measure Weighting Threshold Vesting (25% of maximum) Maximum Vesting (100% of maximum) EPS (pre-exceptional items – cumulative over three years) 28% 970c 1,190c ROCE (three-year average) 28% 15.0% 18.5% Relative TSR\* 29% Median Performance Upper Quartile ESG – Planet CO 2 Emissions Reduction 1 5% 45.25% 50.0% Water Discharge Reduction 2 5% 54.0% 63.0% Waste to Landfill Reduction 3 5% 30.0% 33.0% Straight line vesting between points \* Measured against the following peers: Billerud Korsnas, Cascades, DS Smith, Empresas CMPC, Graphic Packaging, International Paper, Klabin, Mayr-Melnhof, Metsa Board, Mondi, Packaging Corporation of America, Stora Enso, UPM Kymmene and WestRock. 1 Intensity reduction in fossil CO 2 emissions in our global paper and board mill system compared with our baseline year 2005. 2 Intensity reduction of COD content of water returned to the environment from our global paper and board mill system compared with our baseline year 2005. 3 Intensity reduction in waste sent to landfill by our global paper and board mill system compared with our baseline year 2013. A. Smurfit (maximum) = 250% of salary K. Bowles (maximum) = 205% of salary #### Share Ownership #### Requirements A. Smurfit is required to build a shareholding equivalent to 300% of basic salary. K. Bowles is required to build a shareholding equivalent to 200% of basic salary. #### Post-employment Share #### Ownership Requirements The share ownership requirement will apply for the first year post-departure and 50% of the requirement will apply for the second year post departure. ![]() 122 Smurfit Kappa Annual Report 2022 #### Remuneration Policy (abridged) Including 2023 Implementation continued #### Non-executive Directors The table below sets out a summary of Non-executive Director fees. The fees have increased by 4% in line with the salary increase of the Group CEO and CFO which is below the increase for the wider workforce. Annual Fee Chair €364,000 Non-executive Director base fee €72,800 Additional Fees: Senior Independent Director fee €62,400 Committee Chair fee €62,400 Committee membership fee €20,800 #### Alignment with the Workforce    performance culture, enabling people to see a clear link to their remuneration packages when they perform above and beyond what is expected. #### Remuneration Policy (abridged) #### Introduction The current Remuneration Policy is designed to attract, retain and motivate Directors and senior management of the highest calibre who are expected to deliver superior performance and to provide strong leadership to the Group. The Policy has been effective from 30 April 2021 following the strong approval of 94% of shareholders at the 2021 AGM. No changes have been made to the Policy since this time. Full details of the Remuneration Policy can be found on pages 76 to 97 of the 2020 Annual Report. The following table summarises how the Remuneration Policy fulfils the factors set out in Provision 40 of the UK Corporate Governance Code: Code SKG Remuneration #### Clarity Remuneration arrangements should be transparent and promote effective engagement with shareholders and the workforce. The annual bonus and PSP have been designed to incentivise executives to achieve clearly defined stretching targets. Performance measures and targets are reviewed each year by the Committee to ensure that they continue to be clear and appropriate. #### Simplicity Remuneration structures should avoid complexity and their rationale and operation should be easy to understand. In 2018, the Committee replaced the deferred bonus matching plan with a new performance share plan aligned with market practice. This move supported our aim of operating a simple remuneration structure with a single long-term incentive plan operating separately from the annual bonus. #### Risk Remuneration arrangements should ensure reputational and other risks from excessive rewards, and behavioural risks that can arise from target-based incentive plans, are identified and mitigated.  and the objective of developing superior, sustainable returns and value at acceptable levels of risk but with a clear and intelligible link to performance and the financial prosperity of the Group. #### Predictability The range of possible values of rewards to individual Directors and any other limits or discretions should be identified and explained at the time of approving the policy. The Committee believes it is important for executive Directors and senior management that a significant portion of the package is performance related. The potential value and composition of the  and maximum (including share price performance) scenarios under our Remuneration Policy are set out on page 126. #### Remuneration Report continued ![]() 123Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Code SKG Remuneration #### Proportionality The link between individual awards, the delivery of strategy and the long-term performance of the Company should be clear. Outcomes should not reward poor performance. Payments from the annual bonus and PSP require delivery against stretching performance conditions. The performance conditions  The Committee has discretion to override formulaic out-turns to ensure that they are appropriate and reflective of overall performance. #### Alignment to Culture Incentive schemes should drive behaviours consistent with company purpose, values and strategy. Smurfit Kappa is a multinational Group and it is important that remuneration packages in each geographical location are fair and competitive for that location and at a most senior level, on an international basis. Details of how our remuneration arrangements support delivery  on sustainability metrics) are set out on pages 121 to 126. #### Executive Director Policy Table Component Purpose and Link to Strategy, Long-term Interests and Sustainability Operation Opportunity Performance Metrics (i) Basic Salary Competitive salaries are set to attract, retain and motivate executives to deliver superior performance in line with the  strategy.  generally effective on 1 January. Set by taking into consideration  performance and position against peers. When determining increases, consideration is given to:     (v) remuneration trends across the  (vi) competitive market practice. Whilst there is no maximum salary level, basic salary increases will normally be in line with the range of increases for the wider workforce. The Committee may at its discretion award larger increases in certain circumstances, such as a change in responsibilities or development in the role. Not applicable. (ii) Benefits Competitive benefits taking into account market value of role. Benefits relate principally to the use of company cars. Other benefits may be provided, including but not limited to club subscriptions. In the event of recruitment or relocation, additional benefits may be provided as considered appropriate by the Committee. The level of benefit provision is determined based on the cost to the Company and as such no maximum level is set. Not applicable. #### Remuneration Policy (abridged) continued ![]() 124 Smurfit Kappa Annual Report 2022 Component Purpose and Link to Strategy, Long-term Interests and Sustainability Operation Opportunity Performance Metrics (iii) Pension To provide a market competitive package to attract and retain executives. Contributions are made to the  arrangement, or equivalent cash allowances are paid. The defined benefit plan was closed to future accrual with effect from 30 June 2016. The Group continues to honour legacy arrangements. Current executive Directors – maximum Company contribution, or cash equivalent, set at 15.5% and 13.5% of salary for the  the contribution rates for executive Directors reduced to align with the workforce rate (10% of salary) on 1 January 2023. The rate for new hires will be aligned with the rate available to the majority of employees in the relevant jurisdiction. Not applicable. (iv) Annual Bonus Plan To incentivise the executives to achieve clearly defined stretching annual targets (financial and non-financial) which are aligned with the  A deferral element in shares provides a retention element and aligns executives with shareholder interests. Performance measures, their respective weightings and targets are normally set each year by the Committee to ensure continued alignment with the Group strategy. Payouts are determined by the Committee after the year-end taking into account performance against targets. The Committee retains the discretion to review out-turns to ensure they are appropriate in the context of overall performance and how it was delivered. 50% of any bonus award is normally deferred into shares for a period of, normally, three years. Deferred awards may include the right to receive (in cash or shares) the value of the dividends that would have accrued during the vesting period. Malus and clawback provisions are in place. The Committee may adjust and amend awards in accordance with the rules. The maximum bonus opportunity in respect of a financial year is 150% of basic salary. 25% of the bonus pays out for threshold performance. Performance is measured against a range of key financial, operational/ strategic, sustainability and individual performance metrics. No less than 60% of the bonus will be based on financial measures. #### Remuneration Report continued #### Executive Director Policy Table continued ![]() 125Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Executive Director Policy Table continued Component Purpose and Link to Strategy, Long-term Interests and Sustainability Operation Opportunity Performance Metrics (v) Performance Share Plan To incentivise the executives to achieve clearly defined stretching long-term targets which are aligned with the  strategic and sustainability ambition. Annual awards are normally subject to a performance period of no less than three years. Subject to performance, awards will then normally be subject to a holding period of two years. Performance measures, their weightings and targets are normally reviewed each year by the Committee to ensure continued alignment with  Vesting levels are determined by the Committee after the end of the performance period taking into account performance against targets. The Committee retains the discretion to review formulaic outcomes to ensure they are appropriate in the context of overall performance and how it was delivered. Any adjustment to the formulaic outcome will be communicated to investors at the end of the performance period. Awards may include the right to receive (in cash or shares) the value of the dividends that would have accrued during the performance period and any holding period. Malus and clawback provisions are in place. The Committee may adjust and amend awards in accordance with the rules. The maximum PSP award opportunity in respect of a financial year is 250% of basic salary. Up to 25% of the award pays out for threshold performance. Performance measures for the PSP are selected by the Committee to be aligned  strategic priority of delivering sustainable returns to shareholders. Prior to each grant, the Committee will select performance measures and targets. Measures may be financial, non-financial, share-price based, strategic, and sustainability-focused or on any other basis that the Committee considers appropriate. PSP awards for 2023 will be subject to the following performance measures including their percentage weighting: •  • Return on capital  •  • Sustainability (15%). Share ownership requirements To align the interests of executive Directors with those of shareholders and incentivise long-term performance. The Group Chief Executive Officer is required to build a shareholding equivalent to 300% of basic salary, and other executive Directors a shareholding equivalent to 200% of basic salary. Executives will normally also be subject to a post-cessation shareholding requirement. The share ownership requirement will apply for the first year post-departure and 50% of the requirement will apply for the second year post departure. Not applicable Not applicable Recovery provisions Recovery provisions (clawback and malus) may apply where stated in the table above. The provisions may be enforced in the event of: •  • Where an award was determined by reference to an assessment of a performance condition which was based on an error,  •  •  •  •  • Other circumstances which the Committee in its discretion considers to be similar in their nature or effect as the above. Recovery provisions may be enforced in respect of the cash bonus for three years following payment, in respect of deferred shares for three years from grant and in respect of PSP awards for five years from grant. ![]() 126 Smurfit Kappa Annual Report 2022 The Committee reserves the right to make any remuneration payments and payments for loss of office, notwithstanding that they are not in line with the Policy set out on pages 123 to 125, where the terms of the payment were agreed: (i) before the Policy set out on pages 123 to 125, or (ii) at a time when a previous Policy, approved by shareholders, was in place, provided the payment is in line with the terms of that policy, or (iii) at a time when the relevant individual was not a Director of the Company and the payment was not in consideration for the individual becoming a Director of the Company. For these purposes, payments include the Committee satisfying awards of variable remuneration. This means making payments in line with the terms that were agreed at the time the award was granted. The Committee will also retain flexibility in a number of areas regarding the operation and administration of variable pay plans, including (but not limited to): change of control, variation of share capital, demerger, special dividend, winding up or similar events. The Committee retains the discretion within the Policy to amend targets and/or set different measures and weightings if events happen that cause it to determine that the original targets or conditions are no longer appropriate and the amendment is required so that the targets or conditions achieve their original purpose. Revised targets/measures will be, in the opinion of the Committee, no less difficult to satisfy than the original conditions. The Committee may make minor amendments to the Remuneration Policy without obtaining shareholder approval for regulatory, exchange control, tax or administrative purposes or to take account of a change in legislation. The Committee may accelerate the vesting and/or the release of awards if an executive Director moves jurisdictions following grant and there would be greater tax or regulatory burdens on the award in the new jurisdiction. #### Value and Composition of Remuneration Packages The Committee believes it is important for executive Directors and senior management that a significant portion of the package is performance related and a significant portion is delivered in shares to align their interests with shareholders. The potential value and composition of the  charts below. #### Value and Composition of Package #### CEO €m €1m €2m €3m €4m €5m €6m €7m €8m 0% 20% 40% 60% 80% 100% €7.539m €6.057m €2.945m €1.315m Fixed Short-term Incentive Long-term Incentive Fixed Target Maximum Max + growth Fixed Short-term Incentive Long-term Incentive 100% 45% 22% 17% 30% 29% 24% 25% 49% 59% Fixed Target Maximum Max + growth #### CFO €m €1m €2m €3m €5m€4m 0% 20% 40% 60% 80% 100% Fixed Target Maximum Max + growth €4.175m €3.429m €1.764m €0.845m Fixed Short-term Incentive Long-term Incentive Fixed Target Maximum Max + growth Fixed Short-term Incentive Long-term Incentive 100% 48% 25% 20% 31% 32% 26% 21% 43% 54% In developing the scenarios the following assumptions have been made: • Salary: Salary at 1 January 2023. • Benefits: Estimate based on benefits received in 2022. • Pension: Cash in lieu rate or contribution rate applied to salary. • Below Threshold: No pay-outs under any incentive plan. • Target: Up to 50% of the maximum potential under the annual bonus plan and 25% of the maximum PSP awards to be made in 2023 are earned. • Maximum: The maximum potential under the incentive plans for 2023 is earned. • Maximum plus share price growth of 50%: The maximum potential under the incentive plans for 2023 is earned, plus share price growth of 50%. • Other: No share price (unless otherwise stated), dividends or discount rate assumptions have been included. #### Remuneration Report continued #### Executive Director Policy Table continued ![]() 127Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Executive Directors’ Service Contracts and Loss of Office Payment Policy  Effective Date of Contract Notice Period Termination Payments A. Smurfit 9 March 2007 (amended 1 September 2015)  Annual salary, the highest annual bonus for the most recent three years, the regular pension contribution in respect of the annual salary and the cash value of any benefits. K. Bowles 1 April 2016  Annual salary, the regular pension contribution in respect of the annual salary and the cash value of any benefits. Policy going forward n/a  For any new executive Director, any payment in lieu of notice would solely include salary, pension and other benefits.  cessation of office or employment where the payments are made in good faith in discharge of an existing legal obligation (or by way of damages  or employment. #### Non-executive Directors and the Chair #### Terms and Conditions for Non-executive Directors All Non-executive Directors have letters of appointment for a period of three years which are renewable but generally for no more than three terms in aggregate. In compliance with the UK Corporate Governance Code, all Directors will retire at each AGM and offer themselves for re-election.  Non-executive Directors are not eligible to participate in the annual bonus plan or the long-term incentive plans and their service as a Non-executive Director is not pensionable. #### Non-executive Director Policy Table Approach to Fees Operation Other Items Fees for the Chair and Non-executive Directors are set at an appropriate level to reflect the time commitment, responsibility and duties of the position and the contribution that is expected from Non-executive Directors. The remuneration of the Non-executive Directors is determined by the Board within the limits set out in the Articles of Association. The Chair receives an aggregate fee. The Remuneration Policy for Non-executive  (ii) fees for additional board responsibilities (including the Senior Independent Director and the Chair and membership of a committee). Additional fees may also be paid where the time commitment in a particular year was significantly more than anticipated. The Board retains discretion to remunerate the Non-executive Directors in shares rather than cash where appropriate. Non-executive Directors are reimbursed for travel and reasonable personal expenses (including any related tax liability on such expenses). Additional fees or benefits may be provided at the discretion of the Board. If a new Chair or Non-executive Director is appointed, the remuneration arrangements will normally be in line with those detailed in the table above. #### Consideration of Remuneration Arrangements Throughout the Group As the Group is multinational, remuneration packages in each geographical location must be fair and competitive for that location and at a most senior level, on an international basis. Our objectives are to a) ensure that SKG can attract and retain talented employees of the calibre necessary   The employees are rewarded in line with their individual and business performance. In setting remuneration levels, SKG takes into consideration  while also ensuring reasonable internal equity within the Group. #### Consideration of Shareholder Views The Company is committed to ongoing shareholder dialogue when considering changes to the Remuneration Policy. As set out in the letter from  during 2023. ![]() 128 Smurfit Kappa Annual Report 2022 #### Annual Report on Remuneration #### Total Executive Directors’ Remuneration in 2022 The following table shows a single figure of total remuneration for each executive Director for the years 2022 and 2021. Total Annual Bonus LTIP 2 2022 Basic Salary €’000 Pension €’000 Benefits 1 €’000 Cash €’000 Deferred Shares €’000 PSP Shares €’000 Share Appreciation 3 €’000 Total LTIP €’000 Total Fixed €’000 Total Variable €’000 Total €’000 A. Smurfit 1,140 177 11 837 837 2,059 709 2,768 1,328 4,442 5,770 K. Bowles 700 95 44 514 514 957 329 1,286 839 2,314 3,153 2021 A. Smurfit 1,112 228 29 832 832 1,708 1,496 3,204 1,369 4,868 6,237 K. Bowles 678 115 38 507 507 767 671 1,438 831 2,452 3,283 1 Benefits include the use of a company car, club subscriptions or cash equivalent.   the 2020 PSP award was 75% of the maximum as a result of the achievement of the relevant performance targets in the three-year period ended 31 December 2022. The 2020 PSP award (post-tax) is subject to a two-year holding period post-vesting. 3 Share price appreciation element – the additional value generated through share price growth over the grant price in 2020 and 2019. In estimating the value generated for the 2020 grants a share price of €35.89, the average market price for the February 2023 vesting to eligible employees, was applied compared to the grant price of €26.70. The Committee reviewed the value attributable to share price appreciation relative to the value of the original award and, taking into account the performance of the Company over the period and based on the share price at the date of the Committee meeting, was satisfied that the outcome of the award did not give rise to windfall gains. For the 2019 grants, the share price used was €46.26 compared to the grant price of €24.66 per share. #### Pensions Tony Smurfit and Ken Bowles previously participated in a Group contributory defined benefit pension plan based on an accrual rate of 1/60 th of pensionable salary for each year of pensionable service, designed to provide two thirds of salary at retirement for full service. The defined benefit plan which Tony Smurfit and Ken Bowles are members of closed to future accrual with effect from 30 June 2016 and was replaced by a defined contribution plan. All pension benefits are determined solely in relation to basic salary. For 2022, the non-pensionable cash allowance for Tony Smurfit represented 15.5% of salary and for Ken Bowles represented 13.5% of salary. As set out in the 2020 Remuneration Committee Report, the Committee committed to aligning the pension contribution rate to the wider workforce  which is aligned to the workforce rate. #### Annual Bonus Executive Directors participate in an annual bonus scheme based on the achievement of clearly defined stretching annual financial targets, together with targets for Health and Safety and personal/strategic goals for each of the executive Directors. In 2021, a new set of targets was  #### 2022 Annual Bonus The key target areas, as well as their weightings and the specific targets for the 2022 annual bonus plan are set out in the table below: Performance Metrics (weighting) Threshold Target Maximum Resultant Payout (% of max.) EBIT (35%) €1,645m 35.0% (100%) €987m €1,272m €1,557m FCF (35%) €545m 32.9% (94.1%) €167m €368m €569m Health & Safety (10%) The Group TRIR was 0.51, 100% payout for less than 0.55. 10% (100%) People & ESG (10%) Strong progress against People & ESG goals. Further details set out overleaf for the Executive Directors. 10% (100%) Personal/Strategic Goals (10%) Strong progress against personal/strategic goals. Further details set out overleaf, individually for the CEO and CFO. 10% (100%) #### Remuneration Report continued ![]() 129Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### People and ESG Outcome for Executive Directors (10% weighting) Focus area Objectives Assessment Resultant Payout (%) People Develop next generation of leaders, increase employee engagement, promote and champion Inclusion, Diversity and Equality  • Carried out successful strategic talent review for top talent. • Detailed workforce engagement schedule developed and completed with frequent direct and indirect engagement opportunities. • ID&E Discovery insights survey was completed with outputs used to create a clear strategic plan which will inform the next phase of the EveryOne journey. • Design and launch of our new SK Rise programme for female employees, designed to support their career and personal aspirations. 100% Sustainability Drive Group to be a fully sustainable circular business. • Strong progress against Sustainability objectives including approval of sustainability related capital expenditure, publication of Green Bond Allocation and Impact report and improvement across key medium-term KPIs. • Achieved strong scores with key ratings agencies such as MSCI, ISS ESG and Sustainalytics. • Announcement of SBTi validation of emissions reduction targets being consistent with levels required to meet the goals of the Paris Agreement. 100% Total: 10% (100%) #### Personal/Strategic Goals (10% weighting)  Executive Objectives Assessment Resultant Payout (%) A. Smurfit Strategy for Growth Development of strategic plans for the Group. • Ambitious investment and strategic plans developed, presented and approved by the Board. • Completion of four acquisitions which strategically support the Groups growth plan together with the successful integration of Verzuolo, Italy acquired in 2021. • ROCE of over 20%, demonstrating the delivery of the returns from past investments. 100% Digital enablement Oversee completion of Digital Strategy for the Group. • Continued implementation of the multi-functional Digital Strategy transformation plan and delivering on operational efficiencies outlined in the plan. • Successful launch of MyHub, Digital Roadmap for HR Information System and Intelex H&S system. 100% Total: 10% (100%) K. Bowles Strategy for Growth Development of strategic plans for the Group. • Ambitious investment and strategic plans developed, presented and approved by the Board. • Completion of four acquisitions which strategically support the Groups growth plan together with the successful integration of Verzuolo, Italy acquired in 2021. • ROCE of over 20%, demonstrating the delivery of the returns from past investments. 100% Digital enablement Oversee completion of Digital Strategy for the Group. • Continued implementation of the multi-functional Digital Strategy transformation plan and delivering on operational efficiencies outlined in the plan. • Successful launch of MyHub, Digital Roadmap for HR Information System and Intelex H&S system. 100% Total: 10% (100%) #### 2022 Annual Bonus continued ![]() 130 Smurfit Kappa Annual Report 2022 Following the consideration of performance against the targets, and in the context of the wider performance of the Group, the Committee did not consider it necessary to apply discretion to the outturns and approved the following annual bonuses for 2022: 2022 Executive Directors (% Maximum) Bonus Payable (% Salary) Annual Cash Bonus €’000 Deferred Shares €’000 Total Bonus €’000 A. Smurfit 97.9% 146.9% 837 837 1,674 K. Bowles 97.9% 146.9% 514 514 1,028 In line with the Remuneration Policy, half of the bonuses shown above were paid in cash and half are deferred into Company shares which vest after three years subject to the continuity of employment. #### Performance Share Plan #### Awards Vesting in Respect of Performance to 31 December 2022 In 2020, Tony Smurfit and Ken Bowles were granted awards under the 2018 PSP. These awards were based on the following performance criteria:  a straight-line basis between threshold and maximum. Performance Metrics (weightings) Threshold (25% Vesting) Maximum (100% Vesting) Achievement Level of Vesting EPS (pre-exceptional items – cumulative over three years) (33%) 655c 800c 1,014c 33.33% ROCE (three-year average) (33%) 13.5% 16.5% 18% 33.33% Relative TSR vs. a select peer group (33%) Median Upper quartile Median 8.33% Overall vesting 75% The peer group used for the TSR measure comprised the following companies: Billerud Korsnas, Cascades, DS Smith, Empresas CMPC, Graphic Packaging, International Paper, Klabin, Mayr-Melnhof, Metsa Board, Mondi, Packaging Corporation of America, Stora Enso, UPM-Kymmene and WestRock. SKG finished at the median in terms of TSR outcome, as calculated by our external remuneration advisors Ellason, against the peer group for the performance period and was therefore at the threshold in terms of the achievement for the 2020 award. In line with our normal approach for EPS and ROCE, we adjust the achievement for items which would affect comparability such as acquisitions and disposals and the impact of the equity raise. However, these adjustments did not impact on the vesting outcome for the 2020 award. The Committee reviewed performance against the targets in the context of the wider performance of the Group and also considered potential windfall gains. The Committee agreed it was not necessary to apply discretion to the out-turns and approved the level of vesting of the 2020 PSP awards. PSP Awards although vested, are subject to an additional holding period such that they are released following the fifth anniversary of the grant date. #### Share Awards Granted During the Year During the year, executive Directors were granted Deferred Share Awards in respect of the 2021 annual bonus. They were also granted PSP Awards that may vest based on the achievement of performance targets for the three-year period ending on 31 December 2024. PSP Awards are subject to an additional holding period such that they are released following the fifth anniversary of the grant date. Details of the performance conditions attached to these awards are set out on page 94 of the 2021 Annual Report.  Type of Interest Face Value €’000 Granted in 2022 Basis on Which Award Made % Vesting at Threshold Performance Period Deferred Bonus 1 A. Smurfit Deferred shares 832 17,779 Deferred bonus n/a n/a K. Bowles Deferred shares 507 10,836 Deferred bonus n/a n/a Performance Shares 2 A. Smurfit Performance shares 2,850 70,384 250% of salary 25% 01/01/2022–31/12/2024 K. Bowles Performance shares 1,435 35,441 205% of salary 25% 01/01/2022–31/12/2024 1 Share price of deferred shares granted in March 2022 was €46.81. Awards will vest based on continued employment to February 2025 (subject to leaver provisions within the plan rules).    2  underlying targets are set out in the 2021 Annual Report. The Committee retains discretion to review the formulaic outturn at the end of the performance period to ensure that it is appropriate and reflective of overall performance and to ensure that no windfall gains will arise on vesting. #### Remuneration Report continued #### 2022 Annual Bonus continued ![]() 131Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Annual Percentage Change in Remuneration of Directors and Employees Details of the percentage change in the salary, annual bonus and benefits from 2021 to 2022 for the Directors of the Company, along with that applicable to an average FTE employee of Smurfit Kappa, is set out below: Change 2021–2022 Change 2020–2021 Basic Salary Total Bonus Benefits Basic Salary Total Bonus Benefits Executive Directors Group Chief Executive Officer – A. Smurfit 3% 1% (62%) 0% 21% 0% Group Chief Financial Officer – K. Bowles 3% 1% 16% 5% 1 27% (7%) Non-executive Directors 2 I. Finan 0% n/a n/a 0% n/a n/a A. Anderson 0% n/a n/a 0% n/a n/a F. Beurskens 0% n/a n/a 0% n/a n/a C. Fairweather 0% n/a n/a 0% n/a n/a ML. Ferguson-McHugh 3 n/a n/a n/a n/a n/a n/a K. Hietala 10% n/a n/a 671% 4 n/a n/a J. Lawrence 0% n/a n/a 0% n/a n/a L. Melgar 0% n/a n/a 0% n/a n/a J. Moloney 0% n/a n/a 0% n/a n/a J. Buhl Rasmussen 0% n/a n/a 0% n/a n/a G. Restrepo 0% n/a n/a 0% n/a n/a Average employee of Smurfit Kappa Group (FTE) 6% 22% n/a \* 2% 4% n/a \* 1 During 2021, Ken Bowles received a salary increase to €700,000 per annum, effective as of 1 July 2021. This figure has therefore been calculated on a pro-rata basis. 2 Page 135 provides the underlying single figure of remuneration for Non-executive Directors used to calculate the figures above. 3 Mary Lynn Ferguson-McHugh joined the Board in January 2023. 4 Kaisa Hietala joined the Board in October 2020. \* Due to data availability, it is not possible to calculate the percentage change in benefits for all employees for the purpose of this table. #### Chief Executive Officer Pay Ratio Although this legislation does not apply to SKG, the Committee has voluntarily published the ratio. The following table sets out the Group CEO pay  Year Population 25th percentile 50th percentile 75th percentile 2022 Irish employees 143 106 73 2021 Irish employees 152 116 83 2020 Irish employees 132 97 72 2019 Irish employees 92 68 50  for the same period in the single figure table. For part-time employees, their relevant pay and benefit components have been adjusted to the equivalent full-time figure for the relevant business.    the pay progression policies at Smurfit Kappa and acknowledges that there will be volatility in the reported pay ratio year-on-year, driven by the performance-based pay outcomes. #### Relative Importance of Spend on Pay The following tables set out the change in profit, share buyback, dividends and total employee costs for the financial year ended 31 December 2022 against a five-year comparative. 2022 €m 2021 €m 2020 €m 2019 €m 2018 €m 2017 €m Profit before income tax and exceptional items 1,516 944 779 872 938 601 Share buyback/dividends paid to shareholders 374 302 260 238 213 191 Total employee costs 1 2,547 2,292 2,218 2,195 2,139 2,070 Directors Remuneration 10 11 9 7 6 5 1 Total employee costs (excluding Directors) for continuing operations, includes wages and salaries, social insurance costs, share-based payment expense, pension costs and redundancy costs for all employees. The average full time equivalent number of employees and part-time employees in continuing operations was 48,624 (2021: 47,753). ![]() 132 Smurfit Kappa Annual Report 2022 #### Percentage Change of Spend on Pay 2022 vs 2021 0 10 20 30 40 50 60 70 11.0 23.6 60.7 PBT and exceptionals \* Share buyback/ Dividends paid Total employee costs Percentage % \* Profit before income tax and exceptional items. #### Total Shareholder Return Performance The performance graph below shows the Group TSR performance from 31 December 2012 to 31 December 2022 against the performance of the FTSE 100 and FTSE 250 over the same period. Both the FTSE 100 and FTSE 250 have been chosen, as during the relevant period these are the two broad equity market indices of which the Group has been a member. #### Total Return Indices – Smurfit Kappa vs FTSE 100 and FTSE 250       0 800 600 200 400 Total Shareholder Return (rebased to 100) 2012 2013 2014 2015 2016 2017 2018 2019 2020 20222021 #### Remuneration Report continued ![]() 133Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Group Chief Executive Officer Remuneration The table below summarises the single figure of total remuneration for the Group Chief Executive Officer for the past ten years as well as how the actual awards under the annual bonus and LTIP compare to the maximum opportunity. Single Figure of Total Remuneration €’000 Annual Bonus Award Against Maximum Opportunity \* LTI P Award Against Maximum Opportunity Group Chief Executive Officer 2022 A. Smurfit 5,770 97.9% 75% 1 2021 A. Smurfit 6,237 99.8% 62.02% 2 2020 A. Smurfit 5,263 82.6% 78.35% 3 2019 A. Smurfit 3,670 71% 100% 4 2018 A. Smurfit 3,372 97.3% 51.6% 4 2017 A. Smurfit 2,477 41% 45% 4 2016 A. Smurfit 2,407 35% 45% 4 2015 A. Smurfit (appointed 1 September) 1,180 42% 67% 4 2015 G. McGann (retired 31 August) 3,837 42% 67% 4 2014 G. McGann 7,203 55% 75% 4 2013 G. McGann 5,278 54% 93% 4 1 The Performance Share award granted in 2020 had an outcome of 75% of the maximum based on the achievement of the relevant performance targets for the three-year period ending on 31 December 2022. Awards will be released after a two year holding period. 2 The Performance Share award granted in 2019 vested in February 2022 based on the achievement of the relevant performance targets for the three-year period ending on 31 December 2021. Awards will be released after a two-year holding period. 3 The Performance Share award granted in 2018 vested in February 2021 based on the achievement of the relevant performance targets for the three-year period ending on 31 December 2020. Awards are being released in three equal tranches. 4 The Matching and Conditional Matching Awards granted in 2017, 2016, 2015, 2014, 2013, 2012 and 2011 vested in February 2020, 2019, 2018, 2017, 2016, 2015 and 2014 respectively based on the achievement of the relevant performance targets for the three-year periods ending on 31 December 2019, 2018, 2017, 2016, 2015, 2014 and 2013. \* The annual bonus award was paid 50% in cash and 50% in Deferred Share Awards. The information below forms an integral part of the audited Consolidated Financial Statements as described in the Basis of Preparation on page 165. #### Pension Entitlements – Defined Benefit Increase/ (Decrease) in Accrued Pension During Year €’000 Transfer Value of Increase/ (Decrease) in Accrued Pension €’000 2022 Total Accrued Pension 1 €’000 Executive Directors A. Smurfit – – 293 K. Bowles – – 83 1 Accrued pension benefit is that which would be paid annually on normal retirement date. The defined benefit plan was closed to future accrual with effect from 30 June 2016. #### Additional Information #### Payments to Former Directors There were no payments made to former Directors in the year. #### Payments for Loss of Office There were no payments for loss of office made in the year. #### Executive Directors’ Interests in Share Capital at 31 December 2022 The table below summarises the personal shareholdings of each executive Director. The figures include beneficially owned shares and unvested share awards which are not subject to further performance criteria (other than continued employment) on a net of tax basis. Name Beneficially Owned at 31 December 2021 Beneficially Owned at 31 December 2022 Unvested Awards Not Subject to Performance Criteria (Net of Tax) Total Shareholding as at 31 December 2022 Shareholding (% of Salary) Shareholding Guideline (% of Salary) Shareholding Guideline Met? A. Smurfit 1,333,120 1,383,253 26,177 1,409,430 4,592% 300% Yes K. Bowles 63,546 78,423 15,287 93,710 497% 200% Yes #### External Appointments The Company recognises that, during their employment with the Company, Executive Directors may be invited to become Non-executive Directors of other companies and that such duties can broaden their experience and knowledge. Executive Directors may, with the written consent of the Company, accept such appointments outside the Company, and the policy is that any fees may be retained by the Director. The Executive Directors do not hold any paid appointments at present. ![]() 134 Smurfit Kappa Annual Report 2022 #### Deferred Bonus Plan Awards #### Deferred Share Awards Deferred Share Awards were granted to eligible employees in 2022 in respect of the financial year ended 31 December 2021. These awards are not subject to performance conditions. 31 December 2021 Granted (Lapsed) in Year 2022 Shares vested 31 December 2022 Market Price on Award Date Deferral Period Directors A. Smurfit 30,861 (30,861) 1 – 26.13 01/01/2019 – 31/12/2021 17,460 17,460 2 33.91 01/01/2020 – 31/12/2022 17,114 17,114 40.24 01/01/2021 – 31/12/2023 17,779 17,779 46.81 01/01/2022 – 31/12/2024 K. Bowles 16,833 (16,833) 1 – 26.13 01/01/2019 – 31/12/2021 9,798 9,798 2 33.91 01/01/2020 – 31/12/2022 9,940 9,940 40.24 01/01/2021 – 31/12/2023 10,836 10,836 46.81 01/01/2022 – 31/12/2024 Secretary G. Carson-Callan 3,347 (3,347) 1 – 26.13 01/01/2019 – 31/12/2021 1,969 1,969 33.91 01/01/2020 – 31/12/2022 2,746 2,746 40.24 01/01/2021 – 31/12/2023 3,435 3,435 46.81 01/01/2022 – 31/12/2024 1 The deferred shares vested and were released in February 2022. The market price at date of distribution was €46.26. 2 The 2020 DBP award of the Executive Directors was subject to an underpin pending the final outcome of appeals by Smurfit Kappa Italia of fines imposed on the Group subsidiary in 2019. As the outcome is not yet known, the Committee considered the vesting of the 2020 DBP and in their discretion decided to withhold 10% of the award pending the final outcome of the process for Smurfit Kappa Italia. Therefore 15,714 will vest to Tony Smurfit and 8,818 will vest to Ken Bowles.  #### Performance Share Plan Awards PSP Awards were granted to eligible employees in 2022. Awards may vest based on the achievement of the relevant performance targets for the three-year period ending on 31 December 2024. Details of the status of the original awards is included below. 31 December 2021 Granted (Lapsed) in Year 2022 \* Shares Vested 31 December 2022 Market Price on Award Date Performance Period \*\* Directors A. Smurfit 101,472 (38,540) (62,932) 1 – 24.66 01/01/2019 – 31/12/2021 93,719 – – 93,719 2 26.70 01/01/2020 – 31/12/2022 61,391 – – 61,391 40.76 01/01/2021 – 31/12/2023 6,329 3 – – 6,329 43.93 01/01/2021 – 31/12/2023 – 70,384 – 70,384 40.49 01/01/2022 – 31/12/2024 K. Bowles 45,555 (17,302) (28,253) 1 – 24.66 01/01/2019 – 31/12/2021 43,547 – – 43,547 2 26.70 01/01/2020 – 31/12/2022 28,954 – – 28,954 40.76 01/01/2021 – 31/12/2023 3,731 3 – – 3,731 43.93 01/01/2021 – 31/12/2023 – 35,441 – 35,441 40.49 01/01/2022 – 31/12/2024 Secretary G. Carson-Callan 6,813 (2,588) (4,225) 1 – 24.66 01/01/2019 – 31/12/2021 7,865 – – 7,865 2 26.70 01/01/2020 – 31/12/2022 9,495 – – 9,495 40.76 01/01/2021 – 31/12/2023 – 11,114 – 11,114 40.49 01/01/2022 – 31/12/2024 1 Based on the achievement of relevant performance targets for the three-year period ending on 31 December 2021, the conditional share awards including dividend equivalents vested at 62.02% in February 2022. The market price at the time of vesting was €46.26. The dividend equivalents that vested amounted to 6,340, 2,844 and 423 shares for A. Smurfit, K. Bowles and G. Carson-Callan respectively. 2 The Performance Share award granted in 2020 had an outcome of 75% of the maximum based on the achievement of the relevant performance targets for the three-year period ending on 31 December 2022.   at the AGM as part of the 2021 Remuneration Policy. \* Awards are eligible to accrue dividend equivalents during the performance period. \*\* The executive Directors awards (post-tax) are subject to a two-year holding period post-vesting. #### Remuneration Report continued ![]() 135Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Directors’ Remuneration 2022 €’000 2021 €’000 Executive Directors Basic salary 1,840 1,790 Annual cash bonus 1,351 1,339 Annual bonus deferred shares 1,351 1,339 Pension 272 343 Benefits 55 67 Total LTIP 4,054 \* 4,642 Executive Directors’ remuneration 8,923 9,520 Average number of executive Directors 2 2 Non-executive Directors Fees 1,389 1,380 Non-executive Directors’ remuneration 1,389 1,380 Average number of Non-executive Directors 10 10 Directors’ Remuneration 10,312 10,900   #### Individual Remuneration for the Financial Year Ended 31 December 2022 Total 2022 €’000 Total 2021 €’000 Non-executive Directors \* I. Finan 350 350 A. Anderson 90 90 F. Beurskens 1 150 150 C. Fairweather 130 130 K. Hietala 99 90 J. Lawrence 90 90 L. Melgar 90 90 J. Moloney 130 130 J. Buhl Rasmussen 130 130 G. Restrepo 130 130 1,389 1,380 \* Non-executive Director remuneration is entirely fixed.   #### Share-based Payment The executive Directors receive Deferred Share Awards and Performance Share Awards, details of which are outlined on page 134 of this report. The share-based payment expense recognised in the Consolidated Income Statement for the executive Directors in the year totalled €5 million (2021: €5 million). ![]() 136 Smurfit Kappa Annual Report 2022 #### Non-executive Directors’ Interests in Share Capital at 31 December 2022 The interests of the Non-executive Directors and Secretary in the shares of the Company as at 31 December 2022 which are beneficial unless  undertakings. Ordinary Shares 31 December 2022 31 December 2021 Directors I. Finan 24,709 19,709 A. Anderson \* 6,911 6,911 F. Beurskens 7,250 5,300 C. Fairweather 3,000 3,000 K. Hietala 1,471 1,471 J. Lawrence 30,000 170,000 L. Melgar – – J. Moloney 10,206 10,206 J. Buhl Rasmussen 6,146 6,146 G. Restrepo – – Secretary G. Carson-Callan 2,617 1,016 \* From October 2021, Anne Anderson has an indirect interest in 1,000 SKG shares, held by a connected person. These shares were acquired historically in 2019 and 2020. End of information in the Remuneration Report that forms an integral part of the audited Consolidated Financial Statements. #### The Remuneration Committee The Remuneration Committee is chaired by John Moloney and currently comprises five Non-executive Directors. John Moloney will not seek   pages 100 to 103 demonstrate that the members of the Committee bring to it a wide range of experience in the area of senior executive remuneration in comparable companies. The Committee receives advice from independent remuneration consultants, as appropriate, to supplement their own knowledge and to keep the Committee updated on current trends and practices. In 2022, the Committee received advice from its independent advisors, Ellason LLP in relation to the external governance landscape and on the approach to executive remuneration in the Group going forward. The Committee considers that the advice provided by Ellason, who do not have any other affiliation with the Group, was objective and independent. The total fees paid to Ellason LLP in relation to Remuneration Committee work during 2022 were £64,458 and were charged on a time and materials basis.  of conduct in relation to executive remuneration consulting in the UK. The role and responsibilities of the Committee are set out in its Terms of Reference which were updated and approved in December 2022 and are  The Committee met six times during the year. Details of Committee members and meetings attended are provided in the table on page 117. The Group Chief Executive Officer normally attends the meetings and the Group Chief Financial Officer and Group VP Human Resources attend when appropriate (none are involved in discussions concerning their own remuneration). #### Statement on Shareholder Voting The Company is committed to ongoing dialogue with our shareholders regarding executive remuneration. We engaged extensively with our stakeholders during the Policy review in 2020.   Item Votes For and Discretionary % Votes Cast For Votes Against % Votes Cast Against Total Votes Cast Vote Withheld Directors’ Remuneration Report 169,400,028 94.0% 10,766,949 6.0% 180,166,977 5,036,054 Directors’ Remuneration Policy (2021 AGM) 146,576,022 94.0% 9,420,688 6.0% 155,996,710 1,266,390 #### Remuneration Report continued ![]() 137Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Nomination Committee Report “Dear Shareholders, I am pleased to #### present the Nomination Committee report covering the work the #### Committee performed during #### the 2022 financial year.” #### Gonzalo Restrepo Chair of Nomination Committee, #### 14 March 2023 #### Committee Members G. Restrepo (Chair) A. Anderson (Chair designate) F. Beurskens I. Finan J. Lawrence #### The Role of the Nomination Committee • Lead the process for appointments to the Board and make  • Evaluate the balance of skills, knowledge, experience and diversity, including geographical, gender, age and ethnic diversity, on the  • Set measurable objectives and targets for diversity and inclusion  • Prepare descriptions of the role and requirements for new  • Give full consideration to succession planning for the Board and senior management. The roles and responsibilities of the Committee are set out in its  smurfitkappa.com. The Terms of Reference were reviewed and updated in December 2022. Attendance Record A \* B \* Appointment Date G. Restrepo (Chair) 6 6 2019 A. Anderson 6 6 2019 F. Beurskens 6 5 2013 I. Finan 6 6 2019 J. Lawrence 6 6 2015 \* Column A indicates the number of meetings held during the period the Director was a member of the Committee and was eligible to attend and Column B indicates the number of meetings attended. ![]() 138 Smurfit Kappa Annual Report 2022 #### Membership of the Committee The Committee is currently comprised of five Non-executive Directors. The Committee met six times during the year under review. Details of Committee members and meetings attended are provided in the table on page 137. The Group Chief Executive Officer normally attends meetings of the Committee and the Group VP Human Resources attends as appropriate. As announced in December 2022, I will not be seeking re-election at the forthcoming AGM and will retire from the Board on that date. Anne Anderson has been appointed Chair designate and will succeed me as Chair of the Committee at the conclusion of the forthcoming AGM. #### Areas of Focus in 2022 The Committee has fully complied with the principles of the Code, which includes up to date guidance for Nomination Committees of companies listed on the London Stock Exchange and Euronext Dublin throughout the accounting period. The primary role of the Committee is to monitor and maintain an appropriate balance of skills, experience, independence and diversity on the Board while regularly reviewing its structure, size and composition. It is also responsible for ensuring there is a formal, rigorous and transparent process for the appointment of new Directors to the Board. Where necessary, the Committee uses the services of external advisors in order to assist in the search for new appointments to the Board. Advisors are provided with a brief which takes into consideration the skills, experience and diversity required at the time to give balance to the Board. When suitable candidates have been identified, some Committee members will meet with them and if a candidate is agreed upon, the Committee will then recommend the candidate to the Board. All appointments to the Board are approved by the Board as a whole. All newly appointed Directors are subject to election by shareholders at the AGM following their appointment and in compliance with the Code, all Directors are required to retire at each AGM and offer themselves for re-election. Mary Lynn Ferguson-McHugh was appointed to the Board with effect from 5 January 2023 following a robust recruitment process, please see details of this process below.  both for Directors and senior management. A detailed succession planning process is in place which has been developed and has evolved in recent years. The Committee and the Board regularly review succession plans for Directors and senior management of the Group and are assisted by comprehensive updates from the Group VP Human Resources. #### Refreshing the Board and its Committees During the year, the Committee evaluated the composition of the Board with respect to the balance of skills, knowledge, experience and diversity, including geographical, gender, age and ethnic diversity. Following the approval of the Board, Kaisa Hietala succeeded Gonzalo Restrepo as Senior Independent Director in October 2022. As announced in December 2022, John Moloney and Gonzalo Restrepo will not be seeking re-election at the forthcoming AGM and will retire from the Board on that date. As a result of these changes and to ensure an orderly succession for the Committees of the Board, the following Chair designates have been appointed: Jørgen Buhl Rasmussen will succeed John Moloney as Chair of the Remuneration Committee, Anne Anderson will succeed Gonzalo Restrepo as Chair of this Committee and Kaisa Hietala will succeed Jørgen as Chair of the Sustainability Committee. Mary Lynn Ferguson-McHugh was appointed as a Non-executive Director of the Board with effect from 5 January 2023. This appointment was made following a process which involved Russell Reynolds Associates identifying appropriate candidates for appointment to the Board based on a profile and skillset agreed by the Chair and the Committee. After considering a number of candidates put forward by Russell Reynolds Associates as meeting the required profile and skillset, and following a robust interview process carried out in accordance with  made “on merit, against objective criteria and with due regard for the benefits of diversity on the Board”, the Committee recommended the appointment of Mary Lynn to the Board. The appointment of Mary Lynn was approved by the Board and took effect from 5 January 2023. Mary Lynn brings significant global operational experience and fast-moving consumer goods knowledge to the Board and her appointment further broadens the expertise and diversity of the Board. With effect from her appointment, Mary Lynn joined both the Audit and Remuneration  Reynolds Associates have no other affiliation with the Group. #### Chair Designate Anne Anderson was appointed Chair designate of the Committee in December 2022 and will replace Gonzalo Restrepo as Chair following the conclusion of the AGM in April 2023. Anne has been a member of the Committee since 2019. #### Nomination Committee Report continued ![]() 139Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Chair Succession #### Tenure Irial Finan joined the Board in February 2012 and was appointed Chair in May 2019. He was independent at the time of appointment, as recommended by the Code. He was appointed as Chair designate in October 2018 and became Chair at the conclusion of the AGM in May 2019. In 2021, as Irial had then exceeded nine years on the Board, a  consultation was conducted, which was led by Gonzalo Restrepo who was the Senior Independent Director at the time. In line with Provision 19 of the Code, a clear and detailed explanation was provided in the 2021 Annual Report (pages 84 and 85) outlining the conclusions of this  and a recommendation to shareholders that the tenure of Irial be extended by a period of up to three years (or up to the 2025 AGM). In their decision to define a time period for the extension, the Board noted its belief that this would provide clarity and certainty for all stakeholders of the Group. This recommendation was strongly   During the previous two years, internal evaluations conducted by the Senior Independent Director had included an evaluation of the Chair. These evaluations concluded that his performance was exceptional and that the Board were very satisfied with his support, leadership and independence as Chair. In addition to these internal evaluations, an externally facilitated evaluation of the Board including the Chair was conducted by Ffion Hague of Independent Board Evaluation during 2022. The feedback was highly positive with recognition of the interpersonal dynamics Irial has established in what is considered  strong people, investor and customer focus as well as his notable understanding of our business. As a result, following consideration of the Code, the comprehensive review completed during 2021 and the externally facilitated evaluation conducted in 2022, the Board has concluded that it remains in the best interests of the Group and of all stakeholders that the tenure of Irial continue in line with the prior year recommendation. #### Succession Process As noted in the 2021 Annual Report, the Board is committed to ensuring that an orderly succession and transition of the Chair is conducted. As a result, progressing the process remains a priority for the Senior Independent Director who is leading the succession process. During 2022, Kaisa Hietala succeeded Gonzalo Restrepo as Senior Independent Director, and is now responsible for the succession process going forward. A comprehensive handover was conducted following her appointment as Senior Independent Director. In addition, due consideration has been given to the next steps required. During 2023, a detailed specification of the role will be prepared, and an independent external recruitment firm will be selected to work  as Chair of the Board. The Board will keep shareholders informed on the matter of the  engagement as appropriate. #### Recommendation  and believes that it is in the best interests of the Company and its stakeholders that Irial remain as Chair for a period of up to two years (or up to the 2025 AGM). The Board is therefore recommending to shareholders the re-election of Irial at the forthcoming AGM in April 2023. #### Board and Committee Evaluation During 2022 a Board effectiveness review was conducted by Ffion  completed in accordance with the requirement to have an externally facilitated evaluation every three years under Provision 21 of the Code. Details on the evaluation conducted are included in the Corporate Governance Statement on pages 110 to 111. The evaluation considered the performance of this Committee. The outcome was discussed and actions were agreed to further evolve and develop certain processes which included: enhancement of the existing comprehensive induction process to tailor it more specifically to individual non-executive director background and their specific role  mentor programme for new appointments to the Board or for new  Board refreshment and the planning of future appointments. These actions will be considered and implemented during the year. #### Board Balance and Effectiveness As is the case each year, the Committee reviewed the size and performance of the Board during 2022. Key elements of ensuring the Board continues to operate at a high standard is independent oversight and a diverse background of skills, which allows Non-executive Directors to scrutinise and, when necessary, challenge management proposals and strategy. The Committee continues to review that each of the Non-executive Directors, excluding the Chair, remain impartial and independent in order to meet the challenges of their roles. Throughout the year, over half of the Board comprised of independent Non-executive Directors. Kaisa Hietala succeeded Gonzalo Restrepo as the Senior Independent Director in October 2022. The Senior Independent Director provides a sounding board for the Chair and serves as an intermediary for the other Directors and shareholders when necessary. The Board has had due regard to various matters which might affect, or appear to affect, the independence of certain Directors. The Board considers that other than Frits Beurskens, each of the Non-executive Directors is independent. In determining the independence of the Non-executives, the Committee scrutinised any issues relating to actual or perceived conflicts of interest. On 5 December 2022, John Moloney had served on the Board for nine years. In advance of this  into account the principles in relation to independence contained in the Code. The Board concluded that John remains independent and continues to provide effective challenge, advice and support to management. As mentioned above, John has indicated to the Board  AGM and will retire at that time. #### Boardroom and Senior Management Diversity As a global business, inclusion, diversity and equality are integral to how we do business. The Board and Committee recognise the importance of these values at Board level, senior management level and throughout the organisation. As part of our Better Planet 2050 Targets, we have an ambitious target of 25% of management positions to be held by women by 2024. The Board welcomed the introduction of the new FCA Listing Rules target  to gender diversity and at least one woman in a senior leadership position. The Board is committed to ensuring that gender diversity continues to be a focus on its Board and senior management agendas and to increasing the representation of women within senior management roles. During 2022, the Terms of Reference of this Committee and the Board Diversity Policy were updated to reflect the new targets. At Board level, female representation is currently 38.5% 140 Smurfit Kappa Annual Report 2022 and the Board will have 45% female representation following the AGM in April 2023 and will therefore be in line with the new targets. In addition, the female representation of our Group Executive Committee is 38.5%. We are also pleased to be compliant with the FCA Listing Rule requirement to have at least one senior board position held by a woman, with Kaisa Hietala in the position of Senior Independent Director since October 2022. You can read more about diversity at Smurfit Kappa in our Corporate Governance Statement and our People section on page 104 and 92 to 93 respectively. The Board and Committee gives due regard to all aspects of diversity including ethnic and social diversity. The Board includes Directors from eight different nationalities. The Board and the Committee are mindful of the requirements of the FCA Listing Rules and recommendation of the Parker Review to have at least one Board member from an ethnic minority background and the Board currently meets this recommendation. Notwithstanding our policies, any search for Board candidates and any subsequent appointments are made on merit and against objective criteria, in the context of the appropriate balance of skills, diversity of knowledge and thinking, professional and geographic backgrounds and experience which the Board as a whole requires to be effective. We are committed to appointing the best people and ensuring that all employees have an equal opportunity of developing their careers within the Group. We have been on an accelerated journey to step change many of the initiatives with our EveryOne programme and with significant commitment and effort from our teams across the world, many of the key Inclusion, Diversity & Equality focus areas over the past few years have been collectively achieved. This evidences our progress as we continue to create a globally admired company with diverse talent who feel respected and a sense of belonging. Further information on our EveryOne programme is on pages 92 to 93. Finally, I will be retiring at the AGM in April 2023. I would like to thank SKG for the opportunity to serve on its Board and to wish the best to all its wonderful employees in the years to come. Gonzalo Restrepo Chair of Nomination Committee #### Nomination Committee Report continued ![]() 141Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Sustainability Committee Report #### Committee Members J. Buhl Rasmussen (Chair) A. Anderson K. Hietala (Chair designate) L. Melgar #### The Role of the Sustainability Committee The Committee has responsibility for: • Providing strategic guidance and support to management in the implementation of the Smurfit Kappa Sustainability Strategy which is based on three key strategic sustainability and corporate  • Reviewing and approving the annual Sustainable Development  • Reviewing the TCFD (Task Force for Climate-related Financial Disclosures) compliance and reporting of climate-related financial  • Reviewing the climate risks and opportunities of the Group including  • Engagement with the workforce on behalf of the Board as required by the Code. The role and responsibilities of the Committee are set out in its  smurfitkappa.com. The Terms of Reference were reviewed and updated in December 2022. “As Chair, I am pleased to present the 2022 report of #### the Sustainability Committee #### and outline the Committee’s #### continued development, their #### objectives and their activities.” #### Jørgen Buhl Rasmussen Chair of Sustainability Committee, #### 14 March 2023 Attendance Record A \* B \* Appointment Date J. Buhl Rasmussen (Chair) 6 6 2019 A. Anderson 6 6 2019 K. Hietala 6 5 2021 L. Melgar 6 6 2020 \* Column A indicates the number of meetings held during the period the Director was a member of the Committee and was eligible to attend and Column B indicates the number of meetings attended. The Group Chief Sustainability Officer normally attends all meetings and the Group Chair, Group Chief Executive Officer, Group Chief Financial Officer, Group VP Human Resources attend when appropriate. ![]() 142 Smurfit Kappa Annual Report 2022 #### Membership of the Committee The Committee is currently comprised of four Non-executive Directors. The Committee met six times during the year under review. Details of Committee members and meetings attended are provided in the table on page 141. The Group Chief Sustainability Officer normally attends meetings of the Committee and the Group Chair, Group Chief Executive Officer, Group Chief Financial Officer and the Group VP Human Resources attend as appropriate. Kaisa Hietala was appointed Chair designate in December 2022 and will replace me as Chair of the Committee at the conclusion of the forthcoming AGM, when I take over as Chair of the Remuneration Committee, succeeding John Moloney who is retiring from the Board on that date. I will remain a member of this Committee. #### Strategic Sustainability Priorities As a responsible company, operating globally, Smurfit Kappa has a product that is naturally sustainable and a process that is increasingly sustainable, driven by a culture with strong values of safety, loyalty, integrity and respect. Smurfit Kappa understands the challenges facing both our business and the planet and is committed to doing its part in resolving these critical issues. Therefore, our ambition is to deliver sustainable growth to the benefit of all our stakeholders based on our three pillars: Planet, People and Impactful Business. Within these pillars our People, our Communities and Climate Change, Forest, Water and Waste are the main strategic environmental and corporate social responsibility priorities. #### Strategic Guidance As the Committee of the Board with responsibility for providing guidance and support to management in the development of the   Group strategy and global best practice. As a principal risk for the Group, climate change is reviewed regularly at both Board and Executive level. Climate change has been recorded as a material issue for the Group since 2007. Climate risk and opportunities reporting was developed and implemented during the year which included the consideration of emerging and mitigating actions, in addition to reviewing TCFD compliance and reporting of climate-related financial information. An enhanced disclosure consistent with the recommendations of TCFD is outlined on pages 68 to 85 of this report. There is continuous evolution in the laws and regulations in relation to climate change which are constantly  #### Areas of Focus in 2022 The Committee had another very active and productive year with the Group completing many projects across its sustainability agenda, which have been outlined below and throughout this Annual Report. The Group has ambitious goals and sustainability targets, Better Planet 2050, that quantify our commitment to protect what we care about – our planet, our people and our business. Our interim emissions target  in line with the Paris Agreement. The Group continued to make progress on our sustainability strategy, including the announcement of significant investments to reduce our carbon footprint, reduce our impact on the environment and initiatives that help our customers achieve their own carbon reduction and sustainability goals. We have also received improved scores from leading third party certification bodies. The opportunity to reduce CO 2 emissions is also considered as part of our acquisitions process, as relevant. Details of the outcome of CO 2 emissions reductions, Chain of Custody certification and Health and Safety are included in the non-financial KPIs section in this report on pages 30 to 31. During 2022, the Board considered a number of strategic investments, including sustainability focused projects, including the approval of the largest CO 2  This investment of almost US$100 million in a sustainable biomass  2 emissions by approximately 6%. The Board of Directors visited the site of this investment during 2022 prior to its announcement. This project is an example of the circularity that permeates every aspect of our operations  our longer-term commitments to our sustainability targets.  credentials was demonstrated by the publication of our 15 th   th SDR will be published simultaneously with this Annual Report. In September 2022, the Group published its first Green Bond Allocation and Impact Report. This report provided details on the  Green Bond issued in September 2021. #### Chair Designate Kaisa Hietala was appointed Chair designate of the Committee in December 2022 and will replace Jørgen Buhl Rasmussen as Chair of the Committee following the conclusion of the AGM in April 2023. Kaisa has been a member of the Committee since 2021 and has a strong commitment to and experience in sustainability. #### Sustainability Committee Report continued ![]() 143Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information As the business evolved during 2022, the Group has delivered new innovative products to the marketplace that demonstrably lower our  nature of our product and our increasingly sustainable operating footprint, position Smurfit Kappa as an integral part of delivering  is an example of a recent innovation in our process, with this unique  from packaging design through to market launch and has redefined how we collaborate with our customers. The Group focuses on providing fit-for-purpose packaging solutions that are renewable, recyclable and biodegradable. The Better Planet Packaging initiative also provides a key platform for differentiation in a competitive market. Details of some of the innovations and solutions provided to customers are included on pages 10 to 13. #### Workforce Engagement In line with the requirements of the Code, the Committee is also responsible for engaging with the workforce on behalf of the Board. During 2022, we further evolved our workforce engagement with a high level of employee interaction across the year. This included engagement workshops, both in person and virtual, plant visits in Colombia and Italy, as well as regularly reviewing employee sentiment indirectly via people data from employee engagement surveys such  all feedback on subjects such as ethics, health, safety and wellbeing, while we also took into account employee turnover. For further details on employee engagement, see pages 44 to 45. #### Committee Evaluation An independent externally facilitated evaluation of the Board and its Committees was conducted by Ffion Hague from Independent Board Evaluation, details of which are outlined in the Corporate Governance Statement on pages 110 to 111. Overall, the Committee was considered to be operating effectively and efficiently. #### Looking Ahead This Committee will continue to provide guidance and support to  as the Group continues its sustainability journey in 2023. There are many projects in the areas of Planet, People and Impactful Business which will be delivered in 2023 and beyond. The Committee is encouraged by the progress the Group has made so far and we look forward to reporting on our continued progress to all of our stakeholders in the years ahead. Following my appointment as Chair designate of the Remuneration Committee, I will be stepping down as Chair of this Committee at the conclusion of the AGM and Kaisa Hietala will be taking over the position. I will continue as a member of the Committee going forward. I am grateful to have been involved in the formation of the Committee and to lead the Committee as it evolved and developed over the last three years. I look forward to continuing to work with the Committee under the stewardship of Kaisa. I wish her the best of luck as Chair of the Committee. Jørgen Buhl Rasmussen Chair of the Sustainability Committee 144 Smurfit Kappa Annual Report 2022 #### Directors’ Report #### Report of the Directors The Directors submit their Report and Audited Financial Statements for the financial year ended 31 December 2022. #### Principal Activity and Business Review The Group is an integrated paper and paperboard manufacturer and converter whose operations are divided into Europe and the Americas. Geographically, the major economic environments in which the Group conducts its business are Europe (principally the Eurozone, Sweden and the United Kingdom) and the Americas (principally Argentina, Brazil, Colombia, Mexico and the United States).  Strategy Statement, Finance Review (including financial risk management policies), Stakeholder Engagement, Sustainability Report and People Report on pages 16 to 27 and pages 37 to 97 report on the performance of the Group during the year and on future developments. #### Results for the Year The results for the year are set out in the Consolidated Income Statement on page 157. Financial Key Performance Indicators are set out on pages 28 to 31. The Consolidated Financial Statements for the financial year ended 31 December 2022 are set out in detail on pages 157 to 223. #### Dividends In May 2022, a final dividend of 96.1 cent per share was paid to holders of ordinary shares, and in October 2022, an interim dividend of 31.6 cent per share was paid to holders of ordinary shares. The Board is recommending a final dividend of 107.6 cent per share for 2022. Subject  pay the final dividend on 12 May 2023 to all holders of ordinary shares on the share register at the close of business on 14 April 2023. #### Research and Development  development aimed at providing innovative paper-based packaging solutions and improving products, processes and expanding product ranges. Expenditure on research and development in the year amounted to €8 million (2021: €7 million). #### Accounting Records The Directors are responsible for ensuring that adequate accounting records, as outlined in Section 281–286 of the Companies Act, are kept by the Company. The Directors are also responsible for the preparation of the Annual Report. The Directors have appointed professionally qualified accounting personnel with appropriate expertise and have provided adequate resources to the finance function in order to ensure that those requirements are met. The accounting records of the  located at Beech Hill, Clonskeagh, Dublin 4, D04 N2R2. #### Directors The current members of the Board of Directors are named on pages 100 to 103 together with a short biographical note on each Director. Any Director co-opted to the Board by the Directors is subject to election by the shareholders at the first AGM after their appointment. Mary Lynn Ferguson-McHugh was appointed to the Board on 5 January 2023 and will offer herself for election at the 2023 AGM. Pursuant to the Articles of Association, all Directors are subject to re-election at intervals of no more than three years. However, in compliance with the Code, all Directors will retire at the 2023 AGM and other than John Moloney and Gonzalo Restrepo will put themselves forward for election or re-election. To enable shareholders to make an informed decision on the re-election of each Director, reference should be made to pages 100 to 103 which contains a biographical note on each Director offering themselves for election or re-election and to the Notice of the AGM which explains why the Board believes the relevant Directors should be elected or re-elected. The Directors intend to confirm at the AGM that the performance of each individual seeking re-election continues to be effective and demonstrates commitment to the role. Shareholders are referred to the information contained in the Corporate Governance Statement on pages 104 to 112 concerning the operation of the Board and the composition and functions of the Committees of the Board. #### Directors’ and Secretary’s Interests  capital are set out in the Remuneration Report on pages 133, 134 and  #### Principal Risks and Uncertainties Under Irish company law (Section 327 of the Companies Act), the Directors are required to give a description of the principal risks and uncertainties which the Group faces. These principal risks and uncertainties are set out on pages 34 to 36, and form part of this report as required by Section 327 of the Companies Act. #### Corporate Governance   Corporate Governance Statement is set out on pages 104 to 112 and forms part of this report. The Audit Committee Report, the Remuneration Report and the Nomination Report are set out on pages 113 to 140. #### Subsidiary and Associated Undertakings  31 December 2022 is set out in Note 33 to the Consolidated Financial Statements. #### Audit Committee The Group has established an Audit Committee. The responsibilities of the Audit Committee are outlined on page 113. ![]() 145Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Substantial Holdings 31 December 2022 10 March 2023 Number of Shares % of Issued Ordinary Share Capital Number of Shares % of Issued Ordinary Share Capital BlackRock, Inc 18,018,850 6.96% 18,620,194 7.16% Norges Bank 12,141,164 4.69% 12,141,164 4.67% The table above shows all notified shareholdings of 3% or more of the issued ordinary share capital of the Company as at 31 December 2022 and 10 March 2023. #### Non-financial Information Pursuant to the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations  the Group is required to report certain non-financial information to provide an understanding of its development, performance, position and the impact of its activities. We have set out the location below of the information required by the Non-Financial Regulations in this Annual Report.  Requirement Relevant Policies Section(s) in Annual Report Pages Environmental Matters Environmental Policy, Sustainable Sourcing Policy, Sustainable Forestry and Fibre Sourcing Policy Sustainability 50 to 85 Social Matters Social Citizenship Policy Sustainability, People 50 to 97 Employee Matters Code of Conduct, Health and Safety Policy, Social Citizenship Policy Sustainability, People 50 to 97 Human Rights Code of Conduct, Social Citizenship Policy Sustainability 50 to 85 Anti-corruption and Bribery Code of Conduct Sustainability 50 to 85 Business Model Our Business Model 24 to 25 Principal Risks Risk Report 32 to 36 Non-Financial KPIs Key Performance Indicators 28 to 31 EU Taxonomy Sustainability 50 to 85 In addition to the information required by the Non-Financial Regulations, the Group publishes a comprehensive, assured Sustainable Development Report which details our sustainability strategy, corporate social responsibilities and commitments to social matters. The 2022 Sustainable Development Report will be published on our website by the end of March 2023. #### Purchase of Own Shares Special resolutions will be proposed at the 2023 AGM to renew the authority of the Company, or any of its subsidiaries, to purchase  AGM and in relation to the maximum and minimum prices at which treasury shares (effectively shares purchased by the Company and not cancelled) may be re-issued off-market by the Company. If granted, the authority will expire on the earlier of the date of the 2024 AGM or 27 July 2024. A similar authority was granted at the AGM in 2022, which is due to expire on the earlier of the date of the AGM in 2023 or 28 July 2023. During 2022, the Company commenced and completed a share buyback transaction to mitigate the dilution of shares issued on vesting of awards under its Performance Share Plan, the shares repurchased were cancelled. Information on the acquisition and disposal of own shares is set out in Note 23 to the Consolidated Financial Statements. #### Change of Control In the event of a change of control following a bid, the lenders under the Revolving Credit Facility which has been entered into by the Group would have the option to cancel the commitments under the facility and/or to declare all outstanding amounts immediately due and payable, and under the Senior Notes Indentures the Group may be obliged to offer to repurchase the notes. #### Capital Structure  to the Consolidated Financial Statements and are deemed to form part  plans are set out in the Remuneration Report and Note 26 to the Consolidated Financial Statements and are incorporated into this  #### Directors’ Compliance Statement The Directors acknowledge that they are responsible for securing compliance by the Company of its relevant obligations as set out in  The Directors further confirm that there is a Compliance Policy    146 Smurfit Kappa Annual Report 2022 #### Directors’ Report continued The Directors also confirm that appropriate arrangements and   For the financial year ended 31 December 2022, the Directors, with the assistance of the Audit Committee, have conducted a review of the arrangements and structures in place. In discharging their responsibilities under Section 225 of the Companies Act, the Directors relied on the advice of persons who the Directors believe have the requisite knowledge and experience to advise the Company on compliance with its Relevant Obligations. #### Financial Instruments In the normal course of business, the Group has exposure to a variety of financial risks, including foreign currency risk, interest rate risk, liquidity risk, refinancing risk and credit risk. The Group and Company financial risk objectives and policies are set out in Note 29 to the Consolidated Financial Statements. Disclosure of Information to the External Auditor For the purposes of Section 330 of the Companies Act, each of the Directors individually confirm that: • In so far as they are aware, there is no relevant audit information  • They have taken all the steps that they ought to have taken as Directors in order to make themselves aware of any relevant audit  is aware of such information. External Auditor KPMG, Chartered Accountants, were first appointed statutory auditors on 4 May 2018 and have been reappointed annually since that date and pursuant to Section 383(2) of the Companies Act will continue in office. A. Smurfit K. Bowles Director Director 14 March 2023 ![]() 147Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Statement of Directors’ Responsibilities The Directors as at the date of this Annual report, whose names and functions are listed on pages 100 to 103 are responsible for preparing the Annual Report and the Group and Company Financial Statements, in accordance with applicable law and regulations. Company law requires the Directors to prepare Group and Company Financial Statements for each financial year. The Directors are required to prepare the Group Financial Statements in accordance  by the European Union and applicable law including Article 4 of the IAS Regulation. The Directors have elected to prepare the Company Financial Statements in accordance with IFRS as adopted by the European Union as applied in accordance with the provisions of the Companies Act. Under company law, the Directors must not approve the Group and Company Financial Statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of  In preparing each of the Group and Company Financial Statements, the Directors are required to: • Select suitable accounting policies and then apply them  •  • State whether applicable IFRS (as adopted by the European Union) have been followed, subject to any material departures disclosed  • Prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and its Parent Company will continue in business. The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended) and the Central Bank (Investment Market Conduct) Rules 2019 to include a management report containing a fair review of the business and a description of the principal risks and uncertainties facing the Group. The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities, financial position and profit or loss of the Company and which enable them to ensure that the Financial Statements of the Company comply with the provisions of the Companies Act. The Directors are also responsible for taking all reasonable steps to ensure such records are kept by its subsidiaries which enable them to ensure that the Financial Statements of the Group comply with the provisions of the Companies Act including Article 4 of the IAS Regulation. They are responsible for such internal controls as they determine necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibilities for safeguarding the assets of the Company and the Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.  that complies with the requirements of the Companies Act. The Directors are responsible for the maintenance and integrity of   the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Responsibility Statement as Required by the #### Transparency Directive and Code Each of the Directors, whose names and functions are listed on pages 100 to 103 of this Annual Report, confirm that, to the best of each  • The Group Financial Statements, prepared in accordance with IFRS (as adopted by the European Union) and the Company Financial Statements prepared in accordance with IFRS (as adopted by the European Union) as applied in accordance with the provisions of Companies Act, give a true and fair view of the assets, liabilities, and financial position of the Group and Company at 31 December  •  fair review of the development and performance of the business and the position of the Group and Company, together with a description  • The Annual Report and Financial Statements, taken as a whole,  performance, business model and strategy and is fair, balanced and understandable and provides the information necessary for  business model and strategy. On behalf of the Board A. Smurfit K. Bowles Director Director 14 March 2023 ![]() 148 Smurfit Kappa Annual Report 2022 ## US$100 million investment to ## reduce emissions ## in Colombia #### State-of-the-art biomass boiler to be powered by organic residue #### from the paper-making process. #### We have announced an almost US$100 million investment in a sustainable biomass  2 emissions by approximately 6%. The ambitious project is the latest example of the circularity that permeates every aspect of our operations. We have successfully implemented biomass boilers at several                    #### Delivering on our Strategic Priorities ![]() 149Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Financial Statements 148-223                       150 Smurfit Kappa Annual Report 2022 #### Report on the Audit of the Financial Statements #### Opinion     Summary of Significant Accounting Policies     •   •  •   •   #### Basis for Opinion  under those standards are further described in the  section of our report. We believe that the audit evidence we have      #### Conclusions Relating to Going Concern              #### Independent Auditor’s Report #### to the Members of Smurfit Kappa Group plc ![]() 151Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Detecting Irregularities Including Fraud    •    •    •   •  •  •   •     Group.    documentation when necessary.        We assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.    •  •  •  •            ![]() 152 Smurfit Kappa Annual Report 2022 #### Independent Auditor’s Report continued #### to the Members of Smurfit Kappa Group plc #### Key Audit Matters: Our Assessment of Risks of Material Misstatement     do not provide a separate opinion on these matters.   #### Group Key Audit Matters #### Net Defined Benefit Pension Liability – Valuation €517 million (2021: €630 million)  The key audit matter How the matter was addressed in our audit The Group operates a number of defined benefit pension schemes.   and the selection of same across the Group. We focus on this area due to the level of estimation uncertainty        applied.     membership data.     externally derived data.  of the sensitivity of the net deficit to these assumptions.  valuation of the defined benefit pension liability within the Group to  ![]() 153Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Key Audit Matters: Our Assessment of Risks of Material Misstatement continued #### Goodwill Impairment Assessment €2,455 million (2021: €2,511 million)  The key audit matter How the matter was addressed in our audit    irrespective of whether there are indicators of impairment. The Group has performed an impairment assessment as of 31 December 2022.  – three of which individually account for between 10% and 20% of the           •  •   •      •    and •      supported by reasonable assumptions. We found the disclosures  #### Company Key Audit Matter #### Investment in Subsidiaries – Carrying Value €2,955 million (2021 – €2,915 million)  The key audit matter How the matter was addressed in our audit    performance of these subsidiaries is not sufficient to support the               ![]() 154 Smurfit Kappa Annual Report 2022 #### Our Application of Materiality and an Overview of the Scope of our Audit #### Materiality  Group financial statements Company financial statements Overall materiality   Benchmark applied and %   Total assets of which materiality represents 1%  Rationale for the benchmark applied and judgement involved    •     •      •  •   the Group.     •   •   and • The Group has operations in 36 countries.     •   •  operations has operations in 36 countries.         the low number and severity of deficiencies in control activities identified in the prior year financial statement audit.      #### Scoping          introduce a level of unpredictability. #### Involvement with Component Teams    and the information to be reported to the Group audit team and was responsible for the overall scope and direction of the audit process. #### Independent Auditor’s Report continued #### to the Members of Smurfit Kappa Group plc ![]() 155Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Our Application of Materiality and an Overview of the Scope of our Audit continued #### Involvement with Component Teams continued           #### Other Information   and Supplementary Information Sections of the Annual Report.   assurance conclusion thereon.   we have not identified material misstatements in the other information.   •  •  •  #### Corporate Governance Statement      •   •   •   •   •    •   •       •     •   156 Smurfit Kappa Annual Report 2022 #### Independent Auditor’s Report continued #### to the Members of Smurfit Kappa Group plc #### Corporate Governance Statement continued •    Statement. #### Our Opinions on Other Matters Prescribed by the Companies Act 2014 are Unmodified We have obtained all the information and explanations which we consider necessary for the purposes of our audit.   #### We have Nothing to Report on Other Matters on which we are Required to Report by Exception  •  •   •      #### Respective Responsibilities and Restrictions on use #### Responsibilities of Directors for the Financial Statements      #### Auditor’s Responsibilities for the Audit of the Financial Statements       . #### The Purpose of our Audit Work and to Whom we owe our Responsibilities      for and on behalf of     Dublin 2 Ireland   ![]() 157Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Consolidated Income Statement #### For the Financial Year Ended 31 December 2022 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | | | 2022 | | | 2021 | | | | | Pre- | | | Pre- | | | | | | exceptional | Exceptional | Total | exceptional | Exceptional | Total | | | Note | €m | €m | €m | €m | €m | €m | | Revenue | 4 | 12 , 815 | – | 12 , 815 | 10 ,107 | – | 10,107 | | Cost of sales | 5 | (8,752) | – | (8,752) | (7, 0 1 5) | – | (7, 0 1 5) | | Gross profit | | 4,0 63 | – | 4 ,063 | 3 ,0 92 | – | 3, 092 | | Distribution costs | 5 | (9 61) | – | (9 61) | (823) | – | (823) | | Administrative expenses | 5 | (1 , 4 40) | – | (1, 4 4 0) | (1 ,19 6) | – | (1, 19 6) | | Other operating expenses | 5 | – | (22 3) | (22 3) | – | – | – | | Operating profit | | 1,662 | (22 3) | 1,4 39 | 1 ,073 | – | 1,073 | | Finance costs | 7 | (18 4) | – | (18 4) | (14 8) | (31) | (17 9) | | Finance income | 7 | 35 | – | 35 | 17 | – | 17 | | Share of associates’ profit (after tax) | | 3 | – | 3 | 2 | – | 2 | | Profit before income tax | | 1 , 516 | (223) | 1, 293 | 94 4 | (31) | 913 | | Income tax expense | 8 | | | (348) | | | (234) | | Profit for the financial year | | | | 945 | | | 6 79 | | Attributable to: | | | | | | | | | Owners of the parent | | | | 944 | | | 679 | | Non-controlling interests | | | | 1 | | | – | | Profit for the financial year | | | | 945 | | | 6 79 | | Earnings per share | | | | | | | | | Basic earnings per share – cent | 9 | | | 365. 3 | | | 26 3. 9 | | Diluted earnings per share – cent | 9 | | | 3 61. 8 | | | 261 .1 | ![]() 158 Smurfit Kappa Annual Report 2022 #### Consolidated Statement of Comprehensive Income #### For the Financial Year Ended 31 December 2022 | | | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | | Note | €m | €m | | Profit for the financial year | | 945 | 679 | | Other comprehensive income: | | | | | Items that may be subsequently reclassified to profit or loss | | | | | Foreign currency translation adjustments: | | | | | Arising in the financial year | | (63) | 14 | | Recycled to Consolidated Income Statement | | – | 1 | | Effective portion of changes in fair value of cash flow hedges: | | | | | Movement out of reserve | | – | (3) | | Fair value loss on cash flow hedges | | (5) | – | | Changes in fair value of cost of hedging: | | | | | Movement out of reserve | | (1) | (1) | | | | (69) | 11 | | Items which will not be subsequently reclassified to profit or loss | | | | | Defined benefit pension plans: | | | | | Actuarial gain | 25 | 51 | 17 7 | | Related tax | 8 | (8) | (32) | | | | 43 | 145 | | Total other comprehensive (expense)/income | | (26) | 156 | | Total comprehensive income for the financial year | | 919 | 8 35 | | Attributable to: | | | | | Owners of the parent | | 918 | 8 35 | | Non-controlling interests | | 1 | – | | Total comprehensive income for the financial year | | 919 | 8 35 | ![]() 159Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Consolidated Balance Sheet #### At 31 December 2022 | | | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | | Note | €m | €m | | ASSETS | | | | | Non-current assets | | | | | Property, plant and equipment | 11 | 4 , 631 | 4, 265 | | Right-of-use assets | 12 | 345 | 34 6 | | Goodwill and intangible assets | 13 | 2 ,672 | 2,72 2 | | Other investments | 14 | 10 | 11 | | Investment in associates | 15 | 16 | 13 | | Biological assets | 16 | 10 0 | 103 | | Other receivables | 19 | 39 | 26 | | Employee benefits assets | 25 | 17 | – | | Derivative financial instruments | 29 | 2 | 2 | | Deferred income tax assets | 17 | 141 | 14 9 | | | | 7, 9 7 3 | 7, 6 3 7 | | Current assets | | | | | Inventories | 18 | 1 , 231 | 1, 046 | | Biological assets | 16 | 10 | 10 | | Trade and other receivables | 19 | 2, 399 | 2,1 37 | | Derivative financial instruments | 29 | 46 | 8 | | Restricted cash | 22 | 11 | 14 | | Cash and cash equivalents | 22 | 777 | 855 | | | | 4 , 4 74 | 4, 070 | | Assets classified as held for sale | | 35 | – | | | | 4,509 | 4 ,070 | | Total assets | | 12, 4 82 | 11 , 7 0 7 | | EQUITY | | | | | Capital and reserves attributable to owners of the parent | | | | | Equity share capital | 23 | – | – | | Share premium | 23 | 2 ,646 | 2,646 | | Other reserves | 23 | 236 | 26 0 | | Retained earnings | | 2, 143 | 1, 47 3 | | Total equity attributable to owners of the parent | | 5,02 5 | 4 , 379 | | Non-controlling interests | 33 | 13 | 13 | | Total equity | | 5,03 8 | 4, 392 | | LIABILITIES | | | | | Non-current liabilities | | | | | Borrowings | 24 | 3,6 00 | 3, 589 | | Employee benefits | 25 | 534 | 630 | | Derivative financial instruments | 29 | 4 | 7 | | Deferred income tax liabilities | 17 | 19 0 | 17 5 | | Non-current income tax liabilities | | 16 | 17 | | Provisions for liabilities | 27 | 37 | 35 | | Capital grants | | 26 | 24 | | Other payables | 28 | 10 | 11 | | | | 4 , 417 | 4,488 | | Current liabilities | | | | | Borrowings | 24 | 18 0 | 16 5 | | Trade and other payables | 28 | 2,6 42 | 2, 563 | | Current income tax liabilities | | 49 | 27 | | Derivative financial instruments | 29 | 21 | 14 | | Provisions for liabilities | 27 | 10 0 | 58 | | | | 2,992 | 2 , 827 | | Liabilities associated with assets classified as held for sale | | 35 | – | | | | 3, 027 | 2 , 827 | | Total liabilities | | 7 ,444 | 7, 3 1 5 | | Total equity and liabilities | | 12 ,4 8 2 | 11 ,7 0 7 | A. Smurfit K. Bowles Director Director ![]() 160 Smurfit Kappa Annual Report 2022 #### Company Balance Sheet #### At 31 December 2022 Note 2022 €m 2021 €m ASSETS Non-current assets Financial assets 14 2,955 2,915 2,955 2,915 Current assets Amounts receivable from Group companies 19 474 233 474 233 Total assets 3,429 3,148 EQUITY Capital and reserves attributable to owners of the parent Equity share capital 23 – – Share premium 23 2,646 2,646 Share-based payment reserve 256 216 Retained earnings 429 283 Total equity 3,331 3,145 LIABILITIES Current liabilities Amounts payable to Group companies 28 98 3 Total liabilities 98 3 Total equity and liabilities 3,429 3,148 A. Smurfit K. Bowles Director Director ![]() 161Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Consolidated Statement of Changes in Equity #### For the Financial Year Ended 31 December 2022 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Equity | | | | | Non- | | | | Share | Share | Other | Retained | | Controlling | Total | | | Capital | Premium | Reserves\* | Earnings | Total | Interests | Equity | | | €m | €m | €m | €m | €m | €m | €m | | At 1 January 2022 | – | 2 ,646 | 260 | 1 , 473 | 4 , 37 9 | 13 | 4 ,39 2 | | Profit for the financial year | – | – | – | 94 4 | 944 | 1 | 945 | | Other comprehensive income | | | | | | | | | Foreign currency translation adjustments | – | – | (63) | – | (63) | – | (63) | | Defined benefit pension plans | – | – | – | 43 | 43 | – | 43 | | Effective portion of changes in fair value of cash flow hedges | – | – | (5) | – | (5) | – | (5) | | Changes in fair value of cost of hedging | – | – | (1) | – | (1) | – | (1) | | Total comprehensive (expense)/income for the financial year | – | – | (69) | 9 87 | 918 | 1 | 919 | | Hyperinflation adjustment | – | – | – | 66 | 66 | – | 66 | | Dividends paid | – | – | – | (332) | (332) | (1) | (333) | | Share-based payment | – | – | 63 | – | 63 | – | 63 | | Share buyback | – | – | (4 1) | – | (41) | – | (41) | | Share cancellation | – | – | 41 | (4 1) | – | – | – | | Net shares acquired by SKG Employee Trust | – | – | (28) | – | (28) | – | (28) | | Derecognition of equity instruments | – | – | 10 | (10) | – | – | – | | At 31 December 2022 | – | 2 ,646 | 236 | 2, 143 | 5, 025 | 13 | 5, 038 | | At 1 January 2021 | – | 2,646 | 207 | 9 17 | 3,770 | 13 | 3,78 3 | | Profit for the financial year | – | – | – | 679 | 679 | – | 679 | | Other comprehensive income | | | | | | | | | Foreign currency translation adjustments | – | – | 15 | – | 15 | – | 15 | | Defined benefit pension plans | – | – | – | 14 5 | 145 | – | 14 5 | | Effective portion of changes in fair value of cash flow hedges | – | – | (3) | – | (3) | – | (3) | | Changes in fair value of cost of hedging | – | – | (1) | – | (1) | – | (1) | | Total comprehensive income for the financial year | – | – | 11 | 824 | 8 35 | – | 835 | | Hyperinflation adjustment | – | – | – | 34 | 34 | – | 34 | | Dividends paid | – | – | – | (3 02) | (3 02) | – | (3 02) | | Share-based payment | – | – | 64 | – | 64 | – | 64 | | Net shares acquired by SKG Employee Trust | – | – | (22) | – | (22) | – | (22) | | At 31 December 2021 | – | 2,646 | 26 0 | 1, 47 3 | 4 , 379 | 13 | 4 ,392 | \*   ![]() 162 Smurfit Kappa Annual Report 2022 #### Company Statement of Changes in Equity #### For the Financial Year Ended 31 December 2022 Equity Share Capital €m Share Premium €m Share- based Payment Reserve €m Own Shares €m Retained Earnings €m Total Equity €m At 1 January 2022 – 2,646 216 – 283 3,145 Profit for the financial year – – – – 519 519 Dividends paid – – – – (332) (332) Share-based payment – – 40 – – 40 Share buyback – – – (41) – (41) Share cancellation – – – 41 (41) – At 31 December 2022 – 2,646 256 – 429 3,331 At 1 January 2021 – 2,646 173 – 300 3,119 Profit for the financial year – – – – 285 285 Dividends paid – – – – (302) 302 Share-based payment – – 43 – – 43 At 31 December 2021 – 2,646 216 – 283 3,145 ![]() 163Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information #### Consolidated Statement of Cash Flows #### For the Financial Year Ended 31 December 2022 | | | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | | Note | €m | €m | | Cash flows from operating activities | | | | | Profit before income tax | | 1, 293 | 913 | | Adjustment for: | | | | | Net finance costs | 7 | 149 | 162 | | Depreciation charge | 11, 12 | 581 | 513 | | Impairment of non-current assets | 11, 12 | 66 | – | | Impairment of goodwill | 13 | 85 | – | | Amortisation of intangible assets | 13 | 49 | 40 | | Amortisation of capital grants | | (4) | (3) | | Share-based payment expense | 26 | 65 | 69 | | Profit on sale of property, plant and equipment | | (7) | (8) | | Lease modifications | | (3) | – | | Share of associates’ profit (after tax) | | (3) | (2) | | Net movement in working capital | 20 | (350) | (114) | | Change in biological assets | 16 | (2) | 7 | | Italian Competition Authority fine | | – | (124) | | Change in employee benefits and other provisions | | (19) | (81) | | Other (primarily hyperinflation adjustments) | | 8 | 5 | | Cash generated from operations | | 1,90 8 | 1 , 377 | | Interest paid | | (135) | (152) | | Income taxes paid: | | | | | Irish corporation tax (net of tax refunds) paid | | (24) | (21) | | Overseas corporation tax (net of tax refunds) paid | | (2 97) | (218) | | Net cash inflow from operating activities | | 1, 452 | 986 | | Cash flows from investing activities | | | | | Interest received | | 9 | 3 | | Business disposals | | – | 33 | | Additions to property, plant and equipment and biological assets | | (873) | (594) | | Additions to intangible assets | 13 | (17) | (21) | | Receipt of capital grants | | 6 | 5 | | Purchase of investments | | (1) | – | | Disposal of property, plant and equipment | | 12 | 16 | | Dividends received from associates | | 1 | 1 | | Purchase of subsidiaries (net of acquired cash) | | (9 0) | (413) | | Deferred consideration paid | | (14) | (35) | | Net cash outflow from investing activities | | (96 7) | (1, 0 0 5) | | Cash flows from financing activities | | | | | Share buyback | 23 | (41) | – | | Proceeds from bond issuance | | – | 999 | | Purchase of own shares (net) | | (28) | (22) | | Increase/(decrease) in other interest-bearing borrowings | | 8 | (107) | | Repayment of lease liabilities | | (10 3) | (88) | | Repayment of borrowings | | – | (491) | | Derivative termination receipts | | 1 | 9 | | Deferred debt issue costs paid | | – | (1 2) | | Dividends paid to shareholders | | (332) | (3 02) | | Dividends paid to non-controlling interests | | (1) | – | | Net cash outflow from financing activities | | (4 96) | (14) | | Decrease in cash and cash equivalents | | (11) | (33) | | Reconciliation of opening to closing cash and cash equivalents | | | | | Cash and cash equivalents at 1 January | 21 | 8 41 | 886 | | Currency translation adjustment | 21 | (59) | (12) | | Decrease in cash and cash equivalents | 21 | (11) | (33) | | Cash and cash equivalents at 31 December | 21, 22 | 771 | 8 41 | ![]() 164 Smurfit Kappa Annual Report 2022 #### Company Statement of Cash Flows #### For the Financial Year Ended 31 December 2022 Note 2022 €m 2021 €m Cash flows from operating activities Profit before income tax 32 519 285 Adjustment for: Net finance costs (1) – Decrease in trade and other payables 28 – (5) Decrease in amounts payable to Group Companies 28 – (2) Net cash inflow from operating activities 518 278 Cash flows from investing activities Interest received 1 – Net cash inflow from investing activities 1 – Cash flows from financing activities Group loan movements 19, 28 (146) 23 Share buyback (41) – Dividends paid to shareholders (332) (302) Net cash outflow from financing activities (519) (279) Movement in cash and cash equivalents – (1) Reconciliation of opening to closing cash and cash equivalents Cash and cash equivalents at 1 January – 1 Movement in cash and cash equivalents – (1) Cash and cash equivalents at 31 December – – ![]() 165Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information Notes to the Consolidated Financial Statements For the Financial Year Ended 31 December 2022 1. General Information Smurfit Kappa Group plc SKG plc’ or ‘the Company’) and its subsidiaries (together ‘SKG’ or ‘the Group’) primarily manufacture, distribute and sell containerboard, corrugated containers and other paper-based packaging products.  ompa public limited company ith a premium listing on the London Stock Exchange and a secondary listing on Euronext Dublin. It is incorporated and domiciled in Ireland. The address of its registered offic Beech Hill, Clonskeagh, Dublin 4, D04 N2R2, Ireland. The Consolidated Financial Statements of the Group for the financial year ended 31 December 2022 were authorised for issue in accordance with a resolution of the Directors on 14 March 2023. 2. Summary of Significant Accounting Policies The Group has consistently applied the following significant accounting policies to all periods presented, unless otherwise stated. Statement of Compliance The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (‘IFRS’) issued by the International Accounting Standards Board (‘IASB’) as adopted by the European Union (‘EU’), those parts of the Companies Act 2014 applicable to companies reporting under IFRS and Article 4 of the IAS Regulation. The Company Financial Statements have been prepared in accordance with IFRS adopted by the EU as applied in accordance with the provisions of the Companies Act 2014. IFRS adopted by the EU differ in certain respects from IFRS issued by the IASB. References to IFRS hereafter refer to IFRS adopted by the EU. Basis of Preparation The Consolidated Financial Statements are presented in euro rounded to the nearest million. They have been prepared under the historical cost convention except for the following which are recognised at fair value: certain financial assets and liabilities including derivative financial instruments; biological assets; share-based payments at grant date; pension plan assets; and contingent consideration. The financial statements of subsidiaries whose functional currency is the currency of a hyperinflationary economy are stated in terms of the measuring unit currency at the end of the reporting period. This is the case for the Group’s subsidiaries in Argentina. The preparation of financial statements in accordance with IFRS requires the use of accounting judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, income and expenses. The areas involving a higher degree of judgement and areas where assumptions and estimates are significant are discussed in the Significant Accounting Judgements, Estimates and Assumptions note. The Consolidated Financial Statements include the information in the Remuneration Report that is described as being an integral part of the Consolidated Financial Statements. Climate Change In preparing the Consolidated Financial Statements, the Group has considered the impact of climate change in the application of its accounting policies, judgements, estimates and assumptions. The Group has assessed the impact of climate change, particularly in the context of the risks identified in the Risk Report and the Task Force for Climate-related Financial Disclosures (‘TCFD’) and on achieving its sustainability targets, all of which are outlined in the Strategic Report. The assessment included the impact on the useful life of assets, the impairment of non-financial assets and provisions for liabilities. The assessment concluded that climate change in the medium-term is not expected to have a material impact on the Group’s judgements, estimates and assumptions. The Group will continue to assess the application of its accounting policies as it further evaluates its climate risks and develops and implements measures to deliver on the targets set . Going Concern The Group is a highly integrated manufacturer of paper-based packaging solutions with leading market positions, quality assets and broad geographic reach. The financial position of the Group, its cash generation, capital resources and liquidity continue to provide a stable financing platform. The Group’s diversified funding base and long-dated maturity profile of 4.9 years at 31 December 2022 provide a stable funding outlook. At 31 December 2022, the Group had a strong liquidity position of approximately €2.44 billion comprising cash balances of €788 million, undrawn available committed facilities of €1,343 million on its sustainability-linked Revolving Credit Facility (‘RCF’) and €312 million on its sustainability-linked securitisation facilities. At 31 December 2022, the strength of the Group’s balance sheet, a net debt to EBITDA ratio of 1.3x (31 December 2021: 1.7x) and its BBB-/BBB-/Baa3 credit rating, continues to secure long-term strategic and financial flexibility. Having assessed the principal risks facing the Group outlined in the Risk Report, together with the Group’s forecasts and significant financial headroom, the Directors believe that the Group is well placed to manage these risks successfully and have a reasonable expectation that the Company, and the Group as a whole, have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Consolidated Financial Statements. 166 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 2. Summary of Significant Accounting Policies continued New and Amended Standards and Interpretations Effective During 2022 The Group has applied the following standards, interpretations and amendments with effect from 1 January 2022: • Property, Plant and Equipment: Proceeds before Intended Use – Amendments to IAS 16; • Reference to the Conceptual Framework – Amendments to IFRS 3; • Onerous Contracts – Cost of Fulfilling a Contract – Amendments to IAS 37; and • Annual Improvements to IFRS Standards 2018–2020. The amendments listed above did not result in material changes to the Consolidated Financial Statements. The Group reassessed the classification of restricted cash during the year as a result of an agenda decision by the IFRS Interpretations Committee in 2022. Consequently restricted cash is now included as cash and cash equivalents in the Consolidated Statement of Cash Flows. The comparative balances for cash and cash equivalents within the Consolidated Statement of Cash Flows have increased at 1 January 2021 by €10 million and at 31 December 2021 by €14 million. New and Amended Standards and Interpretations Issued but not yet Effective or Early Adopted A number of new standards and interpretations have been issued but are not yet effective for the Group. These standards are either not expected to have a material effect on the Consolidated Financial Statements or they are not currently relevant for the Group. Basis of Consolidation The Consolidated Financial Statements include the annual Financial Statements of the Company and all of its subsidiaries and associates, drawn up to 31 December. Subsidiaries Subsidiaries are entities controlled by the Group. They are consolidated from the date on which control is obtained by the Group. They are deconsolidated from the date on which control is lost by the Group. Control exists when the Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Where necessary, the accounting policies of subsidiaries have been modified to ensure consistency with the policies adopted by the Group. Intragroup transactions, intragroup balances and any unrealised gains and losses arising from intragroup transactions are eliminated in preparing the Consolidated Financial Statements, except to the extent that such a loss provides evidence of impairment. The Company’s investments in subsidiaries are carried at cost less impairment. Non-controlling interests represent the portion of a subsidiary’s equity which is not attributable to the Group. They are presented separately in the Consolidated Financial Statements. Changes in ownership of a subsidiary which do not result in a change of control are treated as equity transactions. Associates Associates are entities in which the Group has significant influence arising from its power to participate in the financial and operating policy decisions of the investee. Associates are recognised using the equity method from the date on which significant influence is obtained until the date on which such influence is lost. Under the equity method investments in associates are recognised at cost and subsequently adjusted to reflect the post-acquisition movements in the Group’s share of the associates’ net assets. The Group profit or loss includes its share of the associates’ profit or loss after tax and the Group’s other comprehensive income includes its share of the associates’ other comprehensive income. The Group’s investment in associates includes goodwill identified on acquisition, net of any accumulated impairment losses. Losses in associates are not recognised once the Group’s carrying value reaches zero, except to the extent that the Group has incurred further obligations in respect of the associate. Unrealised gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the entity. Unrealised losses are similarly eliminated to the extent that they do not provide evidence of impairment. Where necessary, the accounting policies of associates are modified to ensure consistency with Group accounting policies. Revenue The Group’s revenue is primarily derived from the sale of containerboard, corrugated containers and other paper-based packaging products. All revenue relates to revenue from contracts with customers. Contracts with customers include a single performance obligation to sell these products and do not generally contain multiple performance obligations. Revenue comprises the fair value of the consideration receivable for goods sold to third party customers in the ordinary course of business. It excludes sales based taxes and is net of allowances for volume based rebates and early settlement discounts. The transaction price is the contracted price with the customer adjusted for volume based rebates and early settlement discounts. Goods are often sold with retrospective volume rebates based on aggregate sales over a certain period of time and early settlement discounts. Revenue from these sales is recognised based on the price specified in the contract, net of the estimated rebates and discounts. Accumulated experience is used to estimate and provide for the rebates and discounts, using the most likely amount method, and revenue is only recognised to the extent that it is highly probable that a significant reversal will not occur. No element of financing is deemed present as the sales are made with credit terms consistent with market practice and are in line with normal credit terms in the entities’ country of operation. Revenue is recognised when control of the goods has transferred to the customer, being when the goods are delivered to the customer and there is no unfulfilled obligation that could affect the customer’s acceptance of the products. Delivery occurs when the goods have been shipped to the specific location, the risks of obsolescence and loss have been transferred to the customer and the customer has accepted the goods in accordance with the sales contract. For the Group, revenue is recognised at the point in time when delivery to the customer has taken place.  ![]() 167Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 2. Summary of Significant Accounting Policies continued #### Revenue continued A receivable is recognised when the goods are delivered as this is the point in time that the consideration is unconditional because only the passage of time is required before the payment is due. Foreign Currency Functional and Presentation Currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The Consolidated Financial Statements of the Group are presented in euro which is the presentation currency of the Group and the functional currency of the Company. Transactions and Balances Transactions in foreign currencies are translated into the functional currency of the entity at the exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated into functional currencies at the foreign exchange rate ruling at the reporting date. Non-monetary assets and liabilities carried at cost are not subsequently retranslated. Non-monetary assets carried at fair value are subsequently remeasured at the exchange rate at the date of valuation. Foreign exchange differences arising on translation are recognised in profit or loss with the exception of differences on foreign currency borrowings that qualify as a hedge of the Group’s net investment in foreign operations. The portion of exchange gains or losses on foreign currency borrowings used to provide a hedge against a net investment in a foreign operation and that is determined to be an effective hedge is recognised in other comprehensive income. The ineffective portion is recognised immediately in the Consolidated Income Statement. Group Companies The assets and liabilities of entities that do not have the euro as their functional currency, including goodwill and fair value adjustments arising on acquisition, are translated to euro at the foreign exchange rates ruling at the reporting date. Their income, expenses and cash flows are translated to euro at average exchange rates during the year. However, if a Group entity’s functional currency is the currency of a hyperinflationary economy, that entity’s financial statements are first restated in accordance with IAS 29, Financial Reporting in Hyperinflationary Economies (see Reporting in Hyperinflationary Economies). Under IAS 29, income, costs and balance sheet amounts are translated at the exchange rates ruling at the reporting date. All resulting exchange differences are recognised in other comprehensive income. On consolidation, foreign exchange differences arising on translation of net investments including those arising on long-term intragroup loans deemed to be quasi-equity in nature are recognised in other comprehensive income. When a quasi-equity loan ceases to be designated as part of the Group’s net investment, accumulated currency differences are reclassified to profit or loss only when there is a change in the Group’s proportional interest. On disposal of a foreign operation, accumulated currency translation differences are reclassified to profit or loss as part of the overall gain or loss on disposal. Reporting in Hyperinflationary Economies When the economy of a country in which we operate is deemed hyperinflationary and the functional currency of a Group entity is the currency of that hyperinflationary economy, the financial statements of such Group entities are adjusted so that they are stated in terms of the measuring unit current at the end of the reporting period. This involves restatement of income and expenses to reflect changes in the general price index from the start of the reporting period and restatement of non-monetary items in the balance sheet, such as property, plant and equipment and inventories, to reflect current purchasing power as at the period end using a general price index from the date when they were first recognised. The gain or loss on the net monetary position for the year is included in finance costs or income. Comparative amounts are not restated. The restated income, expenses and balance sheets are translated to euro at the closing rate at the end of the reporting period. Differences arising on translation to euro are recognised in other comprehensive income. Business Combinations The Group accounts for business combinations using the acquisition method when the acquired set of activities and assets meets the definition of a business and control is transferred to the Group. Under the acquisition method, the assets, liabilities and contingent liabilities of an acquired business are initially recognised at their fair value at the date of acquisition; which is the date on which control is transferred to the Group. The cost of a business combination is measured as the aggregate of the fair values at the date of exchange of any assets transferred, liabilities assumed and equity instruments issued in exchange for control. In a business combination achieved in stages, the cost includes the acquisition date fair value of any pre-existing equity interest in the subsidiary. When settlement of all or part of a business combination is deferred, the fair value of the deferred component is determined by discounting the amounts payable to their present value at the date of exchange. The discount component is unwound as an interest expense in the Consolidated Income Statement over the life of the obligation. Where a business combination agreement provides for an adjustment to the cost of the combination which is contingent on future events, the contingent consideration is measured at fair value. Any subsequent remeasurement of the contingent amount is recognised in the Consolidated Income Statement if it is identified as a financial liability. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated to the identifiable assets and liabilities are made within twelve months of the acquisition date. Non-controlling interests are measured either, at their proportionate share of the acquiree’s identifiable net assets or, at fair value as at the acquisition date, on a case by case basis. Acquisition related costs are expensed as incurred. 168 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 2. Summary of Significant Accounting Policies continued #### Business Combinations continued Where a put option is held by a non-controlling interest in a subsidiary whereby that party can require the Group to acquire the non-controlling interest’s shareholding in the subsidiary at a future date and the non-controlling interest does not retain present access to the results of the subsidiary, the Group applies the anticipated acquisition method of accounting to the arrangement. The Group recognises a contingent consideration liability at fair value, being the Group’s estimate of the amount required to settle that liability, which is included in the consideration transferred. Any subsequent remeasurements required due to changes in the fair value of the put liability are recognised in the Consolidated Income Statement. Where the Group has a call option over the shares held by a non-controlling interest in a subsidiary, whereby the Group can require the non-controlling interest to sell its shareholding in the subsidiary at a future date, the option is classified as a derivative and is recognised as a financial instrument on inception, with fair value movements recognised in the Consolidated Income Statement. Goodwill Goodwill is the excess of the cost of an acquisition over the Group’s share of the fair value of the identifiable assets, liabilities and contingent liabilities acquired. When the fair value of the identifiable assets and liabilities acquired exceeds the cost of the acquisition, the values are reassessed and any remaining gain is recognised immediately in the Consolidated Income Statement. Goodwill is allocated to the groups of cash-generating units (‘CGUs’) that are expected to benefit from the synergies of the combination. This is the lowest level at which goodwill is monitored for internal management purposes. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Intangible Assets These include software development costs as well as marketing and customer related intangible assets generally arising from business combinations. They are initially recognised at cost which, for those arising in a business combination, is their fair value at the date of acquisition. Subsequently, intangible assets are carried at cost less any accumulated amortisation and impairment. Cost is amortised on a straight-line basis over their estimated useful lives. Carrying values are reviewed for indicators of impairment at each reporting date and are subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable. Further information is provided in the Goodwill and Intangible Assets note. Property, Plant and Equipment Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment charges. Cost includes expenditure that is directly attributable to the acquisition of the assets. Software that is integral to the functionality of the related equipment is capitalised as part of that equipment. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of any retired component is derecognised. Other repair and maintenance expenditure that does not meet the asset recognition criteria is expensed in the Consolidated Income Statement as incurred. Assets are depreciated from the time they are available for use, however land is not depreciated. Depreciation on other assets is calculated to write-off the carrying amount of property, plant and equipment, on a straight-line basis at the following annual rates: • Buildings:  2 – 5% • Plant and equipment: 3 – 33% The estimated residual value and the useful lives of assets are reviewed at each reporting date. The useful lives of assets could be reduced by climate-related factors, for example, because of physical risks, obsolescence or legal restrictions. The impact of climate-related factors on useful lives is considered on an asset-by-asset basis and takes into consideration the climate change targets made by the Group. Capital expenditure will continue to be required for ongoing projects in order to meet our climate change targets and the useful lives of future capital expenditure may differ from current assumptions, however there are no significant changes in the estimates of useful lives during the current financial year. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount. These are included in the Consolidated Income Statement. Capitalisation of costs in respect of constructing an asset commences when it is probable that future economic benefits associated with the asset will flow to the Group and the cost of the asset can be measured reliably. Costs includes expenditure that is directly attributable to the construction of the asset. Construction in progress is not depreciated and is assessed for impairment when there is an indicator of impairment. When these assets are available for use, they are transferred out of construction in progress to the applicable heading under property, plant and equipment. Impairment Goodwill Goodwill is subject to impairment testing on an annual basis at a consistent time each year and at any time an impairment indicator is considered to exist. Impairment is determined by comparing the carrying amount to the recoverable amount of the groups of CGUs to which the goodwill relates. The recoverable amount is the greater of; fair value less costs to sell, and value-in-use. When the recoverable amount of the groups of CGUs is less than the carrying amount, an impairment loss is recognised. Where goodwill forms part of a group of CGUs and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured on the basis of the relative values of the operation disposed of and the portion of the group of CGUs retained. ![]() 169Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 2. Summary of Significant Accounting Policies continued #### Impairment continued #### Goodwill continued In the year in which a business combination occurs, and the goodwill arising affects the goodwill allocation to CGUs, the groups of CGUs are tested for impairment prior to the end of that year. Impairment losses on goodwill are recognised in the Consolidated Income Statement and are not reversed following recognition. Non-financial Assets Long-term tangible and intangible assets that are subject to depreciation or amortisation are tested for impairment whenever events or changes in circumstances, including those relating to climate change, indicate that the carrying amount may not be recoverable. An impairment loss is recognised in the Consolidated Income Statement for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use. When assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows. Non-financial assets that have suffered impairment losses are reviewed for possible reversal of the impairment at each reporting date. The impairment loss is only reversed to the extent that the asset’s carrying amount does not exceed that which would have been determined had no impairment been recognised. Financial Assets For trade receivables, the Group applies the simplified approach permitted by IFRS 9. The Group’s impairment policy is explained in the Trade and Other Receivables note. Biological Assets The Group holds standing timber which is classified as a biological asset and is stated at fair value less estimated costs to sell. Changes in value are recognised in the Consolidated Income Statement. The fair value of standing timber is calculated using weighted average prices for similar transactions with third parties. At the time of harvest, wood is recognised at fair value less estimated costs to sell and transferred to inventory. Further information is provided in the Biological Assets note. Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories is determined on a first-in, first-out basis and includes expenditure incurred in acquiring the inventories and bringing them to their present location and condition. Raw materials are valued on the basis of purchase cost on a first-in, first-out basis. For finished goods and work-in-progress, cost includes direct materials, direct labour and attributable overheads based on normal operating capacity and excludes borrowing costs. The cost of wood is its fair value less estimated costs to sell at the date of harvest, determined in accordance with the policy for biological assets. Any change in value at the date of harvest is recognised in the Consolidated Income Statement. Net realisable value is the estimated proceeds of sale less costs to completion and any costs to be incurred in selling and distribution. Full provision is made for all damaged, deteriorated, obsolete and unusable materials. Financial Instruments Trade receivables and debt instruments issued are initially recognised when they are originated. All other financial instruments are recognised when the Group becomes a party to its contractual provisions. A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially recognised at fair value plus, for an item not at fair value through profit or loss (‘FVPL’), transaction costs that are directly attributable to its acquisition or issue. On initial recognition, a financial asset is classified as measured at amortised cost, or fair value through other comprehensive income (‘FVOCI’), or FVPL. The classification is based on the business model for managing the financial assets and the contractual terms of the cash flows. Reclassification of financial assets is required only when the business model for managing those assets changes. Financial assets are derecognised when the Group’s contractual rights to the cash flows from the financial assets expire, are extinguished or transferred to a third party. Financial liabilities are classified as measured at amortised cost or FVPL. Financial liabilities are derecognised when the Group’s obligations specified in the contracts expire, are discharged or cancelled. The Group also derecognises a financial liability when its terms are modified and the cash flows of the modified liability are substantially different, in which case a new financial liability based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid, (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss. Cash and Cash Equivalents Cash and cash equivalents comprise; cash balances held to meet short-term cash commitments, and; investments which are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value. Where investments are categorised as cash equivalents, the related balances have a maturity of three months or less from the date of acquisition. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. Cash and cash equivalents are stated at amortised cost. Restricted Cash Restricted cash comprises cash held by the Group but which is ring-fenced or used as security for specific financing arrangements, and to which the Group does not have unfettered access. When the contractual restrictions do not change the nature of the demand deposit, restricted cash is included as a component of cash and cash equivalents for the purpose of the Consolidated Statement of Cash Flows. Restricted cash is stated at amortised cost. 170 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 2. Summary of Significant Accounting Policies continued #### Financial Instruments continued Equity Instruments Equity instruments are measured at fair value with fair value gains and losses recognised in other comprehensive income. Dividend income is recognised in profit or loss. There is no reclassification of fair value gains and losses to profit or loss following the derecognition of the investment. Any gains and losses will be reclassified within equity from the FVOCI reserve to retained earnings. Debt Instruments Listed and unlisted debt instruments are measured at fair value with fair value gains and losses recognised in profit or loss. Interest and dividend income is recognised in profit or loss. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in profit or loss over the period of the borrowings using the effective interest method. Fixed rate borrowings, which have been hedged to floating rates are measured at amortised cost adjusted for changes in value attributable to the hedged risk arising from changes in underlying market interest rates. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least one year after the reporting date. Securitised Assets The Group has entered into securitisation transactions involving certain of its trade receivables and the establishment of certain special purpose entities to effect these transactions. These special purpose entities are consolidated as they are considered to be controlled by the Group. The related securitised assets continue to be recognised in the Consolidated Balance Sheet. Trade and Other Receivables Trade and other receivables (unless it is a trade receivable without a significant financing component) are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less loss allowance. Trade receivables without a significant financing component are initially measured at the transaction price. Trade and Other Payables Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method. Derivative Financial Instruments and Hedging Activities The Group uses derivative financial instruments to manage certain foreign currency, interest rate and commodity price exposures. All derivatives are recognised at fair value. The treatment of changes in fair value depends on whether the derivative is designated as a hedging instrument, the nature of the item being hedged and the effectiveness of the hedge. The Group designates certain derivatives as follows: • Hedges of a particular risk associated with a recognised floating rate asset or liability or a highly probable forecast transaction (cash flow hedges); • Hedges of changes in the fair value of a recognised asset or liability (fair value hedges); and • Hedges of net investments in foreign operations (net investment hedges). At inception the Group documents the relationship between the hedging instrument and hedged items, its risk management objectives and the strategy for undertaking the transaction. The Group also documents its assessment of whether the derivative is highly effective in offsetting changes in fair value or cash flows of hedged items, both at inception and in future periods. The fair values of various derivative instruments used for hedging purposes are disclosed in the Financial Instruments note. Movements on the cash flow hedging reserve and cost of hedging reserve in shareholders’ equity are shown in the Capital and Reserves note. The full fair value of a hedging derivative is classified as a non-current asset or liability when its remaining maturity is more than one year; it is classified as a current asset or liability when its remaining maturity is less than one year. Non-hedging derivative assets and liabilities are classified as current or non-current based on expected realisation or settlement dates. Cash Flow Hedges Changes in the fair value of derivative hedging instruments designated as cash flow hedges are recognised in other comprehensive income to the extent that the hedge is effective. The gain or loss relating to the ineffective portion is recognised immediately in profit or loss. When designating a foreign exchange derivative contract as a cash flow hedge, the currency basis spread is excluded and accounted for separately as a cost of hedging, being recognised in a cost of hedging reserve within equity. Amounts accumulated in other comprehensive income are reclassified to the Consolidated Income Statement in the same periods that the hedged items affect profit or loss as follows: • The reclassified gain or loss relating to the effective portion of interest rate swaps hedging variable rate borrowings is recognised in the Consolidated Income Statement within finance income or costs respectively. • When the hedged item is a non-financial asset, the amount recognised in other comprehensive income is transferred to the carrying amount of the asset when it is recognised. The deferred amounts are ultimately recognised in profit or loss as the hedged item affects profit or loss. ![]() 171Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 2. Summary of Significant Accounting Policies continued Derivative Financial Instruments and Hedging Activities continued Cash Flow Hedges continued If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in other comprehensive income remains there until the forecast transaction occurs, unless the hedged transaction is no longer expected to occur, in which case the cumulative gain or loss that was previously recognised in other comprehensive income is transferred to the Consolidated Income Statement. Fair Value Hedges Where derivative hedging instruments are designated as fair value hedges, any gain or loss arising from the remeasurement of the hedging instrument to fair value is reported in the Consolidated Income Statement together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. When the hedging instrument no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is amortised to the Consolidated Income Statement over the period to maturity. Net Investment Hedges Hedges of net investments in foreign operations are accounted for in a similar manner to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the Consolidated Income Statement within finance income or costs respectively. Gains and losses accumulated in other comprehensive income are reclassified to profit or loss when the foreign operation is sold. Derivatives not Designated as Hedges Changes in the fair value of derivatives which are not designated for hedge accounting are recognised in the Consolidated Income Statement. Fair Value Hierarchy The Group reports using the fair value hierarchy in relation to its assets and liabilities which are measured at fair value except for those which are exempt as defined under IFRS 13, Fair Value Measurement. The fair value hierarchy categorises into three levels the inputs to valuation techniques used to measure fair value, which are described as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities; • Level 2: inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly (as prices) or indirectly (derived from prices); and • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs). Provisions A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, and it is probable that an outflow of resources will be required to settle the obligation and the amount can be reliably estimated. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance expense. A contingent liability is not recognised but is disclosed where the existence of an obligation will only be confirmed by future events or where it is not probable that an outflow of resources will be required to settle the obligation or where the amount of the obligation cannot be measured with sufficient reliability. Contingent assets are not recognised but are disclosed where an inflow of economic benefits is probable. Finance Costs and Income Finance costs comprise interest expense on borrowings (including amortisation of deferred debt issue costs), certain foreign currency translation losses related to financing, unwinding of the discount on provisions, borrowing extinguishment costs, fair value loss on financial assets, fair value loss on put options arising in business combinations, net interest cost on net pension liability, net monetary loss arising in hyperinflationary economies, the interest element of lease payments and losses on derivative instruments that are not designated as hedging instruments and are recognised in profit or loss. Borrowing costs are recognised in profit or loss using the effective interest method. Borrowing costs that are directly attributable to the acquisition or construction of a qualifying asset are capitalised as part of the cost of that asset. All other borrowing costs are recognised as an expense in the Consolidated Income Statement. Finance income comprises interest income on funds invested, certain foreign currency translation gains related to financing, fair value gain on financial assets, fair value gain on put options arising in business combinations, net monetary gain arising in hyperinflationary economies, gains on derivative instruments that are not designated as hedging instruments and are recognised in profit or loss and dividend income. Interest income is recognised as it accrues using the effective interest method. Dividend income is recognised on the date that the Group’s right to receive payment is established. Income Taxes The income tax expense recognised in each financial year comprises current and deferred tax and is recognised in the Consolidated Income Statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity, in which case the related tax is similarly recognised in other comprehensive income or in equity. Current Income Tax Current tax consists mainly of the expected tax payable or recoverable on the taxable income for the year using the applicable tax rates during the year and any adjustment to tax payable in respect of previous years. 172 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 2. Summary of Significant Accounting Policies continued Deferred Income Tax Deferred income tax is provided using the liability method, on temporary differences between the carrying amounts of assets and liabilities in the Consolidated Financial Statements and their tax bases. If the temporary difference arises from the initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction does not affect accounting nor taxable profit or loss, it is not recognised. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the reporting date. Deferred tax assets and liabilities are not subject to discounting. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease, if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. The Group recognises a right-of-use asset and a lease liability at the lease commencement date which is the date at which the asset is made available for use by the Group. The right-of-use asset is initially measured at cost, and subsequently at cost less any accumulated depreciation and impairment losses and adjusted for certain remeasurements of the lease liability. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, restoration costs and lease payments made at or before the commencement date less any lease incentives received. The right-of-use asset is depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. Where the lease contains a purchase option, the asset is written off over the useful life of the asset when it is reasonably certain that the purchase option will be exercised. Right-of-use assets are subject to impairment testing. The lease liability is initially measured at the present value of the lease payments to be made over the lease term. The lease payments include fixed payments less any lease incentives receivable, variable lease payments that depend on an index or a rate known at the commencement date, payments for a purchase option, payments for an optional renewal period and termination option payments if the Group is reasonably certain to exercise those options. The lease term is the non-cancellable period of the lease adjusted for any renewal options which are reasonably certain to be exercised or termination options which are reasonably certain not to be exercised. Management applies judgement in determining whether it is reasonably certain that a renewal or termination option will be exercised. The variable lease payments that do not depend on an index or a rate are recognised as an expense in the period in which the event or condition that triggers the payment occurs. The Group has elected to avail of the practical expedient not to separate lease components from any associated non-lease components. Lease liabilities are included in borrowings. The lease payments are discounted using the lessee’s incremental borrowing rate as the interest rate implicit in the lease is generally not readily determinable. Incremental borrowing rates are determined using a build-up approach that uses externally benchmarked information adjusted to take consideration of the lessee’s risk profile and the specific lease characteristics. These characteristics include the type of leased asset, the term of the lease and the currency of the lease. After the commencement date, the lease liability is measured at amortised cost using the effective interest method. It is remeasured if there is a modification, a change in future lease payments arising from a change in an index or rate, or if the Group changes its assessment of whether it is reasonably certain to exercise an option within the contract. The Group has elected to apply the recognition exemptions for short-term and low-value leases and recognises the lease payments associated with these leases as an expense in profit or loss on a straight-line basis over the lease term. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise certain items of IT equipment and small items of office furniture. Retirement Benefit Obligations The Group operates both defined benefit and defined contribution pension plans throughout its operations in accordance with local conditions and practice. For defined contribution pension plans, once contributions have been paid, the Group has no further payment obligations. Contributions are recognised as an employee benefit expense as service is received from employees in the Consolidated Income Statement. Prepaid contributions are recognised as an asset only to the extent that a cash refund or a reduction in future payments is available. The defined benefit pension plans are funded by payments to separately administered funds or in certain countries, in accordance with local practices, scheme liabilities are unfunded and recognised as liabilities in the Consolidated Balance Sheet. The costs and liabilities of defined benefit pension plans are calculated using the projected unit credit method. Actuarial calculations are prepared by independent, professionally qualified actuaries at each reporting date. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms approximating to the terms of the related obligation. ![]() 173Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 2. Summary of Significant Accounting Policies continued #### Retirement Benefit Obligations continued Defined benefit costs are categorised as: (1) service cost; (2) net interest expense or income; and (3) remeasurement. Service cost includes current and past service cost (which can be negative or positive) as well as gains and losses on settlements; it is included in operating profit. Past service cost is recognised at the earlier of the date when the plan amendment or curtailment occurs and the date that the Group recognises related restructuring costs. A gain or loss on settlement is recognised when the settlement occurs. Net interest, included within finance costs, is calculated by applying the discount rate to the net defined benefit asset or liability at the beginning of the year. Remeasurement is comprised of the return on plan assets (excluding net interest) and actuarial gains and losses; it is recognised in other comprehensive income in the period in which it arises and is not subsequently reclassified to the Consolidated Income Statement. The net surplus or deficit arising on the Group’s defined benefit pension plans, together with the liabilities associated with the unfunded plans, are shown either within non-current assets or liabilities in the Consolidated Balance Sheet. The defined benefit pension asset or liability comprises the total for each plan of the present value of the defined benefit obligation less the fair value of plan assets. Fair value of plan assets is based on market price information and in the case of published securities, it is the published bid price. Any pension asset is limited to the present value of economic benefits available in the form of refunds from the plans or reductions in future contributions. The deferred tax impact of pension plan surpluses and deficits is disclosed separately within deferred income tax assets or liabilities, as appropriate. Share-based Payments The Group grants equity settled share-based payments to certain employees as part of their remuneration. The fair value of grants is determined at the date of grant and is expensed in the Consolidated Income Statement over the vesting period with a corresponding increase in equity. Fair value incorporates the effect of market-based conditions. Non-market-based vesting conditions are only taken into account when assessing the number of awards expected to vest such that the cumulative expense recognised equates to the number of grants that actually vest. The periodic expense/credit recognised in the Consolidated Income Statement is calculated as the difference between the cumulative expense as estimated at the start and end of the period. The cumulative expense is reversed when an employee in receipt of share awards terminates service prior to completion of the vesting period or when a non-market-based performance condition is not expected to be met. No reversal of the cumulative charge is made where awards do not vest due to a market-based vesting condition. Where the Group receives a tax deduction for share-based payments, deferred tax is provided on the basis of the difference between the market price of the underlying equity at the date of the financial statements and the exercise price of the share award. As a result, the deferred tax impact will not directly correlate with the expense reported. Proceeds received from the exercise of awards, net of any directly attributable transaction costs, are credited to the share capital and share premium accounts. Exceptional Items The Group has adopted an income statement format which seeks to highlight significant items within the Group results for the year. The Group believes this format is useful as it highlights one-off items, where significant, such as reorganisation and restructuring costs, profit or loss on disposal of operations, profit or loss on disposal of assets, impairment of assets, legislative and regulatory fines, defined benefit costs, foreign exchange gains or losses on currency devaluations, profit or loss on early extinguishment of debt and fair value gains or losses on put options arising in business combinations. Judgement is used by the Group in assessing the particular items, which by virtue of their nature and size, are disclosed as exceptional items. Emissions Rights and Obligations As a result of the European Union Emission Trading Scheme the Group receives free emission rights in certain countries. Rights are received annually and the Group is required to surrender rights equal to its actual emissions. A provision is only recognised when actual emissions exceed the emission rights granted. Any additional rights purchased are recognised at cost and they are not subsequently remeasured. Where excess certificates are sold to third parties, the Group recognises the consideration receivable within cost of sales in the Consolidated Income Statement. Government Grants Government grants are recognised at their fair value when there is reasonable assurance that the grant will be received and the Group will comply with any related conditions. Grants that compensate the Group for expenses are offset against the related expense in the Consolidated Income Statement in the same accounting periods. Grants related to the cost of an asset are recognised in the Consolidated Income Statement over the useful life of the asset within administrative expenses. Share Capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax. Own Shares Ordinary shares acquired by the Company or purchased on behalf of the Company are deducted from equity. No gain or loss is recognised in profit or loss on the purchase, sale, issue or cancellation of the Company’s ordinary shares. 174 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 2. Summary of Significant Accounting Policies continued Dividends Dividends on ordinary shares are recognised as a liability in the period in which they are declared by the Company. In the case of interim dividends, these are considered to be declared when they are paid. In the case of final dividends, these are declared when approved by the shareholders at the Annual General Meeting (‘AGM’). 3. Significant Accounting Judgements, Estimates and Assumptions Preparation of financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities. These judgements, estimates and assumptions are subject to continuing re-evaluation and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable. Actual outcomes may differ significantly from those estimates. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant are set out below. Significant Accounting Judgements Consolidation of Structured Entities The Group is a party to an arrangement involving securitisation of certain of its trade receivables. The arrangement required the establishment of certain special purpose entities (‘SPEs’) which are not owned by the Group. However, the SPEs are consolidated as management considers them to be controlled by the Group. The securitised receivables and the borrowings of the SPEs are recognised in the Consolidated Balance Sheet. The Group has established a trust which facilitates the operation of the Group’s long-term incentive plans. While the Group does not hold any of the equity of the trust, the Directors believe that the Group controls its activities and therefore the financial statements of the trust are included in the Consolidated Financial Statements. Impairment of Goodwill Judgement is required in determining whether goodwill is impaired or not. The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of groups of CGUs have been determined based on value-in-use calculations. The principal assumptions used to determine value-in-use relate to future cash flows and the time value of money. Further information is provided in the Goodwill and Intangible Assets note. Income Taxes Provisions for taxes requires management to make judgement in interpreting tax legislation, current case law or practice. It may be unclear how tax law or practice applies to a particular transaction or set of circumstances. In some instances this may not be known until a tax authority or a court makes a decision in an examination, audit or appeal. The Group considers such uncertain tax positions together or separately depending on which approach better predicts how the uncertainties can be resolved. Where the Group concludes it is not probable that a tax authority will fully accept its assessment of an uncertain tax position, it reflects the effect of the uncertainty as the most likely amount or the expected value. In addition, the Group recognises deferred tax assets, mainly relating to unused tax losses, when it is probable that the assets will be recovered through future profitability and planning. The assessment of recoverability involves judgement. The Group considers the most probable amount of future taxable profits, based on the approach employed in impairment calculations, and taking into account applicable tax legislation in the relevant countries. The Group considered that €42 million of the €47 million of deferred tax assets on losses arise in countries where there is no expiry for losses. The remaining balance is expected to be used within the expiry period. Exceptional Items Judgement is required in determining which items by virtue of their nature and size are considered exceptional and separately disclosed in the Consolidated Income Statement. The Group has outlined significant items which it believes are exceptional, due to both their nature and size, within the accounting policy for exceptional items in the Summary of Significant Accounting Policies note. Significant Accounting Estimates and Assumptions Measurement of Defined Benefit Obligations The cost of defined benefit pension plans and the present value of pension obligations are determined using actuarial valuations. These valuations involve making various assumptions that may differ significantly from actual developments in the future. The assumptions include determination of appropriate discount rates, future salary increases, inflation, mortality rates and future pension increases. Due to the complex nature of the valuations the Group employs an international network of professional actuaries to perform these valuations. The critical assumptions and estimates applied along with a sensitivity analysis are provided in the Employee Benefits note. ![]() 175Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 4. Segment and Revenue Information The Group has identified operating segments based on the manner in which reports are reviewed by the Chief Operating Decision Maker (‘CODM’). The CODM is determined to be the executive management team responsible for assessing performance, allocating resources and making strategic decisions. The Group has identified two operating segments: 1) Europe and 2) the Americas. The Europe and the Americas segments are each highly integrated. They include a system of mills and plants that primarily produce a full line of containerboard that is converted into corrugated containers within each segment. In addition, the Europe segment also produces other types of paper, such as solidboard, sack kraft paper, machine glazed (‘MG’) and graphic paper, and other paper-based packaging, such as honeycomb, solidboard packaging and folding cartons; and bag-in-box packaging. The Americas segment, which includes a number of Latin American countries and the United States, also comprises forestry; other types of paper, such as boxboard and sack paper; and paper-based packaging, such as folding cartons, honeycomb and paper sacks. Inter-segment revenue is not material. No operating segments have been aggregated for disclosure purposes. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are expected to be used for more than one year. Additionally, there are central costs which represent corporate governance costs, including executive costs, and costs of the Group’s legal, company secretarial, pension administration, tax, treasury and controlling functions and other administrative costs. Segment profit is measured based on EBITDA \* . Segment assets consist primarily of property, plant and equipment, right-of-use assets, biological assets, goodwill and intangible assets, inventories, trade and other receivables, deferred income tax assets and cash and cash equivalents. Group centre assets are comprised primarily of property, plant and equipment, derivative financial assets, deferred income tax assets and cash and cash equivalents. Segment liabilities are principally comprised of borrowings, operating liabilities, deferred income tax liabilities and employee benefits. Group centre liabilities are comprised of items such as borrowings, employee benefits, derivative financial instruments, deferred income tax liabilities and certain provisions. Segment capital expenditure comprises additions to property, plant and equipment (Note 11), right-of-use assets (Note 12), goodwill and intangible assets (Note 13) and biological assets (Note 16) and includes additions resulting from acquisitions through business combinations (Note 31). Inter-segment transfers or transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties. Inter-segment transactions are not material. \*  EBITDA as defined in the Supplementary Information section on page 226. ![]() 176 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 4. Segment and Revenue Information continued | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | The | | | The | | | | Europe | Americas | Total | Europe | Americas | Total | | | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | | Revenue and results | €m | €m | €m | €m | €m | €m | | Revenue | 9,900 | 2,915 | 12,815 | 7,847 | 2,260 | 10,107 | | EBITDA | 1,846 | 553 | 2,399 | 1,302 | 441 | 1,743 | | Segment exceptional items | (58) | (14) | (72) | – | – | – | | EBITDA after exceptional items | 1,788 | 539 | 2,327 | 1,302 | 441 | 1,743 | | Unallocated centre costs | | | (44) | | | (41) | | Share-based payment expense | | | (65) | | | (69) | | Depreciation and depletion (net) | | | (579) | | | (520) | | Amortisation | | | (49) | | | (40) | | Impairment of non-current assets | | | (66) | | | – | | Impairment of goodwill | | | (85) | | | – | | Finance costs | | | (184) | | | (179) | | Finance income | | | 35 | | | 17 | | Share of associates’ profit (after tax) | | | 3 | | | 2 | | Profit before income tax | | | 1,293 | | | 913 | | Income tax expense | | | (348) | | | (234) | | Profit for the financial year | | | 945 | | | 679 | | Assets | | | | | | | | Segment assets | 8,933 | 2,735 | 11,668 | 8,521 | 2,349 | 10,870 | | Investment in associates | 1 | 15 | 16 | 1 | 12 | 13 | | Assets classified as held for sale | 35 | – | 35 | – | – | – | | Group centre assets | | | 763 | | | 824 | | Total assets | | | 12,482 | | | 11,707 | | Liabilities | | | | | | | | Segment liabilities | 3,174 | 805 | 3,979 | 3,186 | 714 | 3,900 | | Liabilities associated with assets classified as held for sale | 35 | – | 35 | – | – | – | | Group centre liabilities | | | 3,430 | | | 3,415 | | Total liabilities | | | 7,444 | | | 7, 315 | | Other segmental disclosures | | | | | | | | Segment capital expenditure: | | | | | | | | Segment expenditure | 656 | 434 | 1,090 | 864 | 265 | 1,129 | | Group centre expenditure | | | 1 | | | – | | Total expenditure | | | 1,091 | | | 1,129 | | Depreciation and depletion (net): | | | | | | | | Segment depreciation and depletion (net) | 437 | 141 | 578 | 406 | 113 | 519 | | Group centre depreciation and depletion (net) | | | 1 | | | 1 | | Total depreciation and depletion (net) | | | 579 | | | 520 | | Amortisation: | | | | | | | | Segment amortisation | 30 | 19 | 49 | 24 | 16 | 40 | | Total amortisation | | | 49 | | | 40 | | Other significant non-cash charges: | | | | | | | | Impairment of assets included in other operating expenses | 52 | 14 | 66 | – | – | – | | Impairment of goodwill included in other operating expenses | 18 | 67 | 85 | – | – | – | | Total other significant non-cash charges | | | 151 | | | – | \* \*  Depreciation and depletion is net of fair value adjustments arising on biological assets . ![]() 177Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 4. Segment and Revenue Information continued Information about Geographical Areas The Group has a presence in 36 countries worldwide. The following is a geographical analysis presented in accordance with IFRS 8, which requires disclosure of information about country of domicile (Ireland) and countries with material revenue and non-current assets. | | | | | | --- | --- | --- | --- | | | | Revenue | Revenue | | | | 2022 | 2021 | | | | €m | €m | | Ireland | | 118 | 109 | | Germany | | 1,861 | 1,403 | | France | | 1,521 | 1,094 | | Mexico | | 1,296 | 992 | | Other Europe | – eurozone | 3,787 | 3,071 | | Other Europe | – non-eurozone | 2,566 | 2,134 | | Other Americas | | 1,666 | 1,304 | | | | 12,815 | 10,107 | \* \* \* | | | | | | --- | --- | --- | --- | | | | Non-current | Non-current | | | | Assets | Assets | | | | 2022 | 2021 | | | | €m | €m | | Ireland | | 36 | 40 | | The Netherlands | | 594 | 617 | | France | | 552 | 538 | | Germany | | 532 | 489 | | Other Europe | – eurozone | 1,177 | 1,100 | | Other Europe | – non-eurozone | 1,092 | 1,073 | | Other Americas | | 1,326 | 1,081 | | | | 5,309 | 4,938 | \* \* \* \* No individual country represents greater than 10% of revenue or non-current assets. Revenue is derived almost entirely from the sale of goods and is disclosed based on the location of production. No one customer represents greater than 10% of Group revenues. Non-current assets include marketing and customer related intangible assets, software, investment in associates, biological assets, right-of-use assets and property, plant and equipment and are disclosed based on their location. While the Group does not allocate goodwill by geographic area, if it were to ascribe goodwill to Ireland we estimate the amount would be less than 3% (2021: less than 3%) of the total goodwill of the Group of €2,455 million (2021: €2,511 million). Disaggregation of Revenue The Group derives revenue from the following major product lines. The economic factors which affect the nature, amount, timing and uncertainty of revenue and cash flows from the sub categories of both paper and packaging products are similar. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | 2022 | | | 2021 | | | | Paper | Packaging | Total | Paper | Packaging | Total | | | €m | €m | €m | €m | €m | €m | | Revenue by product: | | | | | | | | Europe | 1,828 | 8,072 | 9,900 | 1,328 | 6,519 | 7,847 | | The Americas | 254 | 2,661 | 2,915 | 213 | 2,047 | 2,260 | | | 2,082 | 10,733 | 12,815 | 1,541 | 8,566 | 10,107 | Packaging revenue is derived mainly from the sale of corrugated products. The remainder of packaging revenue is comprised of bag-in-box and other paper-based packaging products. ![]() 178 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 5. Cost and Income Analysis | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Expenses by function: | | | | Cost of sales | 8,752 | 7,015 | | Distribution costs | 961 | 823 | | Administrative expenses | 1,440 | 1,196 | | Other operating expenses | 223 | – | | | 11,376 | 9,034 | | Expenses by nature: | | | | Raw materials and consumables | 4,564 | 3,756 | | Change in inventories | (101) | (103) | | Employee benefit expense excluding redundancy | 2,529 | 2,294 | | Energy | 1,249 | 657 | | Maintenance and repairs | 527 | 452 | | Transportation and storage costs | 966 | 829 | | Depreciation, amortisation and depletion | 628 | 560 | | Impairment of assets | 209 | – | | Reorganisation and restructuring costs | 22 | 2 | | Foreign exchange gains and losses | 7 | – | | Net remeasurement of loss allowance on trade receivables | 15 | (4) | | Other expenses | 761 | 591 | | Total | 11,376 | 9,034 | Included within the expenses by nature above are research and development expenses of €8 million (2021: €7 million). Research and development expenses are included within administrative expenses in the Consolidated Income Statement. | | | | | --- | --- | --- | | Directors’ remuneration is shown in the Remuneration Report and in Note 30. | 2022 | 2021 | | | €m | €m | | Exceptional items included in operating profit: | | | | Impairment of assets – Russian operations (including goodwill) | 128 | – | | Impairment of goodwill | 67 | – | | Redundancy and reorganisation costs | 14 | – | | Impairment of non-current assets | 14 | – | | | 223 | – | Exceptional items charged within operating profit in 2022 amounted to €223 million, of which €128 million related to the impairment of assets in our Russian operations, €56 million and €11 million respectively for the impairment of goodwill in Argentina and Peru, €14 million for redundancy and reorganisation costs in the Americas along with €14 million for the impairment of property, plant and equipment in our North American operations. There were no exceptional items within operating profit in 2021. Operations in Russia Following the announcement by the Group on 1 April 2022 to exit the Russian market in an orderly manner, the Group has entered into an agreement to sell its Russian operations to local management. At 31 December 2022 completion of the transaction was conditional on regulatory approval being obtained from the Russian authorities. After considering the status of the approval to dispose of its Russian operations including engagement with relevant authorities, the assets and associated liabilities have been presented as held for sale in the Consolidated Balance Sheet at 31 December 2022. The results of the operations in Russia, which represented less than 2% of any of the Group’s key performance indicators, have not been presented as a discontinued operation as they do not represent a separate major line of business or geographical location. In advance of classifying the Russian disposal group as held for sale, the recoverable value was reassessed based on the terms of the sales agreement entered into, applying the fair value less costs to sell method. This has been categorised as a Level 3 fair value. As a result the Group has recorded an exceptional impairment charge of €128 million in relation to its Russian operations. The Russian operations form part of the Europe segment. The Group has made a number of judgements in arriving at the exceptional charges recognised relating to its Russian operations. In determining the exceptional impairment charges the Group had regard to; the continuing war in Ukraine and the significant sanctions regime in place which is expected to continue for some time. Judgements taken, which are not deemed significant judgements in the context of the scale of the Group, will be reassessed on an ongoing basis in light of restrictions in place at reporting dates as required. The major classes of assets and liabilities reclassified as held for sale at 31 December 2022 comprise trade receivables of €26 million and trade and other payables of €30 million (2021: nil). ![]() 179Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 5. Cost and Income Analysis continued Auditors’ Remuneration | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | | Other KPMG | | | Other KPMG | | | | KPMG | Network | | KPMG | Network | | | | Ireland | Firms | Total | Ireland | Firms | Total | | | 2022 | 2022 | 2022 | 2021 | 2021 | 2021 | | | €m | €m | €m | €m | €m | €m | | Audit of entity financial statements | 3.1 | 7. 3 | 10.4 | 2.8 | 6.5 | 9.3 | | Other assurance services | – | 0.2 | 0.2 | – | 0.1 | 0.1 | | Other non-audit services | – | 0.3 | 0.3 | 0.1 | 0.2 | 0.3 | | | 3.1 | 7. 8 | 10.9 | 2.9 | 6.8 | 9.7 | The audit fee for the Parent Company was €55,000 which is payable to KPMG, the Statutory Auditor (2021: €50,000).  | | | | | --- | --- | --- | | 6. Employee Benefit Expense | 2022 | 2021 | | | Number | Number | | Average number of persons employed by the Group by geographical area (full time equivalents): | | | | Europe | 30,792 | 30,405 | | The Americas | 17,832 | 17,348 | | | 48,624 | 47,753 | | | | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | | Note | €m | €m | | The employee benefit expense comprises: | | | | | Wages and salaries | | 1,978 | 1,784 | | Social insurance costs | | 380 | 346 | | Share-based payment expense | | 65 | 69 | | Defined benefit pension expense | 25 | 35 | 29 | | Defined contribution pension plan expense | 25 | 71 | 66 | | Reorganisation and restructuring costs | | 8 | 2 | | Charged to operating profit – pre-exceptional | | 2,537 | 2,296 | | Exceptional – reorganisation and restructuring | | 12 | – | | Finance costs | 25 | 8 | 7 | | Actuarial gain on pension schemes recognised in other comprehensive income | 25 | (51) | (177) | | Total employee benefit expense | | 2,506 | 2,126 | \* \*  These non-exceptional expenses arise in respect of individually immaterial restructurings across the Group . 7. Finance Costs and Income | | | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | | Note | €m | €m | | Finance costs: | | | | | Interest payable on bank loans and overdrafts | | 49 | 25 | | Interest payable on leases | | 10 | 10 | | Interest payable on other borrowings | | 91 | 86 | | Exceptional finance costs associated with debt restructuring | | – | 31 | | Foreign currency translation loss on debt | | 24 | 15 | | Fair value loss on derivatives not designated as hedges | | – | 2 | | Fair value loss on financial assets | | 2 | – | | Interest cost on net pension liability | 25 | 8 | 7 | | Net monetary loss – hyperinflation | | – | 3 | | Total finance costs | | 184 | 179 | | Finance income: | | | | | Other interest receivable | | (9) | (3) | | Foreign currency translation gain on debt | | (13) | (12) | | Fair value gain on derivatives not designated as hedges | | (4) | – | | Fair value gain on financial assets/liabilities | | – | (2) | | Net monetary gain – hyperinflation | | (9) | – | | Total finance income | | (35) | (17) | | Net finance costs | | 149 | 162 | ![]() 180 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 7. Finance Costs and Income continued Exceptional finance costs of €31 million in 2021 represented a redemption premium of €28 million together with the related accelerated write-off of unamortised debt issue costs of €3 million due to the early redemption of bonds. There were no exceptional finance items in 2022. 8. Income Tax Expense Income tax expense recognised in the Consolidated Income Statement | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Current tax: | | | | Europe | 249 | 189 | | The Americas | 100 | 76 | | | 349 | 265 | | Deferred tax | (1) | (31) | | Income tax expense | 348 | 234 | | Current tax is analysed as follows: | | | | Ireland | 31 | 28 | | Foreign | 318 | 237 | | | 349 | 265 | The income tax expense for the financial year 2022 is €114 million higher than in the comparable period in 2021, primarily due to higher profitability. There is a €30 million reduction in the deferred tax credit compared to the prior year. The movement is largely due to the reversal of timing differences on which deferred tax was previously recognised, offset by the recognition of other tax benefits and credits. In 2022, there is a tax credit of €20 million on exceptional items compared to a €4 million tax credit in the prior year. Reconciliation of the Effective Tax Rate The following table reconciles the applicable Republic of Ireland statutory tax rate to the effective tax rate (current and deferred) of the Group: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Profit before income tax | 1,293 | 913 | | Profit before income tax multiplied by the standard rate of tax of 12.5% (2021: 12.5%) | 162 | 114 | | Effects of: | | | | Income subject to different rates of tax | 179 | 130 | | Other items | 2 | (4) | | Adjustment to prior period tax | 7 | (1) | | Effect of previously unrecognised losses | (2) | (5) | | | 348 | 234 | Income Tax Recognised Within Equity | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Recognised in the Consolidated Statement of Comprehensive Income: | | | | Arising on defined benefit pension plans | 8 | 32 | | Total recognised in the Consolidated Statement of Comprehensive Income | 8 | 32 | | Arising on hyperinflation | 7 | 2 | | Total recognised within equity | 15 | 34 | ![]() 181Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 8. Income Tax Expense continued Factors That May Affect the Future Tax Expense and Other Disclosure Requirements Unremitted Earnings in Subsidiaries and Associates The Group has not made provision for deferred tax in relation to temporary differences applicable to investments in subsidiaries on the basis that the Group can control both the timing of and which temporary timing differences will reverse. The Group is not obliged to remit earnings from subsidiaries. It is probable that the Group would only remit earnings which can benefit from the availability of a participation tax exemption or sufficient tax credits (actual or deemed) to ensure there is no additional tax due. The aggregate amount of this temporary difference is approximately €2,680 million (2021: €2,179 million). Due to the absence of control in the context of associates (significant influence by definition) deferred tax liabilities are recognised where necessary in respect of the Group’s investment in these entities. Other The total tax expense in future periods will be affected by changes to the corporation tax rates in force and legislative changes that broaden the tax base or introduce minimum and top-up taxes in the countries in which the Group operates. The tax expense may also be impacted by changes in the geographical mix of earnings. The current tax expense may also be impacted, inter alia, by changes in the excess of tax depreciation (capital allowances) over accounting depreciation, the use of tax credits and the crystallisation of unrecognised deferred tax assets. There are no income tax consequences for the Company in respect of dividends which were proposed prior to the issuance of the Consolidated Financial Statements for which a liability has not been recognised. 9. Earnings per Share (‘EPS’) Basic Basic EPS is calculated by dividing the profit attributable to owners of the parent by the weighted average number of ordinary shares in issue during the year less own shares. | | | | | --- | --- | --- | | | 2022 | 2021 | | Profit attributable to owners of the parent (€ million) | 944 | 679 | | Weighted average number of ordinary shares in issue (million) | 258 | 257 | | Basic EPS (cent) | 365.3 | 263.9 | Diluted Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. These comprise deferred and performance shares issued under the Group’s long-term incentive plans. Details of these plans are set out in Note 26. Where the conditions governing exercisability and vesting of these shares have been satisfied as at the end of the reporting period, they are included in the computation of diluted earnings per ordinary share. | | | | | --- | --- | --- | | | 2022 | 2021 | | Profit attributable to owners of the parent (€ million) | 944 | 679 | | Weighted average number of ordinary shares in issue (million) | 258 | 257 | | Potential dilutive ordinary shares assumed (million) | 3 | 3 | | Diluted weighted average ordinary shares (million) | 261 | 260 | | Diluted EPS (cent) | 361.8 | 261.1 | Pre-exceptional | | | | | --- | --- | --- | | | 2022 | 2021 | | Profit attributable to owners of the parent (€ million) | 944 | 679 | | Exceptional items included in profit before income tax (€ million) | 223 | 31 | | Income tax on exceptional items (€ million) | (20) | (4) | | Pre-exceptional profit attributable to owners of the parent (€ million) | 1,147 | 706 | | Weighted average number of ordinary shares in issue (million) | 258 | 257 | | Pre-exceptional basic EPS (cent) | 444.1 | 274.5 | | Diluted weighted average ordinary shares (million) | 261 | 260 | | Pre-exceptional diluted EPS (cent) | 439.8 | 271.6 | ![]() 182 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 10. Dividends The following dividends were declared and paid by the Group: 2022 €m 2021 €m | | | | | --- | --- | --- | | Final: paid 96.1 cent per ordinary share on 6 May 2022 (2021: paid 87.4 cent per ordinary share on 7 May 2021) | 250 | 226 | | Interim: paid 31.6 cent per ordinary share on 28 October 20  : paid 29.3 cent per ordinary share on 22 Octob K | 82 | 76 | | | 332 | 302 | The Board is recommending a final dividend of 107.6 cent per share (approximately €280 million). It is proposed to pay this dividend on 12 May 2023 to all ordinary shareholders on the share register at the close of business on 14 April 2023, subject to the approval of the shareholders at the 2023 AGM. 11. Property, Plant and Equipment | | | | | | --- | --- | --- | --- | | | Land and | Plant and | | | | Buildings | Equipment | Total | | | €m | €m | €m | | Financial year ended 31 December 2021 | | | | | Opening net book amount | 1,090 | 2,749 | 3,839 | | Reclassifications | 63 | (64) | (1) | | Additions | 1 | 570 | 571 | | Acquisitions | 73 | 186 | 259 | | Depreciation charge | (56) | (369) | (425) | | Retirements and disposals | (9) | (17) | (26) | | Hyperinflation adjustment | 4 | 10 | 14 | | Foreign currency translation adjustment | 9 | 25 | 34 | | At 31 December 2021 | 1,175 | 3,090 | 4,265 | | | | | | | --- | --- | --- | --- | | At 31 December 2021 | | | | | Cost or deemed cost | 2,089 | 7,667 | 9,756 | | Accumulated depreciation and impairment losses | (914) | (4,557) | (5,491) | | Net book amount | 1,175 | 3,090 | 4,265 | | Financial year ended 31 December 2022 | | | | | Opening net book amount | 1,175 | 3,090 | 4,265 | | Reclassifications | 115 | (112) | 3 | | Additions | 21 | 817 | 838 | | Acquisitions | 43 | 15 | 58 | | Depreciation charge | (62) | (421) | (483) | | Impairments | (25) | (37) | (62) | | Retirements and disposals | (1) | (2) | (3) | | Hyperinflation adjustment | 8 | 36 | 44 | | Foreign currency translation adjustment | (5) | (24) | (29) | | At 31 December 2022 | 1,269 | 3,362 | 4,631 | | At 31 December 2022 | | | | | Cost or deemed cost | 2,227 | 8,173 | 10,400 | | Accumulated depreciation and impairment losses | (958) | (4,811) | (5,769) | | Net book amount | 1,269 | 3,362 | 4,631 | Land and Buildings Included in land and buildings is an amount for land of €423 million (2021: €387 million). Construction in Progress Included in land and buildings and plant and equipment are amounts of €105 million (2021: €72 million) and €500 million (2021: €350 million) respectively, for construction in progress. Assets Pledged as Security Assets with a carrying value of €11 million (2021: €12 million) are pledged as security for loans held by the Group. ![]() 183Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 11. Property, Plant and Equipment continued Capital Commitments The following capital commitments in relation to property, plant and equipment were authorised by the Directors, but have not been provided for in the Consolidated Financial Statements: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Contracted for | 573 | 498 | | Not contracted for | 579 | 649 | | | 1,152 | 1,147 | The Group’s sustainability targets outlined in the Strategic Report in relation to climate change, forest, water and waste have been considered in relation to its capital commitments. In October 2022, the Group announced a US$100 million investment in a sustainable biomass boiler at its paper mill in Cali, Colombia, which will reduce its global Scope 1 and Scope 2 CO 2  emissions by approximately 6% and is a further step in the Group’s target of a 55% reduction in fossil fuel emissions intensity by 2030. This investment and other material capital expenditure, not yet capitalised, which will enable the Group to make progress towards its sustainability targets have been authorised by the Directors and are included in the table above. Impairments Impairment tests for items of property, plant and equipment are performed on a cash-generating unit basis when impairment triggers arise. The recoverable amounts of property, plant and equipment are based on the higher of fair value less costs to sell and value-in-use. Value-in-use calculations are based on cash flow projections and discount rates for items of property, plant and equipment. Impairment charges are recognised within other operating expenses in the Consolidated Income Statement. In 2022, the Group recorded an impairment charge of €62 million in relation to our Russian operations and two corrugated plants in our North American operations. The Group considered the impact of climate-related risks when assessing property, plant and equipment for indicators of impairment. The impairment indicators considered related to, amongst others, the risk of obsolescence of certain property, plant and equipment due to future capital expenditure to meet our climate targets, an increased cost of repurposing certain assets and additional repairs and maintenance to mitigate the physical risks in relation to the location of certain assets. There were no impairment triggers identified in relation to climate-related risks in the year. Capitalised Borrowing Costs In 2022, the Group capitalised borrowing costs of €3 million (2021: €2 million) on qualifying assets. Borrowing costs were capitalised at an average rate of 2.8% (2021: 3.0%). 12. Right-of-use Assets/Lease Obligations Amounts Recognised in the Consolidated Balance Sheet | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Right-of-use assets: | | | | Land and buildings | 228 | 235 | | Vehicles | 64 | 65 | | Plant and equipment | 53 | 46 | | | 345 | 346 | Additions to right-of-use assets during 2022 were €108 million (2021: €98 million), of which €4 million (2021: €6 million) related to acquired right-of-use assets. The Group presents lease liabilities in borrowings in the Consolidated Balance Sheet. The amounts included within borrowings are as follows: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Lease liabilities: | | | | Current | 93 | 91 | | Non-current | 281 | 289 | | | 374 | 380 | ![]() 184 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 12. Right-of-use Assets/Lease Obligations continued Amounts Recognised in the Consolidated Income Statement The Consolidated Income Statement includes the following amounts relating to leases: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Depreciation charge of right-of-use assets: | | | | Land and buildings | 53 | 46 | | Vehicles | 31 | 31 | | Plant and equipment | 14 | 11 | | | 98 | 88 | | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Interest expense on lease liabilities | 10 | 10 | | Expenses relating to short-term leases | 20 | 14 | | Expenses relating to leases of low-value assets | 9 | 7 | | Expenses relating to variable lease payments not included in the lease liabilities | 8 | 7 | Lease commitments for short-term leases are similar to the portfolio of short-term leases for which the costs were expensed to the Consolidated Income Statement. Amounts Recognised in the Consolidated Statement of Cash Flows | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Total cash outflow for leases | 150 | 126 | Leasing Activities The Group enters into leases for a range of assets, principally relating to property. These property leases, which consist of office buildings, warehouses and manufacturing facilities, have varying terms, renewal rights, including periodic rent reviews linked with indices. The Group also leases vehicles which include motor vehicles for management and sales functions and trucks for distribution. The effect of excluding future cash outflows arising from variable lease payments, termination options, residual value guarantees, and leases not yet commenced from lease liabilities was not material for the Group. Income from subleasing and gains/losses on sale and leaseback transactions were not material for the Group. The terms and conditions of these leases do not impose significant financial restrictions on the Group. Extension and Termination Options Extension and termination options are included in a number of property, equipment and vehicle leases throughout the Group. They are used to maximise operational flexibility in terms of managing the assets used in the Group’s operations. In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). In determining whether or not a renewal or termination option will be taken, the following factors are normally the most relevant: • If there are significant penalties to terminate (or not to extend), the Group is typically reasonably certain to extend (or not terminate). • If leasehold improvements are expected to have a significant remaining value, when the option becomes exercisable, the Group is typically reasonably certain to extend (or not to terminate). • Strategic importance of the asset to the Group. • Climate-related considerations. • Past practice. • Costs and business disruption to replace the asset. The lease term is reassessed if an option is actually exercised (or not exercised) and this decision has not already been reflected in the lease term as part of a previous determination. The assessment of reasonable certainty is revised only if a significant change in circumstances occurs, which affects this assessment, and this is within the control of the lessee. Impairments Impairment tests for right-of-use assets are performed on a cash-generating unit basis when impairment triggers arise. The recoverable amounts of right-of-use assets are based on the higher of fair value less costs to sell and value-in-use. Value-in-use calculations are based on cash flow projections and discount rates for right-of-use assets. The Group considered the impact of climate-related risks when assessing right-of-use assets for indicators of impairment. There were no impairment triggers identified in relation to climate change-related risks. In 2022, the Group recorded an impairment charge of €4 million in relation to two corrugated plants in our North American operations (2021: nil). ![]() 185Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 13. Goodwill and Intangible Assets | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | Intangible Assets | | | | | | Marketing | Customer | Software | | | | Goodwill | Related | Related | Assets | Total | | | €m | €m | €m | €m | €m | | Financial year ended 31 December 2021 | | | | | | | Opening net book amount | 2,344 | 4 | 136 | 68 | 2,552 | | Additions | – | – | – | 21 | 21 | | Acquisitions | 152 | 8 | 11 | – | 171 | | Amortisation charge | – | (2) | (23) | (15) | (40) | | Disposals | (14) | – | – | – | (14) | | Hyperinflation adjustment | 13 | – | – | – | 13 | | Foreign currency translation adjustment | 16 | – | 2 | 1 | 19 | | At 31 December 2021 | 2,511 | 10 | 126 | 75 | 2,722 | | | | | | | | | --- | --- | --- | --- | --- | --- | | At 31 December 2021 | | | | | | | Cost or deemed cost | 2,734 | 26 | 308 | 241 | 3,309 | | Accumulated amortisation and impairment losses | (223) | (16) | (182) | (166) | (587) | | Net book amount | 2,511 | 10 | 126 | 75 | 2,722 | | Financial year ended 31 December 2022 | | | | | | | Opening net book amount | 2,511 | 10 | 126 | 75 | 2,722 | | Additions | – | – | – | 17 | 17 | | Acquisitions | 22 | (1) | 38 | – | 59 | | Amortisation charge | – | (1) | (28) | (20) | (49) | | Impairments | (85) | – | – | – | (85) | | Reclassifications | – | – | – | (1) | (1) | | Hyperinflation adjustment | 26 | – | – | – | 26 | | Foreign currency translation adjustment | (19) | – | – | 2 | (17) | | At 31 December 2022 | 2,455 | 8 | 136 | 73 | 2,672 | | At 31 December 2022 | | | | | | | Cost or deemed cost | 2,749 | 26 | 353 | 254 | 3,382 | | Accumulated amortisation and impairment losses | (294) | (18) | (217) | (181) | (710) | | Net book amount | 2,455 | 8 | 136 | 73 | 2,672 | The useful lives of intangible assets other than goodwill are finite and range from two to twenty years. Amortisation is recognised as an expense  within cost of sales and administrative expenses in the Consolidated Income Statement. Marketing related intangible assets relate mainly to trade names and non-compete agreements which arise from business combinations and are  amortised over their estimated useful lives of two to ten years. Customer related intangible assets relate mainly to acquisitions and to customer relationships which arise from business combinations. They are amortised over their estimated useful lives of three to twenty years with a weighted average useful life of 12 years. Software assets relate to computer software, other than software for items of machinery that cannot operate without it; such software is regarded as an integral part of the related hardware and is classified as property, plant and equipment. Computer software assets have estimated useful lives of three to eight years for amortisation purposes. In 2022, goodwill of €58 million arose on the acquisitions of Argencraft, Atlas Packaging, PaperBox and Pusa Pack. Further information on these acquisitions is included in Note 31. During 2022, the Group made an amendment to the fair values assigned to Verzuolo and Cartonbox acquisitions  which were acquired in 2021, resulting in a decrease in goodwill of €35 million and €1 million respectively. In 2022, customer related intangible assets of €15 million arose on the acquisitions of Argencraft and Atlas Packaging. The fair values assigned to customer related intangible assets increased by €21 million and €2 million in Verzuolo and Cartonbox respectively. In addition, there was a €1 million decrease in the fair value of marketing related intangible assets in Cartonbox. In 2021, goodwill of €119 million arose on the acquisition of Verzuolo, a containerboard mill in Northern Italy. Goodwill of €24 million and intangible assets of €12 million arose on the acquisition of Cartonbox, a folding carton company in Mexico. Goodwill of €9 million and intangible  assets of €7 million arose on the acquisition of Cartones del Pacifico, a paper-based packaging company in Peru. Impairment Testing of Intangible Assets The Group assesses whether there is an indication that an intangible asset may be impaired. In 2022, such an assessment did not give rise to an impairment charge (2021: nil). ![]() 186 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 13. Goodwill and Intangible Assets continued Impairment Testing of Goodwill Goodwill arising as part of a business combination is allocated to groups of cash-generating units (‘CGUs’) for the purpose of impairment testing based on the Group’s existing business segments or, where appropriate, by recognition of a new CGU. The CGU groups represent the lowest level at which goodwill is monitored for internal management purposes and are not larger than the operating segments determined in accordance with IFRS 8, Operating Segments. A total of 16 groups (2021: 16) of CGUs have been identified and these are analysed between the two operating segments as follows: | | | | | --- | --- | --- | | | 2022 | 2021 | | | Number | Number | | Eurozone | 5 | 5 | | Eastern Europe | 1 | 1 | | Scandinavia | 1 | 1 | | United Kingdom | 1 | 1 | | Bag-in-box | 1 | 1 | | Europe | 9 | 9 | | The Americas | 7 | 7 | | | 16 | 16 | A summary of the allocation of the carrying value of goodwill by operating segment is as follows: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Europe | 2,112 | 2,170 | | The Americas | 343 | 341 | | | 2,455 | 2,511 | An impairment charge of €85 million arose in 2022 in relation to Argentina, Peru and Russia, and was recognised in other operating expenses. Management reassessed the expected future business performance in Argentina and Peru as a result of the continuing difficult economic conditions and consequently the projected cashflows are lower, giving rise to an impairment charge of €56 million and €11 million in Argentina and Peru respectively. Goodwill in Russia was impaired by €18 million as part of the impairment of assets in our Russian operations. The goodwill relating to our operations in Argentina pre-impairment represented 2% of the Group’s total goodwill, and less than 1% in both Peru and Russia. No impairment arose in 2021 in any CGU as the recoverable amount of the groups of CGUs, based on value-in-use and estimated using the methodology outlined below, exceeded the carrying amount. Impairment Testing Methodology and Results The recoverable amount of each CGU is based on a value-in-use calculation. The cash flow forecasts for the purposes of these calculations are based on a nine-year plan approved by senior management. The potential impact of climate change, which is a principal risk in the long-term for the Group, was also considered when preparing cash flow forecasts for each CGU, with none of the CGUs determined to be at risk of being significantly impacted in the forecast period. As a result, no adjustments were applied to the assumptions to specifically incorporate the effect of climate-related risks. Cash flow forecasts use growth factors consistent with historical growth rates as adjusted for the cyclical nature of the business and are validated by reference to external data where available. The terminal value is estimated by applying an appropriate earnings multiple to the average cash flows for years one to nine. The Group believes a nine-year forecast is appropriate to use for the impairment test, due to the cyclical nature of the business in which the Group operates and the long-term lives of its assets. Forecasts are derived from a combination of internal and external factors based on historical experience and take into account the cyclicality of cash flows typically associated with these groups of CGUs. Forecasts also consider management’s expectation of current and future trends, such as energy price inflation, which affect the Group. The cash flows, including terminal value estimations, are discounted using appropriate pre-tax discount rates. Key assumptions include management’s estimates of future profitability, replacement capital expenditure requirements, trade working capital investment needs and discount rates. Key assumptions in determining terminal value include earnings multiples. Of the goodwill allocated to each of the 16 groups of CGUs, three units individually account for between 10% and 20% of the total carrying amount of €2,455 million and are summarised in the table below. All other units account individually for less than 10% of the total carrying amount and are not regarded as individually significant. The additional disclosures required under IAS 36, Impairment of Assets in relation to significant goodwill amounts arising in each of the three groups of CGUs are as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Europe | | Europe | | | Europe | | | France | | Benelux | | | Germany, Austria and Switzerland | | | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | | Carrying amount of goodwill (€ million) | 307 | 307 | 408 | 408 | 427 | 427 | | Basis of recoverable amount | Value-in-use | Value-in-use | Value-in-use | Value-in-use | Value-in-use | Value-in-use | | Discount rate applied (pre-tax) | 9.5% | 9.6% | 9.6% | 9.3% | 9.9% | 9.9% | | Earnings multiple used for terminal value | 7.1 | 7.1 | 7.1 | 7.1 | 7.1 | 7.1 | | Excess of value-in-use (€ million) | 661 | 562 | 500 | 192 | 621 | 736 | ![]() 187Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 13. Goodwill and Intangible Assets continued #### Impairment Testing Methodology and Results continued The key assumptions used for these three CGUs are consistent with those addressed on the previous page. The values applied to each of the key assumptions are derived from a combination of internal and external factors based on historical experience and take into account the cyclicality of cash flows typically associated with these groups of CGUs. Sensitivity analysis was performed by adjusting the key assumptions used to determine terminal value. For all CGUs, other than Argentina and Chile and Peru, any reasonable possible movement in the assumptions used in the impairment test would not result in an impairment. Following the impairment charges booked in 2022 for goodwill in Argentina and Chile and Peru, the goodwill relating to these CGUs represents 0% of the Group’s total goodwill. 14. Financial Assets | | | | | | --- | --- | --- | --- | | Other Investments – Group | | 2022 | 2021 | | | | €m | €m | | Listed | and unlisted debt instruments – FVPL | 10 | 11 | | At 31 December | | 10 | 11 | \* \*  Listed on a recognised stock exchange. Listed and Unlisted Debt Instruments The Group designates listed and unlisted debt instruments as FVPL as they do not qualify for measurement at either amortised cost or FVOCI based on the business model. In 2022, fair value losses of €2 million (2021: nil) on debt instruments were recognised in finance costs. Information about the Group’s fair value measurement of its investments is included in Note 29. Investment in Subsidiaries – Company | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | At 1 January | 2,915 | 2,872 | | Investment in the year | 40 | 43 | | At 31 December | 2,955 | 2,915 | 15. Investment in Associates | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | At 1 January | 13 | 12 | | Share of profit for the year | 3 | 2 | | Dividends received from associates | (1) | (1) | | Foreign currency translation adjustment | 1 | – | | At 31 December | 16 | 13 | 16. Biological Assets | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | At 1 January | 113 | 118 | | Increases due to new plantations | 11 | 9 | | Harvested timber transferred to inventories | (11) | (10) | | Change in fair value less estimated costs to sell | 13 | 3 | | Foreign currency translation adjustment | (16) | (7) | | At 31 December | 110 | 113 | | Current | 10 | 10 | | Non-current | 100 | 103 | | At 31 December | 110 | 113 | | Approximate harvest by volume (tonnes ‘000) | 898 | 640 | ![]() 188 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 16. Biological Assets continued At 31 December 2022, the Group’s biological assets consist of 68,000 (2021: 68,000) hectares of forest plantations which are held for the production of paper and packaging products or sale to third parties. In Colombia, the plantations provide the Group’s mills with a significant proportion of their total wood fibre needs. Measurement of Fair Values Fair Value Hierarchy The Group’s biological assets are measured at fair value and have been categorised within level 2 of the fair value hierarchy. There were no transfers between any levels during the year. Valuation Techniques The Group’s biological assets comprise two species of forest plantations, pine and eucalyptus which are categorised as young or adult plantations for the purpose of determining the measurement of fair value. The age threshold for young pine plantations is 96 months and for young eucalyptus plantations is 48 months. As young plantations are not available to sell or harvest, the cost approach is used to measure their fair value. The cost approach is based on the annually published index by the Colombian government which details the cost of establishing and maintaining a hectare for each species across various age brackets. The number of hectares planted is recorded in the Group’s Forestry Information System. The value of young plantations at 31 December 2022 was €11 million (2021: €11 million). The fair value of adult plantations is calculated using third party market prices in active markets adjusted for estimated costs to sell with eucalyptus based on the 12-month moving average of third party purchases and pine based on third party selling prices. Volumes are determined using an internally developed statistical model which contains data from the last 25 years. The statistical model applies growing equations using historical yields to provide an approximation of the yield of a particular plantation area at a point in time, based on a number of factors including the particular species of the tree, age and location of the plantation. The parameters used in the model are subject to continual refinement based on periodic measurements of a sample of growing trees and actual yields. Pine trees are further classified by use, as either pulpwood or timber wood based upon historical experience. This classification determines the market price used in the fair value measurement of the pine plantations. There has been no change in the proportion of pine trees classified as timber wood in 2021 or 2022. Risk Management Strategy The Group is exposed to a number of risks related to its plantations: Regulatory and Environmental Risks The Group is subject to laws and regulations in various countries in which it operates. The Group has established environmental policies and procedures aimed at ensuring compliance with local environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks. Supply and Demand Risk The Group is exposed to risks arising from market fluctuations in the price and sales volume of similar wood. Where possible the Group manages this risk by aligning its harvest volume to demand for its manufactured products. Management performs regular industry trend analysis to ensure that the Group’s pricing structure is in line with the market and to ensure that projected harvest volumes are consistent with the expected demand. Climate and Other Risks The Group’s forests are exposed to the risk of damage from climatic changes, diseases, fires and other natural forces. Changes in global climate conditions could intensify one or more of these events. Periods of drought and associated high temperatures may increase the risk of forest fires and insect outbreaks. In addition to their effects on forest yields, extreme weather events may also increase the cost of operations. The Group has extensive processes in place aimed at monitoring and mitigating these risks through proactive management and early detection, including regular forest health inspections and industry pest and disease surveys. 17. Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where they relate to income taxes levied by the same tax authority on either a taxable entity or different taxable entities where their intention is to settle the balances on a net basis. This is set out below: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Deferred tax assets | 388 | 394 | | Deferred tax assets/liabilities available for offset | (247) | (245) | | | 141 | 149 | | Deferred tax liabilities | 437 | 420 | | Deferred tax assets/liabilities available for offset | (247) | (245) | | | 190 | 175 | ![]() 189Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 17. Deferred Tax Assets and Liabilities continued Deferred tax assets have been recognised in respect of deductible temporary differences to the extent that it is probable that taxable profit will be available against which the deductible temporary difference can be utilised. Deferred tax assets have been recognised in respect of tax losses available for carry forward when the Group considers it is probable that future taxable profit will be available against which the unused tax losses can be utilised. Where the Group considers that the recovery of such losses is not probable no asset is recognised. The Group considered the impact of climate-related risks to future cashflows and profitability not to be significant. Consequently, it does not expect a material impact on the recoverability of deferred tax assets. | | | | | | --- | --- | --- | --- | | The movement in net deferred tax balances during the year was as follows: | | 2022 | 2021 | | | Note | €m | €m | | At 1 January | | (26) | (19) | | Movement recognised in the Consolidated Income Statement | 8 | 1 | 31 | | Movement recognised in the Consolidated Statement of Comprehensive Income | | (15) | (38) | | Acquisitions and disposals | | (23) | (5) | | Reclassifications | | 2 | 2 | | Assets held for sale | | 4 | – | | Hyperinflation adjustment – recognised in equity | 8 | (7) | (2) | | Foreign currency translation adjustment | | 15 | 5 | | At 31 December | | (49) | (26) | The movements in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same jurisdiction, were as follows: Balance at 31 December | | | | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | Recognised | | | | | | | | | | | | Recognised | in the | | | | | | | | | | | Net | in the | Consolidated | | | Foreign | | | | | | | | balance | Consolidated | Statement of | | Acquisitions | currency | | Assets | | | Deferred | | | at | Income | Comprehensive | | and | translation | | held for | | Deferred | tax | | | 1 January | Statement | Income | Reclassifications | disposals | adjustment | Hyperinflation | sale | Net | tax assets | liabilities | | | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | €m | | Retirement benefit | | | | | | | | | | | | | obligations | 106 | (11) | (38) | – | – | 1 | – | – | 58 | 58 | – | | Tax losses | 83 | (12) | – | – | – | 1 | – | – | 72 | 72 | – | | Derivative fair values | 1 | – | – | – | – | – | – | – | 1 | 1 | – | | Accelerated tax | | | | | | | | | | | | | depreciation | (338) | 15 | – | 18 | (2) | 1 | (1) | – | (307) | – | (307) | | Intangible assets fair values | (9) | – | – | (18) | (3) | – | – | – | (30) | – | (30) | | Biological assets fair values | (3) | (1) | – | – | – | – | – | – | (4) | – | (4) | | Other | 141 | 40 | – | 2 | – | 2 | (1) | – | 184 | 263 | (79) | | At 31 December 2021 | (19) | 31 | (38) | 2 | (5) | 5 | (2) | – | (26) | 394 | (420) | | Retirement benefit | | | | | | | | | | | | | obligations | 58 | (5) | (15) | 36 | – | (1) | – | – | 73 | 76 | (3) | | Tax losses | 72 | (25) | – | – | – | – | – | – | 47 | 47 | – | | Derivative fair values | 1 | 1 | – | (2) | – | – | – | – | – | 2 | (2) | | Accelerated tax | | | | | | | | | | | | | depreciation | (307) | (9) | – | 44 | (14) | 1 | (3) | 4 | (284) | 44 | (328) | | Intangible assets fair values | (30) | – | – | – | (9) | 3 | – | – | (36) | – | (36) | | Biological assets fair values | (4) | 1 | – | – | – | – | – | – | (3) | – | (3) | | Other: | | | | | | | | | | | | | Lease liabilities | 46 | (3) | – | – | – | – | – | – | 43 | 43 | – | | Working capital | 73 | 8 | – | – | – | – | – | – | 81 | 94 | (13) | | Other intangibles | (5) | 41 | – | – | – | – | – | – | 36 | 45 | (9) | | Provisions | 17 | (40) | – | – | – | – | – | – | (23) | 8 | (31) | | Other | 53 | 32 | – | (76) | – | 12 | (4) | – | 17 | 29 | (12) | | At 31 December 2022 | (26) | 1 | (15) | 2 | (23) | 15 | (7) | 4 | (49) | 388 | (437) | ![]() 190 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 17. Deferred Tax Assets and Liabilities continued Deferred tax assets have not been recognised in respect of the following (tax effects): | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Tax losses | 11 | 14 | | Deferred finance costs | 7 | – | | | 18 | 14 | No deferred tax asset is recognised in respect of the above assets on the grounds that there is insufficient evidence that the assets will be recoverable. In the event that sufficient profits are generated in the relevant jurisdictions in the future these assets may be recovered. No deferred tax assets have been recognised in respect of gross tax losses amounting to €45 million (2021: €57 million) that can be carried forward against future taxable income. The expiry dates in respect of these losses are as follows: | | | | --- | --- | | | Tax Losses | | | 2022 | | Expiry dates | €m | | 1 January 2023 to 31 December 2023 | 3 | | 1 January 2024 to 31 December 2024 | – | | 1 January 2025 to 31 December 2025 | – | | 1 January 2026 to 31 December 2026 | 1 | | Greater than 4 years | 2 | | Indefinite | 39 | | | 45 | 18. Inventories | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Raw materials | 383 | 301 | | Work in progress | 57 | 47 | | Finished goods | 549 | 471 | | Consumables and spare parts | 242 | 227 | | | 1,231 | 1,046 | 19. Trade and Other Receivables | | | | | | | --- | --- | --- | --- | --- | | | Group | Group | Company | Company | | | 2022 | 2021 | 2022 | 2021 | | | €m | €m | €m | €m | | Amounts falling due within one financial year: | | | | | | Trade receivables | 1,960 | 1,830 | – | – | | Less: loss allowance | (52) | (44) | – | – | | Trade receivables – net | 1,908 | 1,786 | – | – | | Amounts receivable from associates | 1 | 2 | – | – | | Other receivables | 366 | 248 | – | – | | Prepayments | 124 | 101 | – | – | | Amounts due from Group companies | – | – | 474 | 233 | | Amounts falling due after more than one financial year: | 2,399 | 2,137 | 474 | 233 | | Other receivables | 39 | 26 | – | – | | | 2,438 | 2,163 | 474 | 233 | The carrying amount of trade and other receivables equate to their fair values due to their short-term maturities. The Group has securitised €891 million (2021: €765 million) of its trade receivables. The securitised receivables have not been derecognised as the Group remains exposed to certain related credit risk. As a result, both the underlying trade receivables and the associated borrowings are shown in the Consolidated Balance Sheet. Amounts due from Group companies are unsecured and repayable on demand. There were no past due or impaired receivables from Group companies at 31 December 2022 (2021: nil) and any expected credit loss is not material. ![]() 191Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 19. Trade and Other Receivables continued Impairment Losses The movement in the allowance for impairment in respect of trade receivables was as follows; | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | At 1 January | 44 | 53 | | Net remeasurement of loss allowance | 15 | (4) | | Trade receivables written off as uncollectable | (7) | (5) | | At 31 December | 52 | 44 | Trade debtors arise from a wide and varied customer base spread throughout the Group’s operations and as such there is no significant concentration of credit risk. Credit evaluations are performed on all customers over certain thresholds and all customers are subject to continued monitoring at operating company level. Credit limits are reviewed on a regular basis. Many of the Group’s customers have been transacting with the Group over an extended period and the incidence of bad debts has been low. The Group applies the simplified approach to providing for expected credit losses prescribed by IFRS 9, which permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics, such as, current relationship with the customer, industry in which the customer operates, geographical location of customers, historical information on payment patterns, terms of payment and the days past due. The expected loss rates are based on the historical payment profiles of sales and the corresponding historical credit losses experienced. The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors if there is evidence to suggest that these factors affect the ability of the customers to settle the receivables. The Group considered the potential impact of climate-related risks, which is a principal risk in the long-term for the Group when assessing the recoverability of its trade receivables. Given the short-term nature of the Group’s trade receivables and the sustainable nature of the Group’s products, no adjustments were applied to the expected loss rates to specifically incorporate the effect of climate-related risks. There has been no significant deterioration in the aging of trade receivables or extension of debtor days in the year. Notwithstanding this, the economic risk arising from the war in Ukraine, persistent inflationary pressures, increased energy costs and the overall cost of living crisis has resulted in an increase in the expected credit loss rate, and consequently the impairment loss allowance, compared to the prior year. This reflects the increased risk facing the Group’s customers and any potential future losses they may experience due to the impact of global economic uncertainty. Therefore reflecting past experience and the current uncertain economic risk to the Group, the credit loss allowance recognised in the Consolidated Income Statement as at 31 December 2022 is a charge of €15 million (2021: €4 million credit). The total provision for impairment loss at 31 December 2022 represents 2.6% (2021: 2.4%) of gross trade receivables. On that basis, the loss allowance as at 31 December 2022 was determined as follows for trade receivables: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | 2022 | | | | | 2021 | | | | | | More Than | | | | More Than | | | | | 1 to 90 Days | 90 Days Past | | | 1 to 90 Days | 90 Days Past | | | | Current | Past Due | Due | Total | Current | Past Due | Due | Total | | | €m | €m | €m | €m | €m | €m | €m | €m | | Gross carrying amount | 1,651 | 284 | 25 | 1,960 | 1,586 | 222 | 22 | 1,830 | | Loss allowance | 7 | 20 | 25 | 52 | 6 | 16 | 22 | 44 | Impairment losses in respect of trade receivables are included in administrative expenses in the Consolidated Income Statement. Trade receivables written off as uncollectable are generally eliminated from trade receivables and the loss allowance when there is no expectation of recovering additional cash. Indicators that there is no reasonable expectation of recovery include, amongst others, the failure of a debtor to engage in a repayment plan with the Group and a pattern of failure to make contractual payments. Trade receivables with a contractual amount of €7 million (2021: €5 million) written off during the period are still subject to enforcement activity. 20. Net Movement in Working Capital | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Change in inventories | (187) | (246) | | Change in trade and other receivables | (238) | (492) | | Change in trade and other payables | 75 | 624 | | Net movement in working capital | (350) | (114) | ![]() 192 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | 21. Movements of Liabilities Within Cash Flows Arising from Financing Activities and Net Debt Reconciliation | | | | | | | | | | | Liabilities from Financing Activities | | | | | | Adjustments | | | | | | | Derivatives | Changes in | Derivatives | | | | | | | | Held to | Liabilities | Held to | | | | | | Long & | | Hedge | Arising from | Hedge | Cash and | | | | Short-term | Medium-term | Lease | Long-term | Financing | Long-term | Cash | | | | Borrowings | Borrowings | Liabilities | Borrowings | Activities | Borrowings | Equivalents | Net Debt | | | €m | €m | €m | €m | €m | €m | €m | €m | | At 1 January 2021 | (56) | (2,859) | (346) | (5) | (3,266) | 5 | 886 | (2,375) | | Cash flows | 25 | (405) | 88 | (9) | (301) | 9 | (33) | (325) | | Acquired | (13) | (8) | (5) | – | (26) | – | – | (26) | | Disposed | 3 | – | – | – | 3 | – | – | 3 | | Currency translation adjustment | 3 | (29) | (12) | 10 | (28) | (10) | (12) | (50) | | Other non-cash movements | (7) | – | (105) | (1) | (113) | 1 | – | (112) | | At 31 December 2021 | (45) | (3,301) | (380) | (5) | (3,731) | 5 | 841 | (2,885) | | Cash flows | 11 | (19) | 103 | (1) | 94 | 1 | (11) | 84 | | Acquired | (4) | – | (5) | – | (9) | – | – | (9) | | Currency translation adjustment | (1) | (17) | (4) | 6 | (16) | (6) | (59) | (81) | | Other non-cash movements | (30) | 17 | (88) | (1) | (102) | 1 | – | (101) | | At 31 December 2022 | (69) | (3,320) | (374) | (1) | (3,764) | 1 | 771 | (2,992) | \* \*  In 2021, €9 million of cash flows pertaining to the redemption of debt was classified as an operating cash flow within interest paid. 22. Cash and Cash Equivalents and Restricted Cash | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Cash and current accounts | 109 | 114 | | Short-term deposits | 679 | 755 | | Cash and cash equivalents and restricted cash | 788 | 869 | | Cash and cash equivalents for the purposes of the Consolidated Statement of Cash Flows | | | | Cash and cash equivalents | 788 | 869 | | Bank overdrafts and demand loans used for cash management purposes | (17) | (28) | | Cash and cash equivalents in the Consolidated Statement of Cash Flows | 771 | 841 | At 31 December 2022, restricted cash of €5 million (2021: €6 million) was held in securitisation bank accounts. A further €6 million (2021: €8 million) of restricted cash was held in other Group subsidiaries and by a trust which facilitates the operation of the Group’s long-term incentive plans. The Group reassessed the classification of restricted cash during the year as a result of an agenda decision by the IFRS Interpretations Committee in 2022. Consequently, restricted cash is now included as cash and cash equivalents in the Consolidated Statement of Cash Flows. As a result of this reassessment, the comparative balances for cash and cash equivalents for 2021 have been increased by €14 million. ![]() 193Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 23. Capital and Reserves Share Capital The authorised share capital of the Company comprises ordinary shares and various classes of convertible shares. Restriction on Transfer of Shares The Directors, at their absolute discretion and without assigning any reason therefore, may refuse to register any transfer of a share which is not fully paid or any transfer to or by a minor or person of unsound mind but this shall not apply to a transfer of such a share resulting from a sale of the share through a stock exchange on which the share is listed. Subject to certain exceptions, the Directors may also refuse to register any instrument of transfer (whether or not it is in respect of a fully paid share) unless it is: a) lodged at the registered office of the Company or at such other place as the Directors may appoint; b) accompanied by the certificate for the shares to which it relates and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer; c) in respect of only one class of shares; and d) in favour of not more than four transferees. All convertible shares are subject to restrictions as to their transferability. Generally they are not transferable either at all or without consent of the Directors, save by transmission on the death of a holder. Ordinary Shares Subject to the Articles of Association of the Company (the ‘Articles’), the holders of ordinary shares are entitled to share in any dividends in proportion to the number of shares held by them and are entitled to one vote for every share held by them at a general meeting. On a return of capital (whether on repayment of capital, liquidation or otherwise) the assets and/or capital legally available to be distributed shall firstly be distributed amongst the holders of ordinary shares, in proportion to the number of ordinary shares held by them, of the nominal value of their ordinary shares, secondly (to the extent available) distributed amongst the holders of convertible shares, in proportion to the number of convertible shares held by them, of the nominal value of their convertible shares and the balance (if any) shall be distributed amongst the holders of ordinary shares in proportion to the number of ordinary shares held by them. Convertible Shares The holders of convertible shares have no right to participate in the profits of the Company and are not entitled to receive notice of, attend or vote at general meetings or to vote on any members’ resolution (save for any resolution with regard to the rights of convertible shares). On return of capital (whether on repayment of capital, liquidation or otherwise) the assets and/or capital legally available to be distributed shall, subject first to the rights of the holders of ordinary shares be distributed amongst the holders of convertible shares, in proportion to the number of convertible shares held by them, of the nominal value of their convertible shares. At 31 December 2020, all exercisable convertible shares had lapsed and are no longer convertible into ordinary shares. Restriction of Rights If the Directors determine that a Specified Event as defined in the Articles has occurred in relation to any share or shares, the Directors may serve a notice to such effect on the holder or holders thereof. Upon the expiry of fourteen days from the service of any such notice, for so long as such notice shall remain in force no holder or holders of the share or shares specified in such notice shall, in relation to such specified shares, be entitled to attend, speak or vote either personally, by representative or by proxy at any general meeting of the Company or at any separate general meeting of the class of shares concerned or to exercise any other right conferred by membership in relation to any such meeting. The Directors shall, where the shares specified in such notice represent not less than 0.25 per cent of the class of shares concerned, be entitled: to withhold payment of any dividend or other amount payable (including shares issuable in lieu of dividend) in respect of the shares specified in such notice; and/or to refuse to register any transfer of the shares specified in such notice or any renunciation of any allotment of new shares or debentures made in respect thereof unless such transfer or renunciation is shown to the satisfaction of the Directors to be a bona fide transfer or renunciation to another beneficial owner unconnected with the holder or holders or any person appearing to have an interest in respect of which a notice has been served. ![]() 194 Smurfit Kappa Annual Report 2022 23. Capital and Reserves continued | | | | | | --- | --- | --- | --- | | Authorised Share Capital of the Company | | 2022 | 2021 | | | | €m | €m | | Ordinary shares | | | | | 9,910,931,085 | Ordinary shares of €0.001 each | 10 | 10 | | Convertible shares of €0.001 each 2,356,472 | Class A1 | – | – | | 2,356,471 | Class A2 | – | – | | 2,355,972 | Class A3 | – | – | | 30,000,000 | Class B | – | – | | 30,000,000 | Class C | – | – | | 75,000,000 | Class D | – | – | | | | 10 | 10 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Called Up, Issued and Fully Paid Share Capital of the Company | | | | | | | | | | | | Numbers of Shares of €0.001 Each | | | | | | | | Convertible Shares | | | Ordinary | Total | | | | Class B | Class C | Class D | Tot al | Shares | Shares | €m | | At 1 January 2021 | 2,089,514 | 2,089,514 | 786,486 | 4,965,514 | 257,979,697 | 262,945,211 | – | | Issue of Performance Share Plan shares | – | – | – | – | 1,054,062 | 1,054,062 | – | | At 31 December 2021 | 2,089,514 | 2,089,514 | 786,486 | 4,965,514 | 259,033,759 | 263,999,273 | – | | At 1 January 2022 | 2,089,514 | 2,089,514 | 786,486 | 4,965,514 | 259,033,759 | 263,999,273 | – | | Issue of Performance Share Plan shares | – | – | – | – | 1,175,750 | 1,175,750 | – | | Share cancellation | – | – | – | – | (1,175,750) | (1,175,750) | – | | At 31 December 2022 | 2,089,514 | 2,089,514 | 786,486 | 4,965,514 | 259,033,759 | 263,999,273 | – | \* \*  During 2022, 1.2 million ordinary shares were repurchased and subsequently cancelled as a result of a share buyback transaction. The amount paid to repurchase these shares was initially recognised in the own shares reserve and was transferred to retained earnings on cancellation. At 31 December 2022 ordinary shares represented 98.1% and convertible shares represented 1.9% of issued share capital (2021: 98.1% and 1.9% respectively). The called up, issued and fully paid share capital of the Company at 31 December 2022 was €263,999 (2021: €263,999). Share Premium Share premium of €2,646 million (2021: €2,646 million) relates to the share premium arising on share issues. Other Reserves Other reserves included in the Consolidated Statement of Changes in Equity are comprised of the following: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Foreign | | | | | | | Reverse | Cash Flow | Cost of | Currency | Share-based | | | | | | Acquisition | Hedging | Hedging | Translation | Payment | Own | FVOCI | | | | Reserve | Reserve | Reserve | Reserve | Reserve | Shares | Reserve | Total | | | €m | €m | €m | €m | €m | €m | €m | €m | | At 1 January 2022 | 575 | 1 | 1 | (541) | 293 | (59) | (10) | 260 | | Other comprehensive income | | | | | | | | | | Foreign currency translation adjustments | – | – | – | (63) | – | – | – | (63) | | Effective portion of changes in fair value of cash flow hedges | – | (5) | – | – | – | – | – | (5) | | Changes in fair value of cost of hedging | – | – | (1) | – | – | – | – | (1) | | Total other comprehensive expense | – | (5) | (1) | (63) | – | – | – | (69) | | Share-based payment | – | – | – | – | 63 | – | – | 63 | | Net shares acquired by SKG Employee Trust | – | – | – | – | – | (28) | – | (28) | | Shares distributed by SKG Employee Trust | – | – | – | – | (22) | 22 | – | – | | Share buyback | – | – | – | – | – | (41) | – | (41) | | Share cancellation | – | – | – | – | – | 41 | – | 41 | | Derecognition of equity instruments | – | – | – | – | – | – | 10 | 10 | | At 31 December 2022 | 575 | (4) | – | (604) | 334 | (65) | – | 236 | #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 ![]() 195Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 23. Capital and Reserves continued #### Other Reserves continued | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | | | | Foreign | | | | | | | Reverse | Cash Flow | Cost of | Currency | Share-based | | | | | | Acquisition | Hedging | Hedging | Translation | Payment | Own | FVOCI | | | | Reserve | Reserve | Reserve | Reserve | Reserve | Shares | Reserve | Total | | | €m | €m | €m | €m | €m | €m | €m | €m | | At 1 January 2021 | 575 | 4 | 2 | (556) | 241 | (49) | (10) | 207 | | Other comprehensive income | | | | | | | | | | Foreign currency translation adjustments | – | – | – | 15 | – | – | – | 15 | | Effective portion of changes in fair value of cash flow hedges | – | (3) | – | – | – | – | – | (3) | | Changes in fair value of cost of hedging | – | – | (1) | – | – | – | – | (1) | | Total other comprehensive (expense)/income | – | (3) | (1) | 15 | – | – | – | 11 | | Share-based payment | – | – | – | – | 64 | – | – | 64 | | Net shares acquired by SKG Employee Trust | – | – | – | – | – | (22) | – | (22) | | Shares distributed by SKG Employee Trust | – | – | – | – | (12) | 12 | – | – | | At 31 December 2021 | 575 | 1 | 1 | (541) | 293 | (59) | (10) | 260 | Reverse Acquisition Reserve This reserve arose on the creation of a new parent of the Group prior to listing. Cash Flow Hedging Reserve This reserve comprises the effective portion of the cumulative net change in the fair value of cash flow hedging instruments (net of tax) related to hedged transactions that have not yet occurred. Cost of Hedging Reserve The cost of hedging reserve reflects the gain or loss on the portion excluded from the designated hedging instrument that relates to the currency basis spread on foreign exchange contracts. It is initially recognised in other comprehensive income and accounted for similarly to gains or losses in the cash flow hedging reserve. Foreign Currency Translation Reserve This reserve comprises all foreign currency translation adjustments arising from the translation of the Group’s net investment in foreign operations as well as from the translation of liabilities that hedge those net assets. Share-based Payment Reserve This reserve represents the amounts credited to equity in relation to the share-based payment expense recognised in the Consolidated Income Statement, net of deferred shares distributed by the SKG Employee Trust to participants of the Deferred Annual Bonus Plan and the Deferred Bonus Plan. Own Shares This represents ordinary shares acquired by the SKG Employee Trust under the terms of the Deferred Annual Bonus Plan and the Deferred Bonus Plan. | | | | | --- | --- | --- | | | Numbers of shares of | | | | €0.001 each | | | | 2022 | 2021 | | At 1 January | 1,974,476 | 1,734,281 | | Shares acquired by SKG Employee Trust | 574,247 | 534,005 | | Shares distributed by SKG Employee Trust | (915,001) | (293,810) | | At 31 December | 1,633,722 | 1,974,476 | As at 31 December 2022 the nominal value of own shares held was €1,634 (2021: €1,974). In 2022, own shares were purchased at an average price of €46.81 (2021: €40.24) per share. The number of own shares held represents 0.6% (2021: 0.7%) of the total called up share capital of the Company. Each of these have the same nominal value as the ordinary shares. FVOCI Reserve Equity instruments are measured at fair value with fair value gains and losses recognised in other comprehensive income. These changes are accumulated within the FVOCI reserve within equity. The Group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised. ![]() 196 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 24. Borrowings Analysis of Total Borrowings | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Revolving credit facility | 4 | 2 | | US$292.3 million 7.50% senior debentures due 2025 (including accrued interest) | 276 | 260 | | Bank loans and overdrafts | 110 | 101 | | €100 million receivables securitisation variable funding notes due 2026 (including accrued interest) | 4 | 4 | | €230 million receivables securitisation variable funding notes due 2026 | 11 | 11 | | €250 million 2.75% senior notes due 2025 (including accrued interest) | 252 | 251 | | €1,000 million 2.875% senior notes due 2026 (including accrued interest) 5 | 1,008 | 1,007 | | €750 million 1.5% senior notes due 2027 (including accrued interest) | 748 | 747 | | €500 million 0.5% senior green notes due 2029 (including accrued interest) | 496 | 495 | | €500 million 1.0% senior green notes due 2033 (including accrued interest) | 497 | 496 | | Leases | 374 | 380 | | Total borrowings | 3,780 | 3,754 | | Analysed as follows: | | | | Current | 180 | 165 | | Non-current | 3,600 | 3,589 | | | 3,780 | 3,754 | 1 2, 4 3, 4 5 5 5 5 1  At 31 December 2022, the following amounts were drawn under this facility:  (a) Revolver loans – €7 million.  (b) Drawn under ancillary facilities and facilities supported by letters of credit – nil.  (c) Other operational facilities including letters of credit – nil. 2  At 31 December 2022, the amount drawn under this facility was €5 million. 3  At 31 December 2022, the amount drawn under this facility was €13 million. 4  Secured loans and long-term obligations. 5  Unsecured loans and long-term obligations. Included within the carrying value of borrowings are deferred debt issue costs of €26 million (2021: €33 million), all of which will be recognised in finance costs in the Consolidated Income Statement using the effective interest rate method over the remaining life of the borrowings. Committed facilities (excluding short-term sundry bank loans and overdrafts) amounted to €5,045 million (2021: €5,006 million) of which €3,390 million (2021: €3,351 million) was utilised at 31 December 2022. The weighted average period until maturity of undrawn committed facilities is 3.2 years (2021: 4.2 years). Maturity of Undrawn Committed Facilities | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Within 1 year | – | – | | Between 1 and 2 years | – | – | | More than 2 years | 1,655 | 1,655 | | | 1,655 | 1,655 | The Group’s primary sources of liquidity are cash flows from operations and borrowings under the RCF. The Group’s primary uses of cash are for funding day-to-day operations, capital expenditure, debt service, dividends and other investment activity including acquisitions. The Group’s borrowing agreements contain certain covenants that restrict the Group’s flexibility in certain areas such as incurrence of additional indebtedness and the incurrence of liens. The Group’s borrowing agreements also contain financial covenants, the primary ones being a maximum net borrowings to EBITDA of 3.75 times and a minimum EBITDA to net interest of 3.00 times. The Group is in full compliance with the requirements of its covenant agreements throughout each of the periods presented. At 31 December 2022, as defined in the relevant facility agreement, net borrowings to EBITDA was 1.3 times (2021: 1.7 times) and EBITDA to net interest was 17.4 times (2021: 15.3 times). The sustainability-linked Revolving Credit Facility (‘RCF’) has a facility size of €1,350 million and maturity of January 2026. At 31 December 2022, interest rates applicable on the RCF were relevant interbank rate + 0.64%. The following table sets out the interest rates at 31 December 2022 and 2021 for the Group’s drawings under the RCF. | | | | | | --- | --- | --- | --- | | | | 2022 | 2021 | | | | Interest | Interest | | | Currency | Rate | Rate | | RCF | US$ | 5.02% | 0.75% | ![]() 197Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 24. Borrowings continued Borrowings under the RCF are available to fund the Group’s working capital requirements, capital expenditure and other general requirements. The Group has a trade receivables securitisation programme with a facility size of €100 million, margin of 1.09% and maturity of January 2026. Receivables generated by certain of its operating companies in Austria, Belgium, Italy and the Netherlands are sold to a special purpose Group subsidiary to support the funding. A conduit of Coöperatieve Rabobank U.A. (trading as Rabobank) provides €77 million of the funding and a conduit of Landesbank Hessen-Thüringen Girozentrale (trading as Helaba Bank) provides €23 million of the funding. The Group also has a trade receivables securitisation programme with a facility size of €230 million, margin of 1.09% and a maturity of November 2026. Receivables generated by certain of its operating companies in the UK, Germany and France are sold to a special purpose entity to support the funding provided by Lloyds Banking Group. The sale of the securitised receivables under the Group’s securitisation programmes is not intended to, and does not, meet the requirements for derecognition under IFRS 9, with the result that the sold receivables continue to be shown on the face of the Consolidated Balance Sheet and the notes issued which fund the purchase of these receivables continue to be shown as liabilities. The gross amount of receivables collateralising the €100 million 2026 trade receivables securitisation programme at 31 December 2022 was €399 million (2021: €335 million). The gross amount of receivables collateralising the €230 million 2026 trade receivables securitisation programme at 31 December 2022 was €492 million (2021: €430 million). As the Group retains a subordinated interest in the securitised receivables, the Group remains exposed to the credit risk of the underlying securitised receivables. Further details are set out in Note 29. In accordance with the contractual terms, the counterparty has recourse to the securitised debtors only. Given the short-term nature of the securitised debtors and the variable floating notes, the carrying amount of the securitised debtors and the associated liabilities reported on the Consolidated Balance Sheet is estimated to approximate to fair value. At 31 December 2022, restricted cash of €5 million (2021: €6 million) was held in securitisation bank accounts. In September 2022, the Group published its first Green Bond Allocation and Impact Report, detailing the use of the proceeds of the €1 billion dual-tranche Green Bonds issued in 2021. Issued with coupons of 0.5% and 1% respectively, for tenors of 8 and 12 years, these coupons are the lowest in the Group’s history but also the lowest achieved for a corporate issuer in our rating category. Certain other maturity, interest rate repricing and key terms relating to the Group’s borrowings have been set out in Note 29. 25. Employee Benefits The Group operates both defined benefit and defined contribution pension plans throughout its operations in accordance with local requirements and practices. These plans have broadly similar regulatory frameworks. The major plans are of the defined benefit type and are funded by payments to separately administered funds. In these defined benefit plans, the level of benefits available to members depends on length of service and their average salary over their period of employment or their salary in the final years leading up to retirement or leaving. While the majority of the defined benefit plans are funded, in certain countries, such as Germany, Austria and France, plan liabilities are for the most part unfunded and recognised as liabilities in the Consolidated Balance Sheet. In these countries, a full actuarial valuation of the unfunded liabilities is undertaken by independent actuaries on an annual basis. Responsibility for governance of the plans, including investment decisions and contribution schedules, lies with the company and the boards of trustees. The most significant defined benefit plans are in the Netherlands, United Kingdom, Germany and Ireland. They represent respectively 34%, 30%, 12% and 11% of the obligation thereby totalling 87% of the obligation. The most recent valuation of the significant funded plans are as follows: Ireland 1 January 2022 Netherlands  31 December 2022 United Kingdom  31 March 2020 In accordance with statutory and minimum funding requirements, additional annual contributions are required to be made to the schemes in place in Ireland, the United Kingdom and the Netherlands. The funding requirements are agreed between the company, the trustees and the relevant regulator. The contributions in respect of these schemes are included in the expected contributions for the year ending 31 December 2023 outlined on page 202. The expense for defined contribution pension plans for the year ended 31 December 2022 was €71 million (2021: €66 million). ![]() 198 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 25. Employee Benefits continued The following is a summary of the Group’s employee benefit obligations and their related funding status: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Present value of funded or partially funded obligations | (1,713) | (2,384) | | Fair value of plan assets | 1,608 | 2,276 | | Deficit in funded or partially funded plans | (105) | (108) | | Present value of wholly unfunded obligations | (410) | (520) | | Amounts not recognised as assets due to asset ceiling | (2) | (2) | | Net pension liability | (517) | (630) | | Defined Benefit Asset (for overfunded plans) | 17 | – | | Defined Benefit Liability (for unfunded and partially funded plans) | (534) | (630) | In determining the defined benefit costs and obligations, all valuations are performed by independent actuaries using the projected unit credit method. Financial Assumptions The main actuarial assumptions used to calculate liabilities under IAS 19, Employee Benefits at 31 December 2022 and 31 December 2021 are as follows: | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Eurozone | | Rest of Europe | | The Americas | | | | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | | | % | % | % | % | % | % | | Rate of increase in salaries | 1.00 – 4.00 | 0.25 – 3.05 | 2.30 – 6.00 | 2.50 – 4.50 | 1.50 – 7.48 | 0.99 – 5.50 | | Rate of increase to pensions in payment | Nil – 2.90 | Nil – 2.00 | Nil – 2.00 | Nil – 2.52 | Nil – 7.30 | Nil – 4.59 | | Discount rate for plan liabilities | 3.70 | 1.15 | 3.70 – 7.60 | 1.15 – 4.00 | 3.58 – 15.02 | 2.22 – 11.50 | | Inflation | 2.40 | 2.00 | 2.00 – 4.00 | 2.00 – 2.60 | 1.00 – 7.48 | 0.49 – 4.59 | Mortality Assumptions In assessing the Group’s post retirement liabilities, the mortality assumptions chosen for the principal plans above are based on the country’s population mortality experience, large pension scheme mortality experience and the plan’s own mortality experience. The mortality assumption adopted in the United Kingdom for 2022 allows for the most recent projection model factors as well as an allowance to reflect the negative future outlook on mortality due to COVID-19. In the Netherlands, the mortality table was updated to reflect the latest available mortality table (AG 2022 table, published in September 2022). In Ireland, the mortality table was updated to reflect the table used in the latest tri-annual valuation (as per 1 January 2022). In Germany, the mortality table, which was updated in 2018, is that laid down by statutory authorities. Note that in all cases described here, the mortality tables used allow for future improvements in life expectancy. The current life expectancies underlying the valuation of the plan liabilities for the significant plans are as follows: | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | --- | | | Ireland | | United Kingdom | | Germany | | Netherlands | | | | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | | Longevity at age 65 for current pensioners (years) | | | | | | | | | | Male | 22.6 | 21.9 | 20.0 | 20.3 | 20.6 | 20.5 | 20.9 | 20.7 | | Female | 25.0 | 24.3 | 22.4 | 22.7 | 24.0 | 24.0 | 23.7 | 23.4 | | Longevity at age 65 for current member aged 45 (years) | | | | | | | | | | Male | 24.3 | 24.2 | 20.9 | 21.2 | 23.4 | 23.3 | 23.1 | 22.8 | | Female | 26.7 | 26.3 | 23.6 | 23.9 | 26.3 | 26.2 | 25.8 | 25.3 | The mortality assumptions for other plans are based on relevant standard mortality tables in each country. Sensitivity Analysis The following table illustrates the key sensitivities to the amounts included in the Consolidated Balance Sheet which would arise from adjusting certain key actuarial assumptions. The sensitivity of the defined benefit obligation to changes in actuarial assumptions has been calculated using the projected unit credit method, which is the same method used to calculate the pension liability in the Consolidated Balance Sheet. The methods and assumptions used in preparing the sensitivity analysis have not changed compared to the prior year.  ![]() 199Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 25. Employee Benefits continued #### Sensitivity Analysis continued In each case all the other assumptions remain unchanged: | | | | | --- | --- | --- | | | Increase/(Decrease) in Pension Liabilities | | | | 2022 | 2021 | | Change in Assumption | €m | €m | | Increase discount rate by 0.50% | (136) | (227) | | Decrease discount rate by 0.50% | 163 | 257 | | Increase inflation rate by 0.50% | 47 | 90 | | Decrease inflation rate by 0.50% | (45) | (87) | | Increase in life expectancy by one year | 74 | 120 | \* \*   The sensitivity analysis for 2022 has been calculated on the basis of a 50 basis point variance for the discount rate and inflation rate. The analysis presented above for 2021 has been prepared on the same basis. The disclosures within the Annual Report for 2021 were prepared on the basis of a 25 basis point variance with the range for 2022 increased to take account of increased volatility in the market. The sensitivity information shown above has been determined by performing calculations of the liabilities using different assumptions. Analysis of Plan Assets and Liabilities | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | Plan assets are comprised as follows: | | | | | | | | | | 2022 | | | 2021 | | | | Quoted | Unquoted | Total | Quoted | Unquoted | Total | | | €m | €m | €m | €m | €m | €m | | Equities | 460 | – | 460 | 794 | – | 794 | | Corporate bonds | 292 | – | 292 | 423 | – | 423 | | Government bonds | 516 | – | 516 | 488 | – | 488 | | Property | 112 | 5 | 117 | 105 | 4 | 109 | | Cash | 101 | 1 | 102 | 166 | – | 166 | | Insurance contracts | – | 34 | 34 | – | 37 | 37 | | Liability driven investment | 12 | – | 12 | 116 | – | 116 | | Other | 75 | – | 75 | 121 | 22 | 143 | | | 1,568 | 40 | 1,608 | 2,213 | 63 | 2,276 | Included in plan assets at 31 December 2022 under Property is an amount of €5.4 million (2021: €3.7 million) relating to the Gosport plant in the United Kingdom. This is the only self-investment in the Group by the defined benefit plans. The remeasurement loss on plan assets for the year ended 31 December 2022 was €660 million (2021: a gain of €110 million). An analysis of the assets held by the plans is as follows: | | | | | | | --- | --- | --- | --- | --- | | | | Rest of | The | | | | Eurozone | Europe | Americas | Total | | 31 December 2022 | €m | €m | €m | €m | | Equities | 339 | 105 | 16 | 460 | | Corporate bonds | 161 | 101 | 30 | 292 | | Government bonds | 244 | 272 | – | 516 | | Property | 82 | 35 | – | 117 | | Cash | 14 | 87 | 1 | 102 | | Insurance contracts | 31 | 3 | – | 34 | | Liability driven investment | 81 | (69) | – | 12 | | Other | 35 | 27 | 13 | 75 | | Fair value of plan assets | 987 | 561 | 60 | 1,608 | | Present value of plan liabilities | (1,364) | (673) | (86) | (2,123) | | Amounts not recognised as assets due to asset ceiling | – | (2) | – | (2) | | Net pension liability | (377) | (114) | (26) | (517) | ![]() 200 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 25. Employee Benefits continued | | | | | | | --- | --- | --- | --- | --- | | Analysis of Plan Assets and Liabilities continued | | Rest of | The | | | | Eurozone | Europe | Americas | Total | | 31 December 2021 | €m | €m | €m | €m | | Equities | 463 | 318 | 13 | 794 | | Corporate bonds | 201 | 190 | 32 | 423 | | Government bonds | 324 | 159 | 5 | 488 | | Property | 65 | 43 | 1 | 109 | | Cash | (9) | 169 | 6 | 166 | | Insurance contracts | 33 | 4 | – | 37 | | Liability driven investment | 79 | 29 | 8 | 116 | | Other | 69 | 71 | 3 | 143 | | Fair value of plan assets | 1,225 | 983 | 68 | 2,276 | | Present value of plan liabilities | (1,757) | (1,052) | (95) | (2,904) | | Amounts not recognised as assets due to asset ceiling | – | (2) | – | (2) | | Net pension liability | (532) | (71) | (27) | (630) | Analysis of the Amount Charged in the Consolidated Income Statement | | | | | --- | --- | --- | | The following tables set out the components of the defined benefit cost: | 2022 | 2021 | | | €m | €m | | Current service cost | 34 | 33 | | Administrative expenses | 5 | 4 | | Past service cost | – | (4) | | Gain on settlement | – | (3) | | Actuarial gain arising on other long-term employee benefits | (4) | (1) | | Charged to operating profit | 35 | 29 | | Net interest cost on net pension liability | 8 | 7 | | | 43 | 36 | The defined benefit cost for 2022 includes a defined benefit cost of nil (2021: €4 million) which relates to other long-term employee benefits. The expense recognised in the Consolidated Income Statement is charged to the following line items: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Cost of sales | 18 | 12 | | Administrative expenses | 17 | 17 | | Finance costs | 8 | 7 | | | 43 | 36 | Analysis of Actuarial (Losses)/Gains Recognised in the Consolidated Statement of Comprehensive Income | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | (Loss)/gain on plan assets (excluding interest income) | (660) | 110 | | Actuarial (loss)/gain due to experience adjustments | (41) | 6 | | Actuarial gain due to changes in financial assumptions | 746 | 54 | | Actuarial gain due to changes in demographic assumptions | 6 | 7 | | | 51 | 177 | | | | | | --- | --- | --- | | Movement in Present Value of Defined Benefit Obligation | 2022 | 2021 | | | €m | €m | | At 1 January | (2,904) | (3,075) | | Current service cost | (34) | (33) | | Contributions by plan participants | (5) | (5) | | Interest cost | (44) | (29) | | Actuarial gains and losses | 715 | 68 | | Benefits paid by plans | 113 | 109 | | Past service cost | – | 4 | | Acquisitions | – | (4) | | Decrease arising on settlement | – | 135 | | Foreign currency translation adjustment | 36 | (74) | | At 31 December | (2,123) | (2,904) | ![]() 201Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 25. Employee Benefits continued | | | | | --- | --- | --- | | Movement in Fair Value of Plan Assets | 2022 | 2021 | | | €m | €m | | At 1 January | 2,276 | 2,224 | | Interest income on plan assets | 36 | 22 | | Return on plan assets (excluding interest income) | (660) | 110 | | Administrative expenses | (5) | (4) | | Contributions by employer | 99 | 93 | | Contributions by plan participants | 5 | 5 | | Benefits paid by plans | (113) | (109) | | Decrease arising on settlements | – | (132) | | Foreign currency translation adjustment | (30) | 67 | | At 31 December | 1,608 | 2,276 | Movement in Asset Ceiling | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | At 1 January | (2) | (2) | | At 31 December | (2) | (2) | Employee Benefit Plan Risks The employee benefit plans expose the Group to a number of risks, the most significant of which are: | | | | --- | --- | | Asset Volatility | The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets | | | underperform this yield, this will create a deficit. The plans hold a significant proportion of equities which, | | | though expected to outperform corporate bonds in the long-term, create volatility and risk in the short-term. | | | The allocation to equities is monitored to ensure it remains appropriate given the plans’ long-term objectives. | | Changes in Bond Yields | A decrease in corporate bond yields will increase the value placed on the plans’ liabilities, although this will be | | | partially offset by an increase in the value of the plans’ bond holdings. | | Inflation Risk | The plans’ benefit obligations are linked to inflation, and higher inflation will lead to higher liabilities (although, | | | in most cases, caps on the level of inflationary increases are in place to protect against extreme inflation). The | | | majority of the assets are either unaffected by or only loosely correlated with inflation, meaning that an increase | | | in inflation will also increase the deficit. | | Life Expectancy | The majority of the plans’ obligations are to provide benefits based on the life of the member, so increases in life | | | expectancy will result in an increase in the liabilities. | In the case of the funded plans, the Group ensures that the investment positions are managed with an asset-liability matching (‘ALM’) framework that has been developed to achieve long-term investments that are in line with the obligations under the pension schemes. Within this framework, the Group’s ALM objective is to match assets to the pension obligations by investing in long-term fixed interest securities with maturities that match the benefit payments as they fall due and in the appropriate currency. Maturity Analysis The expected maturity analysis is set out in the table below: | | | | | | | | --- | --- | --- | --- | --- | --- | | | | United | | | | | | Netherlands | Kingdom | Germany | Ireland | Other | | | Projected | Projected | Projected | Projected | Projected | | | Amounts | Amounts | Amounts | Amounts | Amounts | | Expected benefit payments: | €m | €m | €m | €m | €m | | Financial year 2023 | 19 | 40 | 18 | 10 | 19 | | Financial year 2024 | 20 | 41 | 18 | 10 | 17 | | Financial years 2025 – 2027 | 69 | 128 | 55 | 33 | 72 | | Financial years 2028 – 2032 | 151 | 231 | 80 | 64 | 125 | The weighted average duration of the defined benefit obligation at 31 December 2022 is 14.82 years (2021: 16.90 years). Most of the plans are closed to new entrants and therefore, under the projected unit credit method, the current service cost is expected to increase (all other elements remaining equal) as the members approach retirement and to decrease as members retire or leave service. With plans in Ireland and the UK being frozen for future service, this risk no longer applies for these countries. ![]() 202 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 25. Employee Benefits continued #### Maturity Analysis continued The expected employee and employer contributions for the year ending 31 December 2023 for the funded schemes are €5 million and €66 million respectively. The expected employer contributions for unfunded schemes for the year ending 31 December 2023 are €27 million and the expected benefit payments made directly by the employer in respect of funded plans for the year ending 31 December 2023 are €1 million. 26. Share-based Payment Share-based Payment Expense Recognised in the Consolidated Income Statement | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Charge arising from the Deferred Bonus Plan | 23 | 21 | | Charge arising from the Performance Share Plan | 40 | 43 | | | 63 | 64 | Social charges relating to equity settled share-based payments in 2022 are €2 million (2021: €5 million). The Group grants equity settled share-based payments to employees as part of their remuneration. The accounting for share-based payment expense falls under IFRS 2, Share-based Payment. Under IFRS 2, when share awards are subject to vesting conditions, the related expense is recognised in profit or loss over the vesting period. In 2022, awards were made under the two active plans; the Deferred Bonus Plan (‘DBP’) and the Performance Share Plan (‘PSP’). Deferred Bonus Plan In May 2018, at the Company’s AGM, shareholders approved the adoption of the DBP which replaced the deferred element of the existing long-term incentive plan, the Deferred Annual Bonus Plan (‘DABP’). Participants may be granted an award of up to 150% of salary (other than a recruitment award). The actual bonus earned in any financial year is based on the achievement of clearly defined stretching annual financial targets for some of the Group’s Key Performance Indicators (‘KPIs’). For 2022, these were Earnings before Interest and Tax (‘EBIT’), Free Cash Flow (‘FCF’), together with targets for Health and Safety, People and ESG and personal/strategic targets for the executive Directors. The structure of the plan is that 50% of any annual bonus earned for a financial year will be deferred into SKG plc shares (‘Deferred Shares’) to be granted in the form of a Deferred Share Award. The Deferred Shares will vest (i.e. become unconditional) after a three-year holding period based on a service condition of continuity of employment or in certain circumstances, based on normal good leaver provisions. Deferred Share Awards were granted in 2022 to eligible employees in respect of the financial year ended 31 December 2021. The fair value of the Deferred Share Awards granted in 2022 was €46.81 (2021: €40.24) which was the market value of the deferred shares granted. At 31 December 2022 there were 1,582,192 outstanding shares (2021: 1,940,041 shares). During 2022, 571,693 shares were granted under the DBP scheme (2021: 528,447 shares). The total DBP charge for the year comprises a charge pertaining to the Deferred Share Awards granted in respect of 2019, 2020, 2021 and to be granted in respect of 2022. The DBP awards which were granted in 2020 in respect of the financial year ended 31 December 2019 vested in February 2023 and were released to relevant employees. The average market price for the February vesting was €35.89. Performance Share Plan In May 2018, at the Company’s AGM, shareholders approved the adoption of the PSP, which replaced the existing long-term incentive plan, the matching element of the DABP. Participants may be granted an award of up to 250% of salary (other than a recruitment award). Awards may vest after a three-year performance period to the extent to which the performance conditions have been met. Awards may also be subject to an additional holding period following vesting (of up to two years). At the end of the relevant holding period, the PSP awards will be released (i.e. become unconditional) to the participant. The performance targets assigned to the PSP awards are set by the Remuneration Committee on the granting of awards at the start of each three-year cycle and are set out in the Remuneration Report. The actual number of shares that will vest under the PSP is dependent on the performance conditions of the Group’s EPS, ROCE, Total Shareholder Return (‘TSR’) (relative to a peer group) and for the 2021 and 2022 PSP awards, Sustainability targets measured over the same three-year performance period. PSP performance conditions will be reviewed at the end of the three-year performance period and the PSP shares awarded will vest depending upon the extent to which these performance conditions have been satisfied. The fair values assigned to the EPS, ROCE and Sustainability components of the PSP are equivalent to the share price on the date of award. ![]() 203Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 26. Share-based Payment continued #### Performance Share Plan continued The Monte Carlo simulation approach was used to calculate the fair value of the TSR component of the PSP award at the respective grant dates. The expected volatility rate applied was based upon both the historical and implied share price volatility levels of the Group. For the 2022 award, a rate of 31.5% was used (2021 award: 19.13%). The risk free interest rate used for the 2022 award was 0.723% (2021 award: (0.468%)). The total PSP charge for the year comprises a charge pertaining to the awards granted in respect of 2020, 2021 and 2022. | | | | | | | | --- | --- | --- | --- | --- | --- | | A summary of the PSP schemes is presented below: | | | | | | | | | | | Number of Shares | | | | | Fair Value of EPS, | | | | | | | ROCE and | | | | | | Period to Earliest | Sustainability | Fair Value of TSR | | Net Outstanding At | | | Release Date | Components | Component | Initial Award | 31 December 2022 | | Granted in 2020 | 3 years | €26.70 | €14.85 | 1,706,648 | 1,753,972 | | Granted in 2021 | 3 years | €40.79 | €16.11 | 1,113,325 | 1,122,636 | | Granted in 2022 | 3 years | €40.49 | €16.91 | 1,423,604 | 1,407,895 | 1 2 3 1  Numbers represent the initial awards granted to employees. The Remuneration Committee has determined that dividend equivalents will accrue on awards under the PSP schemes. Subject to satisfaction of the applicable performance criteria, such dividend equivalents will be released to participants in the form of additional shares on vesting. 2  Numbers include dividend equivalent shares accrued less share forfeitures to date. 3  Two grants of performance shares were made to the executive Directors in 2021; the first in March, with a second tranche granted in May to reflect the increased PSP opportunity approved at the AGM as part of the 2021 Remuneration Policy. The share price of performance shares granted in March 2021 was €40.76; the share price of performance shares granted in May 2021 was €43.93. The PSP awards which were granted in 2020 vested in February 2023 and were released to the relevant employees. The average market price for the February vesting was €35.89. Details of the performance targets and results for the three-year period to 31 December 2022 are set out in the Remuneration Report. 27. Provisions for Liabilities | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Current | 100 | 58 | | Non-current | 37 | 35 | | | 137 | 93 | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Deferred and | | | | | | | | Contingent | | | | | | | | Consideration | Restructuring | Environmental | Legal | Other | Total | | | €m | €m | €m | €m | €m | €m | | At 1 January 2022 | 10 | 10 | 3 | 26 | 44 | 93 | | Made | 8 | 15 | – | 38 | 41 | 102 | | Released | – | (1) | – | (5) | (1) | (7) | | Utilised | (13) | (7) | – | (3) | (30) | (53) | | Arising on acquisition | – | – | 2 | – | – | 2 | | At 31 December 2022 | 5 | 17 | 5 | 56 | 54 | 137 | The Group considered the impact of climate-related risks on environmental and remediation provisions. The measurement of our provisions is based on reasonable and supportable assumptions that represent management’s current best estimate of the range of economic conditions that will exist in the foreseeable future. As outlined in the Risk Report, the Group has robust processes in place to ensure it is compliant with environmental legislation and regulation and the consideration of climate-related risks have not significantly impacted the provisions for liabilities. The Group also considered the sustainability targets and ambitions outlined in the Sustainability section in the Strategic Report and whether they give rise to any constructive obligations of the Group which would require a provision to be recognised or contingent liability to be disclosed. As any obligation which may  arise depends on the future actions of the Group, which are within its control, no provision or contingent liability arises. #### Deferred and Contingent Consideration Deferred and contingent consideration represents the deferred and contingent element of acquisition consideration payable. The balance at 31 December 2022 relates to the acquisition of the following: • Pusa Pack, Spain (2022) – deferred consideration of €2 million payable in 2023; • PaperBox, Brazil (2022) – deferred consideration of €2 million payable in 2023; and • Atlas Packaging, United Kingdom (2022) – deferred consideration of €1 million payable in 2024. #### Restructuring These provisions relate to irrevocable commitments in respect of restructuring programmes throughout the Group. During 2022, the Group incurred an exceptional charge of €14 million in relation to redundancy and reorganisation costs in the Americas, of which €11 million was unpaid at 31 December 2022 and is expected to be paid in 2023. ![]() 204 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 27. Provisions for Liabilities continued Environmental Provisions for environmental costs mainly relate to the reinstatement of landfill sites and other remediation and improvement costs incurred in compliance with either local or national environmental regulations together with constructive obligations stemming from established practice. The timing of settlement of these provisions is not certain particularly where provisions are based on past practice and there is no legal obligation. Legal Legal represents provisions for certain legal claims the Group is involved in. Provisions are expensed in the Consolidated Income Statement within administrative expenses. Legal provisions are uncertain as to timing and amount as they are the subject of ongoing cases. Other Other comprises a number of provisions including: liabilities arising from dilapidations amounting to €13 million (2021: €7 million); employee compensation in certain countries in which we operate amounting to €18 million (2021: €15 million); and numerous other items which are not individually material and are not readily grouped together. 28. Trade and Other Payables | | | | | | | --- | --- | --- | --- | --- | | | Group | Group | Company | Company | | | 2022 | 2021 | 2022 | 2021 | | | €m | €m | €m | €m | | Amounts falling due within one financial year: | | | | | | Trade payables | 1,410 | 1,419 | – | – | | Payroll taxes | 39 | 43 | – | – | | Value added tax | 117 | 106 | – | – | | Social insurance | 50 | 47 | – | – | | Accruals | 791 | 741 | – | – | | Capital payables | 175 | 155 | – | – | | Other payables | 60 | 52 | – | – | | Amounts payable to Group companies | – | – | 98 | 3 | | | 2,642 | 2,563 | 98 | 3 | | Amounts falling due after more than one financial year: | | | | | | Other payables | 10 | 11 | – | – | | | 2,652 | 2, 574 | 98 | 3 | The fair values of trade and other payables are not materially different from their carrying amounts. Amounts owed to Group companies are unsecured, interest free and are repayable on demand. ![]() 205Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments Financial Instruments by Category The accounting policies for financial instruments have been applied to the line items below: | | | | | | | --- | --- | --- | --- | --- | | | | Assets at Fair | | | | | Assets at | Value Through | Derivatives | | | | Amortised Cost | Profit or Loss | Used for Hedging | Total | | 31 December 2022 | €m | €m | €m | €m | | Assets per Consolidated Balance Sheet: | | | | | | Listed and unlisted debt instruments | – | 10 | – | 10 | | Derivative financial instruments | – | 44 | 4 | 48 | | Trade and other receivables | 2,228 | – | – | 2,228 | | Cash and cash equivalents | 777 | – | – | 777 | | Restricted cash | 11 | – | – | 11 | | | 3,016 | 54 | 4 | 3,074 | \* \*  Excludes statutory taxes and prepayments. At 31 December 2022 the financial assets of the Company of €474 million consist of assets at amortised cost (2021: €233 million). | | | | | | | --- | --- | --- | --- | --- | | | Liabilities at Fair | Derivatives | Other | | | | Value Through | Used for | Financial | | | | Profit or Loss | Hedging | Liabilities | Total | | 31 December 2022 | €m | €m | €m | €m | | Liabilities per Consolidated Balance Sheet: | | | | | | Borrowings | – | – | 3,780 | 3,780 | | Derivative financial instruments | 16 | 9 | – | 25 | | Trade and other payables | – | – | 2,121 | 2,121 | | Deferred consideration | – | – | 5 | 5 | | | 16 | 9 | 5,906 | 5,931 | \* \*  Excludes statutory taxes and employee benefits. At 31 December 2022 the financial liabilities of the Company of €98 million consist of other financial liabilities (2021: €3 million). | | | | | | | --- | --- | --- | --- | --- | | | | Assets at Fair | Derivatives | | | | Assets at | Value Through | Used for | | | | Amortised Cost | Profit or Loss | Hedging | Total | | 31 December 2021 | €m | €m | €m | €m | | Assets per Consolidated Balance Sheet: | | | | | | Listed and unlisted debt instruments | – | 11 | – | 11 | | Derivative financial instruments | – | 8 | 2 | 10 | | Trade and other receivables | 2,006 | – | – | 2,006 | | Cash and cash equivalents | 855 | – | – | 855 | | Restricted cash | 14 | – | – | 14 | | | 2,875 | 19 | 2 | 2,896 | \* \*  Excludes statutory taxes and prepayments. At 31 December 2021 the financial assets of the Company of €233 million consist of assets at amortised cost. | | | | | | | --- | --- | --- | --- | --- | | | Liabilities at Fair | Derivatives | Other | | | | Value Through | Used for | Financial | | | | Profit or Loss | Hedging | Liabilities | Total | | 31 December 2021 | €m | €m | €m | €m | | Liabilities per Consolidated Balance Sheet: | | | | | | Borrowings | – | – | 3,754 | 3,754 | | Derivative financial instruments | 13 | 8 | – | 21 | | Trade and other payables | – | – | 2,082 | 2,082 | | Deferred consideration | – | – | 10 | 10 | | | 13 | 8 | 5,846 | 5,867 | \* \*  Excludes statutory taxes and employee benefits. At 31 December 2021 the financial liabilities of the Company of €3 million consist of other financial liabilities. 206 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued Key Financial Risks and Financial Risk Management Resulting from the Use of Financial Instruments and Related Sensitivity Analysis Financial and Credit Risk Management The operating parameters and policies of the Group’s treasury management function are established under formal Board authority. The Treasury Policy covers the areas of funding, counterparty risk, foreign exchange, controls and derivatives. Risk arising on counterparty default is controlled within a framework of dealing with high quality institutions and, by policy, limiting the amount of credit exposure to any one bank or institution. The Group uses financial instruments, including fixed and variable rate debt to finance operations, for capital spending programmes and for general corporate purposes. Additionally, financial instruments, including derivative instruments are used to hedge exposure to interest rate, commodity and foreign currency risks. Where all relevant criteria are met, hedge accounting is applied to remove the accounting mismatch between the hedging instrument and the hedged item. The Group does not use financial instruments for trading purposes. The Group mitigates the risk that counterparties to derivatives will fail to perform by contracting with major financial institutions having high credit ratings and considers the likelihood of counterparty failure to be low. Trade debtors arise from a wide and varied customer base. There is no significant concentration of credit risk amongst any of the Group’s most significant financial assets. The Group also holds no collateral in respect of its principal credit exposures. The successful management of the Group’s currency and interest rate exposure depends on a variety of factors, some of which are outside its control. The Group is exposed to the impact of interest rate changes and foreign currency fluctuations due to its investing and funding activities and its operations in foreign currencies. The Group manages interest rate exposure to achieve what management considers to be an appropriate balance of fixed and variable rate funding. To achieve this objective the Group may enter into interest rate swaps, options and forward rate agreements. The Group manages its balance sheet having regard to the currency exposures arising from its assets being denominated in a wide range of currencies. To this end, where foreign currency assets are funded by local borrowing, such borrowing is generally sourced in the currency of the related assets. The Group may also hedge currency exposure through the use of currency swaps, options and forward contracts. Tables detailing the impact of these derivatives on the currency profile of the Group’s financial instruments have been set out elsewhere in this note. Further details on certain specific financial risks encountered have been set out below. Interest Rate Risk The Group is exposed to changes in interest rates, primarily changes in Euribor. The revolving credit facility (‘RCF’) is variable rate debt, as are the Group’s securitisation facilities. Interest rate changes therefore generally do not affect the market value of such debt but do impact the amount of the Group’s interest payments and, therefore, its future earnings and cash flows, assuming other factors are held constant. At 31 December 2022, the Group had fixed an average of 97% (2021: 97%) of its interest cost on borrowings over the following 12 months. Holding all other variables constant, if interest rates for these borrowings increased by one percent, the Group’s interest expense would increase, and income before taxes would decrease, by approximately €2 million over the following twelve months. Interest income on the Group’s cash balances would increase by approximately €8 million assuming a one percent increase in interest rates earned on such balances over the following twelve months. Currency Sensitivity The Group operates in the following principal currency areas (other than euro): Swedish Krona, Sterling, Latin America (comprising mainly Mexican Peso, Colombian Peso and Brazilian Real), US Dollar and Eastern Europe (comprising mainly the Polish Zloty, the Czech Koruna). At the end of 2022, approximately 99% (2021: 99%) of its non-euro denominated net assets consisted of the Swedish Krona 19% (2021: 19%), Sterling 14% (2021: 17%), Latin American currencies 45% (2021: 40%), US Dollar 8% (2021: 7%) and Eastern European currencies 13% (2021: 16%). The Group believes that a strengthening of the euro exchange rate by 1% against all other foreign currencies from the 31 December 2022 rate would reduce shareholders’ equity by approximately €26 million (2021: €25 million). Commodity Price Risk Containerboard The Group is exposed to commodity price risks through its dependence on recovered paper, the principal raw material used in the manufacture of recycled containerboard. The price of recovered paper is dependent on both demand and supply conditions. Demand conditions include the production of recycled containerboard in Europe and the demand for recovered paper for the production of recycled containerboard outside of Europe, principally in Asia. Supply conditions include the rate of recovery of recovered paper, itself dependant on historic pricing related to the cost of recovery, and some slight seasonal variations. Just over 1.05 metric tonnes of recovered paper are required to manufacture 1.0 metric tonne of recycled containerboard. Consequently, an increase in the price of recovered paper of, for example, €20 per tonne would increase the cost of production of recycled containerboard by approximately €21 per tonne. Historically, increases in the cost of recovered paper, if sustained, have led to a rise in the price of recycled containerboard, with a lag of one to two months. ![]() 207Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued #### Key Financial Risks and Financial Risk Management Resulting from the Use of Financial Instruments and Related #### Sensitivity Analysis continued #### Commodity Price Risk continued Containerboard continued The price of recovered paper can fluctuate significantly within a given year, affecting the operating results of the Group’s paper processing facilities. The Group seeks to manage this risk operationally rather than by entering into financial risk management derivatives. Accordingly, at each of 31 December 2022 and 2021, there were no derivatives held to mitigate such risks. In addition, developing policy changes in the EU with regard to renewable energy sources have created an additional demand for wood, the principal raw material used in the manufacture of kraftliner. This has the effect of potentially increasing the price of wood and consequently the cost of the Group’s raw materials. At each of 31 December 2022 and 2021, the Group held no derivatives to mitigate such risks. Energy The cost of producing the Group’s products is also sensitive to the price of energy. The Group’s main energy exposure is to the cost of gas and electricity. These energy costs have experienced unprecedented price volatility in 2022, with a corresponding effect on Group production costs. Natural gas prices, relevant to the Group, started the year at €83.23 per megawatt-hour, increased to €308.23 in August 2022 and decreased to €116.16 per megawatt-hour in December 2022, giving an average price of €120.91 for 2022 (2021: average price of €48.10). The Group has entered into a limited level of energy derivative contracts to economically hedge a portion of its energy costs in Sweden. The Group has also fixed a certain level of its energy costs through contractual arrangements directly with its energy suppliers. 2022 was characterised by unprecedented cost inflation, especially in energy, which moderated in the latter part of the year. The Group’s overall energy costs increased by approximately 90% when compared with 2021 mainly due to higher energy market prices and increased usage due to the acquisition of the Verzuolo mill in October 2021. Tables detailing the Group’s energy derivatives have been set out elsewhere in this note. Liquidity Risk The Group is exposed to liquidity risk which arises primarily from the maturing of short-term and long-term debt obligations and derivative transactions. The Group’s policy is to ensure that sufficient resources are available either from cash balances, cash flows or undrawn committed bank facilities, to ensure all obligations can be met as they fall due. To achieve this objective, the Group: • Maintains cash balances and liquid investments with highly rated counterparties; • Limits the maturity of cash balances; and • Borrows the bulk of its debt needs under committed bank lines or other term financing and by policy maintains a minimum level of undrawn committed facilities. The Group has entered into a series of borrowing arrangements in order to facilitate its liquidity needs in this regard and the key terms of those arrangements are described within Note 24 and within certain tables set out below. At each year-end, the Group’s rolling liquidity reserve (which comprises cash and cash equivalents and undrawn committed facilities and which represents the amount of available cash headroom in the Group’s funding structure) was as follows: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Cash and cash equivalents | 788 | 869 | | Committed undrawn facilities | 1,655 | 1,655 | | Liquidity reserve | 2,443 | 2,524 | | Borrowings due within one year – contractual undiscounted cash flows | (264) | (237) | | Net position | 2,179 | 2,287 | Management monitors rolling cash flow forecasts on an ongoing basis to determine the adequacy of the liquidity position of the Group. This process also incorporates a longer term liquidity review to ensure refinancing risks are adequately catered for as part of the Group’s strategic planning. The Group continues to benefit from its existing financing package and debt profile. In addition, the Group’s operating activities are cash generative and expect to be so over the foreseeable future; the Group has committed undrawn facilities of €1,655 million at 31 December 2022; and the Group has cash and cash equivalents of €788 million at 31 December 2022. The Group reassessed the classification of restricted cash during the year as a result of an agenda decision by the IFRS Interpretations Committee in 2022. Consequently restricted cash is now included as cash and cash equivalents in the Consolidated Statement of Cash Flows. As a result of this reassessment, the comparative balances for cash and cash equivalents for 2021 have been increased by €14 million. The maturity dates of the Group’s main borrowing facilities as set out in Note 24, together with the liquidity analysis as set out in this note, more fully describes the Group’s longer term financing risks. 208 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued #### Key Financial Risks and Financial Risk Management Resulting from the Use of Financial Instruments and Related #### Sensitivity Analysis continued Capital Risk Management The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the overall cost of capital. In managing its capital structure, the primary focus of the Group is the ratio of net debt as a multiple of EBITDA (earnings before exceptional items, share-based payment expense, share of associates’ profit (after tax), net finance costs, income tax expense, depreciation and depletion (net) and intangible asset amortisation). Maximum levels for this ratio are set under Board approved policy. At 31 December 2022, the net debt to EBITDA ratio of the Group was 1.3 times (net debt of €2,992 million) which compares to 1.7 times (net debt of €2,885 million) at the end of 2021. This gives the Group continuing headroom compared to the actual covenant level at 31 December 2022 of 3.75 times. On the basis of pre-exceptional operating profit, the Group’s return on capital employed was 21.8% compared to 16.0% in 2021. The return on capital employed comprises pre-exceptional operating profit plus share of associates’ profit (after tax) as a percentage of average capital employed (where average capital employed is the average of total equity and net debt at the current and prior year-end). Capital employed at 31 December 2022 was €8,030 million (2021: €7,277 million). The capital employed of the Company at 31 December 2022 was €2,955 million (2021: €2,915 million). Credit Risk Credit risk arises from credit exposure to trade debtors, cash and cash equivalents including deposits with banks and financial institutions, derivative financial instruments and investments. The Group has no sovereign exposures and no material debtors with Government agencies. The maximum exposure to credit risk is represented by the carrying amount of each asset. Trade debtors arise from a wide and varied customer base spread throughout the Group’s operations and as such there is no significant concentration of credit risk. Credit evaluations are performed on all customers over certain thresholds and all customers are subject to continued monitoring at operating company level. Further information on the Group approach to providing for expected credit losses is set out in Note 19. Risk of counterparty default arising on cash and cash equivalents and derivative financial instruments is controlled within a framework of dealing with high quality institutions and, by policy, limiting the amount of credit exposure to any one bank or institution. Of the Group’s total cash and cash equivalents (including restricted cash) at 31 December 2022 of €788 million, 38% was with financial institutions in the A rating category of Standard & Poor’s or Moody’s and 53% was with financial institutions in the AA/Aa or higher rating category. The remaining 9% was largely represented by cash held with banks in Latin America which fell outside the A or higher ratings categories. At 31 December 2022, derivative transactions were with counterparties with ratings ranging from BB- to AA- with Standard & Poor’s or Ba1 to Aa2 with Moody’s. At each reporting date, there were no significant concentrations of credit risk which individually represented more than 10% of the Group’s financial assets. A geographical analysis of the Group’s segment assets has been provided in Note 4. Market Risk – Listed and Unlisted Debt Instruments The Group’s listed and unlisted debt instruments principally comprise investments held relating to unfunded pension liabilities. These investments are being carried at their estimated fair value and the Group’s maximum exposure to risks associated with these investments is represented by their carrying amounts. Further details on listed and unlisted debt instruments are set out in Note 14. ![]() 209Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued #### Key Financial Risks and Financial Risk Management Resulting from the Use of Financial Instruments and Related #### Sensitivity Analysis continued Derivative Positions Derivative financial instruments recognised as assets and liabilities in the Consolidated Balance Sheet both as part of cash flow hedges and other economic hedges which do not meet the criteria for hedge accounting under IFRS 9, have been set out below: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Non-current derivative assets | | | | Cash flow hedges: | | | | Cross currency swaps | 2 | 2 | | Total non-current derivative assets | 2 | 2 | | Current derivative assets | | | | Cash flow hedges: | | | | Foreign currency forwards | 1 | – | | Cross currency swaps | 1 | – | | Not designated as hedges: | | | | Foreign currency forwards | 1 | 1 | | Cross currency swaps | 34 | 2 | | Energy hedging contracts | 9 | 5 | | Total current derivative assets | 46 | 8 | | Total derivative assets | 48 | 10 | | Non-current derivative liabilities | | | | Cash flow hedges: | | | | Foreign currency forwards | (1) | – | | Cross currency swaps | (3) | (7) | | Total non-current derivative liabilities | (4) | (7) | | Current derivative liabilities | | | | Cash flow hedges: | | | | Foreign currency forwards | (5) | (1) | | Not designated as hedges: | | | | Foreign currency forwards | (1) | – | | Cross currency swaps | (6) | (6) | | Energy hedging contracts | (9) | (7) | | Total current derivative liabilities | (21) | (14) | | Total derivative liabilities | (25) | (21) | | Net asset/(liability) on derivative financial instruments | 23 | (11) | ![]() 210 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued Fair Value Hierarchy | | | | | | | --- | --- | --- | --- | --- | | | Level 1 | Level 2 | Level 3 | Total | | Fair value measurement at 31 December 2022 | €m | €m | €m | €m | | Other investments: | | | | | | Listed | 2 | – | – | 2 | | Unlisted | – | 8 | – | 8 | | Derivative financial instruments: | | | | | | Assets at fair value through profit or loss | – | 44 | – | 44 | | Derivatives used for hedging | – | 4 | – | 4 | | Derivative financial instruments: | | | | | | Liabilities at fair value through profit or loss | – | (16) | – | (16) | | Derivatives used for hedging | – | (9) | – | (9) | | | 2 | 31 | – | 33 | | | | | | | | --- | --- | --- | --- | --- | | | Level 1 | Level 2 | Level 3 | Total | | Fair value measurement at 31 December 2021 | €m | €m | €m | €m | | Other investments: | | | | | | Listed | 2 | – | – | 2 | | Unlisted | – | 9 | – | 9 | | Derivative financial instruments: | | | | | | Assets at fair value through profit or loss | – | 8 | – | 8 | | Derivatives used for hedging | – | 2 | – | 2 | | Derivative financial instruments: | | | | | | Liabilities at fair value through profit or loss | – | (13) | – | (13) | | Derivatives used for hedging | – | (8) | – | (8) | | | 2 | (2) | – | – | The fair value of listed investments is determined by reference to their bid price at the reporting date. Unlisted investments are valued using recognised valuation techniques for the underlying security including discounted cash flows and similar unlisted equity valuation models. The fair value of the derivative financial instruments set out above has been measured in accordance with level 2 of the fair value hierarchy. All are plain derivative instruments, valued with reference to observable foreign exchange rates, interest rates or broker prices.  Financial Instruments in Level 3 The following table presents the changes in level 3 instruments for the years ended 31 December 2022 and 31 December 2021: | | | | --- | --- | | | Deferred | | | Contingent | | | Consideration | | | €m | | Balance at 1 January 2021 | (35) | | Gain included in finance income – net change in fair value | 2 | | Paid during the year | 33 | | Balance at 31 December 2021 | – | | Balance at 31 December 2022 | – | In 2019, as part of its acquisition in Serbia, the Group put in place put and call options over the remaining 25% non-controlling interest in the acquired business. The Group recognised deferred contingent consideration in respect of the put option under the anticipated-acquisition method of accounting; with the call option being classified as a derivative. The valuation model for the deferred contingent consideration was measured in accordance with level 3 of the fair value hierarchy and was based on the present value of the expected payment discounted using a risk-adjusted discount rate. The unobservable input in determining the fair value was the underlying profitability of the business unit to which the consideration relates. During 2021, the Group exercised its call option to purchase the remaining 25% of the Serbian business at a cost of €33 million. There were no reclassifications or transfers between the levels of the fair value hierarchy during the period. ![]() 211Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued Cash Flow Hedging As more fully set out in this note, the Group principally utilises interest rate and cross currency swaps to swap its variable rate debt into fixed rates. Hedge ineffectiveness is determined at the inception of the hedge relationship and through periodic prospective hedge effectiveness assessments to ensure that an economic relationship exists between the hedged item and the hedging instrument. The Group determines the existence of an economic relationship between the hedging instrument and hedged item based on the reference interest rates, tenors, repricing dates and maturities and notional amounts. The Group does not hedge 100% of its loans, therefore the hedged item is identified as a proportion of the outstanding loans up to the notional amount of the swaps. As the Group enters into hedge relationships where the critical terms of the hedging instrument materially match the terms of the hedged item, a qualitative assessment of effectiveness is performed. If changes in circumstances affect the terms of the hedged item such that the critical terms no longer match exactly with the critical terms of the hedging instrument, the Group uses the hypothetical derivative method to assess effectiveness. Hedge ineffectiveness for interest rate swaps and cross currency swaps may occur due to: • The effect of the counterparty’s and the Group’s own credit risk on the fair value of the swaps which is not reflected in the change in the fair value of the hedged cash flows attributable to the change in the hedged risk; • Changes in the contractual terms or timing of the payments on the hedged item; or • The fair value of the hedging instrument on the hedge relationship designation date (if not zero). The Group had no interest rate swaps outstanding in 2021 or 2022. There was no material ineffectiveness in hedged risk in relation to cross currency swap hedges in 2022 and 2021. Amounts accounted for in the cash flow hedging reserve in respect of these swaps during the current and preceding periods have been set out in the Consolidated Statement of Comprehensive Income. These fair value gains and losses are expected to impact on profit and loss in 2023, in line with the underlying debt being hedged. The Group has also entered into a limited number of bunker fuel swaps to hedge against variability in the cost of bunker fuel included in certain of its shipping contracts. Hedge effectiveness is assessed using the same principles as those used for designated interest rate and cross currency swaps. In hedges of bunker fuel costs, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated or if there are changes in the credit risk of the Group or the counterparty. These hedges have been highly effective in achieving offsetting cash flows with no ineffectiveness recorded. These fair value gains and losses are expected to impact on profit and loss over the period from 2023 to 2025. In addition, certain subsidiaries use foreign currency forward contracts to hedge forecast foreign currency sales and purchases. Such forward contracts are designated as cash flow hedges and are set so as to closely match the critical terms of the underlying cash flows. Hedge effectiveness is assessed using the same principles as those used for designated interest rate, cross currency and bunker fuel swaps. In hedges of foreign currency sales and purchases, ineffectiveness may arise if the timing of the forecast transaction changes from what was originally estimated or if there are changes in the credit risk of the Group or the counterparty. These hedges have been highly effective in achieving offsetting cash flows with no ineffectiveness recorded. These fair value gains and losses are expected to impact on profit and loss during 2023 and 2024. The Group’s hedging reserves disclosed in Note 23 relate to the following hedging instruments: | | | | | | | --- | --- | --- | --- | --- | | | Cost of | Cross | Foreign | Total | | | Hedging | Currency | Currency | Hedge | | | Reserve | Swaps | Forwards | Reserves | | | €m | €m | €m | €m | | At 1 January 2022 | 1 | 2 | (1) | 2 | | Change in fair value of hedging instrument recognised in OCI | – | – | (5) | (5) | | Reclassified from OCI to profit or loss – included in finance costs | (1) | (1) | – | (2) | | Reclassified from OCI to profit or loss – included in revenue | – | – | 1 | 1 | | At 31 December 2022 | – | 1 | (5) | (4) | | | | | | | | --- | --- | --- | --- | --- | | | Cost of | Cross | Foreign | Total | | | Hedging | Currency | Currency | Hedge | | | Reserve | Swaps | Forwards | Reserves | | | €m | €m | €m | €m | | At 1 January 2021 | 2 | 1 | 3 | 6 | | Change in fair value of hedging instrument recognised in OCI | – | 1 | (1) | – | | Reclassified from OCI to profit or loss – included in finance costs | (1) | – | – | (1) | | Reclassified from OCI to profit or loss – included in revenue | – | – | (3) | (3) | | At 31 December 2021 | 1 | 2 | (1) | 2 | Derivatives not Designated as Hedges The Group utilises a combination of foreign currency forward contracts and cross currency swaps in order to economically hedge on balance sheet debtor, creditor and borrowing exposures which are denominated in currencies other than the euro. Formal hedge accounting as permitted by IFRS 9 is not applied to these derivative instruments because a natural offset is effectively already achieved through fair valuing the derivatives through the profit or loss as required by IFRS 9, while also retranslating the related balance sheet foreign currency denominated monetary assets or liabilities at appropriate closing rates at each balance sheet date, as required by IAS 21, The Effects of Changes in Foreign Exchange Rates. 212 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued #### Derivatives not Designated as Hedges continued The Group has also entered into certain energy hedging contracts to mitigate the associated price risks which occur as a result of the Group’s normal operations. These have not been designated as hedges in accordance with IFRS 9 and are recognised at fair value through the profit or loss as required by that standard. The principal terms of the Group’s material derivative contracts have been set out further below. Interest Rate Risk Management The Group adopts a policy of maintaining between 55% and 90% of its interest rate risk exposure at fixed rates over the next twelve months. This is achieved by entering into fixed rate instruments. The proceeds of the Group’s November 2020 equity issuance were initially allocated to repaying variable rate debt under the RCF and securitisation programmes, which reduced the level of variable rate debt comprised in the Group’s gross debt balance. These funds will be fully utilised in the coming years (along with ongoing cash flows) to fund investment. Consequently, the Group is temporarily over its maximum fixed rate levels at 31 December 2022 and 31 December 2021. The Group expects to return to a level of fixed rate debt within policy parameters over the medium-term. Global reform, discontinuation and replacement of certain benchmark interest rates such as the London Interbank Offered Rate (‘LIBOR’) is underway. The publication of GBP, EUR, CHF and JPY LIBOR settings, and the 1-week and 2-month USD LIBOR settings, ceased immediately following publication on 31 December 2021 and they were replaced with alternative Risk Free Rates (‘RFR’). The remaining USD LIBOR settings will cease immediately following publication on 30 June 2023. The Group’s borrowings are substantially fixed rate and the Group has no hedge accounting relationships that reference LIBOR. The Group’s floating rate RCF references, amongst others, USD LIBOR. Euro denominated borrowings under the RCF are indexed to the Euro Interbank Offered Rate (‘EURIBOR’) which is expected to continue for now since its reform from the previous quote-based methodology to a new hybrid methodology. At 31 December 2022, the Group has one loan drawn under the RCF of USD$8 million. The Group’s contracts which reference those benchmark interest rates subject to reform and replacement adequately provide for an alternative calculation of interest in the event that they are unavailable. It is intended that the Secured Overnight Financing Rate (‘SOFR’) will be the replacement for USD LIBOR for USD borrowings under the RCF, with SOFR plus a credit adjustment spread expected to be economically equivalent to the existing USD LIBOR rates. The Group is well placed to manage the discontinuation, reform or replacement of these important benchmark rates and the impact on the Group and its ability to manage its interest rate risk is immaterial. Foreign Exchange Risk Management The Group manages its balance sheet having regard to the currency exposures arising from its assets being denominated in a wide range of currencies. To this end, where foreign currency assets are funded by local borrowing, such borrowing is generally sourced in the currency of the related assets. Additionally, the Group has a number of long-term foreign currency intra-group loans for which settlement is neither planned nor likely to happen in the foreseeable future, and as a consequence of which are deemed quasi-equity in nature and therefore part of the Group’s net investment in its foreign operations. The Group also hedges a portion of its currency exposure through the use of currency swaps and forward contracts. At 31 December 2022 the Group had entered into €339 million (2021: €347 million) currency equivalent of forward contracts and there were no option contracts outstanding in respect of its day-to-day trading. At 31 December 2022 the Group had also entered into further short-term currency swaps of €1,300 million equivalent (2021: €893 million) as part of its short-term liquidity management. The Group is exposed to transactional foreign exchange currency risk to the extent that there is a mismatch between the currencies in which sales, purchases, receivables and borrowings are denominated and the respective functional currencies of the Group companies. The Group’s risk management policy allows the hedging of estimated foreign currency exposure in respect of highly probable forecast sales, primarily in Sweden, and purchases. As such, certain subsidiaries enter into foreign currency forward contracts to hedge highly probable forecast foreign currency sales and purchases for which hedge accounting under IFRS 9 is applied. As a consequence, therefore, the Group does not have any material transactional exposures. ![]() 213Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued #### Foreign Exchange Risk Management continued The effects of these designated foreign currency forwards on the Group’s financial position and performance are mainly as follows: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Foreign currency forwards – sales: | | | | Carrying amount – liability | (3) | (1) | | Notional amount | 112 | 107 | | Line item in balance sheet – hedging instrument | Derivative financial instruments | Derivative financial instruments | | Line item in balance sheet – hedged item | Trade and other receivables | Trade and other receivables | | Maturity dates | January 2023 – December 2023 | January 2022 – December 2022 | | Hedge ratio | 1:1 | 1:1 | | Change in fair value of outstanding hedging instrument recognised in OCI | (4) | (1) | | Change in fair value of hedged item used to determine hedge effectiveness | 1 | 1 | | Weighted average EUR:SEK forward contract rate | 10.85 | 10.30 | | Weighted average GBP:SEK forward contract rate | 12.18 | 12.03 | The Group uses a portion of its foreign currency borrowings to hedge the net investment in certain of its foreign entities. The carrying amount of borrowings which are designated as net investment hedges at the year-end amounted to €46 million (2021: €43 million). The gains or losses on the effective portions of such borrowings are recognised in other comprehensive income. Ineffective portions of the gains and losses on such borrowings are recognised in the income statement. There has been no ineffectiveness recognised in relation to these hedges in the current or prior financial year. The Group also enters into longer term cross currency swap arrangements in respect of its US$ dollar debt, which are set out in more detail in the tables below. In addition, the Group entered into a number of cross currency swaps in respect of the funding of its acquisition in Brazil, which are set out in more detail in the table below. Outstanding currency swap agreements at 31 December 2022 are summarised as follows: | | | | | | | --- | --- | --- | --- | --- | | | Currency | | | | | | Received | Maturity | Interest Rate | Interest Rate | | Currency Swapped (million) | (million) | Date | Paid | Received | | US$ 154 | EUR 144 | 2023 | 5.30% | 7.50% | | EUR 25 | BRL 153 | 2024 | CDI + 2.15% | Euribor +2.05% | | EUR 13 | BRL 76 | 2024 | CDI + 2.17% | Euribor +2.05% | | EUR 5 | BRL 28 | 2024 | CDI + 1.84% | Euribor +2.05% | | EUR 20 | BRL 106 | 2025 | CDI + 2.78% | Euribor + 2.38% | | EUR 20 | BRL 106 | 2025 | CDI + 2.76% | Euribor + 2.38% | Outstanding currency swap agreements at 31 December 2021 are summarised as follows: | | | | | | | --- | --- | --- | --- | --- | | | Currency | | | | | | Received | Maturity | Interest Rate | Interest Rate | | Currency Swapped (million) | (million) | Date | Paid | Received | | US$ 154 | EUR 144 | 2023 | 5.30% | 7.50% | | EUR 25 | BRL 153 | 2024 | CDI + 2.15% | Euribor +2.05% | | EUR 13 | BRL 76 | 2024 | CDI + 2.17% | Euribor +2.05% | | EUR 5 | BRL 28 | 2024 | CDI + 1.84% | Euribor +2.05% | ![]() 214 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued #### Foreign Exchange Risk Management continued The effects of the cross currency swaps designated as cash flow hedges on the Group’s financial position and performance are as follows: | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Hedge of US$ debt: | | | | Carrying amount – asset/(liability) | 1 | (7) | | Notional amount – EUR | 144 | 144 | | Line item in balance sheet – hedging instrument | Derivative financial instruments | Derivative financial instruments | | Line item in balance sheet – hedged item | Borrowings | Borrowings | | Maturity dates | November 2023 | November 2023 | | Hedge ratio | 1:1 | 1:1 | | Change in fair value of outstanding hedging instrument recognised in OCI | – | – | | Change in fair value of hedged item used to determine hedge effectiveness | (1) | – | | Weighted average EUR:USD hedged rate | 1.07 | 1.07 | | Hedge – Brazil acquisition funding: | | | | Carrying amount – (liability)/asset | (1) | 2 | | Notional amount – BRL | 469 | 257 | | Line item in balance sheet – hedging instrument | Derivative financial instruments | Derivative financial instruments | | Line item in balance sheet – hedged item | Borrowings | Borrowings | | Maturity dates | June 2024 – October 2025 | June 2024 | | Hedge ratio | 1:1 | 1:1 | | Change in fair value of outstanding hedging instrument recognised in OCI | – | 1 | | Change in fair value of hedged item used to determine hedge effectiveness | – | (1) | | Weighted average EUR:BRL hedged rate | 5.65 | 5.99 | Energy Risk Management The Group had the following energy hedging contracts outstanding at the end of 31 December 2022 and 2021. Gains and losses recorded in respect of these contracts have been set out elsewhere in this note. | | | | | | | --- | --- | --- | --- | --- | | | 2022 | | | 2021 | | | Notional | Maturity | Notional | Maturity | | | | Q1 2023 | | Q1 2022 | | Energy contracts | €4 million | – Q4 2024 | €7 million | – Q4 2024 | ![]() 215Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued Effective Interest Rates and Repricing Analysis In respect of income earning financial assets and interest bearing financial liabilities, the following tables indicate their average effective interest rates at the reporting date and the periods in which they reprice: | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Average | | | | | | | | | Effective | 6 Months | 6-12 | 1-2 | 2-5 | More Than | | | | Interest | or Less | Months | Years | Years | 5 Years | Total | | 31 December 2022 | Rate | €m | €m | €m | €m | €m | €m | | Fixed rate instruments | | | | | | | | | Liabilities: | | | | | | | | | 2025 debentures | 7.55% | – | – | – | 276 | – | 276 | | 2025 notes | 2.96% | – | – | – | 252 | – | 252 | | 2026 notes | 3.04% | – | – | – | 1,008 | – | 1,008 | | 2027 notes | 1.66% | – | – | – | 748 | – | 748 | | 2029 green notes | 0.64% | – | – | – | – | 496 | 496 | | 2033 green notes | 1.10% | – | – | – | – | 497 | 497 | | Bank loans/overdrafts | 5.88% | 9 | – | 1 | 5 | – | 15 | | Total | | 9 | – | 1 | 2,289 | 993 | 3,292 | | Leases | 2.95% | 12 | 10 | 34 | 127 | 191 | 374 | | Total fixed rate liabilities | | 21 | 10 | 35 | 2,416 | 1,184 | 3,666 | | Floating rate instruments | | | | | | | | | Assets: | | | | | | | | | Cash and cash equivalents | 2.08% | 777 | – | – | – | – | 777 | | Restricted cash | 0.33% | 11 | – | – | – | – | 11 | | Total floating rate assets | | 788 | – | – | – | – | 788 | | Liabilities: | | | | | | | | | Revolving credit facility | 46.90% | 4 | – | – | – | – | 4 | | 2026 €100 million receivables securitisation | 8.55% | 4 | – | – | – | – | 4 | | 2026 €230 million receivables securitisation | 6.42% | 11 | – | – | – | – | 11 | | Bank loans/overdrafts | 10.64% | 95 | – | – | – | – | 95 | | Total floating rate liabilities | | 114 | – | – | – | – | 114 | | Total net position | | 653 | (10) | (35) | (2,416) | (1,184) | (2,992) | ![]() 216 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued #### Effective Interest Rates and Repricing Analysis continued | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Average | | | | | | | | | Effective | 6 Months | 6-12 | 1-2 | 2-5 | More Than | | | | Interest | or Less | Months | Years | Years | 5 Years | Total | | 31 December 2021 | Rate | €m | €m | €m | €m | €m | €m | | Fixed rate instruments | | | | | | | | | Liabilities: | | | | | | | | | 2025 debentures | 7.56% | – | – | – | 260 | – | 260 | | 2025 notes | 2.97% | – | – | – | 251 | – | 251 | | 2026 notes | 3.05% | – | – | – | 1,007 | – | 1,007 | | 2027 notes | 1.66% | – | – | – | – | 747 | 747 | | 2029 green notes | 0.64% | – | – | – | – | 495 | 495 | | 2033 green notes | 1.10% | – | – | – | – | 496 | 496 | | Bank loans/overdrafts | 3.84% | – | 1 | 1 | 5 | – | 7 | | Total | | – | 1 | 1 | 1,523 | 1,738 | 3,263 | | Leases | 2.84% | 11 | 8 | 28 | 122 | 211 | 380 | | Total fixed rate liabilities | | 11 | 9 | 29 | 1,645 | 1,949 | 3,643 | | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | Floating rate instruments | | | | | | | | | Assets: | | | | | | | | | Cash and cash equivalents | (0.36)% | 855 | – | – | – | – | 855 | | Restricted cash | 0.01% | 14 | – | – | – | – | 14 | | Total floating rate assets | | 869 | – | – | – | – | 869 | | Liabilities: | | | | | | | | | Revolving credit facility | 66.05% | 2 | – | – | – | – | 2 | | 2026 €100 million receivables securitisation | 6.36% | 4 | – | – | – | – | 4 | | 2026 €230 million receivables securitisation | 3.80% | 11 | – | – | – | – | 11 | | Bank loans/overdrafts | 8.10% | 94 | – | – | – | – | 94 | | Total floating rate liabilities | | 111 | – | – | – | – | 111 | | Total net position | | 747 | (9) | (29) | (1,645) | (1,949) | (2,885) | Liquidity Analysis The following table sets out the maturity or liquidity analysis of the Group’s financial liabilities and net settled derivative financial liabilities into the relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows: | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Weighted | | | | | | | | | Average | | | | | | | | | Period | | | | | | | | | Until | No Fixed | Less Than | 1-2 | 2-5 | More Than | | | | Maturity | Term | 1 Year | Years | Years | 5 Years | Total | | 31 December 2022 | (Years) | €m | €m | €m | €m | €m | €m | | Liabilities: | | | | | | | | | Trade and other payables | | – | 2,121 | – | – | – | 2,121 | | Revolving credit facility | 3.1 | – | – | – | 8 | – | 8 | | 2026 €100 million receivables securitisation | 3.1 | – | – | – | 5 | – | 5 | | 2026 €230 million receivables securitisation | 3.9 | – | – | – | 13 | – | 13 | | Bank loans/overdrafts | 1.1 | 17 | 53 | 23 | 16 | 1 | 110 | | 2025 debentures | 2.9 | – | 21 | 21 | 315 | – | 357 | | 2025 notes | 2.1 | – | 7 | 7 | 260 | – | 274 | | 2026 notes | 3.0 | – | 29 | 29 | 1,043 | – | 1,101 | | 2027 notes | 4.7 | – | 11 | 11 | 784 | – | 806 | | 2029 green notes | 6.7 | – | 3 | 3 | 7 | 505 | 518 | | 2033 green notes | 10.7 | – | 5 | 5 | 15 | 530 | 555 | | | | 17 | 2,250 | 99 | 2,466 | 1,036 | 5,868 | | Leases | 4.7 | – | 104 | 74 | 139 | 108 | 425 | | | | 17 | 2,354 | 173 | 2,605 | 1,144 | 6,293 | | Derivative liabilities | | – | 10 | – | – | – | 10 | | Deferred consideration | | – | 4 | 1 | – | – | 5 | | Total liabilities | | 17 | 2,368 | 174 | 2,605 | 1,144 | 6,308 | ![]() 217Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued #### Liquidity Analysis continued | | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | --- | | | Weighted | | | | | | | | | Average | | | | | | | | | Period | | | | | | | | | Until | No Fixed | Less Than | 1-2 | 2-5 | More Than | | | | Maturity | Term | 1 Year | Years | Years | 5 Years | Total | | 31 December 2021 | (Years) | €m | €m | €m | €m | €m | €m | | Liabilities: | | | | | | | | | Trade and other payables | | – | 2,082 | – | – | – | 2,082 | | Revolving credit facility | 4.1 | – | – | – | 7 | – | 7 | | 2026 €100 million receivables securitisation | 4.1 | – | – | – | 5 | – | 5 | | 2026 €230 million receivables securitisation | 4.9 | – | – | – | 13 | – | 13 | | Bank loans/overdrafts | 1.1 | 28 | 29 | 33 | 10 | 1 | 101 | | 2025 debentures | 3.9 | – | 19 | 19 | 297 | – | 335 | | 2025 notes | 3.1 | – | 7 | 7 | 260 | – | 274 | | 2026 notes | 4.0 | – | 29 | 29 | 1,072 | – | 1,130 | | 2027 notes | 5.7 | – | 11 | 11 | 34 | 761 | 817 | | 2029 green notes | 7.7 | – | 3 | 3 | 7 | 507 | 520 | | 2033 green notes | 11.7 | – | 5 | 5 | 15 | 535 | 560 | | | | 28 | 2,185 | 107 | 1,720 | 1,804 | 5,844 | | Leases | 4.9 | – | 98 | 76 | 135 | 128 | 437 | | | | 28 | 2,283 | 183 | 1,855 | 1,932 | 6,281 | | Derivative liabilities | | – | 6 | 1 | – | – | 7 | | Deferred consideration | | – | 10 | – | – | – | 10 | | Total liabilities | | 28 | 2,299 | 184 | 1,855 | 1,932 | 6,298 | The financial liabilities of the Company of €98 million (2021: €3 million) are repayable on demand. The following table sets out the liquidity analysis with regard to derivatives which do not net settle in the normal course of business (primarily foreign exchange contracts and currency swaps). The table shows the estimated timing of gross contractual cash flows exchanged on an undiscounted basis: | | | | | | | --- | --- | --- | --- | --- | | | Less Than | 1-2 | 2-5 | | | | 1 Year | Years | Years | Total | | 31 December 2022 | €m | €m | €m | €m | | Liabilities: | | | | | | Cross currency swaps | (1,413) | (48) | (35) | (1,496) | | Foreign currency forwards | (318) | (4) | (2) | (324) | | Total outflow | (1,731) | (52) | (37) | (1,820) | | Assets: | | | | | | Cross currency swaps | 1,304 | 199 | 42 | 1,545 | | Foreign currency forwards | 314 | 3 | 2 | 319 | | Total inflow | 1,618 | 202 | 44 | 1,864 | | | | | | | | --- | --- | --- | --- | --- | | | Less Than | 1-2 | 2-5 | | | | 1 Year | Years | Years | Total | | 31 December 2021 | €m | €m | €m | €m | | Liabilities: | | | | | | Cross currency swaps | (911) | (156) | (33) | (1,100) | | Foreign currency forwards | (341) | (6) | – | (347) | | Total outflow | (1,252) | (162) | (33) | (1,447) | | Assets: | | | | | | Cross currency swaps | 904 | 144 | 43 | 1,091 | | Foreign currency forwards | 341 | 6 | – | 347 | | Total inflow | 1,245 | 150 | 43 | 1,438 | ![]() 218 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 29. Financial Instruments continued Currency Analysis The table below sets out the Group’s financial assets and liabilities according to their principal currencies. Currency risk related to financial assets and liabilities denominated in currencies other than the Group’s presentation currency (euro) represents both transactional and translation risk. As at 31 December 2022 and 2021 the Company had no material financial assets or liabilities denominated in foreign currencies. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Euro | Sterling | Latin America | US Dollar | Other | Total | | 31 December 2022 | €m | €m | €m | €m | €m | €m | | Trade and other receivables | 1,278 | 180 | 269 | 260 | 241 | 2,228 | | Listed and unlisted debt instruments | 10 | – | – | – | – | 10 | | Cash and cash equivalents | 576 | 40 | 42 | 101 | 18 | 777 | | Restricted cash | 9 | – | 1 | – | 1 | 11 | | Total assets | 1,873 | 220 | 312 | 361 | 260 | 3,026 | | Trade and other payables | 1,323 | 142 | 203 | 237 | 216 | 2,121 | | Revolving credit facility | (3) | – | – | 7 | – | 4 | | 2026 €100 million receivables securitisation | 4 | – | – | – | – | 4 | | 2026 €230 million receivables securitisation | 11 | – | – | – | – | 11 | | Bank loans/overdrafts | 25 | – | 66 | 18 | 1 | 110 | | 2025 debentures | – | – | – | 276 | – | 276 | | 2025 notes | 252 | – | – | – | – | 252 | | 2026 notes | 1,008 | – | – | – | – | 1,008 | | 2027 notes | 748 | – | – | – | – | 748 | | 2029 green notes | 496 | – | – | – | – | 496 | | 2033 green notes | 497 | – | – | – | – | 497 | | | 4,361 | 142 | 269 | 538 | 217 | 5,527 | | Leases | 166 | 58 | 15 | 123 | 12 | 374 | | Deferred consideration | 5 | – | – | – | – | 5 | | Total liabilities | 4,532 | 200 | 284 | 661 | 229 | 5,906 | | Impact of foreign exchange contracts | (492) | 157 | 117 | 135 | (67) | (150) | | Total (liabilities)/assets | (2,167) | (137) | (89) | (435) | 98 | (2,730) | \* \*  Latin America includes currencies such as the Mexican Peso, Colombian Peso and Brazilian Real. These have been grouped together principally owing to their size and impact on the currency analysis tables within this note. | | | | | | | | | --- | --- | --- | --- | --- | --- | --- | | | Euro | Sterling | Latin America | US Dollar | Other | Total | | 31 December 2021 | €m | €m | €m | €m | €m | €m | | Trade and other receivables | 1,106 | 171 | 253 | 247 | 229 | 2,006 | | Listed and unlisted debt instruments | 11 | – | – | – | – | 11 | | Cash and cash equivalents | 673 | 51 | 35 | 73 | 23 | 855 | | Restricted cash | 12 | – | 1 | 1 | – | 14 | | Total assets | 1,802 | 222 | 289 | 321 | 252 | 2,886 | | Trade and other payables | 1,360 | 131 | 165 | 234 | 192 | 2,082 | | Revolving credit facility | (5) | – | – | 7 | – | 2 | | 2026 €100 million receivables securitisation | 4 | – | – | – | – | 4 | | 2026 €230 million receivables securitisation | 11 | – | – | – | – | 11 | | Bank loans/overdrafts | 24 | – | 56 | 19 | 2 | 101 | | 2025 debentures | – | – | – | 260 | – | 260 | | 2025 notes | 251 | – | – | – | – | 251 | | 2026 notes | 1,007 | – | – | – | – | 1,007 | | 2027 notes | 747 | – | – | – | – | 747 | | 2029 green notes | 495 | – | – | – | – | 495 | | 2033 green notes | 496 | – | – | – | – | 496 | | | 4,390 | 131 | 221 | 520 | 194 | 5,456 | | Leases | 169 | 52 | 13 | 132 | 14 | 380 | | Deferred consideration | 10 | – | – | – | – | 10 | | Total liabilities | 4,569 | 183 | 234 | 652 | 208 | 5,846 | | Impact of foreign exchange contracts | (305) | 170 | 79 | 86 | (21) | 9 | | Total (liabilities)/assets | (2,462) | (131) | (24) | (417) | 65 | (2,969) | \* \*  Latin America includes currencies such as the Mexican Peso, Colombian Peso and Brazilian Real. These have been grouped together principally owing to their size and impact on the currency analysis tables within this note. ![]() 219Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 29. Financial Instruments continued Fair Value | | | | | | | --- | --- | --- | --- | --- | | | 2022 | | 2021 | | | | Carrying | Fair | Carrying | Fair | | | Value | Value | Value | Value | | | €m | €m | €m | €m | | Trade and other receivables 1 | 2,228 | 2,228 | 2,006 | 2,006 | | Listed and unlisted debt instruments | 10 | 10 | 11 | 11 | | Cash and cash equivalents | 777 | 777 | 855 | 855 | | Derivative assets | 48 | 48 | 10 | 10 | | Restricted cash | 11 | 11 | 14 | 14 | | | 3,074 | 3,074 | 2,896 | 2,896 | | Trade and other payables 1 | 2,121 | 2,121 | 2,082 | 2,082 | | Revolving credit facility | 4 | 4 | 2 | 2 | | 2026 €100 million receivables securitisation | 4 | 4 | 4 | 4 | | 2026 €230 million receivables securitisation 3 | 11 | 11 | 11 | 11 | | Bank overdrafts | 110 | 110 | 101 | 101 | | 2025 debentures | 276 | 297 | 260 | 318 | | 2025 notes | 252 | 246 | 251 | 270 | | 2026 notes | 1,008 | 981 | 1,007 | 1,103 | | 2027 notes | 748 | 672 | 747 | 786 | | 2029 green notes | 496 | 385 | 495 | 489 | | 2033 green notes | 497 | 349 | 496 | 490 | | | 5,527 | 5,180 | 5,456 | 5,656 | | Derivative liabilities | 25 | 25 | 21 | 21 | | Deferred consideration 7 | 5 | 5 | 10 | 10 | | | 5,557 | 5,210 | 5,487 | 5,687 | | Total net position | (2,483) | (2,136) | (2,591) | (2,791) | 2 3 4 3 5 3 3 6 6 6 6 6 6 4 1 The fair value of trade and other receivables and payables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. 2 The fair value of listed financial assets is determined by reference to their bid price at the reporting date. Unlisted financial assets are valued using recognised valuation techniques for the underlying security including discounted cash flows and similar unlisted equity valuation models. 3 The carrying amount reported in the Consolidated Balance Sheet is estimated to approximate to fair value because of the short-term maturity of these instruments and, in the case of the receivables securitisation, the variable nature of the facility and repricing dates. 4 The fair value of forward foreign currency, energy and commodity contracts is based on their listed market price if available. If a listed market price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds). 5 The fair value (level 2) of the revolving credit facility is based on the present value of its estimated future cash flows discounted at an appropriate market discount rate at the balance sheet date. 6 The fair value (level 2) is based on broker prices at the balance sheet date. 7 The fair value of deferred consideration is based on the present value of the expected payment, discounted using an appropriate market discount rate at the balance sheet date. The fair value of the Company’s financial assets and financial liabilities approximates to their carrying values. 30. Related Party Transactions The principal related party relationships requiring disclosure under IAS 24, Related Party Disclosures pertain to the existence of subsidiaries and associates and transactions with these entities entered into by the Group and the identification and compensation of key management personnel as addressed in greater detail below. Transactions with Subsidiaries and Associates The Consolidated Financial Statements include the Financial Statements of the Company and its subsidiaries and associates as documented in the accounting policies on page 166. A listing of the principal subsidiaries is provided on page 222. Sales to and purchases from, together with outstanding payables and receivables to and from, subsidiaries are eliminated in the preparation of the consolidated financial information in accordance with IFRS 10, Consolidated Financial Statements. The Group conducts certain transactions with associates in the normal course of business which are summarised as follows: 2022 €m 2021 €m Sale of goods 6 3 Receiving of services (2) (2) These transactions are undertaken and settled at normal trading terms. No guarantees are given or received by either party. The receivables from related parties of €1 million (2021: €2 million) arise mainly from sales transactions and are due two months after the date of sale. The receivables are unsecured in nature and do not bear interest. ![]() 220 Smurfit Kappa Annual Report 2022 #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 30. Related Party Transactions continued The payables to related parties are nil in the current year (2021: nil). No provision has been made in 2022 or 2021 relating to balances with related parties. Transactions with Other Related Parties In 2022, the Group provided funding of €2.4 million to the Smurfit Kappa Foundation. There were no other significant transactions with other related parties during 2022 or 2021. Transactions with Key Management Personnel For the purposes of the disclosure requirements of IAS 24, the term ‘key management personnel’ (i.e. those persons having authority and responsibility for planning, directing and controlling the activities of the Company) comprises the Board of Directors and Secretary who manage the business and affairs of the Company. | | | | | --- | --- | --- | | | 2022 | 2021 | | | €m | €m | | Short-term employee benefits | 5 | 5 | | Share-based payment expense | 5 | 5 | | | 10 | 10 | Information on the Parent Company The parent Company is an investment holding company and as a result, holds investments in the Group subsidiaries as financial assets. The parent Company also has receivables and payables with its subsidiaries entered into in the normal course of business. These balances are repayable on demand. Details of related party transactions and balances in the financial year ended 31 December 2022 between the Parent Company and its subsidiaries are provided in Note 14, Note 19 and Note 28 to the Consolidated Financial Statements. 31. Business Combinations The acquisitions completed by the Group during the year, together with percentages acquired and completion dates were as follows: • Argencraft, (100%, 1 April 2022) a corrugated facility in Argentina; • Atlas Packaging, (100%, 29 April 2022), a corrugated packaging company in the United Kingdom; • PaperBox (100%, 3 October 2022) a packaging plant in Brazil; and • Pusa Pack (100%, 31 October 2022) a bag-in-box packaging plant in Spain. The table below reflects the provisional fair values of the identifiable net assets acquired in respect of the acquisitions completed during the year. Any amendments to fair values will be made within the twelve month period from the date of acquisition, as permitted by IFRS 3, Business Combinations and disclosed in the 2023 Annual Report. None of the business combinations completed during the year were considered sufficiently material to warrant separate disclosure of the fair values attributable to those combinations. | | | | --- | --- | | | Total | | | €m | | Non-current assets | | | Property, plant and equipment | 58 | | Right-of-use assets | 4 | | Intangible assets | 37 | | Current assets | | | Inventories | 7 | | Trade and other receivables | 21 | | Cash and cash equivalents | 6 | | Non-current liabilities | | | Deferred income tax liabilities | (23) | | Provisions | (2) | | Borrowings | (1) | | Current liabilities | | | Borrowings | (8) | | Trade and other payables | (15) | | Current income tax liabilities | (2) | | Net assets acquired | 82 | | Goodwill | 22 | | Consideration | 104 | | Settled by: | | | Cash | 96 | | Deferred consideration | 8 | | | 104 | \* \*  In addition to the 2022 acquisitions, the amounts also include fair value adjustments in relation to 2021 acquisitions. ![]() 221Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 31. Business Combinations continued During 2022 the Group made an amendment to the fair values assigned to the Verzuolo acquisition completed in late 2021. Given the proximity of the transaction to the year-end, the accounting treatment for the acquisition at 31 December 2021 was provisional, and on completion of the fair value exercise in 2022 the Group identified adjustments that were required as outlined below. The adjustments were not of a material nature and therefore have been recognised as movements within 2022 acquisitions in the 2022 Consolidated Financial Statements. | | | | --- | --- | | | 2022 | | | €m | | Increase in property, plant and equipment | 26 | | Increase in intangible assets | 21 | | Increase in deferred tax liability | (12) | | Other | (1) | | Increase in net assets | 34 | | Decrease in purchase price | 1 | | Decrease in goodwill | 35 | The principal factors contributing to the recognition of goodwill are the realisation of cost savings and other synergies with existing entities in the Group which do not qualify for separate recognition as intangible assets. None of the goodwill arising on business combinations completed in the year is expected to be deductible for tax purposes as at 31 December 2022. | | | | --- | --- | | Net cash outflow arising on acquisition | €m | | Cash consideration | 96 | | Less cash & cash equivalents acquired | (6) | | Tot al | 90 | The gross contractual value of trade and other receivables as at the respective dates of acquisition amounted to €21 million. The fair value of these receivables is estimated at €21 million (all of which is expected to be recoverable). Acquisition-related costs of €1 million were incurred and are included within administrative expenses in the Consolidated Income Statement. The Group’s acquisitions in 2022 have contributed €84 million to revenue and €14 million to profit after tax. The proforma revenue and profit after tax of the Group for the year ended 31 December 2022 would have been €12,855 million and €951 million respectively, had the acquisitions taken place at the start of the reporting period. There have been no acquisitions completed subsequent to the balance sheet date which would be individually material to the Group, thereby requiring disclosure under either IFRS 3 or IAS 10, Events after the Balance Sheet Date. 32. Profit Dealt with in the Parent Company In accordance with Section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual Income Statement to the AGM and from filing it with the Registrar of Companies. A profit after tax of €519 million (2021: a profit after tax of €285 million) has been dealt with in the Income Statement of the Company. ![]() 222 Smurfit Kappa Annual Report 2022 33. Principal Subsidiaries Each of Smurfit Kappa Group plc, Smurfit Kappa Investments Limited, Smurfit Kappa Holdings Limited and Smurfit Kappa Acquisitions Unlimited Company with an address at Beech Hill, Clonskeagh, Dublin 4, D04 N2R2, is a holding company with no operations of its own. Smurfit Kappa Acquisitions Unlimited Company is a Public Unlimited Company. A listing of the principal subsidiaries is set out as follows: 1 | | | | | | | | --- | --- | --- | --- | --- | --- | | | | | | Country of | Holding | | Subsidiaries | | | Principal Activities | Incorporation | % | | Cartón de Colombia, S.A. | | | Manufacture and sale of paperboard, paper sacks, | Colombia | 99.7 | | Calle 15 No. 18–109 Puerto Isaacs, Yumbo – Valle del Cauca, Colombia | | | writing paper and packaging products | | | | Smurfit Carton y Papel de México S.A. de C.V. | | | Manufacture and sale of paperboard and | Mexico | 100 | | Miguel de Cervantes Saavedra, 301, Torre B Pis  | | | packaging products | | | | Colonia Ampliación Granada, Alc. Miguel Hidalgo | | | | | | | Ciudad de Mexico, c.p. 11520, Mexico | | | | | | | Smurfit Kappa Nettingsdorf AG & Co KG | | | Manufacture and sale of containerboard and holding | Austria | 100 | | Nettingsdorfer Straße 40, | | | company for Austrian operations which manufacture | | | | 4 | 053 H | aid bei Ansfelden, Austria | corrugated board | | | | Smurfit International B.V. | | | Principal international holding company | Netherlands | 100 | | Warandelaan 2, 4904 PC Oosterhout, The Netherlands | | | | | | | Smurfit Kappa de Argentina, S.A. | | | Manufacture and sale of paperboard and | Argentina | 100 | | Av. Cordoba 838, 9 Floor, of. 18, Ciudad de Buenos Aires, Argentina | | | packaging products | | | | Smurfit Kappa Deutschland GmbH | | | Holding company for German operations whose | Germany | 100 | | Tilsiter Straße 162, | | | principal activities are the manufacture and sale | | | | 220 | 47 Hamburg, Germany | | of paperboard, solidboard and packaging products | | | | Smurfit Kappa Europe B.V. | | | International holding company | Netherlands | 100 | | Evert van de Beekstraat 1–106, 1118 CL Sch  | | | | | | | The Netherlands | | | | | | | Smurfit Kappa Italia, S.p.A. | | | Manufacture and sale of paperboard and | Italy | 100 | | Via Vicenzo Monti 12 | | | packaging products | | | | 20123 M | | ila  ), Italy | | | | | Smurfit Kappa Holdings US Inc. | | | Holding company for North America and certain | United States | 100 | | 913 N. Market Street | | | Mexican operations whose principal activities | | | | Suite 200, | | | are the manufacture and sale of paperboard and | | | | Wilmington, DE 19801 USA | | | packaging products | | | | Smurfit Kappa Ireland Limited | | | Manufacture and sale of packaging products | Ireland | 100 | | Beech Hill, Clonskeagh, Dublin 4, D04 N2R2, Ireland | | | | | | | Smurfit Kappa Kraftliner Piteå AB | | | Manufacture and sale of containerboard and holding | Sweden | 100 | | SE – 941 86 | , Piteå, Sweden | | company for operations in Sweden and Norway which | | | | | | | manufacture and sell packaging products | | | | Smurfit Kappa Nederland B.V. | | | Holding company for Dutch operations which | Netherlands | 100 | | Warandelaan 2, 4904 PC Oosterhout, The Netherlands | | | manufacture paperboard and packaging products | | | | Smurfit Kappa Nervión, S.A. | | | Manufacture and sale of sack paper and holding | Spain | 100 | | B Arriandi s/n, 48215 Iurreta, | | | company for Spanish and Portuguese operations | | | | Vizcaya, Spain | | | whose principal activities are the manufacture | | | | | | | and sale of paperboard and packaging products | | | | Smurfit Kappa Packaging UK Limited | | | Holding company for operations in the United Ki  | England | 100 | | Cunard Building, Pier Head, Liverpool, LS3 1SF, | | | whose principal activities are the manufacture and sale | | | | United Kingdom | | | of paperboard and packaging products | | | | Smurfit Kappa do Brasil Indústria de Embalagens S.A | | | Holding company for operations in Brazil whose | Brazil | 100 | | Rua Castilho, 392, Cj.162, Brooklin, | | | principal activities are the manufacture and sale | | | | CEP 04568–010, São Paulo, Brazil | | | of paperboard and packaging products | | | | Smurfit Kappa Participations SAS | | | Holding company for French operations whose | France | 100 | | 5 Avenue du Général de Gaulle, | | | activities are the manufacture and sale of paperboard | | | | 94160 Sa | int Mandé, France | | and packaging products | | | | Smurfit Kappa Treasury Unlimited Company | | | Finance company | Ireland | 100 | | Beech Hill, Clonskeagh, Dublin 4, D04 N2R2, Ireland | | | | | | 2 1  A full list of subsidiaries and associates will be annexed to the Annual Return of the Company to be filed with the Irish Registrar of Companies. 2 The companies operate principally in their countries of incorporation. #### Notes to the Consolidated Financial Statements continued #### For the Financial Year Ended 31 December 2022 ![]() 223Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 33. Principal Subsidiaries continued Section 357 Guarantees Pursuant to the provisions of Section 357 of the Companies Act 2014, Smurfit Kappa Group plc has irrevocably guaranteed all commitments entered into by certain of its Irish subsidiaries (including amounts shown as liabilities (within the meaning of Section 357 (1) (b) of the Companies Act 2014) in the statutory financial statements of such subsidiaries) for the financial year ended 31 December 2022 and as a result such subsidiaries have been exempted from the filing provisions of Section 347 and Section 348 of the Companies Act 2014. The Irish subsidiaries availing of this exemption are as follows – Belgray Holdings Unlimited Company, Brenchley Limited, Claystoke Designated Activity Company, Damous Limited, DLRS (Holdings) Limited, Smurfit Kappa Security Concepts Limited, Gorda Limited, Iona Print Limited, iVenus Limited, Jefferson Smurfit & Sons Limited, Margrave Investments Limited, Smurfit International Designated Activity Company, Smurfit Kappa Holdings Limited, Smurfit Kappa Investments Limited, Smurfit Kappa Ireland Limited, Smurfit Kappa Irish Paper Sacks Limited, Smurfit Kappa Leasing Unlimited Company, Smurfit Kappa Packaging Limited, Smurfit Kappa Services Limited, Smurfit Kappa Treasury Funding Designated Activity Company, Smurfit Securities Limited. Article 403 Guarantees Smurfit Kappa Group plc has, in accordance with Article 403, Book 2 of the Dutch Civil Code, guaranteed the debts of its following Dutch subsidiaries – Adavale (Netherlands) B.V., Smurfit International B.V., Smurfit Holdings B.V., Smurfit Investments B.V., Packaging Investments Netherlands (PIN) B.V., Packaging Investments Holdings (PIH) B.V., Smurfit Kappa Europe B.V., Smurfit Kappa Nederland B.V., Smurfit Kappa Corrugated Benelux B.V., Smurfit Kappa TWINCORR B.V., Smurfit Kappa MNL Golfkarton B.V., Smurfit Kappa Van Dam Golfkarton B.V., Smurfit Kappa Vandra B.V., Smurfit Kappa Orko-Pak B.V., Smurfit Kappa ELCORR B.V., Smurfit Kappa Trobox Kartonnages B.V., Smurfit Kappa Zedek B.V., Smurfit Kappa Recycling B.V., Smurfit Kappa Development Centre B.V., Smurfit Kappa Paper Services B.V., Smurfit Kappa Roermond Papier B.V., Smurfit Kappa RapidCorr Eindhoven B.V., Smurfit Kappa Group IS Nederland B.V., Smurfit Kappa Finance B.V., Smurfit Kappa Hexacomb B.V., Smurfit Kappa Parenco B.V., Parenco Energy B.V., Reparco Nederland B.V. | | | | | --- | --- | --- | | Non-controlling Interests | 2022 | 2021 | | | €m | €m | | At 1 January | 13 | 13 | | Share of profit for the financial year | 1 | – | | Dividends paid | (1) | – | | At 31 December | 13 | 13 | ![]() 224 Smurfit Kappa Annual Report 2022 ## A circular approach to benefit the ## local community #### Our Nettingsdorf paper mill in Austria is to provide heating #### for homes in the surrounding area.        installation of a new recovery boiler that allows the recovery of biomass   2      2 .               #### Delivering on our Strategic Priorities ![]() 225Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information 20,000 homes to benefit from the #### sustainable district #### heating project #### Supplementary #### Information 224-232   Shareholder Information 232 ![]() 226 Smurfit Kappa Annual Report 2022            A. EBITDA #### Definition    #### Reconciliation of Profit to EBITDA Reference 2022 €m 2021 €m Profit for the financial year CIS 945 679 Income tax expense (after exceptional items) CIS 348 234 Exceptional items charged in operating profit CIS 223 – Net finance costs (after exceptional items) Note 7 149 162 Share of associates’ profit (after tax) CIS (3) (2) Share-based payment expense Note 4 65 69 Depreciation, depletion (net) and amortisation Note 4 628 560 EBITDA 2,355 1,702 B. EBITDA Margin #### Definition  Reference 2022 €m 2021 €m EBITDA A 2,355 1,702 Revenue CIS 12,815 10,107 EBITDA margin 18.4% 16.8% C. Operating Profit Before Exceptional Items #### Definition   Reference 2022 €m 2021 €m Operating profit CIS 1,439 1,073 Exceptional items CIS 223 – Operating profit before exceptional items CIS 1,662 1,073 D. Pre-exceptional Basic Earnings per Share #### Definition     #### Alternative Performance Measures ![]() 227Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information E. Underlying EBITDA and Revenue #### Definition    each year. Europe 2022 The Americas 2022 Total 2022 Europe 2021 The Americas 2021 Total 2021 EBITDA Currency – 7% 2% 1% (2%) – Acquisitions/disposals 1% 5% 2% (1%) 1% – Underlying EBITDA change 41% 13% 34% 10% 20% 13% Reported EBITDA change 42% 25% 38% 10% 19% 13% Revenue Currency – 7% 2% – (3%) – Hyperinflation – 2% – – 1% – Acquisitions/disposals 2% 4% 2% 1% 1% – Underlying revenue change 24% 16% 23% 17% 21% 18% Reported revenue change 26% 29% 27% 18% 20% 18% F. Net Debt #### Definition   Reference 2022 €m 2021 €m Borrowings Note 24 3,780 3,754 Less: Restricted cash CBS (11) (14) Cash and cash equivalents CBS (777) (855) Net debt 2,992 2,885 G. Net Debt to EBITDA #### Definition  Reference 2022 €m 2021 €m Net Debt F 2,992 2,885 EBITDA A 2,355 1,702 Net debt to EBITDA (times) 1.3 1.7 ![]() 228 Smurfit Kappa Annual Report 2022 H. Return on Capital Employed (‘ROCE’) #### Definition    Reference 2022 €m 2021 €m Operating profit before exceptional items C 1,662 1,073 Share of associates’ profit (after tax) CIS 3 2 Operating profit before exceptional items plus share of associates’ profit (after tax) 1,665 1,075 Total equity – current year-end CBS 5,038 4,392 Net debt – current year-end F 2,992 2,885 Capital employed – current year-end 8,030 7, 277 Total equity – prior year-end CBS 4,392 3,783 Net debt – prior year-end F 2,885 2,375 Capital employed – prior year-end 7,277 6,158 Average capital employed 7,654 6,718 Return on capital employed 21.8% 16.0% I. Working Capital #### Definition  Reference 2022 €m 2021 €m Inventories CBS 1,231 1,046 Trade and other receivables (current and non-current) CBS 2,438 2,163 Trade and other payables CBS (2,642) (2,563) Working capital 1,027 646 J. Working Capital as a Percentage of Sales #### Definition  Reference 2022 €m 2021 €m Working capital I 1,027 646 Annualised quarterly revenue 12,361 11,281 Working capital as a percentage of sales 8.3% 5.7% #### Alternative Performance Measures continued ![]() 229Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information K. Summary Cash Flow #### Definition    #### Reconciliation of the Summary Cash Flow to the Consolidated Statement of Cash Flows Reference 2022 €m 2021 €m EBITDA A 2,355 1,702 Exceptional items K.1 (3) – Cash interest expense K.2 (132) (109) Working capital change K.3 (358) (114) Capital expenditure K.4 (970) (693) Change in capital creditors K.4 (24) (14) Tax paid CSCF (321) (239) Change in employee benefits and other provisions K.6 (25) (81) Other K.7 23 3 Free cash flow L 545 455 Italian Competition Authority fine CSCF – (124) Impairment of cash balances held in Russia L (50) – Share buyback CSCF (41) – Purchase of own shares (net) CSCF (28) (22) Sale of businesses and investments K.8 – 37 Purchase of businesses, investments and NCI K.9 (110) (449) Dividends CSCF (333) (302) Derivative termination receipts CSCF 1 9 Premium on early repayment of bonds K.2 – (28) Net cash outflow (16) (424) Acquired net debt K.10 (3) (25) Disposed net cash K.11 – (1) Deferred debt issue costs amortised K.12 (7) (10) Currency translation adjustment Note 21 (81) (50) Increase in net debt (107) (510) #### K.1 Exceptional Items 2022 €m 2021 €m Reorganisation and restructuring costs – paid (3) – Per summary cash flow (3) – #### K.2 Cash Interest Expense Reference 2022 €m 2021 €m Interest paid CSCF (135) (152) Interest received CSCF 9 3 Move in accrued interest K.12 (6) 3 Initial cost of bonds repaid Note 21 – 9 Premium on early repayment of bonds K – 28 Per summary cash flow (132) (109) #### K.3 Working Capital Change Reference 2022 €m 2021 €m Net movement in working capital CSCF (350) (114) Impairment loss on Russian trade receivables L (8) – Per summary cash flow (358) (114) ![]() 230 Smurfit Kappa Annual Report 2022 K. Summary Cash Flow continued #### K.4 Capital Expenditure Reference 2022 €m 2021 €m Additions to property, plant and equipment and biological assets CSCF (873) (594) Additions to intangible assets CSCF (17) (21) Additions to right-of-use assets Note 12 (104) (92) Change in capital creditors K 24 14 Per summary cash flow (970) (693) #### K.5 Capital Expenditure as a Percentage of Depreciation Reference 2022 €m 2021 €m Capital expenditure K.4 970 693 Depreciation, depletion (net) and amortisation A 628 560 Capital expenditure as a percentage of depreciation 155% 124% #### K.6 Change in Employee Benefits and Other Provisions Reference 2022 €m 2021 €m Change in employee benefits and other provisions CSCF (19) (81) Reorganisation and restructuring costs – unpaid K.6.1 (11) – Right-of-use asset retirement obligations K.12 5 – Per summary cash flow (25) (81) K.6.1 Reorganisation and Restructuring Costs    #### K.7 Other Reference 2022 €m 2021 €m Other within the summary cash flow comprises the following: Amortisation of capital grants CSCF (4) (3) Profit on sale of property, plant and equipment CSCF (7) (8) Other (primarily hyperinflation adjustments) CSCF 8 5 Receipt of capital grants CSCF 6 5 Disposal of property, plant and equipment CSCF 12 16 Dividends received from associates CSCF 1 1 Right-of-use asset terminations/modifications L 7 (13) Per summary cash flow 23 3 #### K.8 Sale of Businesses and Investments Reference 2022 €m 2021 €m Disposal of subsidiaries (net of disposed cash) CSCF – 33 Disposed cash and cash equivalents K.11 – 4 Per summary cash flow – 37 #### K.9 Purchase of Businesses, Investments and NCI Reference 2022 €m 2021 €m Purchase of subsidiaries (net of acquired cash) CSCF (90) (413) Deferred consideration paid CSCF (14) (35) Acquired cash and cash equivalents K.10 (6) (1) Per summary cash flow (110) (449) #### Alternative Performance Measures continued ![]() 231Smurfit Kappa Annual Report 2022 Overview Strategic Report Governance Financial Statements Supplementary Information K. Summary Cash Flow continued #### K.10 Acquired Net Debt Reference 2022 €m 2021 €m Acquired debt Note 21 (9) (26) Acquired cash and cash equivalents K.9 6 1 Per summary cash flow (3) (25) #### K.11 Disposed Net Cash Reference 2022 €m 2021 €m Disposed debt Note 21 – 3 Disposed cash and cash equivalents K.8 – (4) Per summary cash flow – (1) #### K.12 Reconciliation of Other Non-cash Movements to Note 21 Reference 2022 €m 2021 €m Deferred debt issue costs amortised K (7) (10) Additions to right-of-use assets K.4 (104) (92) Right-of-use asset terminations/modifications L 7 (13) Move in accrued interest K.2 (6) 3 Right-of-use asset retirement obligations K.6 5 – Lease modifications CSCF 3 – Other 1 – Other non-cash movements Note 21 (101) (112) L. Free Cash Flow (‘FCF’) #### Definition   #### Reconciliation of Free Cash Flow to Cash Generated from Operations Reference 2022 €m 2021 €m Free cash flow K 545 455 Reconciling items: Cash interest expense K.2 132 109 Capital expenditure (net of change in capital creditors) K.4 994 707 Tax payments CSCF 321 239 Disposal of property, plant and equipment CSCF (12) (16) Right-of-use asset terminations/modifications K.7 (7) 13 Receipt of capital grants CSCF (6) (5) Dividends received from associates CSCF (1) (1) Italian Competition Authority fine CSCF – (124) Impairment loss on Russian trade receivables K.3 (8) – Impairment of cash balances held in Russia K (50) – Cash generated from operations CSCF 1,908 1,377 ![]() 232 Smurfit Kappa Annual Report 2022 #### Ordinary Shareholdings  Number of Shares Number of Shareholders % of Total Number of Shares Held % of Total 1 – 1,000 232 76.32 86,438 0.03 1,001 – 5,000 62 20.39 141,178 0.06 5,001 – 10,000 6 1.97 42,415 0.02 10,001 – 100,000 3 0.99 61,830 0.02 100,001 – 500,000 – – – – Over 500,000 1 0.33 258,701,898 99.87 Total 304 100 259,033,759 100 #### Stock Exchange Listings  Exchange Type City Symbol LSE Premium London SKG Euronext Dublin Secondary Dublin SK3 #### Financial Calendar        #### Website   #### Registrars        #### Certificated/Electronic Shareholding    #### Proxy Voting     #### Shareholder Information ![]() CBP017361 Confirmation of rights to use the trademarks: Printed on material from well-managed, FSC ® -certified forests and other controlled sources. This publication was printed by an FSC ® -recognised printer that holds an ISO 14001 certification. ![]() Smurfit Kappa Group plc Annual Report 2022 Smurfit Kappa Group plc Beech Hill, Clonskeagh, Dublin 4, D04 N2R2 Ireland +353 1 202 7000 #### smurfitkappa.com