PhilipsFullAnnualReport2023 English

PDF/printed version
This document is the PDF/printed version of the 2023 Annual Report

of Royal Philips and has been prepared for ease of use. The 2023
Annual Report was made publicly available pursuant to section 5:25c
of the Dutch Financial Supervision Act (Wet op het financieel
toezicht), and was filed with Netherlands Authority for the Financial
Markets in European single electronic reporting format (the ESEF
package). The ESEF package is available on the company's website at
https://www.results.philips.com/downloadcenter#ar23 and includes
a human readable XHTML version of the 2023 Annual Report. In any
case of discrepancies between this PDF version and the ESEF
package, the latter prevails.
IFRS basis of presentation

The financial information included in this document is based on IFRS,
as explained in General information to the Consolidated financial
statements, starting on page 147, unless otherwise indicated.
Forward-looking statements
This document contains certain forward-looking statements. By their
nature, these statements involve risk and uncertainty. For more
information, please refer to Forward-looking statements and other
information, starting on page 300.
References to Philips
References to the company, to Philips or the (Philips) Group or group,
relate to Koninklijke Philips N.V. and its subsidiaries, as the context
requires. Royal Philips refers to Koninklijke Philips N.V.
Dutch Financial Markets Supervision Act

This document comprises regulated information within the meaning
of the Dutch Financial Markets Supervision Act (Wet op het financieel
toezicht).
Statutory financial statements and management report

The chapters Group financial statements, starting on page 140 and
Company financial statements, starting on page 220 contain the
statutory financial statements of the company. Under 'Management
report' in section References to the content of this Annual Report,
starting on page 274 we set out which parts of this Annual Report
form the Management report within the meaning of Section 2:391 of
the Dutch Civil Code.
Due to rounding, amounts may not add up precisely to the totals

provided in this report.
Contents
1 Message from the CEO 5 6 Risk management 85 10 Group financial statements 140
6.1 Our approach to risk management 86 10.1 Consolidated statements of income 141
2 Board of Management and Executive 7 6.2 Risk factors 88 10.2 Consolidated statements of comprehensive 142
Committee 6.3 Strategic risks 90 income
6.4 Operational risks 93 10.3 Consolidated balance sheets 143
3 Strategy and Businesses 9 6.5 Financial risks 97 10.4 Consolidated statements of cash flows 144
3.1 Our strategic focus 10 6.6 Compliance risks 99 10.5 Consolidated statements of changes in equity 145
3.2 How we create value with sustainable impact 12 10.6 Notes to the Consolidated financial 147
3.3 Double Materiality Assessment 13 7 Supervisory Board 101 statements
3.4 Our business structure 15
3.5 Our geographic structure 22 8 Supervisory Board report 103 11 Company financial statements 220
3.6 Supply chain and procurement 24 8.1 Report of the Corporate Governance and 110 11.1 Statements of income 221
3.7 Real Estate 25 Nomination & Selection Committee 11.2 Balance sheets before appropriation of results 222
8.2 Report of the Remuneration Committee 111 11.3 Statements of changes in equity 223
4 Financial performance 26 8.3 Report of the Audit Committee 126 11.4 Notes to the Company financial statements 224
4.1 Performance review 27 8.4 Report of the Quality & Regulatory 128
4.2 Factors impacting performance 28 Committee 12 ESG statements 230
4.3 Results of operations 28 12.1 Approach to ESG reporting 230
4.4 Restructuring and acquisition-related charges 34 9 Corporate governance 130 12.2 Economic indicators 238
4.5 Acquisitions and divestments 35 9.1 Introduction 130 12.3 Environmental statements 239
4.6 Cash flows 35 9.2 Board of Management and Executive 130 12.4 Social statements 257
4.7 Financing 36 Committee 12.5 Governance statements 267
4.8 Debt position 36 9.3 Supervisory Board 131
4.9 Liquidity position 37 9.4 Other Board-related matters 133 13 Further information 274
4.10 Shareholders’ equity 38 9.5 General Meeting of Shareholders 135 13.1 References to the content of this Annual 274
4.11 Cash obligations 40 9.6 Risk management and internal control 136 Report
4.12 Dividend 40 9.7 Annual financial statements and external 137 13.2 Management’s statements and report 274
4.13 Analysis of 2022 compared to 2021 41 audit 13.3 Independent auditor's reports 275
4.14 Outlook 41 9.8 Stichting Preferente Aandelen Philips 138 13.4 Appropriation of profits 289
9.9 Investor relations 138 13.5 Reconciliation of non-IFRS information 289
5 Environmental, Social and Governance 42 9.10 Major shareholders as filed with the AFM 139 13.6 Other Key Performance Indicators 298
5.1 Philips' ESG commitments 44 9.11 Corporate information 139 13.7 Forward-looking statements and other 300
5.2 Environmental performance 46 information
5.3 Social performance 56 13.8 Investor information 301
5.4 Governance 67 13.9 Definitions and abbreviations 304
5.5 Philips' ESG performance at a glance 73
5.6 ESG by key country 74
Contents 1 Message from the CEO 2 Board of Management and Executive Committee 3 Strategy and Businesses 4 Financial performance 5 Environmental, Social and Governance 6 Risk management
2023 at a glance
7 Supervisory Board 8 Supervisory Board report 9 Corporate governance 10 Group financial statements 11 Company financial statements 12 ESG statements 13 Further information
Social impact Innovation People & culture

• 1.88 billion lives improved • Increased focus on innovation impact and • New operating model – reinvigorated culture
• 221 million in underserved communities productivity, with patient safety and quality at and leadership focused on organic growth,
the core of innovation design people- and patient-centric innovation at
• Philips named as a Clarivate Top 100 Global scale, and improved execution
Patient safety & quality Innovator for 10th year in succession • Employee Engagement Score 73%
• 31% representation of women in senior
• Further strengthening patient safety and leadership roles
quality Philips' highest priority Operations
• Chief Patient Safety & Quality Officer
appointed to Executive Committee • Continued focus and effort on Respironics Financials
• October 3: company-wide Timeout for Patient recall – remediation of sleep therapy devices
Safety and Quality almost complete, and remediation of • EUR 18.2 billion sales
ventilators ongoing • Adjusted EBITA*) margin: 10.6%
• Improved supply delivery performance • Free cash flow*): EUR 1,582 million
Customers • 100th anniversary of Philips in China • Order intake: improvement actions under way
• Customer NPS 66
• ~70% of revenues from #1 or #2 positions in Environmental sustainability Shareholders
Philips-addressable markets
• Approximately 40% recurring revenues • Circular revenues at 20% of sales • Share price: +51% in 2023
• CDP ‘A List’ rating for 11th year in a row • Strategic investment by Exor
• Top 3 ranking in Dow Jones Sustainability
Index 2023
*) Non-IFRS financial measure. For the definition and reconciliation of the most
directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.
4
1 Message from the CEO

“ 2023 was a year of many challenges, as well as considerable progress, with continued strong focus on patient
safety and quality, supply chain reliability, and performance improvement.”
Roy Jakobs CEO Royal Philips
Dear Stakeholder, device registrations that are complete and actionable have been remediated, while the
The challenges of a world in turmoil amplify the sense of urgency I feel to make sure Philips remediation of the ventilator devices remains ongoing.
delivers on its purpose and becomes an even stronger force for good, so people everywhere
can look after their health and well-being and access the care they need, with us focusing on We are fully committed to complying with the terms of the consent decree agreed with the
where we can help, from the hospital to the home. US Department of Justice (DOJ), representing the US Food and Drug Administration (FDA),
which primarily focuses on Philips Respironics in the US. The proposed consent decree will
In January 2023, we announced our multi-year plan to create value with sustainable impact. provide Philips Respironics with a roadmap of defined actions, milestones, and deliverables
Throughout the year, Philips teams around the world worked relentlessly, in a volatile to demonstrate compliance with regulatory requirements and to restore the business.
environment, to deliver on the first phase of that plan, laying a strong foundation for Further details will become available once the consent decree has been finalized and
sustained future success. submitted to the relevant US court for approval.
Our products and services reached 1.9 billion people in 2023, including 221 million in As well as implementing all measures agreed with the FDA and DOJ in connection with the
underserved communities – taking us closer to our goal of improving 2.5 billion lives per year Respironics recall, we will continue to rebuild relations with the FDA and other national
by 2030, including 400 million in underserved communities. regulators. In October, Philips Respironics received preliminary court approval for the class
action settlement that would resolve all or nearly all private economic loss claims in the US
Our improved operational performance was driven by significant progress on the three related to the recall. The settlement does not include or constitute any admission of liability,
pillars of our plan to create value for all our stakeholders: 1) focused organic growth; 2) wrongdoing, or fault by any of the Philips parties. The previously disclosed litigation,
scalable people- and patient-centric innovation; and 3) focus on execution to enhance including the personal injury and medical monitoring claims, and investigation by the DOJ
patient safety and quality, strengthen our supply chain reliability, and establish a simplified, related to the Respironics recall are ongoing.
agile operating model.
Driving progress on priorities
We achieved our raised 2023 outlook with strong sales growth, improved profitability, and With patient safety and quality the number one priority, oversight now resides at Executive
strong cash flow, despite the uncertainties brought about by an increasingly turbulent Committee level, and we have a new organization in place, with stronger processes and
geopolitical environment. While the order book remains strong in absolute terms, order more effective early warning systems in the businesses. We are pro-actively addressing
intake was down, for which the necessary improvement actions are under way. There is still a quality improvements and first-time-right design. One of the most inspiring events of the
lot of work to be done, but 2023 represents a good start, and it reinforces our confidence in year took place in October – a company-wide Timeout for Patient Safety and Quality. All
delivering on our three-year plan. 70,000 employees came together in their teams to discuss how we are moving forward on
patient safety and quality, and how to take it further.
Patient safety and quality
Resolving the consequences of the Respironics recall for our patients and customers is a key In our drive to create more reliable and resilient supply chains, we have significantly reduced
focus area, and I apologize for the distress caused. Globally, over 99% of the sleep therapy our high-risk components and our inventories, and the actions we have taken continued to
5
have a positive impact on our sales and service levels. We continue to strengthen further With real-time and predictive insights supporting collaboration across the patient journey.
through regionalization of the supply base and manufacturing capability to better respond And AI being used in a responsible manner to optimize workflows and improve efficiency, so
to local requirements with a shorter value chain. that clinical staff get the time and space to focus on what matters and what they do best:
caring for their patients.
We also started the shift to our new, simplified operating model – with end-to-end
businesses supported by a leaner enterprise layer, strong regions and a reinvigorated impact We see a future where it is also easier for people everywhere to look after their health and
culture – and completed the realignment of workforce roles and reporting lines. This well-being. For example, with solutions helping more parents and babies in the first 1,000
included the difficult but necessary reduction of approximately 8,000 roles to date, out of days and supporting the connection between good oral care and good overall health.
the planned reduction of 10,000 roles by 2025.
Recognizing that human health and environmental health go hand in hand, we are
Reflecting our changing culture of people- and patient-centricity, accountability and impact, collaborating with our customers and suppliers to decarbonize healthcare and so create a
our Executive Committee was strengthened with the arrival of four new members in 2023, more sustainable and resilient industry.
each bringing valuable experience and skills to the work of our leadership team. We also
welcome the decision by Exor to take a 15% minority stake in our company – a sign of Looking ahead
confidence in our plan, our people, and our future. And we marked the 100th anniversary of While realistic about the challenging economic environment, geopolitical risks, and
Philips in China, a remarkable achievement. uncertainties around ongoing litigation, I am confident we will continue to deliver on our
multi-year plan to create value with sustainable impact – helping consumers lead healthy
The opportunity to deliver better care for more people lives and healthcare providers deliver efficient, high-quality care to patients in a sustainable
Today, millions of people around the world have little or no access to basic healthcare, and way. Based on our ongoing actions to enhance execution – driving patient safety and
climate change is impacting both environmental and human health. Healthcare is simply not quality, increasing supply chain reliability, and further simplifying how we work – we expect
working as it needs to. There are not enough doctors and nurses to address the growing further performance improvement in 2024.
demand for care. In parallel, rising costs are stretching financial budgets to the limit.
Against this background, and reflecting the importance we attach to dividend stability, we
That’s why we are advocating for systemic change, driven by all ecosystem players, that propose to maintain the dividend at EUR 0.85 per share, to be distributed fully in shares.
addresses technology, clinical practice, financing and regulation as a whole. Change that
delivers better, more productive healthcare that works for everyone. Without this change, On behalf of the Executive Committee, I would like to thank our consumers, our customers
communities all around the world will increasingly face challenges to get the care they need. and their patients, our suppliers and ecosystem partners for their support, and the
Supervisory Board for their support and guidance. I also want to express my deep gratitude
Focusing our efforts on where we can make a difference, we want to help more healthcare to our employees for their dedication to improving people’s lives and our company’s
providers help more patients, in a sustainable way, and empower more people to take care performance, and to our shareholders and other stakeholders for their continued support.
of their health and well-being – by applying our combined capabilities in innovation, design
and sustainability. As I look ahead, I am realistic about the challenges we face, optimistic about building on the
momentum we have created, and excited about delivering on our purpose – for the benefit
There is a lot of work to be done, but we see the potential for a future where health systems of patients, customers and consumers the world over.
run smoothly, efficiently and sustainably, with doctors and nurses seeing the patient at the
right time and at the right point of care. Where they can be confident that the right choice is Roy Jakobs
also the easy choice, with simpler workflows enabling them to give patients the best care Chief Executive Officer
and best experience.
6
2 Board of Management and Executive Committee

Royal Philips has a two-tier board structure consisting of a Board of Management and a Supervisory Board, each of which is
accountable to the General Meeting of Shareholders for the fulfillment of its respective duties. The Board of Management is
entrusted with the management of the company. The other members of the Executive Committee have been appointed to
support the Board of Management in the fulfilment of its managerial duties. Please also refer to Board of Management and
Executive Committee, starting on page 130 within the chapter Corporate governance.
Members of the Board of Management
Roy Jakobs Abhijit Bhattacharya Marnix van Ginneken

Born 1974, Dutch and German Born 1961, Indian Born 1973, Dutch
Chief Executive Officer (CEO) Executive Vice President Executive Vice President
Chairman of the Board of Management and the Member of the Board of Management (since December Member of the Board of Management (since November
Executive Committee (since October 2022) 2015) 2017)
Roy Jakobs joined Philips in 2010 and has held various Chief Financial Officer Chief ESG & Legal Officer
global leadership positions across the company, starting Abhijit Bhattacharya first joined Philips in 1987 and has Marnix van Ginneken joined Philips in 2007 and became
as Chief Marketing & Strategy Officer for Philips Lighting. held multiple senior leadership positions across various Head of Group Legal in 2010. In 2014, Marnix became
In 2012, he became Market Leader for Philips Middle East businesses and functions in Europe, Asia Pacific and the Chief Legal Officer of Royal Philips and Member of the
& Turkey, leading the Healthcare, Consumer, and Lighting US. Between 2010 – 2014, he was the Head of Investor Executive Committee. In 2017 he was appointed to the
businesses out of Dubai. Subsequently, he became Relations of Philips, and subsequently, CFO of Philips Board of Management. He is responsible for driving ESG
Business Leader of Domestic Appliances, based in Healthcare, Philips’ largest sector at the time. Prior to efforts across the company, including Sustainability. He is
Shanghai, in 2015. In 2018, Roy joined the Executive 2010, Abhijit was Head of Operations & Quality at ST- also responsible for Legal, Intellectual Property &
Committee as Chief Business Leader of the Personal Ericsson, the joint venture of ST Microelectronics and Standards and Government & Public affairs. Since January
Health businesses and in early 2020 he started as Chief Ericsson, and he was CFO of NXP’s largest business group. 1, 2024 he is Chairman of the Board of the Philips
Business Leader of Connected Care. Prior to his career at Foundation. In 2011, he was appointed Professor of
Philips, he held various management positions at Royal International Corporate Governance at the Erasmus
Dutch Shell and Reed Elsevier. School of Law in Rotterdam. Before joining Philips, Marnix
worked for Akzo Nobel and as an attorney in a private
practice.
7
Other members of the Executive Committee
Willem Appelo Edwin Paalvast Steve C de Baca

Born 1964, Dutch Born 1963, Dutch Born 1968, American
Executive Vice President Executive Vice President Executive Vice President
Chief Operations Officer Chief Market Leader of International Region Chief Patient Safety and Quality Officer
Andy Ho Shez Partovi Julia Strandberg

Born 1961, Chinese/Canadian Born 1967, Canadian Born 1974, American
Executive Vice President Executive Vice President Executive Vice President
Chief Market Leader of Philips Greater China Chief Innovation & Strategy Officer Chief Business Leader Connected Care
Deeptha Khanna Jeff DiLullo

Born 1976, Singaporean Born 1969, American
Executive Vice President Executive Vice President
Chief Business Leader Personal Health Chief Market Leader of Philips North America
Bert van Meurs Heidi Sichien

Born 1961, Dutch Born 1974, Belgian
Executive Vice President Executive Vice President
Chief Business Leader Image Guided Therapy and Chief People Officer
Chief Business Leader Precision Diagnosis (a.i.),
responsible for Diagnosis & Treatment
This page reflects the composition of the Executive Committee as per December 31, 2023. For a current overview of the
Executive Committee members, see also https://www.philips.com/a-w/about/executive-committee.html
8
At a glance Significant opportunities to drive impact – helping
Strategy and
healthcare providers help more patients, in a sustainable
way, and empowering more people to take care of their
Businesses
health and well-being
Patient safety and quality at the heart of innovation

design
Strong customer interest in AI-enabled health

technology innovations across our portfolio
Personal health innovations supported by online

expansion, retail partnerships, and scaling of new
business models
Respironics recall: remediation of sleep devices almost

complete, remediation of ventilator devices ongoing
9
3 Strategy and Businesses

3.1 Our strategic focus We help our customers to unlock actionable insights from pools of medical imaging data,
Today, most healthcare systems are struggling to keep up with the ever-rising need for, and vital signs (patient monitoring) data and insights generated with the support of artificial
cost of, healthcare, while systemic staff shortages and financial resource constraints increase intelligence (AI) to optimize care delivery across the patient journey. With the scaling of our
the pressure. Climate change is impacting both environmental and human health, end-to-end multi-vendor Enterprise Informatics business, we aim to grow our platforms
compounding the stress on our healthcare systems and influencing consumer behavior. At such as radiology, pathology and remote care delivery across health systems and care
the same time, in both the hospital and the home, emerging technologies and AI are settings, while building long-term customer relationships, generating recurring revenue and
affecting our lives like never before. enabling the hardware business to maintain a competitive advantage.
At Philips, our purpose is to improve people’s health and well-being through meaningful Additionally, we remain committed to rebuilding our position in Sleep & Respiratory Care
innovation. As such, we see huge opportunities to make a difference through innovation, while continuing to resolve the effects of the Respironics recall.
design, and sustainability – partnering with our healthcare customers to increase
productivity and deliver better care for more people through our innovation platforms of Scalable patient- and people-centric innovation
monitoring, imaging, interventional and enterprise informatics. And empowering more At Philips, we’ve been innovating to improve lives for over 130 years. People’s needs are at
people to take care of their health and well-being through our personal health propositions. the very heart of how we innovate and design for sustainable impact with a ‘safety and
quality first’ mindset.
Our plan to create value with sustainable impact
As a health technology company, Philips is committed to driving progressive value creation Innovation is our core strength and will continue to be our core differentiator. Recent
through a strategy of focused organic growth, scalable patient- and people-centric industry trends have accelerated the adoption of technology within healthcare. We are
innovation, and focus on reliable execution. embracing these trends and shifting our innovation to a more patient- and people-centric
model closer to our customers. This starts with asking: What do people – in our case, patients
Philips has significant strengths to build on. We have a portfolio of patient- and people- and clinicians, nurses and technicians, consumers – really need? And how can we best support
centric innovations in hardware, software, AI and services, supporting care in the hospital healthcare professionals with their workflow?
and in the home. And we are the preferred strategic and innovation partner for many
customers across the globe. In our businesses, we are focusing our efforts and resources on fewer projects offering
greater scale and impact on patient outcomes and care providers’ clinical, operational and
A strategy of focused growth sustainability challenges. We do this by balancing new, breakthrough innovations and
We operate in growing market segments, where attractive margins provide a foundation for continuous optimized lifecycle management, through upgrades and services, of Philips
sustainable value creation. To deliver on our strategy, we make clear portfolio choices. We products and systems already deployed in care settings. We bring together expertise across
are concentrating our resources on areas where we have strong positions and can accelerate the product lifecycle, from research through serviceability, to ensure our innovations drive
growth and expand margins more quickly – Image Guided Therapy, Monitoring, Ultrasound, maximum impact for our customers and consumers – delivering a superior experience and
and Personal Health. In doing so, we will focus to support clinical workflows in areas where value, with minimum environmental impact.
we have domain leadership, such as cardiology, and that build on our deep strength in the
Intensive Care Unit (ICU) and Cath Lab.
In Diagnostic Imaging, our goal is to help healthcare providers who need to do more with
less. We will do so by leveraging our differentiating, AI-enabled innovations to increase their
imaging workflow productivity, departmental efficiency and financial sustainability and, by
doing so, improve our margins and drive uptake of our services supporting care pathways.
10
Execution as the value driver Driving impact for people and planet
Enabled by a culture of patient- and people-centricity, accountability and impact, supported Building on our strong heritage in environmental sustainability and social impact, we have
by strong health technology capabilities, we see effective execution as the key value driver operationalized our purpose by adopting a fully integrated approach to doing business
of our plan and a key driver for change. We are focusing on: responsibly and sustainably. We are partnering with stakeholders to drive environmental,
social and governance (ESG) priorities and make a global impact. For example:
• Patient safety and quality – remains our highest priority
• End-to-end supply chain resilience • We aim to improve the lives of 2.5 billion people a year, including 400 million in
• A simplified operating model with an agile way of working underserved communities, by 2030
• We will continue to operate carbon-neutrally and are partnering with customers and
First, patient safety and quality is at the heart of everything we do. We have stepped up suppliers on reducing emissions across the full value chain in line with science-based
accountability for patient safety and quality, for example, by elevating oversight to the targets
Executive Committee and creating a new organization, with stronger processes and more • We aim to increase circular revenues from 15% of sales in 2020 to 25% of sales by 2025
effective early warning systems in the businesses, as well as giving all employees dedicated
patient safety and quality objectives. We are investing in systems, capabilities and training to Delivering on our plan
facilitate identification of potential patient safety or quality issues. And we are taking the With our global reach, market leadership positions, deep clinical and technological insights,
learnings from the Respironics recall to improve our ability to correctly assess patient safety and patient- and people-focused innovation, we believe Philips is well positioned to help
and provide quality of the highest standard across Philips and in delivery to patients, deliver real change across healthcare. Fueled by our purpose and supported by a
customers and consumers. reinvigorated culture of accountability and empowerment, as well as strengthened health
technology capabilities, we aim to progressively create value with sustainable impact.
Second, we are re-shaping our supply chain set-up so we can ensure reliable delivery of
products and services and deliver our order book. We have moved away from being
organized around central functions to a structure where we align procurement and supply
chain to our businesses. A more regionalized structure combined with dual sourcing that
can work effectively even when volatile conditions emerge in different parts of the world.
We are pruning our product portfolio, which includes a long tail of smaller product lines and
older generations of our products. We also have a dedicated team redesigning products and
components to increase our resilience to more volatile demand.
Finally, we are implementing our simplified operating model to enable us to better serve
patients, customers and consumers, as well as ensuring that our cost of organization
remains competitive in an inflationary and cost-driven environment, and that we are more
agile in responding to changes in the market. Prime accountability has been assigned to the
businesses, supported by lean Functions and Regions following tailored models, all guided
by fewer KPIs and more focused targets.
11
3.2 How we create value with sustainable impact

The overview below is based on the International Integrated Reporting Council framework and includes resource inputs, value outcomes and societal impact across various financial and
Environmental, Social and Governance (ESG) dimensions.
Resource inputs Value outcomes Societal impact

Human Human Human
• Employees 69,656, 120-plus nationalities, 39% female • Employee Engagement Index 73% favorable • Employee benefit expenses EUR 6,903 million, all staff
• Training 3,670,963 courses, 2,987,260 hours, 3,578,199 • Sales per employee EUR 260,840 paid at least a Living Wage
training completions • Safety 172 Total Recordable Cases • Appointed 81% of our senior positions from internal
• 30,558 employees in Growth geographies sources
• Focus on Inclusion & Diversity Intellectual • 31% of Leadership positions held by women
• New patent filings 795
Intellectual • Royalties EUR 434.2 million Intellectual
• Invested in R&D EUR 1.9 billion (Green/EcoDesigned • 160 design awards for the Philips brand • Around 48% of revenues from new products and
Innovation EUR 142 million) solutions introduced in the last three years
• Employees in R&D 10,833 Financial • Approximately 70% of sales from leadership positions
• Comparable sales growth*) 6.0%
Financial • Adjusted EBITA*) as a % of sales 10.6% Financial
• Equity EUR 12.1 billion • Free cash flow*) EUR 1,582 million • Market capitalization EUR 19 billion at year-end
1 2 3
• Net debt*) EUR 5.8 billion • Long-term credit rating BBB+ , Baa1 , BBB+ **)
Manufacturing • Dividend EUR 749 million
Manufacturing • EUR 12.4 billion revenues from goods sold
• Employees in production 35,281 Manufacturing
• Industrial sites 23, cost of materials used EUR 4.6 Natural • 100% electricity from renewable sources
billion • 70.5% Green/EcoDesigned Revenues
• Total assets EUR 29 billion • 20.0% revenues from circular propositions Natural
• Capital expenditures on property, plant and • Net CO2 emissions from own operations down to • Environmental impact of Philips operations up to EUR
equipment EUR 345 million zero kilotonnes 261 million
• 107,000 tonnes (estimated) from products, parts • All 23/23 industrial sites 'Zero Waste to Landfill' at
Natural and packaging used to put products on the year-end 2023
• Energy used in manufacturing 322,532 megawatt market • Updated CO2 reductions approved by the Science
hours • Waste 19,375 tonnes, of which 91% recirculated Based Targets initiative
3
• Water used 661,076 m
• 'Closing the loop' on all our professional medical Social Social
equipment by 2025 • Brand value USD 11.2 billion (Interbrand) • 1.88 billion Lives Improved, of which 221 million in
• Partnerships with UNICEF, Red Cross, Amref and underserved communities (including 1.4 million via
Social Ashoka Philips Foundation)
• Philips Foundation • 723,000 employees impacted at suppliers
• Stakeholder engagement participating in the 'Beyond Auditing' program
• Volunteering policy • Total tax contribution EUR 3,051 million (taxes paid/
withheld)
• Corporate income tax paid EUR 152 million
*)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS
measure, refer to Reconciliation of non-IFRS information, starting on page 289.
1
**) Fitch, 2 Moody's, 3 Standards & Poor's
12
3.3 Double Materiality Assessment Similar to 2022, we used an evidence-based approach to materiality assessment, powered by
We identify the Environmental, Social and Governance topics which we believe have the a third-party AI-based application. The application allows automated sifting and analysis of
greatest impact on our business and the greatest level of concern to stakeholders along our millions of data points from publicly available sources, including corporate reports,
value chain, for instance patient safety and quality. We do this through a multi-stakeholder mandatory regulations and voluntary initiatives, as well as news. With this data-driven
process. Please refer to Working with stakeholders and advocacy, starting on page 65 for approach to materiality assessment we have incorporated a wider range of data and
more information. Assessing these topics enables us to prioritize and focus upon the most stakeholders than was ever possible before and managed to get an evidence-based
material topics and effectively address these in our policies, programs, targets and actions. perspective on regulatory, strategic and reputational risks and opportunities. Topics were
We do this with reference to the GRI standard and identify and assess impacts on an prioritized through a survey sent to a large and diverse set of internal and external
ongoing basis, for example through discussions with our customers, suppliers, investors, stakeholders, combined with input from the application.
employees, peer companies, social partners, regulators, NGOs, and academics. We also
conduct a benchmark exercise, carry out trend analysis and run media searches to provide Changes in 2023
input for our materiality analysis. GRI has not yet published a sector standard for the On both external and internal importance axis, the most significant increases compared to
healthcare industry. Philips’ impact on society at large is covered through our Lives Improved 2022 were Waste management and Social inclusion & engagement. Innovation & research
metric and the Environmental Profit & Loss account, as well as a number of other KPIs went down on both axes. On the internal importance axis, there was a significant decrease
addressed in Environmental, Social and Governance, starting on page 42. The result of our on Pollution.
impact materiality assessment you will find below.
Double materiality
After completing the regular impact materiality assessment, we completed a preliminary
'double materiality' assessment, in preparation for the upcoming requirements of the EU
Corporate Sustainability Reporting Directive (CSRD). The double materiality assessment
addresses both financial materiality (the impact of society on Philips) as well as impact
materiality (the impact of Philips on society): we only included the high and medium
material topics from impact materiality and/or financial materiality. The data sources used
for the financial materiality include corporate reports, mandatory regulations with
sanctions, voluntary initiatives by e.g. central banks, and Sustainability Accounting Standards
Board (SASB) accounting metrics. For impact materiality, we included sustainability data
from corporate reports or sustainability reports, coverage in the news and voluntary
initiatives and regulation. We calibrated the financial and impact materiality with a team of
internal experts from Enterprise Risk Management, Group Control, Internal Audit, Insurance
and Risk Management and Sustainability and aligned with our Enterprise Risk Management
assessment. After this calibration the financial impact of Product responsibility & safety,
Geopolitical events, and Big data, AI & Cybersecurity were increased. The results of the
double materiality analysis are depicted below.
13
From the financial materiality assessment, the topics that ranked highest were: (1) Product From the impact materiality assessment, the topics that ranked the highest were: (1) from
responsibility & safety, (2) Geopolitical events, and (3) Big data, AI & Cybersecurity, as well as the Environmental topics, Climate change, and Energy efficiency; (2) from the Social topics,
Business ethics & General business principles. Employee well-being, health & safety, and Access to (quality & affordable) care; and (3) from
the Governance topics, Big data, AI & Cybersecurity, and Competition & market access. These
topics are all covered in more detail in the Annual Report 2023 and monitored regularly.
The outcome of the double materiality assessment did not result in any significant changes
in the material topics identified from impact materiality.
14
The results of our materiality assessment have been reviewed and approved by the Philips 3.4 Our business structure
Board of Management and will be used to prepare for the upcoming EU legislation.
Koninklijke Philips N.V. (Royal Philips) is the parent company of the Philips Group. As
For more information on materiality, refer to Material topics and our focus, starting on page announced on January 30, 2023, Philips has changed its operating model to end-to-end
232. businesses with single accountability in order to make the company more agile in its drive to
create value with sustainable impact. The segments Diagnosis & Treatment, Connected Care
and Personal Health are each responsible for the management of their business activity
worldwide, and are made up of the six businesses shown below. Additionally, Royal Philips
identifies the segment Other.
Philips Group
Total sales by reportable segment
2023
Diagnosis & Treatment 49%
Connected Care 28%
Personal Health 20%
Other 3%
15
3.4.1 Diagnosis & Treatment segment • Ultrasound business unit – echography solutions focused on diagnosis, treatment
Our Diagnosis & Treatment businesses create value through their portfolio of innovative AI- planning and guidance for cardiology, general imaging, obstetrics/gynecology, and
enabled solutions that support precision diagnosis and minimally invasive treatment in point-of-care applications, as well as proprietary AI-enabled and intelligent software
therapeutic areas such as cardiology, peripheral vascular, neurology, surgery, and oncology. capabilities to enable early, advanced diagnostics and timely interventions, and
With these solutions, we enable our customers to realize better health outcomes, improved remote capabilities to enable tele-ultrasound operations and training
patient and staff experience, and lower cost of care.
• Image Guided Therapy, consisting of:
Serving diagnostic imaging markets globally, our goal is to improve customer performance • Image Guided Therapy Systems business unit – integrated interventional systems that
in the radiology/imaging workflow. We see significant opportunity to enable precision combine information from imaging systems, interventional devices, navigation tools,
diagnosis while at the same time supporting adjacent needs for care orchestration across monitoring patient data and patient health records, supported by AI, to provide
care pathways and increasing departmental productivity. We do this through smart interventional staff with the control and information they need to perform
diagnostic systems, connected workflow solutions, and integrated AI-supported diagnostics procedures efficiently
and pathway informatics. These drive enterprise-wide operational efficiency and help • Image Guided Therapy Devices business unit – interventional diagnostic and
clinicians to provide an early and definitive diagnosis, enabling them to select tailored care therapeutic devices to treat coronary artery and peripheral vascular disease
pathways with predictable outcomes for every patient, both inside and outside the hospital.
Diagnosis & Treatment
Total sales by business
We also provide integrated solutions combining imaging systems, diagnostic monitoring
2023
data and therapeutic devices, which optimize interventional procedures to deliver more 1)
Precision Diagnosis 61%
effective treatment, better outcomes and higher productivity. Building upon our leading-
Image Guided Therapy 39%
edge Azurion system, we continue to innovate, optimizing clinical and operational lab
performance through advances in workflow and integration for routine procedures, and 1)
of which Diagnostic Imaging 39%, Ultrasound 22%
expanding the role of image-guided interventions to treat new groups of patients such as
those with complex diseases including various cardiovascular conditions, stroke and lung
cancer. We are also innovating the way we engage with our customers, using new business Revenue is predominantly earned through the sale of products, leasing, customer services
models across different care settings, including out-of-hospital settings such as office-based fees, recurring per-procedure fees for disposable devices, and software license fees. For
labs and ambulatory surgical centers, which offer clear clinical, financial and operational certain offerings, per-study fees or outcome-based fees are earned over the contract term.
benefits.
Sales channels are a mix of a direct sales force, especially in the larger markets, third-party
In 2023, the Diagnosis & Treatment segment consisted of the following businesses: distributors and an online sales portal. This varies by product, market and price segment. Our
sales organizations have an intimate knowledge of technologies and clinical applications, as
• Precision Diagnosis, consisting of: well as the solutions necessary to solve problems for our customers.
• Diagnostic Imaging:
Sales at Philips’ Diagnosis & Treatment businesses are generally higher in the second half of
• Diagnostic X-ray business unit – systems with associated software to optimize
the year, largely due to the timing of customer spending patterns.
diagnostic imaging quality and improve efficiency and productivity for the
hospital
At year-end 2023, Diagnosis & Treatment had 28,397 employees worldwide.
• Magnetic Resonance Imaging business unit – helium-free-for-life operations,
bundled with associated AI-enabled software to streamline workflows, optimize
diagnostic quality, and improve patient experience
2023 highlights
At RSNA23, Philips announced a raft of new innovations, including next-generation EPIQ
• Computed Tomography AMI business unit – advanced and efficient systems and
Elite 10.0 and Affiniti ultrasound systems that increase diagnostic confidence and workflow
software, including detector-based Spectral CT and molecular and hybrid imaging
efficiency, BlueSeal MRI Mobile, the world’s first and only mobile MRI system with helium-
solutions for nuclear medicine
16
free operations, and new AI-enabled cloud solutions that enhance radiology efficiency and 3.4.2 Connected Care segment
clinical confidence. With technology constantly advancing and becoming increasingly pervasive in healthcare,
the Connected Care businesses aim to connect and elevate care for all. Philips connects
Philips launched its new MR 7700 3.0T system, which features an enhanced gradient system patients and caregivers across care settings, delivering clinical, operational and therapeutic
designed to deliver outstanding imaging results and speed to support confident diagnosis solutions that help our customers deliver better health outcomes, improve the patient and
for every patient. staff experience, and lower the cost of care across care settings. In 2023, the global economic
situation continued to put additional pressure on customer budgets and worsened trends
Five top hospitals in Shanghai, with a total of more than 10,000 beds, installed Philips’ such as staff shortages, as well as increasing the need for solutions that enable more
advanced Spectral CT 7500 imaging system, helping physicians deliver first-time-right effective, sustainable and convenient care in hospital, clinics and the home – especially
diagnosis through fast, low-dose X-ray scans. enabled by strong informatics and AI.
Philips further expanded its ultrasound portfolio with the launch of the Ultrasound Compact The Sleep & Respiratory Care business in particular continued to face multiple operational
5500 CV, which delivers cart-based premium image quality in ultrasound exams for and regulatory challenges in 2023, but action has been taken to improve the ability of the
cardiology and vascular patients at the bedside. Sleep & Respiratory Care organization to correctly assess potential patient safety or quality
issues. Philips has reaffirmed its core activities, which put patient safety front and center in
Philips IntraSight Mobile received approval from the Chinese regulatory authority, paving everything we do, and we believe that the implementation of a new simplified organization,
the way for its commercial introduction in the Chinese market. IntraSight Mobile combines which for Sleep & Respiratory Care began in 2022, will help to achieve this, as well as to
imaging and physiology applications on a mobile system for peripheral and coronary artery improve productivity and increase agility. In the course of the year, Sleep & Respiratory Care
disease therapy. gradually returned to the market for sleep therapy devices outside the US. For information
about the Respironics recall and related remediation effort, please refer to Quality &
Philips expanded its image-guided therapy portfolio with the launch of Philips Zenition 10, Regulatory and patient safety, starting on page 69.
which provides a cost-effective imaging solution to guide high-volume routine surgery, as
well as complex orthopedic and trauma procedures. Philips also launched the Zenition 30 With clinical depth and discovery, Philips Connected Care technologies help to cultivate a
Image Guided Therapy Mobile C-arm. Its workflow-enhancing features and excellent image more accurate and complete view of the patient that drives better health and care. The
quality enable surgeons to deliver enhanced care to more patients, helping alleviate the combination of advanced technological solutions and a co-creation approach allows Philips
staff shortages faced by many hospitals. to be an effective partner to its customers in their digital transformation, both across the
enterprise and at the level of the individual clinician, nurse and patient. We help our
Through the WE-TRUST study, Philips is driving innovation in stroke treatment. The trial customers to unlock actionable insights from pools of medical imaging data, patient
examines the impact of the direct-to-angio treatment pathway on clinical outcomes, monitoring data, and through the use of advanced AI, to improve outcomes and drive
facilitated by a helical scan in the angio suite developed by Philips to reduce time to productivity.
treatment. With 16 leading stroke centers and hospitals around the world involved in the
trial and 100 patients enrolled, the WE-TRUST study has already achieved the scale and Philips’ open, interoperable platforms aggregate and leverage information from clinical
momentum needed to deliver a reliable evidence base on the potential benefits of the devices, patient and historical data to support care providers in patient engagement,
Direct to Angio Suite pathway for patients suspected of having a large vessel occlusion (LVO) diagnostics, and patient monitoring in the hospital, ambulatory and home settings.
ischemic stroke – a treatment pathway that focuses squarely on addressing the fact that the
faster a patient is treated, the more likely they are to recover. Another significant milestone
was the publication of health economics analysis results in the Journal of
NeuroInterventional Surgery, demonstrating that this new stroke care pathway can save
over USD 3,000 per patient.
17
In 2023, the Connected Care segment consisted of the following businesses: • The EMR & Care Management business unit provides electronic medical record (EMR),
acute care, and TeleICU solutions to deliver intelligent informatics propositions to
• Monitoring – in-hospital, ambulatory and home-based monitoring and diagnosis connect people, data, and technology across care settings.
solutions and services supporting the patient journey; as well as continuous monitoring • The Clinical Integration & Insights business unit offers medical device and data
and workflow solutions fueled by advanced interoperability and patient data insights. integration across the enterprise for continuous, vendor-neutral data capture from
• The Hospital Patient Monitoring business unit delivers acute patient management more than 1,000 device models supported by insightful clinical decision support and
solutions to improve clinical and patient outcomes and achieve operational and analysis.
economic efficiencies. Leveraging a strong presence in the operating theater and • The Cardiovascular Informatics business unit offers solutions that empower caregivers
intensive care unit (ICU), Hospital Patient Monitoring solutions enhance customers’ across the enterprise to make fast, informed clinical decisions to care for cardiac
experience and improve patient outcomes with seamless patient data pulled from patients, providing support in managing increased volume and complexity of clinical
over 1,000 vendor-neutral devices monitoring from admission to discharge, and by and administrative data, wherever care is delivered.
turning that patient data into clinical insights that are actionable at the right time • The Clinical Insight & Informatics business unit delivers clinical decision support in the
and specific to targeted care settings. domains of digital pathology, advanced visualization and specific disease
• The Ambulatory Monitoring & Diagnostics business unit provides patient care management solutions.
management in ambulatory and home care settings through a suite of cardiac
Connected Care
diagnostic and monitoring solutions to identify heart rhythm disorders plus other Total sales by business
disease states supported by AI algorithms that orchestrate workflows and services
2023
across care settings to provide care virtually anywhere.
Monitoring 60%
• The Emergency Care business unit’s propositions play a critical role in connected acute Sleep & Respiratory Care 17%
care management, both inside and outside the hospital, including cardiac Enterprise Informatics 23%
resuscitation (e.g. Automated External Defibrillators) and emergency care solutions
(devices, services, and digital/data solutions) for professional and consumer
applications. In most of the Connected Care businesses, revenue is earned through the sale of products
and solutions, as well as services and software licenses. Where bundled offerings result in
• Sleep & Respiratory Care – Working closely with clinical partners and Durable/Home solutions for our customers, or offerings are based on the number of people being
Medical Equipment providers, Philips Respironics provides sleep and respiratory solutions monitored, we see more usage-based earnings models. In the area of patient care
to customers, clinicians and patients. This extends from ambulatory patient care solutions management (Ambulatory Monitoring & Diagnostics business unit and Sleep & Respiratory
for obstructive sleep apnea, to solutions encompassing diagnostics, people-centric Care business), revenue is generated through clinical services, product sales and through
therapy, cloud-based connected propositions and care management services for patients rental models, whereby revenue is generated over time.
with COPD (Chronic Obstructive Pulmonary Disease) and respiratory conditions. Hospital
Respiratory Care provides invasive and non-invasive ventilators for acute and sub-acute Sales channels include a mix of a direct sales force, partly paired with an online sales portal
hospital environments; Home Respiratory Care supports chronic care management in the and distributors (varying by product, market and price segment). Sales are mostly driven by a
home. direct sales force with an intimate knowledge of clinical settings and patient-specific
diagnosis and treatment. Philips collaborates with customers and partners to co-create
• Enterprise Informatics – By combining our informatics propositions into one end-to-end solutions, drive commercial innovation and adapt to new models such as monitoring-as-a-
business segment, Philips can scale its software business, providing vendor-agnostic, service and software-as-a-service.
integrated workflow solutions that convert data from our imaging and monitoring
systems into clinical and operational. Sales at Philips’ Connected Care businesses are generally higher in the second half of the
• The Radiology Informatics business unit enables enterprise imaging across sites, year, largely due to customer spending patterns. However, the Philips Respironics voluntary
specialties and technologies to simplify medical image management, facilitate recall notification in the Sleep & Respiratory Care business in June 2021 (as further discussed
effective collaboration and enhance patient care. in Quality & Regulatory and patient safety, starting on page 69) continued to have a
negative impact on sales throughout 2023.
18
At year-end 2023, Connected Care had 17,549 employees worldwide. 3.4.3 Personal Health segment
Our Personal Health business plays an important role in enabling healthy individual care
2023 highlights routines with technology and solutions that support people’s long-term health and well-
Philips signed a 10-year, EUR 100 million Enterprise Monitoring as a Service agreement with being.
one of the largest health systems in the US, covering 20 hospitals with over 3,000 beds. The
agreement provides the health system with constant access to the latest technology, We aim to drive profitable growth through a focus on innovation across three key areas:
including software and services, while lowering initial investments.
• Reaching more people through consumer-driven product and solutions innovation
Philips and NYU Langone Health announced an 8-year strategic partnership valued up to • Ensuring the highest quality of consumer experience from pre-purchase consideration
USD 115 million and aimed at enhancing patient care through further innovation. The through to purchase and unboxing, all the way to end-of-use recycling
partnership includes digital pathology, clinical informatics, and innovative AI-enabled • Expanding our ecosystem through partnerships with leading retailers and scaling new
diagnostics, with an Enterprise Monitoring as a Service model. With these new technologies, business models, such as try-and-buy and subscription services
NYU Langone clinicians can collaborate in real time, sharing pathology, imaging studies or
patient data to support diagnostic confidence and tailor individualized care plans. The Personal Health segment consists of the Personal Health business, which comprises the
following business units:
Highlighting the strength of its comprehensive patient monitoring offering, Philips
announced a multi-year partnership with Northwell Health to standardize and centralize • Oral Healthcare business unit – power toothbrushes for a range of price segments, from
patient monitoring across the hospital, allowing caregivers to see what is happening at each entry-level battery-operated toothbrushes for a young audience to premium power
bedside. toothbrushes connected to the Sonicare app with in-app coaching; brush heads, which
are also available as a subscription service; products for interdental cleaning and for
Philips announced new interoperability capabilities that offer a comprehensive view of teeth whitening
patient health for improved monitoring and care coordination. This is realized through the • Mother & Child Care business unit – products to support parents and babies in the first
interoperability of Philips Capsule Medical Device Information Platform (MDIP) with Philips 1,000 days, including infant feeding (breast pumps, baby bottles and sterilizers),
Patient Information Center iX (PIC iX) with streaming, vendor-neutral data that supports connected baby monitors and digital parental and women’s health solutions
care delivery and collaboration. (Pregnancy+ and Baby+ apps)
• Personal Care business unit – grooming and beauty products ranging from entry-level to
Philips introduced the cloud-based Philips HealthSuite Imaging PACS on Amazon Web premium. The grooming portfolio includes shavers, OneBlade, groomers, trimmers and
Services. This cloud-based enterprise imaging solution, which includes advanced AI-enabled hair clippers, as well as premium solutions with SkinIQ technology, in-app coaching for a
applications, has been designed to enhance image access speed, reliability, and data personalized shave, and blade subscriptions. The beauty portfolio includes devices to
orchestration for clinicians across the imaging workflow, while reducing costs for healthcare support skin care, hair care and hair removal, including Lumea premium IPL hair removal
organizations. devices and solutions with the latest SenseIQ technology that sense and adapt for
personalized care; also available through subscription models.
Philips launched its ambulatory monitoring offering in Japan, combining Philips ePatch
Holter monitors with ECG analysis through AI and advanced algorithms. This innovative Personal Health
Total sales by business
approach aims to reduce clinician workload and improve the patient experience.
2023
1)
Personal Health 100%
1)
of which Oral Healthcare 35%, Mother & Child Care 11%, Personal Care 54%
19
Through our Personal Health business, we offer a broad range of solutions in various 2023 highlights
consumer price segments to support people in proactively managing their health and well- Philips successfully launched the Sonicare DiamondClean 7900 Series electric toothbrush in
being. Depending on the market, we offer an additional portfolio of locally relevant China on major online shopping channels Alibaba and JD.com. Highlighting increasing
innovations and adjust our range to increase accessibility. A notable aspect of our customer demand, it claimed the number-one position in the high-end toothbrush category
commercial strategy is driving increased direct-to-consumer relationships and sales through on Alibaba’s Tmall.
our consumer communities and online store. About half of our Personal Health sales
worldwide now take place online. In partnership with JD.com, Philips launched the premium 7 Series Shaver in China, debuting
as the #1 shaver on this major online shopping channel. Additionally, Philips’ DiamondClean
We are leveraging connectivity to offer new business models, partnering with other players 9000 premium electric toothbrush has become the best-selling high-end oral healthcare
in the health ecosystem, e.g. insurance companies and healthcare professionals, with the product on Alibaba.
goal of extending opportunities for people to live healthily and prevent or manage disease.
We are engaging consumers in their health journey in new and impactful ways through To improve oral care habits among children, Philips introduced Sonicare for Kids 'Design a
social media and digital innovation. Pet Edition' with an entry price point designed to give more parents access to an electric
toothbrush for their children.
In Personal Health, improving lives also means caring for the world, with a key focus on
environmental sustainability. For example, in 2023 we launched an initiative in Germany, Philips OneBlade packaging was named the 2023 Red Dot Communication Design Best of
Philips Refurb Editions, to give products a second life, with the same two-year guarantee as the Best in recognition of its paper-based model, illustrating how the use of less material,
a new product. This is part of Personal Health’s commitment to driving a more circular fewer parts, and less volume can go hand in hand with iconic presence and the best user
economy, and we believe we need to keep finding innovative ways to support consumers experience.
with greater choices to live sustainably.
Philips launched its 'Better than New' campaign in Germany, repositioning refurbished
We also offer mobile solutions to support parents and parents-to-be for a more informed, innovations and underscoring the company's commitment to circularity and sustainability.
more connected and healthier journey to parenthood. The Pregnancy+ app and Baby+ app The campaign led to a significant year-on-year increase in sales revenue of refurbished
offer parents supportive content at every stage of their first 1,000-day journey. Pregnancy+ Lumea and refurbished shaving products.
also offers state-of-the-art, photo-realistic and interactive 3D fetal models to make the
experience even more exciting, with new, personalized content for each day of the Philips announced Babybell Maternal & Child Supplies as the exclusive distributor for Philips
pregnancy. The Philips Pregnancy+ app was ranked among the best pregnancy apps of 2023 Avent OneFeeding in China; the partnership aims to accelerate growth of the Philips Avent
by Forbes*). It has more than 1.5 million daily active users and is available in 22 languages. brand in the Chinese maternal health industry. The partnership combines the power of
Philips’ latest innovations with Babybell's rich understanding of the local market and robust
The revenue model is mainly based on product sale at the point in time the products are retail network to deliver on a faster innovation pace and expand market share.
delivered to retailers and online platforms. We continue to increase revenue model diversity
by expanding our new business models, including direct-to-consumer, subscriptions, try-
and-buy offerings and services.
The Personal Health business experiences seasonality, with higher sales around key national
and international events and holidays.
At year-end 2023, Personal Health employed 9,085 people worldwide.
*)
https://www.forbes.com/health/womens-health/pregnancy/best-pregnancy-apps/
20
3.4.4 Segment Other Innovation Excellence helps our business units to be the best they can in innovation by
In our external reporting on Other we report on the items Innovation & Strategy, IP offering them an outside-in view and developing competencies, processes, data and tools
Royalties, Central costs, and other small items. At year-end 2023, 14,626 people worldwide they need to excel at innovation.
were working in these areas.
Innovation Effectiveness teams help to measure the return on innovation investments and
About segment Other guide enterprise-wide innovation initiatives.
Innovation & Strategy Innovation & Strategy works from four main innovation sites – Eindhoven (Netherlands),
At Philips, we have set up our innovation teams to be as close to our customers and Cambridge (USA), Bangalore (India) and Shanghai (China) – and smaller innovation and
consumers as possible. The majority of our Research & Development (R&D) experts work in research sites in the Regions. Our global footprint enables us to understand, anticipate and
one of our business units, which allows them to directly hear customer and consumer needs react to local markets and needs.
and work closely with other stakeholders to turn innovations into actual products.
Innovation at Philips is organized to encourage innovation anywhere along the value chain IP Royalties
and not just at the product ideation stage. Philips Intellectual Property & Standards (IP&S) proactively pursues the creation of new
Intellectual Property (IP) in close co-operation with Philips’ operating businesses and
The remaining R&D experts are part of our central Innovation & Strategy organization. The Innovation & Strategy. IP&S is a leading industrial IP organization providing world-class IP
main job of these experts is to focus on industry-shifting ideas that advance a core product solutions to Philips’ businesses to support their growth, competitiveness and profitability.
to fulfill the needs of a broad new customer segment. Innovation & Strategy focuses on
enabling and accelerating innovation across our business units in different ways: Royal Philips’ IP portfolio currently consists of approximately 53,000 patent rights, 31,500
trademarks, 135,000 design rights and 3,300 domain names. Philips filed 795 new patents in
Strategy supports the business units in shaping their strategy to create a competitive 2023, with a strong focus on the growth areas in health technology services and solutions.
advantage. The Enterprise Strategy team focuses on overall corporate strategy, and the
Market Analysis & Forecasting team analyzes customer segments and market growth trends. Philips earns substantial annual income from license fees and royalties.
Strategy also partners closely with the Mergers & Acquisitions and Finance teams to ensure
our M&A activity is aligned with the business units and our enterprise strategic direction. Philips believes its business as a whole is not materially dependent on any particular third-
party patent or license, or any particular group of third-party patents and licenses.
Research helps to define the future of healthcare by unlocking opportunities that have the
potential to disrupt the healthcare industry. Breakthrough Innovation Teams (BRITE) and Central Costs
Exploratory Innovations Teams (XITE) are two ways Philips nurtures long-term ‘big bets’ in We recharge the directly attributable part of the functional costs to the businesses. The
innovation and enables the growth of an overarching entrepreneurial mindset across all of remaining part is accounted for as 'central costs', and includes costs related to the Executive
Philips. Committee and Group Functions such as Strategy, Legal and Audit fees.
Experience Design plays an important role in making sure that the voice of the customer is Other small items
heard and included in innovation. This means linking product development from inception Other small items refer to remaining items for intra-group services and legacy items relating
with a patient and consumer view and ensuring that the highest product and experience to previously disposed businesses.
performance requirements are embedded throughout all innovation projects. In 2023, the
Philips brand won 160 awards for design excellence.
Innovation Engineering teams bring innovations to life by providing Philips business units
with a central team of experienced, talented individuals with capabilities in software,
hardware engineering, and AI. Innovation Engineering teams also enable business units to
scale through shared platforms.
21
3.5 Our geographic structure Philips continues to lead the way with innovation in its efforts to help address health
disparities and maternal health access specifically – partnering with the state of Michigan to
3.5.1 Our Regions tailor the Philips Avent Pregnancy+ app, making it easier for moms within the state to find
Geographically, our business is organized in three Regions: North America, Greater China resources available to them, such as home-visiting nurses. During the first year, Pregnancy+
and International Region (the latter made up of Europe and Growth groupings). Within our reached over 32,000 Michigan families, helping them get access to vital resources. The app
Regions, we further organize the business by Zones and Countries. Their primary was recognized by Forbes as the best pregnancy app of 2023. Forbes also recognized Philips
accountability is to manage customer intimacy, relationships and understanding of their for its Inclusion & Diversity efforts in North America, naming the company among the Best
needs, (strategic) account management, service delivery, and indirect partner management. Employers for Diversity and Best Employers for Women for the second year in a row.
They are also accountable for government relations, local infrastructure needed to support
Philips’ presence in a country (license to operate) and for statutory, fiscal & compliance Greater China
duties, safety, sustainability and labor relations to secure compliant operations in the In 2023, we continued to deliver on our commitment to support China’s national health
Region/Zone/Country. strategy, supplying hospitals with tailor-made solutions for their clinical and research needs,
and empowering consumers to manage their health and well-being.
For financial reporting purposes, we recognize four geographic areas: Western Europe,
North America, Other mature geographies, and Growth geographies. Western Europe, With the aim of better serving the Chinese market, we are committed to our ‘In China, For
North America and Other mature geographies are collectively recognized as Mature China’ strategy, which focuses on local innovation, manufacturing, services and partnership.
geographies in reporting on sales. This reflects the grouping of countries based on similar We continue to drive ‘made in China’ fulfillment and create more locally relevant solutions
economic characteristics. by leveraging local ecosystems to serve both professional and consumer markets.
3.5.2 2023 highlights from our Regions In the professional market, we have expanded our cooperation with local customers by
providing cutting-edge imaging systems, informatics solutions and other products in
North America support of delivering better care to patients in terms of precision diagnosis, interventional
Leading health systems such as Northwell, TriHealth, and Atrium Health, have extended treatment, and smart hospital development. Key customers include many top hospitals:
their long-term strategic partnerships (LSPs) with Philips to include enterprise informatics Huaxi Hospital in Sichuan Province, Renji Hospital, Xinhua Hospital, the Sixth People's
th
and precision diagnostics. In Canada, eHealth Saskatchewan elected to extend their Hospital, the 10 People's Hospital and Children’s Hospital in Shanghai, Jishuitan Hospital
enterprise informatics relationship with Philips, reinforcing the value of the partnership to and Anzhen Hospital in Beijing, the First Affiliated Hospital of Dalian Medical University, the
clinicians and patients across the province. First Affiliated Hospital of Zhengzhou University, and Regional Imaging Center of Jiangxi
Province, to name just a few.
The Enterprise Monitoring as a Service model (EMaaS) also drove innovation, giving health
systems like NYU Langone Health, the University of California Irvine and Children’s Hospital In the consumer market, in line with our consistent ‘Professional, Young and Premium’
of Orange County a predictable, scalable business model that enables them to standardize positioning, Philips’ brand strength increased in 2023, despite an overall weak consumer
their patient monitoring platform across the enterprise. In addition to adopting EMaaS for market. We leveraged new online and offline channels, including Healthy Living Lab, TikTok,
their monitoring solutions, NYU Langone Health is also partnering with Philips to advance O2O instant retail platforms like Meituan, JD to home, and Ele.me to engage with young
patient safety, quality and improve patient outcomes through digital innovation, including consumers and grow business. Local innovation drove significant growth in Male Grooming
integrating patient data across the network, AI-enabled diagnostic imaging and digital and Oral Healthcare, which continue to solidify their leadership positions in China. Philips
pathology for precision diagnosis and treatment. was recognized as a ‘gold brand’ (most favored consumer brand) in the Personal Health
category for the fourth consecutive year by China Business Weekly.
Philips Sonicare remains the leading electric rechargeable toothbrush in the United States
and Canada, as well as the most-recommended rechargeable toothbrush brand in the 2023 marked the 100th anniversary of Philips in China. This achievement stands as a
United States. Additionally, Philips Norelco remains the leading electric male grooming testament to Philips’ commitment and dedication to improving people’s lives through
brand in the US and Canada, reaching the next generation of young men with our One meaningful innovation and fostering strong partnerships in China.
Blade multi-purpose shaver.
22
International Marie-Lannelongue (Hauts-de-Seine) to improve personalized cancer care by integrating

In International Region we strive to execute on a shared global vision whilst meeting the digital pathology into the imaging workflow. And Philips has opened its new healthcare
unique local needs and circumstances of our customers. Our goal is to elevate customer innovation center, Health Innovation Paris (HIP).
relationships and move from being a trusted supplier of equipment, services and software to
a transformational partner directly contributing to our customers’ long-term success. To Philips' innovative technologies feature across the Polish hospital network. In 2023, the first
support this vision we have made great progress on leveling up our go-to-market model, Incisive CT scanner in Central & Eastern Europe was installed to diagnose patients with
developing scalable solutions and software, expanding fit-for-future capabilities, reinvesting cardiac disease at a private cardiology network. In addition, a state-of-the-art hybrid room
revenue to enable new business models, and establishing new partnerships. was created at the University Hospital in Bydgoszcz. Longstanding cooperation with the
American Heart of Poland has resulted in further contracts, including the installation of a
In International Region, our Personal Health business plays an important role in enabling monitoring network.
healthy individual care routines with technology and solutions that support people’s long-
term health and well-being. Philips and Norwegian Vestre Viken Health Trust deployed AI-enabled clinical care to help
radiologists improve patient care. The large-scale deployment provides access to an AI-based
Philips entered into many new customer partnerships in 2023, including the following: bone fracture radiology application that will serve the needs of around half a million people
across 22 Norwegian municipalities.
International – Europe
Patients at Martini Hospital were the first in the Netherlands to use Philips' ePatch wearable International – Growth
sensor to diagnose cardiac arrhythmias. The hospital uses the sensor and Cardiologs Philips Japan officially launched the Turbo-Power laser atherectomy catheter, which debulks
software to detect atrial fibrillation after patients have had a stroke. The patch is designed lesions in a single step and offers remote automatic rotation for precise directional control –
to replace traditional Holter monitors, which are more cumbersome and can only be worn a powerful tool for the treatment of peripheral vascular diseases. The Philips MR7700 3.0T
for a day. The new sensor is expected to improve detection of heart rhythm disorders and imaging system with SmartSpeed AI was installed for the first time in Japan, at Hamamatsu
provide more personalized care, as well as reducing workload and lowering costs. University Hospital. The MR7700 achieves high image quality, while SmartSpeed utilizes the
Compressed SENSE speed engine to reduce scan time.
Philips and Gibraltar Health Authority announced a 16-year strategic partnership to
transform patient imaging and cardiac care for local patients. The partnership will provide Philips launched the Spectral CT 7500 imaging system with an event for the top 100
local coronary angiography and angioplasty services in a new interventional cardiac suite radiologists in India. This system performs low-dose scans without compromising speed,
equipped with the latest diagnostic technology. The announcement represents a major power or field of view. We also received an order for 28 Philips Incisive CT systems from a
reform in service delivery, improving the region’s access to life-saving interventions while single state. This system combines operator and design efficiencies to improve patient and
reducing environmental impact, with patients no longer needing to travel abroad for staff experience and support clinical decision-making. Philips Innovation Campus opened its
treatment. new site in Bengaluru, home to over 5,000 engineers, scientists, business developers, and
clinical experts.
Developed by Dr David Tscholl and Dr Christoph Nöthiger, consulting anesthesiologists at
University Hospital Zurich, the Visual Patient Avatar is a new approach to patient In Australia, Philips signed a 7-year partnership agreement with the Queensland
monitoring: patient data is translated into a simple visual design, reducing the time needed Government and Cairns and Hinterland Hospital and Health Service (CHHHS) to provide a
in the operating room to check and interpret vital signs. Together with Philips, this idea was turnkey solution including Vue PACS, Reporting & VNA Philips Software, and Infrastructure
further developed into a commercial solution that is now being implemented at University as a Service (IaaS) across a remote and large geography. The Philips solution will enable
Hospital Bonn, the first hospital in Europe to use this type of display for faster decision clinicians to access a complete imaging health record of their patients and provide a
support. platform for the integration of all image data across the CHHHS enterprise, greatly
enhancing the radiology workflow.
Philips is partnering with Assistance Publique-Hôpitaux de Paris, Hôpitaux Civils de Lyon and
Incepto (a PACS AI application platform) to make Artificial Intelligence more accessible to
radiologists. Philips has also joined forces with Hôpital Saint-Joseph (Paris) and Hôpital
23
Demonstrating our commitment to high-quality, sustainable healthcare, Philips undertook Driving end-to-end supply chain reliability and agility
multiple initiatives to expand helium-free MR operations in Brazil. Besides Brazil, this As part of our plan to create value with sustainable impact, the supply chain plays an
expansion reached Mexico, Panama, Puerto Rico, Colombia, Chile, Argentina and Ecuador, important role in improving our performance and delivering to our customers and
making a significant mark on the region's healthcare landscape. We are also working to consumers as promised. In 2023, we initiated multiple interventions and have longer-term
localize the production of BlueSeal MRI magnets in Brazil. Other notable ventures included programs planned to improve our execution capabilities and become more resilient in
the Brazilian Company of Hospital Services (EBSERH) installing 14 Incisive CT imaging systems navigating volatility.
at Federal University Hospitals.
In 2023, we focused on restoring the stability and reliability of our supply chain, including
In Turkey, Philips has supplied high-grade medical equipment to the new Gaziantep City safeguarding material flows and de-risking in a sustainable manner. For example, we
Hospital. The public city hospital complex, with 1,875 new beds, will serve Gaziantep and accelerated the redesign of printed circuit board assemblies (PCBAs) to replace older e-
surrounding cities, adding much-needed healthcare capacity to the region, which was hit by components with more modern and widely available e-components. We also reduced our
a devastating earthquake in February 2023. purchases of high-risk parts by applying our supplier risk management framework, which
assesses suppliers for factors such as strategic fit, financial stability, operational performance,
As part of a deal with Egypt’s Ministry of Health, Philips unveiled the first Mobile MRI Truck quality, sustainability, compliance and location. We aim to maintain close relationships with
for the Middle East, Turkey & Africa region, to enhance healthcare delivery in remote, our suppliers and conduct an ongoing dialogue with respect to our forecast.
difficult-to-access and underserved locations. In just 3 months after implementation, more
than 1,100 patients across Egypt had already benefited from this initiative. Over the past year, we have re-aligned our end-to-end supply chain organization, with
dedicated teams by Business and Region allowing us to tailor to specific challenges and
In Kazakhstan, Philips provided advanced medical equipment to the National Coordination implement solutions that address different customer and consumer needs. Whereas Philips’
Center for Emergency HealthCare in Astana and the Hematology and Cardiology Center in supply chain historically delivered efficiencies through a functional orientation, the new
Ust-Kamenogorsk. Both are multi-modality projects and have a high social importance, as operating model has sped up decision-making and better supports the businesses in
the Emergency Center will be the flagship center for the National Stroke Program in achieving their short-, mid- and long-term goals.
Kazakhstan, and the Hematology and Cardiology Canter treats patients with serous blood
diseases. Under the new set-up, initial investments have been made to improve our end-to-end
visibility and planning tools by digitizing our priority information flows.
3.6 Supply chain and procurement We continue to deploy our strategy for a more regional vs global approach to our end-to-
Philips runs an Integrated Supply Chain (ISC), which encompasses supplier selection and end network design, taking into account factors such as customer proximity, leveraging
management through procurement, manufacturing across all the industrial sites, logistics manufacturing capabilities, our environmental footprint, and efficiency. We are using our
and warehousing operations, customer installation, as well as demand/supply orchestration. multi-modality sites, in combination with contract manufacturing partners, to regionally
‘multi-source’ many of our products. This is intended to increase the resilience of our supply
When selecting and evaluating partners, we consider not only business metrics such as chain to manage future, unplanned disruptions and to ensure access to public healthcare
quality, on-time delivery performance and cost, but also environmental, social and investment where ‘local’ requirements exist in our largest markets.
governance factors. We use supplier classification models to identify critical suppliers,
including those supplying materials, components and services that could influence the Like the rest of the industry, we remain exposed to continued geopolitical tensions around
safety and performance of our products and solutions. the world. Labor costs remain a concern due to the persistent inflation in 2023 and show an
upward trend entering 2024. On the other hand, overall macroeconomics show improved
The Philips Supplier Quality Manual outlines Philips’ quality, regulatory, product, process and availability of materials. As a result, the cost of raw materials and energy, as well as inflation,
customer requirements. The standards outlined in this manual underpin agreements show a downward trend compared to 2022. We believe that our interventions, in
between suppliers and Philips, and guide compliance with Philips’ quality standards. combination with the improvement in macroeconomic trends, put us on the right track in
our journey to build a reliable, predictable and efficient supply chain.
24
Philips Group
Supplier spend analysis per geographic area in %
2023
Western Europe 31%
North America 34%
Other mature geographies 6%
Mature geographies 72%
Growth geographies 28%
Philips Group 100%
3.7 Real Estate

Philips is present in 75 countries globally and has its corporate headquarters in Amsterdam,
Netherlands. Our real estate locations are spread around the globe, with key manufacturing
and R&D sites in Europe, the Americas and Asia.
In 2023, we consolidated five different R&D locations into a new R&D Hub in Bangalore,
India, which will host some 5,000 employees. We continued our right-sizing program
through our Future of Work concepts to support hybrid working. The project to move
Philips’ headquarters to a new location in Amsterdam in 2025 is progressing as planned.
We also continue to optimize our real estate portfolio in line with our Environmental ESG
commitments towards 2025. Having met our goal of bringing our site-related CO₂ emissions
under 35 kilotons per year in 2020, we further reduced our CO₂ emissions to 22 kilotons in
2023. In addition, we reached 78% renewable energy in 2023, already exceeding our target
of 75% by 2025. Energy consumption decreased by 7.8% compared to 2022.
Over 75% of our locations are leased properties, and we manage vacancy closely to ensure
the right level of space efficiency and flexibility to support our business dynamic. Our current
facilities are adequate to meet the requirements of our present and foreseeable future
operations. As expected, occupancy rates in our offices continued to stabilize in the first half
of 2023. We continue to evaluate options to right-size our office footprint, to further adopt
task-based working principles, and to cater for meaningful presence in inspiring layout and
workplace solutions. The net book value of our land and buildings as of December 31, 2023,
represented EUR 1,282 million; construction in progress represented EUR 32 million.
25
At a glance Group sales increased 6% on a comparable basis to

*)
Financial
EUR 18.2 billion in 2023
performance Income from operations was a loss of EUR 115 million,

compared to a loss of EUR 1,529 million in 2022
*)
Adjusted EBITA increased to EUR 1,921 million, or 10.6%
of sales, compared to EUR 1,318 million, or 7.4% of sales,
in 2022
Operating cash flow improved to EUR 2,136 million,

compared to an outflow of EUR 173 million in 2022
*) Non-IFRS financial measure. For the definition and reconciliation of the most
directly comparable IFRS measure, refer to Reconciliation of non-IFRS information.
26
4 Financial performance
*)
“ In 2023, we delivered 6% comparable sales growth , 320 bps improvement in profitability and an operating cash
flow of EUR 2.1 billion, as we improved our supply chain, established a simplified operating model and enhanced
patient safety and quality.”
Abhijit Bhattacharya CFO Royal Philips
4.1 Performance review Philips Group

Key data in millions of EUR unless otherwise stated
The year 2023 2021 2022 2023

Sales 17,156 17,827 18,169
• Sales amounted to EUR 18.2 billion, an increase of 2% on a nominal basis. On a
Nominal sales growth (0.9)% 3.9% 1.9%
comparable basis*), sales increased 6%, driven by supply chain improvements.
Comparable sales growth 1) (1.2)% (2.8)% 6.0%
Comparable sales*) showed 11% growth in the Diagnosis & Treatment segment, 1% Impairment of goodwill (15) (1,357) (8)
growth in the Connected Care segment, and 3% growth in the Personal Health segment. Income from operations 553 (1,529) (115)
• Net income amounted to a loss of EUR 463 million, driven by higher earnings offset by a as a % of sales 3.2% (8.6)% (0.6)%
EUR 575 million Respironics litigation provision. Net income for 2022 was a loss of EUR 1.6 Financial expenses, net (39) (200) (314)
billion, which included a charge of EUR 1.5 billion related to goodwill and R&D Investments in associates, net of income taxes (4) (2) (98)
impairments. Income tax (expense) benefit 103 113 73
• As of December 31, 2023, over 99% of the sleep therapy device registrations that are Income from continuing operations 612 (1,618) (454)
actionable had been remediated, while the remediation of the ventilator devices remains Discontinued operations, net of income taxes 2,711 13 (10)
ongoing. In October 2023, Philips Respironics received preliminary court approval for the Net income 3,323 (1,605) (463)
class action settlement that would resolve all or nearly all private economic loss claims in Adjusted EBITA 1) 2,054 1,318 1,921
the US. as a % of sales 12.0% 7.4% 10.6%
• Adjusted EBITA*) amounted to EUR 1,921 million, or 10.6% of sales, compared to 7.4% of Income from continuing operations attributable to shareholders 2) per 0.64 (1.76) (0.50)
common share (in EUR) - diluted
sales in 2022. All segments showed an increase in Adjusted EBITA*) margin, mainly driven
Adjusted income from continuing operations attributable to 1.58 0.92 1.25
by increased sales and pricing & productivity measures, partly offset by cost inflation. shareholders 2) per common share (in EUR) - diluted 1)
• Supported by significant change management efforts, by year-end 2023 Philips had
1)
reduced its workforce by approximately 8,000 roles, out of 10,000 roles in total planned Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to
Reconciliation of non-IFRS information, starting on page 289.
by 2025. 2)
Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted
• Net cash flows from operating activities amounted to EUR 2,136 million; free cash flow*) retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2022.
amounted to EUR 1,582 million.
• Philips cancelled approximately 15.1 million shares acquired under its 2021 share buyback
program for capital reduction purposes. *)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to
27
4.2 Factors impacting performance Limited availability and delays in the supply of certain components and products
The introduction of a simplified operating model, workforce reduction, an improved global internationally – partly a consequence of the COVID pandemic and the Russia-Ukraine war –
supply chain, and the geopolitical environment contributed to the company’s business and impacted our results in 2022. In addition, the supply chain constraints resulted in an increase
results in 2023. Where relevant, the impact of these factors and the resulting uncertainties in overall working capital, in particular inventories.
on the company’s results, balance sheet and cash flows have been considered and are
reflected in amounts reported. Geopolitical environment
Having substantially reduced our operations in Russia in 2022, the remaining activities were
Macro-economic landscape 2023 focused on the delivery of medical systems, devices, and spare parts to healthcare providers.
In 2023, global economic growth is estimated to have slowed compared to 2022, marked by In 2023, increased sanctions and export controls led to a further reduction in sales activity.
easing price pressures and supply chain stress while major central banks were tightening Philips’ operations in Russia and Ukraine on a combined basis represented less than 2% of
their respective monetary policies. Global real GDP is estimated to have grown by 2.7% in group sales in both 2022 and 2023. The asset value of the activities in Russia and Ukraine,
2023, compared with 3.1% in 2022. On the consumer side, households were dipping into mainly working capital, was less than 1% of the consolidated total assets as of December 31,
their savings accumulated during the COVID period to maintain their spending levels and to 2022 and 2023. The Russia-Ukraine war continues to put pressure on the global commodity
cushion against the inflation surge since late 2021. However, consumer spending landscape and supply chains, and contribute to higher levels of cost inflation.
momentum is not expected to sustain due to the depletion of savings and expected labor
market softening because of tighter financial conditions. The delayed effect of higher The company’s global operations are exposed to geopolitical and macroeconomic changes
benchmark interest rates is expected to manifest further in 2024, leading to a further (refer to Risk management and internal control framework , starting on page 136). The
slowdown in global economic growth. Oxford Economics expects world real GDP growth of current situation in the Middle East further increases economic and political uncertainty.
2.3% in 2024. Philips is present in Israel with several subsidiaries, mainly in Diagnosis & Treatment and
Connected Care, that are primarily involved in manufacturing and research and
Simplified operating model development activities.
On January 30, 2023, Philips announced its plan to create value with sustainable impact,
which is based on focused organic growth to deliver patient- and people-driven innovation Climate-related matters
at scale, with improved execution as a key value driver, prioritizing patient safety and quality, In preparing the consolidated financial statements, management has considered the impact
supply chain reliability and a simplified operating model. The simplified operating model of climate change, specifically the financial impact of Philips meeting its internal and
aims to simplify the organization to increase agility and structurally lower the cost base by external climate-related aims, the potential impact of climate-related risks, and the costs
giving end-to-end accountability to the segments. Operating model productivity savings, incurred to pro-actively manage such risks. These considerations did not have a material
procurement savings and other productivity programs contributed positively to the results impact on the financial reporting judgments, estimates or assumptions. The financial
of operations. impacts considered include specific climate mitigation measures, such as the use of lower-
carbon energy sources, the cost of developing more sustainable product offerings, and
Workforce reduction expenses incurred to mitigate against the impact of extreme weather conditions. To meet its
In addition to the reduction of its workforce by 4,000 roles announced in October 2022, in long-term Science Based Targets and reduce its full value chain emissions in line with a 1.5°C
2023 Philips announced plans to reduce its workforce by an additional 6,000 roles globally global warming scenario, Philips has entered into a number of power purchase agreements.
by 2025, in line with relevant local regulations and processes. These reductions are focused
on Corporate and Functions optimization and non-core activities, and amounted to
approximately 8,000 roles by year-end 2023. Workforce-related restructuring charges were 4.3 Results of operations
EUR 196 million in 2023 and EUR 136 million in 2022.
Sales
Supply chain resilience The composition of sales growth in percentage terms in 2023, compared to 2022 and 2021, is
In 2023, following significant actions to increase supply chain resilience and mitigate the presented in the following table.
impact of disruptions, our sales benefited from improved material availability and resolved
shortages in components.
28
Philips Group Therapy and high-single-digit growth in Diagnostic Imaging, due to supply chain
Sales in millions of EUR unless otherwise stated
improvements.
2021 2022 2023
Diagnosis & Treatment 7,825 8,290 8,818
Connected Care
Nominal sales growth 5.9% 5.9% 6.4%
In 2023, sales amounted to EUR 5,138 million, 2.5% lower than in 2022 on a nominal basis.
Comparable sales growth 1) 8.3% (0.8)% 11.1%
Considering a 3.6% negative currency effect and consolidation impact, comparable sales*)
increased by 1.1%. This growth was mainly driven by double-digit growth in Monitoring,
Connected Care 5,371 5,268 5,138
Nominal sales growth (14.9)% (1.9)% (2.5)% partly offset by a decline in Sleep & Respiratory Care due to the consequences of the
Comparable sales growth 1) (19.0)% (9.1)% 1.1% Respironics recall. In addition, sales were impacted by provisions charged to sales of EUR 174
million, mainly in connection with the proposed Respironics consent decree, which had a
Personal Health 3,429 3,626 3,602 negative impact of 3.4%.
Nominal sales growth 7.2% 5.7% (0.7)%
Comparable sales growth 1) 8.8% 0.1% 3.2% Personal Health
In 2023, sales amounted to EUR 3,602 million, 0.7% lower than in 2022 on a nominal basis.
Other 530 643 612 Considering a 3.9% negative currency effect and consolidation impact, comparable sales*)
increased by 3.2%. This was mainly driven by high-single-digit growth in Personal Care,
Philips Group 17,156 17,827 18,169 partly offset by a decline in Oral Healthcare.
Nominal sales growth (0.9)% 3.9% 1.9%
Comparable sales growth 1) (1.2)% (2.8)% 6.0% Other
1)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to In 2023, sales amounted to EUR 612 million, compared to EUR 643 million in 2022. The
Reconciliation of non-IFRS information, starting on page 289. decrease was mainly due to the discontinuation of innovation consultancy activities
provided to other companies until 2023.
Group sales in 2023 amounted to EUR 18,169 million, 1.9% higher than in 2022 on a nominal
basis. Considering a 4.1% negative currency effect and consolidation impact, comparable Performance by geographic area
sales growth*) was 6.0%. The negative currency effect was mainly due to depreciation of
currencies against the euro, and affected all segments. In addition, provisions charged to Philips Group
Sales by geographic area in millions of EUR unless otherwise stated
sales of EUR 174 million, mainly in connection with the proposed Respironics consent decree,
2021 2022 2023
had a negative impact of 1%.
Western Europe 3,645 3,603 3,819
North America 6,781 7,588 7,562
Comparable order intake decreased 5% in 2023, compared to a 3% decline in 2022. The
Other mature geographies 1,694 1,643 1,626
order book (which covers around 40% of Group sales) remains strong, and we are taking the
Mature geographies 12,120 12,833 13,007
necessary actions to improve order intake by shortening lead times from order to delivery
Nominal sales growth (2)% 6% 1%
and building on the positive impact we are making with our innovations, for example in Comparable sales growth 1) (3)% (1)% 4%
predictive data analytics and artificial intelligence across our portfolio, to help improve the Growth geographies 5,036 4,993 5,162
quality and efficiency of care delivery. The order book remains strong and is expected to Nominal sales growth 1% (1)% 3%
continue to support growth. Comparable sales growth 1) 3% (7)% 10%
Philips Group 17,156 17,827 18,169
Diagnosis & Treatment Nominal sales growth (0.9)% 3.9% 1.9%
In 2023, sales amounted to EUR 8,818 million, 6.4% higher than in 2022 on a nominal basis. Comparable sales growth 1) (1.2)% (2.8)% 6.0%
Considering a 4.7% negative currency effect and consolidation impact, comparable sales*) 1)
increased by 11.1%. This was due to double-digit growth in Ultrasound and Image-Guided Reconciliation of non-IFRS information, starting on page 289.
29
Sales in Mature geographies in 2023 were 1% higher than in 2022 on a nominal basis and 4% Connected Care
higher on a comparable basis*). Sales in Western Europe were 6% higher year-on-year on a
nominal basis and 7% higher on a comparable basis*), with double-digit growth in the Connected Care
Diagnosis & Treatment segment, mid-single-digit growth in the Personal Health segment,
2021 2022 2023
and low-single-digit decline in the Connected Care segment. Sales in North America were
Western Europe 949 828 798
flat year-on-year on a nominal basis and 3% higher on a comparable basis*), as high-single-
North America 3,019 3,227 3,132
digit growth in the Diagnosis & Treatment segment was offset by a low-single-digit decline
Other mature geographies 649 587 573
in the Personal Health segment. Sales in Other mature geographies decreased by 1% on a
Mature geographies 4,618 4,642 4,503
nominal basis and increased by 7% on a comparable basis*), with high-single-digit
Growth geographies 753 626 635
comparable sales growth*) in the Connected Care segment and mid-single-digit growth in Sales 5,371 5,268 5,138
the Diagnosis & Treatment and Personal Health segments. Nominal sales growth (15)% (2)% (2)%
Comparable sales growth 1) (19)% (9)% 1%
Sales in Growth geographies in 2023 increased by 3% on a nominal basis and 10% on a
1)
comparable basis*), with double-digit growth in the Diagnosis & Treatment and Connected Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to
Care segments and low-single-digit growth in the Personal Health segment. The double-
digit growth in comparable sales growth*) was driven by China, Middle East & Turkey and
Latin America. Sales in Growth geographies increased by 1% on a nominal basis in 2023, and on a
comparable basis*) grew 7%, which was driven by Latin America and China. Sales in Mature
Diagnosis & Treatment geographies decreased by 3% on a nominal basis and were flat year-on-year on a
comparable basis*), as growth in Other mature geographies was offset by Western Europe.
Diagnosis & Treatment In addition, provisions charged to sales of EUR 174 million, mainly in connection with the
proposed Respironics consent decree, had a negative impact of 3.4%.
2021 2022 2023
Western Europe 1,553 1,521 1,743
Personal Health
North America 2,664 3,019 3,172
Other mature geographies 805 782 766 Personal Health
Mature geographies 5,022 5,322 5,681 Sales by geographic area in millions of EUR unless otherwise stated
Growth geographies 2,803 2,968 3,137 2021 2022 2023
Sales 7,825 8,290 8,818 Western Europe 894 902 961
Nominal sales growth 6% 6% 6% North America 939 1,209 1,144
Comparable sales growth 1) 8% (1)% 11% Other mature geographies 198 211 207
1)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Mature geographies 2,032 2,322 2,312
Reconciliation of non-IFRS information, starting on page 289. Growth geographies 1,398 1,304 1,290
Sales 3,429 3,626 3,602
Nominal sales growth 7% 6% (1)%
Sales in Growth geographies increased by 6% on a nominal basis in 2023, and on a Comparable sales growth 1) 9% 0% 3%
comparable basis*) showed double-digit growth, which was mainly driven by China and
1)
Middle East & Turkey. Sales in Mature geographies increased by 7% on a nominal basis and Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to
showed double-digit growth on a comparable basis*), which was driven by double-digit
growth in Western Europe and high-single-digit growth in North America.
Sales in Growth geographies decreased by 1% on a nominal basis in 2023, and on a
comparable basis*) showed mid-single-digit growth, which was mainly driven by Middle-East
& Turkey and China, partly offset by a decline in Russia & Central Asia. Sales in Mature
30
geographies were flat on a nominal basis, and on a comparable basis*) showed low-single- Selling expenses
digit growth, driven by Western Europe. Selling expenses amounted to EUR 4,524 million, or 24.9% of sales, in 2023, compared to EUR
4,621 million, or 25.9% of sales, in 2022. The year-on-year decrease in selling expenses of EUR
Cost of sales 97 million was mainly driven by a favorable foreign currency impact, partly offset by higher
restructuring, acquisition-related and other charges.
Philips Group
Cost of sales components in millions of EUR unless otherwise stated
General and administrative expenses
as a % of as a % of as a % of
2021 sales 2022 sales 2023 sales General and administrative expenses amounted to EUR 608 million, or 3.3% of sales, in 2023,
Costs of materials used 4,142 24.1% 4,320 24.2% 4,626 25.5% compared to EUR 671 million, or 3.8% of sales, in 2022. The year-on-year decrease of EUR 63
Salaries and wages 2,245 13.1% 2,462 13.8% 2,381 13.1% million was mainly driven by a favorable foreign currency impact and lower restructuring,
Depreciation and amortization 479 2.8% 535 3.0% 461 2.5% acquisition-related and other charges.
Other manufacturing costs 3,123 18.2% 3,316 18.6% 3,252 17.9%
Cost of sales 9,988 58.2% 10,633 59.6% 10,721 59.0% Research and development expenses
Research and development costs were EUR 1,890 million, or 10.4% of sales, in 2023,
compared to EUR 2,091 million, or 11.7% of sales, in 2022. The year-on-year decrease of EUR
Cost of sales includes only expenses directly or indirectly attributable to the sale of products 201 million was mainly driven by lower restructuring, acquisition-related and other charges
or services, such as cost of materials used, salaries and wages, depreciation and amortization and a favorable foreign currency impact. 2022 included R&D project impairment charges.
of assets used in manufacturing, and other manufacturing costs (such as repair and
maintenance costs related to production, expenses incurred for shipping and handling of Philips Group
Research and development expenses in millions of EUR unless otherwise stated
internal movements of goods, and other expenses related to manufacturing).
2021 2022 2023
Diagnosis & Treatment 762 894 827
Philips’ cost of sales increased by EUR 88 million to EUR 10,721 million in 2023, and decreased
Connected Care 670 822 663
as a percentage of sales, compared to EUR 10,633 million in 2022, mainly due to an increase
Personal Health 190 200 197
in Cost of materials used by EUR 306 million in 2023, mainly due to increased sales volume
Other 184 175 203
and cost inflation, partly offset by productivity measures and a favorable foreign currency
Philips Group 1,806 2,091 1,890
impact. Other key factors influencing cost of sales were as follows: As a % of sales 10.5% 11.7% 10.4%
• Salaries and wages decreased by EUR 81 million, driven by productivity measures and a
favorable foreign currency impact, partly offset by cost inflation. Impairment of goodwill
• Depreciation and amortization decreased by EUR 74 million in 2023, mainly due to a Goodwill impairment charges were EUR 8 million in 2023 and EUR 1,357 million in 2022. For
favorable foreign currency impact. further information refer to Goodwill, starting on page 173.
• Other manufacturing costs decreased by EUR 64 million in 2023, driven by productivity
measures and a favorable foreign currency impact, partly offset by cost inflation. Net income, Income from operations (EBIT) and Adjusted EBITA*)
Net income amounted to a loss of EUR 463 million in 2023, an improvement of EUR 1.1 billion
Gross margin compared to 2022, which included a charge of EUR 1.5 billion related to goodwill and R&D
In 2023, Philips’ gross margin was EUR 7,448 million, or 41.0% of sales, compared to EUR impairments. Higher earnings in 2023 were offset by a EUR 575 million litigation provision in
7,194 million, or 40.4% of sales, in 2022. Gross margin increased by EUR 254 million year-on- connection with the Respironics recall. Net income in 2022 included a charge of EUR 1.5
year, driven by increased sales and price & productivity measures, partly offset by cost billion related to goodwill and R&D impairments. Net income is not allocated to segments,
inflation, an unfavorable foreign currency impact, and higher restructuring, acquisition- as certain income and expense line items are monitored on a centralized basis, resulting in
related and other charges. them being shown on a Philips Group level only.
31
The following overview shows Income from operations and Adjusted EBITA*) by segment. Restructuring, acquisition-related and other charges were EUR 1,739 million in 2023. This
includes: a EUR 575 million Respironics litigation provision, EUR 363 million in connection
Philips Group with the proposed Respironics consent decree, and EUR 224 million Respironics field-action
Income from operations and Adjusted EBITA 1) in millions of EUR unless otherwise stated
running remediation costs. In addition, it includes EUR 285 million restructuring charges,
Income from operations as a % of sales Adjusted EBITA 1) as a % of sales
mainly related to workforce reduction, and charges in relation to quality remediation
2023
actions of EUR 175 million. 2022 charges were EUR 1,127 million and included: restructuring
Diagnosis & Treatment 720 8.2% 1,026 11.6%
charges of EUR 185 million; EUR 148 million portfolio realignment impairments and charges;
Connected Care (1,199) (23.3)% 369 7.2%
Personal Health 552 15.3% 597 16.6%
R&D project impairment charges of EUR 134 million; EUR 250 million for the Respironics
Other (188) (71) field-action provision; EUR 210 million Respironics field-action running remediation costs; an
Philips Group (115) (0.6)% 1,921 10.6% approximately EUR 60 million provision for public investigations into tender irregularities;
2022 and EUR 59 million for provisions for quality actions in Connected Care.
Diagnosis & Treatment 538 6.5% 788 9.5%
Connected Care (2,347) (44.6)% 111 2.1% Income from continuing operations attributable to shareholders per common share (in EUR)
Personal Health 515 14.2% 538 14.8% - diluted, was EUR (0.50) in 2023, compared to EUR (1.76) in 2022. Adjusted income from
Other (235) (119) continuing operations attributable to shareholders per common share (in EUR) - diluted*)
Philips Group (1,529) (8.6)% 1,318 7.4% was EUR 1.25, compared to EUR 0.92 in 2022.
2021
Diagnosis & Treatment 948 12.1% 1,028 13.1% Diagnosis & Treatment
Connected Care (716) (13.3)% 553 10.3% Income from operations increased to EUR 720 million in 2023, compared to EUR 538 million
Personal Health 576 16.8% 590 17.2% in 2022. This was mainly driven by increased sales and pricing & productivity measures, partly
Other (255) (117)
offset by cost inflation. These factors also resulted in an increase in Adjusted EBITA*) to 11.6%
Philips Group 553 3.2% 2,054 12.0%
of sales in 2023.
1)
Reconciliation of non-IFRS information, starting on page 289. Amortization and goodwill impairment charges in 2023 were EUR 98 million and include
EUR 89 million amortization charges and EUR 8 million goodwill impairment charges. 2022
Income from operations amounted to a loss of EUR 115 million, or (0.6)% of sales, in 2023, charges were EUR 115 million and included EUR 22 million of charges related to an
compared to a loss of EUR 1,529 million, or (8.6)% of sales, in 2022, which included a charge impairment of a technology asset in Image-Guided Therapy.
of EUR 1.5 billion related to goodwill and R&D impairments. Higher earnings in 2023 were
offset by a EUR 575 million Respironics litigation provision. Adjusted EBITA*) increased to EUR Restructuring, acquisition-related and other charges in 2023 were EUR 210 million and
1,921 million and the margin improved to 10.6%, compared to EUR 1,318 million and a include EUR 81 million charges in relation to quality remediation actions and EUR 73 million
margin of 7.4% in 2022, mainly driven by increased sales and pricing & productivity restructuring charges, mainly related to workforce reduction. 2022 charges amounted to
measures. EUR 136 million and included R&D project impairment charges of EUR 73 million and a
provision of approximately EUR 60 million for public investigations into tender irregularities.
Amortization and goodwill impairment charges were EUR 298 million in 2023. This includes
amortization charges of EUR 290 million and goodwill impairment charges of EUR 8 million. Connected Care
Amortization and goodwill impairment charges in 2022 were EUR 1,720 million. This Income from operations increased to EUR (1,199) million in 2023, compared to EUR (2,347)
included a charge of EUR 1,331 million related to an impairment of goodwill in the Sleep & million in 2022, which included a charge of EUR 1.3 billion related to goodwill impairment.
Respiratory Care business, EUR 363 million amortization charges and a EUR 27 million 2023 was mainly impacted by the consequences of the Respironics field action, in particular
goodwill impairment in the Precision Diagnosis Solutions business. the EUR 575 million provision in connection with the Respironics litigation, partly offset by
increased sales and productivity measures. Adjusted EBITA*) improved to 7.2% of sales and
was also impacted by cost inflation.
32
Amortization and goodwill impairment charges in 2023 were EUR 178 million and include Financial income and expenses
EUR 178 million amortization charges. 2022 charges were EUR 1,583 million and included A breakdown of financial income and expenses is presented in the following table.
EUR 1,331 million impairment of goodwill related to the Sleep & Respiratory Care business
and a goodwill impairment of EUR 27 million in Precision Diagnosis Solutions. Philips Group
Financial income and expenses in millions of EUR
2021 2022 2023
Restructuring, acquisition-related and other charges in 2023 were EUR 1,390 million and
Interest expense, net (141) (210) (230)
include: charges of EUR 575 million Respironics litigation provision, EUR 363 million in
Net change in fair value of financial assets through profit or loss 95 9 (26)
connection with the proposed Respironics consent decree, and EUR 224 million Respironics
Net foreign exchange gains (losses) - 9 (23)
field-action running remediation costs. In addition, it includes EUR 64 million restructuring
Other 6 (8) (34)
charges, mainly related to workforce reduction, and charges in relation to quality
Financial income and expenses (39) (200) (314)
remediation actions of EUR 94 million. 2022 charges were EUR 875 million and included: EUR
250 million for the Respironics field action provision; EUR 210 million Respironics running
remediation costs; EUR 148 million portfolio realignment impairments and charges; and EUR Financial income and expenses resulted in a net expense of EUR 314 million in 2023,
59 million provisions for quality actions in Connected Care. compared to a net expense of EUR 200 million in 2022. 2023 includes higher interest
expense, fair value losses on minority investments and net foreign exchange losses
Personal Health compared to 2022. For further information, refer to Financial income and expenses, starting
Income from operations increased to EUR 552 million in 2023, compared to EUR 515 million on page 164.
in 2022. This was mainly driven by increased sales and pricing & productivity measures. These
factors also resulted in an increase in Adjusted EBITA*) to 16.6% of sales. Income taxes
Income tax expense increased by EUR 40 million year-on-year. The income tax benefit in
Amortization charges in 2023 were EUR 14 million and include amortization charges related 2023 is mainly driven by the negative income before tax, recognition of tax credits and tax
to intangible assets in Mother & Child Care. 2022 charges were EUR 15 million and included incentives, partly offset by the tax effect on the economic loss class-action settlement
amortization charges related to intangible assets in Mother & Child Care. provision relating to the Respironics recall. The income tax benefit in 2022 was mainly driven
by the negative income before tax and tax incentives, partly offset by non-tax-deductible
Restructuring, acquisition-related and other charges in 2023 were EUR 31 million and include goodwill impairment.
a EUR 23 million investment re-measurement loss and restructuring costs mainly related to
workforce reduction of EUR 9 million. 2022 charges were not material. Investments in associates
Results related to investments in associates declined from a loss of EUR 2 million in 2022 to a
Other loss of EUR 98 million in 2023. 2023 includes impairments of EUR 58 million and share of
In Other we report on the items Innovation & Strategy, IP Royalties, Central costs and Other. results of associates of EUR 40 million.
Income from operations amounted to a loss of EUR 188 million in 2023, compared to a loss Discontinued operations
of EUR 235 million in 2022. Adjusted EBITA*) amounted to a loss of EUR 71 million, compared
to a loss of EUR 119 million in 2022. The increase in Adjusted EBITA*) was mainly due to cost Philips Group
Discontinued operations, net of income taxes in millions of EUR
savings, partly offset by lower royalty income.
2021 2022 2023
Domestic Appliances 2,698 3 (2)
Restructuring, acquisition-related and other charges in 2023 were EUR 108 million and
Other 13 10 (7)
include EUR 139 million restructuring charges mainly related to workforce reduction and a
Net income of Discontinued operations 2,711 13 (10)
gain of EUR 35 million due to a divestment. 2022 charges were EUR 108 million and included
restructuring charges of EUR 61 million and a EUR 21 million impairment of intangible assets.
33
In 2023 and 2022, Discontinued operations consisted primarily of the Domestic Appliances In 2022, Philips initiated general productivity actions aimed at simplifying the organization
business and certain other divestments that were reported as discontinued operations. In to streamline ways of working and reduce operating expenses. This included an immediate
2021, the sale of the Domestic Appliance business resulted in an after-tax gain of EUR 2.5 reduction of around 4,000 positions globally across the organization, for which a
billion. restructuring charge of EUR 80 million was recorded. In addition, restructuring projects were
executed during the year, of which the most significant impacted the Diagnosis & Treatment
For further information, refer to Discontinued operations and assets classified as held for and Connected Care segments and mainly took place in the US and Netherlands. The
sale, starting on page 154. restructuring mainly comprised product portfolio rationalization and the reorganization of
global support functions.
Non-controlling interests
Net income attributable to non-controlling interests decreased from EUR 3 million in 2022 to For further information on restructuring, refer to Provisions, starting on page 188.
EUR 2 million in 2023.
Philips Group
Acquisition-related charges in millions of EUR
*)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to 2021 2022 2023
Diagnosis & Treatment (53) (54) 45
Philips Group 14 17 96
4.4 Restructuring and acquisition-related charges

In 2023, acquisition-related charges amounted to EUR 96 million. The Diagnosis & Treatment
Philips Group segment recorded charges of EUR 45 million, mainly related to the acquisition of
Restructuring charges in millions of EUR
Spectranetics, due to post-acquisition integration costs. The Connected Care segment
2021 2022 2023
recorded charges of EUR 51 million, mainly related to the acquisition of BioTelemetry and
Restructuring charges per segment:
Capsule Technologies, due to post-acquisition integration costs.
Diagnosis & Treatment 24 57 73
In 2022, acquisition-related charges amounted to EUR 17 million. The Connected Care
Personal Health (1) 11 9
segment recorded charges of EUR 70 million related to the acquisitions of BioTelemetry and
Other (5) 61 139
Philips Group 80 185 285 Capsule Technologies, due to post-acquisition integration costs. The Diagnosis & Treatment
segment recorded a net gain of EUR 54 million, mainly related to a gain of EUR 92 million
Cost breakdown of restructuring charges: from the re-measurement of contingent consideration liabilities, partly offset by charges
Provision for personnel lay-off costs 17 136 196 related to the acquisition of Spectranetics.
Restructuring-related asset impairment 30 31 56
Other restructuring-related costs 33 18 33
Philips Group 80 185 285
In 2023, Philips continued general productivity actions aimed at simplifying the organization
to streamline ways of working and reduce operating expenses. This included a further
reduction to 8,000 roles to date, out of the planned reduction of 10,000 roles globally across
the organization by 2025, for which a restructuring charge of EUR 140 million was recorded
in 2023. In addition, restructuring projects were executed during the year, of which the most
significant impacted the Diagnosis & Treatment and Connected Care segments and mainly
took place in the US and Netherlands.
34
4.5 Acquisitions and divestments Net cash flows from operating activities
Net cash flows from operating activities amounted to an inflow of EUR 2,136 million in 2023,
Acquisitions compared to an outflow of EUR 173 million in 2022. This increase is mainly due to higher
In 2023, Philips completed one acquisition involving a total net cash outflow of EUR 53 cash earnings and lower working capital, and includes a EUR 141 million payment related to
million (total equity price and settlement of debt). The acquisition is subject to final the previously announced resolution of the economic loss class action in the US. Free cash
purchase price allocation procedures, which are expected to be finalized in the second flow*) amounted to a cash inflow of EUR 1,582 million in 2023, compared to an outflow of
quarter of 2024. EUR 961 million in 2022.
In 2022, Philips completed three acquisitions. The acquisition of Vesper Medical Inc., Net cash flows from operating activities amounted to an outflow of EUR 173 million in 2022,
completed on January 11, 2022, was the most notable. Acquisitions in 2022 and prior years compared to an inflow of EUR 1,629 million in 2021. This decrease is mainly due to lower cash
led to acquisition and post-merger integration charges of EUR 70 million in the Connected earnings, increased working capital and cash costs related to the Philips Respironics field
Care segment. action. Free cash flow*) amounted to a cash outflow of EUR 961 million in 2022, compared to
an inflow of EUR 900 million in 2021.
Divestments
In 2023, Philips completed six divestments for a cash consideration of EUR 80 million, notably Net cash flows from investing activities
Philips Pharma Solutions in the US. Net cash flows from investing activities consist of net capital expenditures and other cash
flows from investing activities.
In 2022, Philips completed one divestment, which was not material.
In 2023, other cash flows from investing activities amounted to a cash outflow of EUR 82
For details, please refer to Acquisitions and divestments, starting on page 156. million, mainly due to a new business acquisition and minority investments, partly offset by
divestment proceeds.
4.6 Cash flows In 2022, other cash flows from investing activities amounted to a cash outflow of EUR 698
The movements in cash and cash equivalents balance for the years ended December 31, million, mainly due to the acquisitions of Vesper Medical and Cardiologs, amounting to EUR
2021, 2022 and 2023 are presented and explained in the following table. 414 million, and new minority investments.
Philips Group Net cash flows from financing activities

Condensed consolidated cash flows in millions of EUR
Net cash flows from financing activities consist of treasury shares transactions, changes in
2021 2022 2023
debt, dividend paid and other cash flow items.
Beginning cash and cash equivalents balance 3,226 2,303 1,172
Net cash flows from operating activities 1,629 (173) 2,136
In 2023, treasury shares transactions mainly included the share buyback activities, which
Net cash flows from investing activities
resulted in EUR 662 million net cash outflow. Changes in debt mainly includes new bonds
Net capital expenditures (729) (788) (554)
issued of EUR 500 million and loan repayments amounting to EUR 500 million. The dividend
Other cash flows from investing activities (2,943) (698) (82)
Net cash flows from financing activities was distributed fully in shares.
Treasury shares transactions (1,613) (174) (662)
Changes in debt (251) 1,092 (181) In 2022, treasury shares transactions mainly included the share buyback activities, which
Dividend paid to shareholders of the company (482) (412) (2) resulted in EUR 174 million net cash outflow. Changes in debt mainly included new bonds
Other cash flow items 62 34 (81) issued of EUR 2 billion and a new term loan issued of EUR 500 million, partly offset by bond
Net cash flows from discontinued operations 3,403 (12) 123 repayments of EUR 1.2 billion. Philips’ shareholders received a total dividend of EUR 741
Ending cash and cash equivalents balance 2,303 1,172 1,869 million, including costs, of which the cash portion amounted to EUR 412 million.
35
Net cash flows from discontinued operations 4.8 Debt position

In 2023, net cash provided by discontinued operations was EUR 123 million, mainly related to Total debt outstanding at the end of 2023 was EUR 7,689 million, compared with EUR 8,201
a refund received of one-off advance tax payments of a previously disposed business. million at the end of 2022.
In 2022, net cash used for discontinued operations was EUR 12 million, mainly related to Philips Group
Balance sheet changes in debt in millions of EUR
previously disposed businesses.
2021 2022 2023
New lease liabilities 164 104 (233)
*)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to New borrowings long-term debt 76 2,516 (544)
Repayments long-term debt incl. leases (302) (1,472) 754
New borrowings (repayments) short-term debt (25) 47 (29)
Forward contracts entered (matured) (48) (76) 462
Currency effects, consolidation changes and other 180 101 102
4.7 Financing Changes in debt 46 1,221 512
Condensed consolidated balance sheets as of December 31, 2021, 2022 and 2023 are
presented in the following table:
In 2023, total debt decreased by EUR 512 million compared to 2022. The decrease mainly
Philips Group comes from maturing forward contracts related to the share buyback program and long-
Condensed consolidated balance sheets in millions of EUR
term incentive and employee stock purchase plans, and repayments of long-term debt
2021 2022 2023
including leases, partly offset by new borrowings. In 2023, Philips issued EUR 500 million of
Intangible assets 14,287 13,764 13,067
fixed rate notes under the company’s EMTN program that mature in 2031 and used the
Property, plant and equipment 2,699 2,638 2,483
proceeds for general corporate purposes, including the repayment of EUR 500 million that
Investments and financial assets 1,121 1,334 1,050
Deferred tax assets 2,216 2,449 2,627
was outstanding under the credit facility entered into in the fourth quarter of 2022. Changes
Inventories 3,450 4,049 3,491 in payment obligations from forward contracts are related to the maturity in 2023 of EUR
Receivables 4,191 4,616 4,146 481 million of share buyback forwards (as announced in July 2021) and EUR 125 million of
Other assets 693 665 672 forwards relating to long-term incentive and employee stock purchase plans (as announced
Payables (3,784) (3,635) (3,886) in March 2020 and May 2021), partially offset by EUR 138 million of forwards entered into
Provisions (2,313) (2,115) (2,498) relating to long-term incentive plans (as announced in June 2023).
Contract liabilities (1,936) (2,210) (2,278)
Other liabilities (1,473) (1,244) (993) In 2022, Philips announced a series of Liability Management transactions to optimize its debt
Net assets employed 19,151 20,311 17,881 maturity profile. The transactions included the issuance of three series of Notes under its
EMTN program for a total of EUR 2 billion with maturities in 2027, 2029 and 2033. Part of the
Cash and cash equivalents 2,303 1,172 1,869 proceeds were used to tender certain of Philips’ outstanding US Dollar denominated bonds
Debt (6,980) (8,201) (7,689) due 2025 and 2026 and Euro-denominated bonds due 2023, 2024 and 2025, as well as make-
Net debt 1) (4,676) (7,028) (5,820) whole and fully redeem the Euro-denominated bonds due 2023 and 2024 that were not
Non-controlling interests (36) (34) (33)
purchased as part of the Euro tender offer. Philips issued Commercial Paper of EUR 200
Shareholders' equity (14,438) (13,249) (12,028)
million in September 2022 and EUR 101 million in October 2022. These tranches were repaid
Financing (19,151) (20,311) (17,881)
throughout the fourth quarter of 2022. In addition, in October 2022 Philips entered into a
1)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to EUR 1 billion credit facility that could be used for general corporate purposes. The credit
Reconciliation of non-IFRS information, starting on page 289. facility was fully repaid in October 2023. Per year-end 2022, EUR 500 million was utilized and
outstanding under the credit facility.
36
At the end of 2023, long-term debt as a proportion of the total debt stood at 91.5% with an Philips has a EUR 1 billion committed revolving credit facility which was signed in April 2017
average remaining term (including current portion) of 6.0 years, compared to 88.6% and 6.1 and refinanced in March 2022, which will expire in March 2027. In 2023, Philips extended the
years respectively at the end of 2022. maturity of the facility to 2028 and has one 1-year extension option remaining. The facility
can be used for general group purposes, such as a backstop of its Commercial Paper
At the end of 2022, long-term debt as a proportion of the total debt stood at 88.6% with an Program.
average remaining term (including current portion) of 6.1 years, compared to 92.7% and 6.0
years respectively at the end of 2021. Philips' Commercial Paper Program amounts to USD 2.5 billion, under which commercial
paper can be issued up to 364 days in tenor, both in the US and in Europe, in any major
For further information, please refer to Debt, starting on page 186. freely convertible currency. As of December 31, 2023, Philips had no commercial paper
outstanding. Philips established a Euro Medium Term Note (EMTN) program which
facilitates the issuance of notes for a total amount of up to EUR 10.0 billion. In 2023, Philips
4.9 Liquidity position issued EUR 500 million fixed rate notes due 2031 under the program. The proceeds were
As of December 31, 2023, including the cash position (cash and cash equivalents), as well as used for general corporate purposes, including the repayment of EUR 500 million that was
its EUR 1 billion committed revolving credit facility, the Philips Group had access to available outstanding under the credit facility entered into in the fourth quarter of 2022.
liquidity of EUR 2,883 million, compared with gross debt (including short and long-term) of
EUR 7,689 million. In terms of liquidity, the company has access to various sources. The company’s liquidity risk
management procedures have not changed significantly during 2023. The access to existing
As of December 31, 2022, including the cash position (cash and cash equivalents), as well as lines of credit remains intact. These lines of credit, along with other financial risks to which
its EUR 1 billion committed revolving credit facility and the EUR 500 million undrawn portion Philips is exposed, are disclosed in Details of treasury and other financial risks, starting on
of the credit facility entered into in October 2022, the Philips Group had access to available page 213. Further, with respect to potential claims related to the Respironics recall, please
liquidity of EUR 2,704 million, compared with gross debt (including short and long-term) of refer to Contingencies, starting on page 198. The management continues to monitor the
EUR 8,201 million. risks associated with such potential claims and its impact on liquidity position, if any.
Philips Group Philips’ existing long-term debt is rated BBB+ (with stable outlook) by Fitch, Baa1 (with
Liquidity position in millions of EUR
negative outlook) by Moody’s, and BBB+ (with negative outlook) by Standard & Poor’s. As
2021 2022 2023
part of our capital allocation policy, our net debt*) position is managed with the intention of
Cash and cash equivalents 2,303 1,172 1,869
retaining our strong investment grade credit rating. Ratings are subject to change at any
Listed equity investments at fair value 1) 67 32 14
time and there is no assurance that Philips will be able to achieve this goal. Philips' aim when
Committed revolving credit facility 1,000 1,000 1,000
Credit facility 500
managing the net debt*) position is dividend stability and a pay-out ratio of 40% to 50% of
Liquidity 3,370 2,704 2,883 adjusted income from continuing operations attributable to shareholders*). Philips’
outstanding long-term debt and credit facilities do not contain financial covenants. Adverse
Short-term debt (506) (931) (654) changes in the company’s ratings will not trigger automatic withdrawal of committed credit
Long-term debt (6,473) (7,270) (7,035) facilities or any acceleration in the outstanding long-term debt (provided that the USD-
Debt (6,980) (8,201) (7,689) denominated bonds issued by Philips in March 2008 and 2012 contain a ‘Change of Control
Triggering Event’ and the EUR-denominated bonds contain a ‘Change of Control Put Event’).
Net available liquidity resources (3,609) (5,497) (4,806) A description of Philips’ credit facilities can be found in Debt, starting on page 186.
1)
Philips holds listed equity investments at fair value (level 1) in common shares of companies in various industries. Refer to
Other financial assets, starting on page 178 and Fair value of financial assets and liabilities, starting on page 208.
37
Philips Group million shares in May 2023 in order to distribute the 2022 dividend. The company cancelled
Credit rating summary
15.1 million shares in December 2023.
long-term short-term outlook
Fitch BBB+ Stable
The number of issued common shares of Royal Philips as of December 31, 2022 was
Moody's Baa1 P-2 Negative
889,315,082. At year-end 2022, the company held 7.8 million shares in treasury. Of these
Standard & Poor's BBB+ A-2 Negative
shares, 5.7 million shares were held to cover obligations under long-term incentive plans and
2.2 million shares were held for capital reduction purposes. In 2016, Philips purchased call
Philips pools cash from subsidiaries to the extent legally and economically feasible. Cash not options on its own shares to hedge options granted to employees up to 2013, and as of
pooled remains available for local operational needs or general purposes. The company December 31, 2022, Philips’ outstanding options related to 26 thousand shares. In 2022 (and
faces cross-border foreign exchange controls and/or other legal restrictions in a few earlier years), the company entered into several forward contracts to acquire its own shares,
countries, which could limit its ability to make these balances available on short notice for and as of December 31, 2022, the outstanding forward contracts related to 24.5 million
general use by the group. shares. See below for more information on the shares that were acquired in the course of
2022. Philips issued 14.2 million shares in June 2022 in order to distribute the 2021 dividend.
Philips believes its current liquidity and direct access to capital markets is sufficient to meet The company cancelled 8.8 million shares in June 2022.
its present financing needs.
Share repurchase methods for long-term incentive plans and capital
*)
reduction purposes
Reconciliation of non-IFRS information, starting on page 289. Historically, Philips uses different methods to repurchase shares in its own capital: (i) share
buyback repurchases in the open market via an intermediary; (ii) repurchase of shares via
forward contracts for future delivery of shares; and (iii) the unwinding of call options on
own shares. During 2023, Philips used method (ii) to repurchase shares for capital reduction
4.10 Shareholders’ equity purposes and share-based compensation plans.
In 2023, shareholders’ equity decreased by EUR 1,220 million to EUR 12,028 million at year-
end. The decrease was mainly due to the net loss of EUR 463 million and currency translation The open market transactions via an intermediary allow for buybacks during both open and
reductions in equity of EUR 604 million, primarily due to the depreciation of the US dollar closed periods.
against the euro in 2023.
For more information on share repurchase transactions entered into 2021, 2022, and 2023,
In 2022, shareholders’ equity decreased by EUR 1,189 million to EUR 13,249 million at year- please refer to Equity, starting on page 182.
end. The decrease was mainly due to net loss of EUR 1,608 million, dividend distributed (EUR
412 million), and settlements of earlier concluded forward contracts (EUR 140 million). This Philips Group
Impact of share acquisitions and cancellations on share count in thousands of shares as of December 31
was partly offset by currency translation gains of EUR 749 million, primarily due to the
2019 2020 2021 2022 2023
appreciation of the US dollar against the euro in 2022.
Shares issued 896,734 911,053 883,899 889,315 913,516
Shares in treasury 5,760 5,925 13,717 7,835 7,113
Share capital structure Shares outstanding 890,974 905,128 870,182 881,481 906,403
The number of issued common shares of Royal Philips as of December 31, 2023 was Shares acquired 40,390 8,670 45,486 5,081 15,964
913,515,966. At year-end 2023, the company held 7.1 million shares in treasury to cover Shares cancelled 38,541 3,810 33,500 8,758 15,134
obligations under long-term incentive plans. In 2016, Philips purchased call options on its
own shares to hedge options granted to employees up to 2013, and as of December 31, 2023,
no such options remained outstanding. In 2023 (and earlier years), the company entered
into several forward contracts to acquire its own shares, and as of December 31, 2023, the
outstanding forward contracts related to 15.5 million shares. See below for more
information on the shares that were acquired in the course of 2023. Philips issued 39.3
38
Philips Group
Total number of shares repurchased in thousands of shares unless otherwise stated
approximate value
total number of of shares that may
share repurchases shares purchased yet be purchased
related to shares as part of publicly under the plans or
acquired for capital average price paid shares acquired for average price paid total number of average price paid announced plans programs in
reduction per share in EUR LTI's per share in EUR shares purchased 1) per share in EUR or programs 2) 3) 4) thousands of EUR
January 2023 858,343
February 2023 858,343
March 2023 858,343
April 2023 858,343
May 2023 2,100 37.54 2,100 37.54 2,100 781,290
June 2023 919,239
July 2023 2,100 36.69 2,100 36.69 2,100 842,194
August 2023 842,194
September 2023 2,100 36.69 2,100 36.69 2,100 765,153
October 2023 2,224 37.47 1,000 44.85 3,224 39.76 3,224 636,967
November 2023 2,223 37.49 2,000 39.96 4,223 38.66 4,223 473,721
December 2023 2,218 37.58 2,218 37.58 2,218 390,388
Total 12,964 3,000 15,964 38.66 15,964
of which 5)
purchased in the open market
acquired through exercise of call options/ 12,964 3,000 15,964 15,964
settlement of forward contracts
To be acquired by settlement of forward 390,388
contracts after December 31, 2023
1)
All shares were purchased through publicly announced plans or programs.
2)
First, on January 29, 2020, Philips announced that it would repurchase up to 6 million shares to cover certain of its obligations arising from its long-term incentive and employee stock purchase plans. Under this program, Philips entered into three forward contracts to
acquire 5 million shares for an amount of EUR 174 million with settlement dates varying between October 2021 and November 2022. On October 26, 2022, the original settlement date of two share tranches entered into under this program (in total 1.75 million
shares) has been extended from November 23, 2022, to November 2023, and 2024, respectively. Second, on May 19, 2021, Philips announced that it will repurchase up to 2 million shares to cover certain of its obligations arising from its long-term incentive and
employee stock purchase plans. Under this program, Philips entered into one forward contract for an amount of EUR 90 million to acquire 2 million shares with settlement dates in October and November 2023. Third, on July 26, 2021, Philips announced a share
buyback program for share cancellation purposes for an amount of up to EUR 1.5 billion. Consequently, in the third quarter of 2021 Philips entered into three forward contracts for an amount of EUR 731 million to acquire 19.6 million shares with settlement dates in
2022, 2023 and 2024. Philips executed the remainder of the program through open market purchases by an intermediary in the fourth quarter of 2021 (acquiring 21 million shares) and January 2022 (acquiring 0.8 million shares). Fourth, on June 13, 2022, Philips
announced that it will repurchase up to 3.2 million shares to cover certain of its obligations arising from its long-term incentive and employee stock purchases plans. Under this program, Philips entered into two forward contracts for an amount of EUR 63 million to
acquire 3.2 million shares with settlement dates in November 2024 and December 2024. Fifth, on June 14, 2023, Philips announced that it will repurchase up to 7.1 million shares to cover certain of its obligations arising from its long-term incentive and employee
stock purchase plans. Under this program, Philips entered into three forward contracts for an amount of EUR 138 million to acquire 7.1 million shares with settlement dates varying between November 2024 and November 2025. For further details on these publicly
announced plans or programs refer to Equity, starting on page 182.
3)
Philips cancelled 15.1 million shares on December 18, 2023.
4)
In 2023, Philips did not determine to terminate any publicly announced plans or programs prior to expiration, or determine that it intends not to make any further purchases under any publicly announced plans or programs.
5)
As described above, Philips acquired shares via repurchase of shares via forward contracts for future delivery of shares.
39
4.11 Cash obligations Philips offers voluntary supply chain finance programs with third parties, which provide
participating suppliers with the opportunity to factor their trade receivables at the sole
Contractual cash obligations discretion of both the suppliers and the third parties. Philips continues to recognize these
The following table presents a summary of the Group's fixed contractual cash obligations liabilities as trade payables and settles them accordingly on the invoice maturity date based
and commitments as of December 31, 2023. These amounts are an estimate of future on the terms and conditions of these arrangements. As of December 31, 2023, approximately
payments, which could change as a result of various factors such as a change in interest EUR 114 million (2022: EUR 151 million) of the Philips accounts payable were transferred
rates, foreign exchange, contractual provisions, as well as changes in our business strategy under these arrangements.
and needs. Therefore, the actual payments made in future periods may differ from those
presented in the following table: Other cash commitments
The company and its subsidiaries sponsor post-employment benefit plans in many countries
Philips Group in accordance with legal requirements, customs and the local situation in the countries
Contractual cash obligations 1) 2) in millions of EUR
involved. For a discussion of the plans and expected cash outflows, please refer to Post-
payments due by period
employment benefits, starting on page 192.
total less than 1 year 1-3 years 3-5 years after 5 years
Long-term debt 7,615 533 1,934 1,431 3,717
The company had various provisions by the end of 2023 which are expected to result in cash
Short-term debt 122 122
Interest on debt 1,704 180 328 285 911
outflows in 2024. Refer to Provisions, starting on page 188.
Derivative liabilities 39 38 1
Purchase obligations 3) 668 355 286 27 Philips has contracts with investment funds where it committed itself to make, under certain
Trade and other payables 1,917 1,917 conditions, capital contributions to these funds of an aggregated remaining amount of EUR
Contractual cash obligations 12,065 3,145 2,549 1,716 4,655 153 million (2022: EUR 127 million). Capital contributions already made to these investment
funds are recorded as non-current financial assets.
1)
Amounts in this table are undiscounted
2)
This table excludes post-employment benefit plan contribution commitments and income tax liabilities in respect of tax risks
because it is not possible to make a reasonably reliable estimate of the actual period of cash settlement. Please refer to Dividend, starting on page 40 for information on the proposed dividend
3)
Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding for the Group. distribution.
They specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price
provisions and the approximate timing of the transaction. They do not include open purchase orders or other commitments
which do not specify all significant terms. Please refer to Equity, starting on page 182 for information on other Long-term incentive
and employee stock purchase plans.
Included in debt are remaining forward contracts of EUR 167 million related to the EUR 1.5 Guarantees
billion share buyback program announced in July 2021 and EUR 224 million relating to the Philips’ policy is to provide guarantees and other letters of support only in writing. Philips
repurchase of shares to cover long-term incentive and employee stock purchase plans. In does not provide other forms of support. The total fair value of guarantees recognized on
2023, Philips entered into a total amount of EUR 138 million of forward contracts relating to the balance sheet amounts to EUR nil million for both 2023 and 2022. Remaining off-
the repurchase of up to 7.1 million shares to cover long-term incentive plans. In addition, in balance-sheet business-related guarantees on behalf of third parties and associates amount
2023 there were maturities of a total of EUR 481 million of forward contracts for 13.0 million to EUR 2 million as of December 31, 2023 (December 31, 2022: EUR 2 million).
shares related to the EUR 1.5 billion share buyback program announced in July 2021, as well
as maturities of a total of EUR 125 million of forward contracts to repurchase shares to cover
long-term incentive and employee stock purchase plans. Philips intends to cancel all of the 4.12 Dividend
shares acquired under the share buyback program and has canceled 15.1 million shares
acquired in 2023, as the program was initiated for capital reduction purposes. Dividend policy
Philips’ dividend policy is aimed at dividend stability and a pay-out ratio of 40% to 50% of
adjusted income from continuing operations attributable to shareholders*).
40
Proposed distribution Philips Group

Gross dividends on the common shares
A proposal will be submitted to the Annual General Meeting of Shareholders, to be held on
2019 1) 2020 1) 2021 2) 2022 1) 2023 2)
May 7, 2024, to declare a distribution of EUR 0.85 per common share, in common shares,
in EUR 0.85 0.85 0.85 0.85 0.85
against retained earnings.
in USD 0.96 0.95 1.03 0.90 0.93
If the above dividend proposal is adopted, the shares will be traded ex-dividend as of May 9, 1)
In cash or shares at the election of shareholder.
2024 at the New York Stock Exchange and Euronext Amsterdam. In compliance with the 2)
In shares only.
listing requirements of the New York Stock Exchange and Euronext Amsterdam, the
dividend record date will be May 10, 2024.
*)
The number of share dividend rights entitled to one new common share will be determined Reconciliation of non-IFRS information, starting on page 289.
based on the volume-weighted average price of all traded common shares of Koninklijke
Philips N.V. at Euronext Amsterdam on May 9, 10 and 13, 2024. The company will calculate
the number of share dividend rights entitled to one new common share (the ratio), such
that the gross dividend in shares will be approximately equal to EUR 0.85. The ratio and the 4.13 Analysis of 2022 compared to 2021
number of shares to be issued will be announced on May 15, 2024. Distribution of the The analysis of the 2022 financial results compared to 2021, and the discussion of the critical
dividend (up to EUR 770 million) and delivery of new common shares, with settlement of any accounting policies, have not been included in this Annual Report. These sections are
fractions in cash, will take place from May 16, 2024. included in Philips’ Form 20-F for the financial year 2023, which will be filed electronically
with the US Securities and Exchange Commission.
ex-dividend date record date distribution from
Euronext Amsterdam May 9, 2024 May 10, 2024 May 16, 2024
New York Stock Exchange May 9, 2024 May 10, 2024 May 16, 2024
4.14 Outlook
Philips reiterates confidence in delivering the plan for 2023-2025, acknowledging that
Further details will be given in the agenda with explanatory notes for the 2024 Annual uncertainties remain. For full-year 2024, Philips expects to deliver 3-5% comparable sales
General Meeting of Shareholders. The proposed distribution and all dates mentioned growth*) and an Adjusted EBITA*) margin of 11-11.5%. In 2024, Philips expects around 100
remain provisional until then. basis points of costs that relate to remediation activities and disgorgement payments for
Philips Respironics sales in the US. The free cash flow*) from Philips' businesses is expected to
Dividend in shares distributed out of retained earnings is subject to 15% dividend amount to EUR 0.8-1 billion. This only excludes the remaining cash-out related to the
withholding tax, but only in respect of the par value of the shares (EUR 0.20 per share). previously announced resolution of the economic loss class action in the US.
Shareholders are advised to consult their tax advisor on the applicable situation with respect The previously stated 2023-2025 Group financial outlook of mid-single-digit comparable
to taxes on the dividend received. sales growth*), low-teens Adjusted EBITA*) margin, and EUR 1.4-1.6 billion free cash flow*)
now takes the proposed Respironics consent decree into account and remains unchanged. It
In May 2023, Philips settled a dividend of EUR 0.85 per common share, representing a total excludes the investigation by the US Department of Justice related to the Respironics field
value of EUR 749 million (including costs). The dividend was distributed in the form of shares action and the impact of the ongoing litigation.
only, resulting in the issuance of 39,334,938 new common shares, leading to a 4.5% dilution.
For more information refer to Shareholders’ equity, starting on page 38. *)
Dividends and distributions per common share
The following table sets forth in euros the gross dividends on the common shares in the
fiscal years indicated (from prior-year profit distribution) and such amounts as converted
into US dollars and paid to holders of shares of the New York Registry:
41
At a glance 1.88 billion lives improved by our products and solutions,
Environmental,
including 221 million in underserved communities
Social and CDP ‘A List' rating for climate action for 11 year in a
th
Governance row
Strengthening patient safety and quality Philips' highest

priority
Shift to new, simplified operating model, including

reduction of roles
Preparing for upcoming ESG reporting legislation
42
5 Environmental, Social and Governance

“ Building on our strong heritage in environmental and social responsibility, we have an enhanced and fully
integrated approach to doing business responsibly and sustainably, in line with our company purpose. I am truly
convinced that our ESG commitments are the best way for Philips to drive priorities for global impact and create
long-term value for our stakeholders.”
Marnix van Ginneken Chief ESG & Legal Officer Royal Philips
Environmental, Social & Governance (ESG) are three key dimensions within which a We have excluded the data from Domestic Appliances from the ESG information wherever
company’s approach to doing business responsibly and sustainably, and its overall societal possible. In a limited number of cases, for example for road logistics emissions, we have used
impact, are defined. They give expression to an increasingly widely held view – that proxies. If Domestic Appliances information was not available for past years, and could
companies that hold themselves accountable to their stakeholders and increase therefore not be excluded, we have indicated this in the respective section. The Employee
transparency will be more viable, and valuable, in the long term. Engagement Index (EEI) and General Business Principles (GBP) results have not been
restated.
Philips is a purpose-driven company aiming to improve the health and well-being of 2.5
billion people annually by 2030. We believe that private-sector companies like ours have a
vital role to play in collaborating with other partners across our supply chain, and with
private and public organizations in society, to address the major challenges the world is
facing.
Taking a multi-stakeholder approach, we draw inspiration from the societal impact we can
have through our products and solutions, and through how we operate in the world. Our
company is very conscious of our responsibility and our contribution to society and the
environment. We are also witnessing growing interest in ESG on the part of our customers,
who are increasingly turning to technology companies for support in addressing their
sustainability objectives and are including ESG-related considerations in their procurement
policies and criteria.
We aim to be a front-runner in the area of ESG and have been recognized as leading the
way in, for example, sustainability, corporate governance practices and tax transparency.
Our reporting is aligned with the comprehensive and integrated Environmental, Social &
Governance (ESG) commitments we have adopted for the period 2020-2025.
43
5.1 Philips' ESG commitments

In September 2020, Philips reinforced its commitments as a purpose-driven company with
the announcement of an enhanced and fully integrated approach to doing business
responsibly and sustainably. Philips’ framework comprises a comprehensive set of
commitments across all the Environmental, Social and Governance (ESG) dimensions that
guide execution of the company’s strategy. It includes ambitious targets and detailed plans
of action.
As a leading health technology company today, our purpose is to improve people’s health
and well-being through meaningful innovation, positively impacting 2.5 billion lives per
year by 2030. We aim to grow Philips responsibly and sustainably, and we therefore
continuously set ourselves challenging environmental and social targets, and highest
standards of governance. Acting responsibly towards the planet and society is part of our
DNA. We believe that this is the best way for us to create superior, long-term value for
Philips’ multiple stakeholders.
Philips’ ESG commitments are set out below. Further details relating to these commitments
can be found throughout the rest of this chapter, in Supplier sustainability, starting on page
63, and in ESG statements, starting on page 230.
44
Our key ESG commitments
Environmental Social Governance

We act responsibly towards our planet in line with Our purpose is to improve people’s health and well- We aim to deliver superior long-term value for our
UN SDGs 12 and 13. being through meaningful innovation, in line with customers and shareholders, and we live up to the
UN SDG 3. We act responsibly towards society and highest standards of ethics and governance in our
partner with our stakeholders culture and practices
• We will maintain carbon neutrality and use 75% • We aim to improve the health and well-being of 2 billion • Our management structure and governance combines
renewable energy in our operations by 2025. We will people per year by 2025, including 300 million people in responsible leadership and independent supervision.
reduce CO₂ emissions in our entire value chain in line underserved communities.
with a 1.5 °C global warming scenario (based on Science • Our integrated operating model defines how we work
Based Targets). • It is our strategy to lead with innovative solutions along together to delight our customers and achieve our
the health continuum – helping our customers deliver company goals, leveraging our global scale and
• We will generate 25% of our revenue from products, better health outcomes, a better experience for patients capabilities.
services and solutions contributing to circularity, and and staff, lower cost of care, and helping people take
offer responsible take-back on all professional medical better care of their health. • We are committed to delivering the highest-quality
equipment by 2025. products, services and solutions compliant with all
• We aim to be the best place to work for our employees, applicable laws and standards.
• We will embed circular practices at our sites and put zero providing opportunities for learning and development,
waste to landfill by 2025. embracing diversity and inclusion, and assuring a safe • Our remuneration policy is designed to encourage
and healthy work environment. We pay at least a living employees to deliver on our purpose and strategy and
• We will design all new product introductions in line with wage and aim for employee engagement above the create stakeholder value, and to motivate and retain
our EcoDesign requirements by 2025, with ‘EcoHeroes’ high-performance norm. them. Our executive long-term incentive plan includes
accounting for 25% of hardware revenues. environmental and social commitments.
• Through our supplier development program we will
• We work with our suppliers to reduce the environmental improve the lives of 1,000,000 workers in our supply • We ensure ethical behavior through our General Business
footprint of our supply chain in line with a 1.5 °C global chain by 2025. Principles, with a strong compliance and reporting
warming scenario (based on Science Based Targets). framework.
• We actively engage with and support the communities in
• We engage with our stakeholders and other companies which we operate, e.g. through volunteering, • Our risk management is designed to provide reasonable
to drive sustainability efforts addressing the United internships, STEM (Science, Technology, Engineering, assurance that strategic and operational objectives are
Nations Sustainable Development Goals. Mathematics) initiatives. met, legal requirements complied with, and the integrity
of the company’s reporting and related disclosures
• We contribute to the Philips Foundation, an independent safeguarded.
foundation (stichting) organized under Dutch law, which
aims to provide access to quality healthcare for • We are transparent about our plans, activities, results and
disadvantaged communities. contributions to society (e.g. Country activity and Tax
report), and engage with shareholders, customers,
• We consider our tax payments as a contribution to the business partners, governments and regulators through
communities in which we operate, as part of our social a variety of platforms.
value creation.
45
5.2 Environmental performance The Philips products subject to the Respironics recall were evaluated as part of the 2023
We have an environmental impact through our global operations (including our supply EP&L calculation. In accordance with the EP&L methodology, products replaced during the
chain), but even more so through our products and solutions. This is where we contribute to recall by new products with lifetime guarantees were included in the 2023 EP&L calculation
SDG 12 (Ensure sustainable consumption and production patterns) and SDG 13 (Take urgent for all life cycle stages. Refurbished products and repair kits were not included.
action to combat climate change and its impacts).
Results 2023
In this Environmental performance section, an overview is given of the most important Compared to the adjusted 2022 EP&L impact of EUR 4.38 billion, Philips reduced its
environmental parameters of our ESG commitments. We focus on the material topics arising environmental impact in 2023 to EUR 4.21 billion. This is mainly due to differences in sales
from our Double Materiality Assessment - Climate change and Resource use and circular mix (including the impact of the Respironics recall).
economy, but also address some other environmental topics. Details can be found in the ESG
statements, starting on page 230. The increase in the 2022 baseline was mainly driven was mainly driven by the update to the
EcoInvent 3.9.1 database using ReCiPe 2016 (our Life Cycle Inventory database containing
Measuring our environmental impact environmental impacts of products and services) from the EcoInvent 3.8 database using
Philips has been performing Life-Cycle Assessments (LCAs) since 1990. LCAs provide insight ReCiPe 2008, and the update to the 2023 CE Delft prices for EU27 from the 2017 CE Delft
into the lifetime environmental impact of our products. They are used to steer our prices for Dutch territory only. Philips updates the EcoInvent database used on a yearly basis
EcoDesign efforts by reducing the environmental impact during the lifetime of our products to utilize recent emission factors and in this case, to utilize the current ReCiPe 2016
and to grow our Green/EcoDesigned/EcoHero and Circular portfolio. As a next step, for the methodology. Additionally, the CE Delft prices for EU27 were more representative of a
seventh year, we have measured our environmental impact on society at large via a so-called global manufacturing company, like Philips.
Environmental Profit & Loss (EP&L) account, which includes the hidden environmental costs
associated with our activities and products. It provides insights into the main environmental
hotspots and innovation areas to reduce the environmental impact of our products and
solutions.
The EP&L account is based on LCA methodology, in which the environmental impacts are
expressed in monetary terms using conversion factors developed by CE Delft. These
conversion factors are subject to further refinement and are expected to change over time.
We used expert opinions and estimates for some parts of the calculations. The figures
reported are Philips’ best possible estimates. As we gain new insights and retrieve more and
better data, we will enhance the methodology, use-cases and accuracy of results in the
future. For more information and details we refer to our methodology document.
The definition of the use-case scenarios has a significant impact on the result, especially for
consumer products, which have large sales volumes, long lifetimes and frequently high
energy consumption.
The current EP&L account only includes the hidden environmental costs. It does not yet
include the benefits to society that Philips generates by improving people’s health and well-
being through our products and solutions. We have a well-established methodology to
calculate the number of lives we positively touch with our products and solutions. We aim to
look into valuing these societal benefits in monetary terms in the future.
46
To understand the changes to the 2022 EP&L and have a comparable baseline for the 2023 The majority of this increase can be attributed to the increase in the emission factors and/or
reporting, please refer to the following chart: prices for the following environmental impact categories on the lifecycle stages included in
the 2022 EP&L:
• Climate change
• Human toxicity, mainly linked to electricity generation
• Particulate matter formation
Additionally, the environmental impact categories associated with biodiversity and

ecosystem services were included, which amounted to approximately EUR 61 million.
Therefore, the total increase attributed to methodology changes to the 2022 EP&L with the
existing 2022 lifecycle stages is EUR 2.48 billion. Additionally, to compare the 2022 EP&L with
the 2023 EP&L, the Raw Material Processing and Raw Material Waste lifecycle stages should
be included (adding some EUR 302 million to the 2022 EP&L). With the inclusion of data
quality improvements and corrections performed in 2023, the 2022 EP&L would be
approximately EUR 4.38 billion.
The most significant environmental impact, 51% of the total, is related to the usage of our
products, which is due to electricity consumption. Human toxicity, particulate matter
formation, and climate change are other important impacts. The environmental costs
include the environmental impact of the full lifetime of the products that we put on the
market in 2023, e.g. 10 years in the case of a MRI or 5 years of usage in the case of a Sonicare
toothbrush. Products identified as rentals are the only exception, with an energy
consumption of one year. As we expand our EcoDesign activities, with a target to have all
our products EcoDesigned by 2025, we expect to better report on its environmental impact
in the years to come.
Of the total 2023 impact, just EUR 261 million (6%) is directly caused by Philips’ own
operations, mainly driven by outbound logistics, followed by business travel. Compared to
EUR 128 million in 2022, this is almost a two times increase, mainly due to updating the
emission factors from EcoInvent 3.8 to EcoInvent 3.9.1 and the prices to the 2023 CE Delft
prices for EU27, mitigating the downward trend in logistics emissions as presented in
Sustainable Operations, starting on page 54.
Our materials and components supply chain, including raw materials supply, raw materials
processing, raw materials waste, and packaging currently has an environmental impact of
some EUR 1.80 billion, which is 43% of our total environmental impact. The main
contributors are the electronic components (including printed circuit boards), cables and
metals used in our products. Through our Circular Economy and Supplier Sustainability
programs we will continue to focus on reducing the environmental impact caused by the
materials we source and apply in our products.
47
In 2018, we were the first health technology company to have its 2020-2040 targets
(including purchased goods and services and the use of sold products) approved by the
Science Based Targets initiative – showing our commitment to drive climate action across the
value chain, from suppliers to customers, and ensuring that we contribute to the
decarbonization required to stay in line with a 1.5 °C global warming scenario, as agreed in
the Paris Agreement. Together with the insights gained through the EP&L we will optimize
our climate impact by providing our businesses with actionable insights. For more
information on our climate performance please refer to Climate Action, starting on page 48.
For more information on our efforts to reduce emissions in the supply chain, please refer to
Supplier sustainability, starting on page 263.
For more information on our efforts to reduce emissions in the customer use-phase, please
refer to Green/EcoDesigned Innovation, starting on page 52 and Green/EcoDesigned and
EcoHero Revenues, starting on page 53.
5.2.1 Climate Action
Carbon footprint and energy efficiency

At Philips, we see climate change as a serious threat. Research from the Potsdam Institute for
Climate Impact Research shows that over 4% of global CO2 emissions are caused by the
healthcare sector. Therefore, we are taking action to rethink our business models and
decouple economic growth from the impact we have on the environment. We believe large
corporates should lead the transition to a low-carbon economy. This will not only benefit the
environment, but will also positively impact social and economic aspects.
Operational carbon footprint

During the COP21 United Nations Climate Conference in Paris in 2015, we committed to
become carbon-neutral in our operations, pursue all efforts to reduce our operational
emissions, source all our electricity from 100% renewable sources, and offset all unavoidable
emissions by year-end 2020. We delivered on a comprehensive program that included
energy-efficiency improvements, on-site renewables, and Power Purchase Agreements, as
well as business travel improvements and transport mode shifts to low-carbon-emitting
alternatives. As a result, we have significantly reduced our operational carbon footprint.
Since 2020, Philips has been carbon-neutral in its operations (scope 1, scope 2, and scope 3 -
business travel and transportation & distribution). Although we prioritize carbon reduction,
our comprehensive carbon offsetting program is still necessary to ensure carbon neutrality in
our own operations.
48
Philips Group Philips Group

Net operational carbon footprint in kilotonnes CO2 -equivalent Science Based Targets reduction % compared to baseline
Scope
coverage 2025 2030 2040
Absolute Contraction Approach (ACA) Scope 1 & 2 (Baseline 2015) 100% -75% -90%
668 emission reduction targets Scope 3 (Baseline 2020) 96% -42%
In establishing our Greenhouse Gas (GHG) emissions baseline, the selection of the base year
518 519 is guided by several considerations. More precisely, it is driven by historical data availability,
the stability of operations during that period, and the desire to capture a representative
416 438 snapshot of our emissions profile. In particular, we consider factors such as significant
418
changes in business operations, facility expansions, or the implementation of emission
reduction initiatives.
Despite the unprecedented challenges brought about by the COVID-19 pandemic, the year
518 519 2020 stands out as a significant year for Philips, marked by a level of relative stability in both
438 418
Compensated customer base and emissions profile. In contrast, the year 2015 was selected as the baseline
emissions
for scope 1 and 2 emissions due to it being the earliest feasible date for measurement and
target-setting in alignment with the Paris Agreement. Should enhancements in data quality
252
or methodological changes lead to an emission deviation exceeding 5% compared to our
current baseline emissions, we are committed to restating the baseline in accordance with
Net operational the Science Based Targets initiative.
0 0 0 0
carbon footprint
2019 2020 2021 2022 2023
How we will drive emission reduction across the value chain
By joining forces with customers and suppliers, we can reduce our shared carbon footprint
and create a sustainable and more resilient healthcare industry. To deliver, we will focus on
the following four objectives, in order of magnitude:
Driving emission reductions across the value chain
Having achieved our 2020 carbon neutrality target, we have raised the bar and set ambitious Designing energy-efficient products and collaborating with our customers to reduce
emission reduction targets to ensure we help limit the impact of global warming emissions during the use-phase
throughout our value chain – collaborating with suppliers and customers to amplify our More and more, customers – both in healthcare and retail – are seeking solutions that are
impact. Philips is committed to addressing climate change by establishing ambitious long- less impactful on the environment. To address that demand, we are continuously reducing
term emission reduction targets, officially approved by the Science Based Targets initiative the climate impact of our products by increasing the energy efficiency of our existing
(SBTi). We have added the emissions from our (scope 3 categories) Purchased Goods & installed base and future product introductions. We see improving energy efficiency as a
Services and Use of Sold Products retrospectively to define a baseline (2020). With these huge lever to deliver on our value chain emission reductions. More information can be
additions, we cover approximately 96% of our value chain emissions. found on our sustainability website.
For all of our SBTi-approved and 1.5 °C-aligned targets, baselines and performance, please Collaborating with our suppliers to reduce emissions in our supply chain
refer to the following table. These targets follow the cross-sector guidance of the SBTi. There is a pressing need for industry and business to manage and reduce CO2-e emissions
Philips was the first health technology company to have its targets approved by the SBTi. across the entire value chain – including at supplier level. To this end, we have invited many
of our largest suppliers – first-tier manufacturing and transportation-related suppliers – to
report their climate performance and strategy as part of the Carbon Disclosure Project (CDP)
49
Supply Chain program. Additionally, we engage with these suppliers to reduce their 5.2.2 Circular Economy
emissions as part of our Supplier Sustainability program. More information can be found on A circular economy aims to decouple economic growth from the consumption of natural
our sustainability website. resources and ecosystems by optimizing their use, eliminating waste and pollution, and
circulating products and materials for as long as possible, while giving natural systems the
Minimizing our climate impact by adopting circular economy principles opportunity to regenerate themselves. The way we take, make and use materials has a
From a climate perspective, applying circular business models can lead to a significant significant impact on both climate and nature, as 45% of global GHG emissions come from
emission reduction. As the value of materials is retained, the need for virgin resources is the way products are made and used, and more than 90% of biodiversity loss stems from
significantly reduced, and consequently, the need for e.g. energy to produce those virgin extraction and processing. Bringing this back to Philips’ impact on the planet, our use of
materials, leading to reduced emissions. This is also part of our Circular Economy program. materials accounts for over 40% of our environmental impact based on our EP&L
More information can be found on our sustainability website. methodology, which includes raw material supply, processing, waste and packaging.
Therefore, in addition to the use of renewable resources and energy efficiency, the transition
Transitioning to lower carbon-emitting energy at our sites to a circular economy will be essential to meet our global climate goals.
By continuing to phase out fossil fuels at our sites and increase our global renewable energy
share, we will be able to achieve our long-term emission targets (scope 1 and 2). This entails, Our Circular Economy program
for example, moving towards geothermal and renewable district heating and cooling The Circular Economy program at Philips ran for the 11th year in 2023, building on more than
solutions where available. More information can be found on our sustainability website. 30 years' experience of applying resource efficiency through our sustainability programs.
Our ambition is to help our customers to ‘do more with less’ and drive the circular
Recognition transformation across the value chain together with our partners. We apply Philips’
Our efforts are acknowledged by CDP (formerly known as the Carbon Disclosure Project), a circularity principles ‘use less, use longer and use again’ across five strategic areas:
global NGO that assesses the greenhouse gas (GHG) emission performance and
management of reporting companies. In 2023, we were ranked on the CDP Climate Change • Circular design of software and hardware
th
’A’ List for our continued climate performance and transparency for the 11 consecutive year. • Circular manufacturing and supply
None of our peers can claim the same. • Circular delivery and financing models
• Circular service in use-phase
Actions related to the achievement of our targets are governed by our Environmental policy, • Circular end-of-use management
which incorporates input from Philips' regulatory, design, sustainability, supply chain, and
operations stakeholders, as well as the voice of our customers to minimize their
environmental footprint.
For more information on our Climate Action progress in 2023, please refer to Climate Action,
starting on page 239.
Philips reports all its emissions in line with the Greenhouse Gas Protocol (GHGP) as further
described in Scope of reporting, starting on page 236.
50
Philips Group For more information on our Circular Economy program, please refer to Circular Economy,
Progress towards Philips' 2025 circularity targets
2020 2022 2023 2025 Key actions to deliver on 2025
Metrics Unit Baseline Results Results Targets targets
Resource 5.2.3 Biodiversity and Ecosystem Services
inflows & Philips recognizes the importance of healthy ecosystems and biodiversity for our company,
outflows our employees, and society. Therefore, Philips has developed the Natural Capital program,
(products)
which is an addition to existing sustainability programs. This program is dedicated to
Circular % 15 18.2 20.0 25 Grow sales from products, services
revenues and solutions that use less virgin reducing Philips’ impacts on natural capital, focusing on our chemicals footprint, water
materials, optimize and extend consumption, and improving biodiversity and ecosystem services. By systematically
product lifetime, recirculate
quantifying and reducing the environmental impact of our operations, supply chain and the
materials
use-phase of our products, we actively aim to protect and restore biodiversity. Philips
Resource
inflows & acknowledges its dependency and impact on natural capital and aims to iteratively improve
outflows its understanding to drive regenerative decisions.
(waste)
Zero waste % 2.6 0.0 0.0 less than Minimize waste to landfill
to landfill 0.5 Philips aims to restore and enhance biodiversity and ecosystem services (BES) at our
Circular % 90 91 91 95 Avoid waste by increasing the industrial sites and to actively promote ecosystem restoration activities through partnerships
materials recirculation of discarded materials with, among others, NGOs, local communities, and governments. The Natural Capital
management program is focused, taking our 23 manufacturing sites as a starting point; Philips has created
Resource a BES community and trained employees on all these sites in ecosystem services. As a result,
inflows
(products) the ecosystem services of Philips' global manufacturing sites have been mapped and
Close the # Achieved Extend to Adopt policy ensuring responsible quantified. Based on this data, Philips evaluated the total area and ecological value of each
loop on for large small end-of-use management manufacturing site and established the first BES data baseline to measure BES
medical medical medical
improvements by 2024. Together with our partners, we are working to develop more
equipment equipment equipment
advanced BES metrics suitable for industrial areas.
Philips has committed to voluntary circularity targets to be delivered by 2025 as part of our In 2022, our manufacturing sites delivered some 80 potential measures to enhance
externally communicated 2025 Sustainability Commitments. Key actions to deliver on these biodiversity on-site. Philips implemented 30% of the biodiversity improvement measures
are stated in the above table. In 2023, Philips increased its circular revenues by 1.8% selected for the short term at a number of sites in 2023, e.g. planting native trees in India,
compared to the previous year, mainly driven by circular design of software and hardware. creating flower gardens in China, and creating habitats for endangered bee species in
We implemented sharpened circular revenue requirements to further align with Central America. Furthermore, we have published our first Taskforce on Nature-related
developments on circularity metrics and reporting disclosures. For example, external trends Financial Disclosures (TNFD) report and aim to set ourselves Science Based Targets for Nature
on metrics led to further sharpening of the definition of our software contributions. We also (SBTN) in the future.
brought our circular revenue reporting more in line with our circular strategy on design and
closing the loop. Philips aims to expand BES improvements in 2024 and track BES performance at our
manufacturing sites with a new ecosystem services mapping according to our Environmental
In 2023, Philips achieved 91% circular materials management, comparable to 2022. We Policy. Improving BES at our manufacturing sites, and thereby also improving the working
continued the emphasis on our Zero Waste to Landfill KPI, achieving 0.0% waste to landfill, environment, is a contributor to making Philips the ’best place to work’, one of the ESG
compared to 0.0% in 2022. commitments Philips announced in 2020. Furthermore, healthy ecosystems support our
efforts to mitigate climate risks assessed in our TCFD report for our sites.
We reclaimed more than 11,500 systems or pieces of equipment in 2023. The main driver was
our take-back program for patient monitors.
51
As can be derived from our Environmental Profit & Loss (EP&L) account, the environmental Philips Group
Green/EcoDesigned Innovation per segment in millions of EUR
impact of Philips’ sites is limited, as they are not very energy-intensive, are 100%-powered
with electricity from renewable sources, do not emit large quantities of high-impact
substances, and are not water-intensive. At the same time, Philips is aware that the total
environmental impact of the full value chain is substantial, especially upstream in the mining
industry. Philips considers improving biodiversity on its own land as a first important step 197
towards reducing biodiversity impact over the full value chain. 4
168
Having become carbon-neutral in our operations by year-end 2020, and with our drive to 4
send zero waste to landfill, focus on circular materials management, and enhance BES, the 65
142
environmental impact of our sites will be further optimized in the years to come. 40 2
Other
Personal Health
5.2.4 Green/EcoDesigned Innovation 32
33
31
At Philips, we recognize that human health and environmental health go hand in hand. In
2022, the United Nations declared the ability to live in a clean, healthy and sustainable 29 Connected Care
environment a human right.
Climate change poses a threat to health and is expected to cause some 250,000 additional
deaths per year globally, according to the World Health Organization. It creates a pressing 96 93 Diagnosis &
78 Treatment
need – together with global resource constraints, growing and aging populations, and the
rise of chronic diseases – for resilient and sustainable healthcare models.
We see a growing demand from our customers, including hospitals, to reduce their
2021 2022 2023
environmental impact, reduce waste and decarbonize healthcare. Our Green/EcoDesigned
Innovation – the Research & Development spend related to the development of new
generations of Green/EcoDesigned products and solutions and Green technologies,
addressing SDG 12 (Ensure sustainable consumption and production patterns) – is focused on
addressing that impact. Diagnosis & Treatment
Philips develops innovative solutions that support precision diagnosis and effective,
Sustainable Innovation is the Research & Development spend related to the development of minimally invasive interventions and therapy, while respecting the limits of natural
new generations of products and solutions that address the United Nations’ Sustainable resources. Investments in Green Innovation in 2023 amounted to EUR 78 million, a reduction
Development Goals 3 (Ensure healthy lives and promote well-being for all at all ages) or 12. compared to EUR 93 million in 2022.
In 2023, Philips invested EUR 142 million in Green/EcoDesigned Innovation, a decrease We aim to reduce environmental impact over the total lifecycle and our Green/EcoDesign
compared to 2022 due to more demanding EcoDesign criteria, a growing share of innovations focus on four areas: Energy, Substances, Circularity, and Packaging. Energy
innovation spend in software, for which reporting processes still need to be further efficiency is an area of focus, especially for our large imaging systems such as MRI. Through
implemented, and reduced R&D investments at Philips. We expect Green/EcoDesigned circular design, Philips also pays particular attention to enabling the reduction in use of
Innovation spend to increase in the years to come, as one of our 2025 ESG commitments is to virgin materials, for example, through designing for low weight and enabling the upgrading
design all our new product introductions in line with our EcoDesign requirements by 2025. and re-use of our products. As a result, our customers can, for example, benefit from
Over EUR 1.5 billion was invested in Sustainable Innovation in 2023. enhancements in workflow, dose management and imaging quality. In addition, we are
reducing the substances of concern and improving our packaging. We continued to actively
partner with multiple leading care providers to investigate innovative ways to reduce the
52
environmental impact of healthcare, for example by maximizing energy-efficient use of For more information on our Circular Economy activities and the progress towards targets in
medical equipment (e.g. by introducing EcoModes) and optimizing lifetime value. Philips 2023, please refer to Circular Economy, starting on page 50.
closed the loop on large equipment by the end of 2020, by structurally embedding a
responsible take-back policy into its customer trade-in offers. This means that for all 5.2.5 Green/EcoDesigned and EcoHero Revenues
equipment that a customer is willing to trade-in at end of use, Philips will take it back for Green/EcoDesigned Revenues are generated through products and solutions that offer a
refurbishment and parts recovery where feasible, or locally recycle it in a certified way to significant environmental improvement in one or more Green Focal Areas – Energy
ensure it does not end up in landfill. Sustainable design and innovation help to further efficiency, Packaging, Substances, and Circularity – and thereby deliver a contribution to SDG
increase the value created and decrease the environmental impact Philips can deliver from 12 (Ensure sustainable consumption and production patterns). Green/EcoDesigned Revenues
returned systems. amounted to EUR 12.8 billion in 2023, or 70.5% of sales, comparable to 2022 (71.7% in 2022).
Connected Care As the first EU Taxonomy delegated act, addressing Climate Change Adaptation and Climate
Philips’ connected health solutions integrate, collect, combine and deliver quality data for Change Mitigation, only applies to sectors with the highest CO2 emissions, Philips’ activities
actionable insights to help improve access to quality care, while respecting the limits of are not within the scope of this delegated act and consequently none of Philips' revenues
natural resources. It is our belief that well-designed e-health solutions can reduce the travel- were eligible under this taxonomy during 2023.
related carbon footprint of healthcare, increase efficiency in hospitals, reduce waste, and
improve access to care and outcomes. For example, our Philips Radiology Operations Philips Group
Green/EcoDesigned Revenues per segment in millions of EUR unless otherwise stated
Command Center enables real-time collaboration and virtual imaging operations and can
decrease staff travel time and costs. The value and adoption of e-health solutions also
71.7%
became apparent during the COVID-19 crisis. Green/EcoDesigned Innovation investments in As a % of sales
70.5% 70.5%
2023 amounted to EUR 29 million, in line with EUR 31 million in 2022. Over the coming years,
Green/EcoDesigned Innovation projects will deliver, among other things, new EcoDesigned 12,772 12,811
Other
12,095 0 52
patient monitors with lower environmental footprints.
0
Personal Health
2,723
Personal Health 2,846
3,278
R&D investments at our Personal Health segment amounted to EUR 33 million in 2023,
compared with EUR 40 million in 2022. Personal Health continued its work on improving the
2,924 Connected Care
energy efficiency of its products, and the voluntary phase-out of polyvinyl chloride (PVC), 2,252
2,547
brominated flame retardants (BFR), Bisphenol A (BPA) and phthalates from, among others,
food contact and childcare products. New hairdryers have been launched that are more
energy-efficient, with an improvement of more than 10% compared to the 2020 baseline.
Personal Health also continues to increase circularity by, for example, using recycled
materials in products and packaging. For packaging, we are increasingly shifting away from
Diagnosis &
single use plastic materials. As part of our Fit for Future Packaging program, we have 6,702
7,245 7,112 Treatment
launched additional paper-based, mailbox-ready packaging solutions in our Grooming &
Beauty portfolio, including OneBlades and hairdryers.
Other
The segment Other invested EUR 2 million in Green/EcoDesigned Innovation, spread over
2021 2022 2023
projects focused on global challenges relating to water, air, energy, food, circular economy,
and access to affordable healthcare.
53
Through our EcoDesign process we aim to create products and solutions that have Water
significantly less impact on the environment over their whole lifecycle. Overall, the most Annually, we undertake thorough assessments of both our operational sites and strategic
significant improvements have been in energy efficiency and lower weight (thus less suppliers to address potential water-related risks. We utilize publicly accessible tools such as
resources), although increased attention was also given to substances of concern, packaging the Aqueduct Water Risk Atlas by WRI and WWF Water Risk Filter to define and respond to
and circular design, in particular design for recyclability, in all segments in 2023. these risks. This comprehensive process evaluates the susceptibility of our sites to various
risks including water availability, wastewater quality, workplace water accessibility, and
By 2025, 25% of hardware revenues should come from EcoHeroes, which meet the groundwater replenishment, encompassing physical, regulatory, and reputational concerns.
EcoDesign requirements and outperform in at least one of the focal areas compared to their
predecessor or relevant benchmarks, supported by a sustainability claim. In 2023, Philips While Philips is not a water-intensive organization, this practice ensures the uninterrupted
achieved 15.9% in EcoHero Revenues, with most contributions from improvements in energy continuity of our operations and the provision of high-quality Water, Sanitation and
use. Hygiene (WASH) services at all our sites and those of our strategic suppliers. Among our
facilities, five locations have been identified as exposed to substantive financial and strategic
Diagnosis & Treatment risks related to water. These sites are situated either in areas highly vulnerable to coastal
In 2023, a number of main platforms were launched. Specific attention was paid to flooding or extremely high-water stress (>80%), with three in China, one in Indonesia, and
preparing for future EcoDesigned product launches. one in the USA. In response, we have deployed engineers and experts to conduct further
investigations, accurately identify risk exposure, anticipate potential losses, and implement
Connected Care proactive measures to mitigate property loss and business interruption.
New Green/EcoDesigned products in Connected Care are expected in 2024 and beyond,
with improvements in all EcoDesign focal areas. We are proud to have received an 'A' score for disclosure transparency on water security in
the CDP Europe 2023, demonstrating our ongoing commitment to water risk management
Personal Health and sustainability practices.
In our Personal Health business, the focus is on Green/EcoDesigned Products and Solutions
3
that meet or exceed our minimum requirements in the areas of energy consumption, Total water withdrawal in 2023 was 661,076 m , a 3% decrease compared to 2022 and a 7%
packaging, substances of concern, and application of recycled plastics. We continue to make reduction compared to 2019 (pre-COVID level).
progress in developing PVC/BFR-free products. More than 90% of our consumer product
sales consist of PVC/BFR-free products, with the exception of power cords, for which there Diagnosis & Treatment, which consumes 49% of total water usage, recorded a 5% increase,
are not yet economically viable alternatives available. In our Oral Healthcare portfolio, we mainly caused by lower amounts of reused water in a site in North America. Personal Health
introduced the first brush heads containing 75% bio-based materials. In our Mother & Child recorded a 7% decrease. In 2022, one of our manufacturing sites in Asia experienced a water
Care portfolio, we launched the first baby monitor with recycled plastic. And we leakage which resulted in higher water intake in that year. This leakage was remedied.
implemented recycled plastic in the interior parts of a significant proportion of the Male Connected Care showed a decrease of 11%, due to decreased production volumes at a site in
Grooming portfolio. Asia.
5.2.6 Sustainable Operations Philips Group

3
Water withdrawal in thousands of m
Philips’ Sustainable Operations programs focus on the main contributors to climate change,
2019 2020 2021 2022 2023
with the aim of reducing, re-using and/or recycling waste, reducing water consumption, and
Diagnosis & Treatment 295 286 337 310 324
reducing emissions.
Connected Care 150 116 119 111 99
Personal Health 265 221 247 257 238
Full details can be found in ESG statements, starting on page 230. Philips Group 710 623 703 678 661
In 2023, 99.6% of water was purchased and 0.4% was extracted from groundwater wells.
54
Waste Philips Group

Total waste by destination in tonnes
In 2023, our manufacturing sites generated 19,375 tonnes of waste, a decrease of 15%
Total waste Hazardous Non-hazardous
compared to 2022, mainly driven by the lower construction activities in different locations generated waste waste
across the globe, lower paper/cardboard and plastic waste due to reduced production Re-use 1,651 1 1,650
volumes at some sites and more efficient waste management. The reported re-used Recycling 15,762 1,536 14,226
materials were 9% of the total waste. Other recovery 33 - 33
Waste diverted from disposal by recovery 17,446 1,537 15,909
Diagnosis & Treatment decreased waste by 12%, mainly driven by the decreased volume of operation
one-time construction related re-used materials and lower construction activity, which was Incineration (with energy recovery) 1,480 199 1,281
partially offset by the operational changes. Connected Care decreased waste by 21% due to Incineration (without energy recovery) 298 294 4
Landfill 151 1) 4 147
the significant decrease in shipment packaging materials related to the recall, increased
Waste directed to disposal by disposal 1,929 497 1,432
volume of re-used materials and operational changes. Personal Health reduced waste by
operation
17% due to operational changes, lower production volumes and the start of a smart Total waste generated 19,375 2,034 17,341
warehouse, that significantly reduced amounts of wood pallets and cardboard wastes by
using reusable plastic trays.
1)
2.7 tonnes out of 151 tonnes of waste sent to landfill, excluding one-time-only waste and waste delivered to landfill due to
regulatory requirements
Philips Environmental Policy addresses the waste hierarchy stating that Philips drives action
by ensuring circular manufacturing and supply to increase circular practices at our sites and The total waste destinations are fully categorized above. There is no waste generated that is
responsible waste management according to the waste hierarchy. destined for other disposal methods. Our sites addressed both the Circular Materials
Management percentage as well as waste sent to landfill, as part of our ESG commitments;
Philips Group refer to Definitions and abbreviations, starting on page 304 for the definition of Circular
Total waste in tonnes
Materials Management.
2019 2020 2021 2022 2023
Diagnosis & Treatment 9,675 19,703 9,974 10,694 9,422
The Circular Materials Management percentage has replaced the recycling percentage in
Connected Care 4,095 3,475 2,753 2,899 2,276
2021. In 2023, it remained at 91%, the same level as in 2022.
Personal Health 8,758 7,929 9,477 9,209 7,677
Philips Group 22,528 31,107 22,204 22,802 19,375
Our Zero Waste to Landfill KPI excludes one-time-only waste and waste delivered to landfill
due to regulatory requirements. According to this definition, in 2023 we reported 2.7 tonnes
Until 2020, total waste consisted of waste that is delivered for landfill, incineration, waste to of waste sent to landfill, a small increase compared to 1 tonne in 2022. All our 23 industrial
energy or recycling. We extended the scope with materials sent for re-use and other sites achieved Zero Waste to Landfill status at the end of 2023.
recovery as of 2021. Total waste does not include waste prevented.
Materials delivered for re-use, other recovery or recycling via an external contractor
amounted to 17,446 tonnes, which equals 90% of the total waste. Materials delivered to
incineration and landfill amounted to 1,929 tonnes, which equals 10% of the total waste, of
which 74% comprised non-hazardous waste and 26% hazardous waste. We recorded 1,531
tonnes of waste prevented in our own activities in 2023, compared to 1,484 tonnes in 2022.
Philips did not produce any radioactive waste in 2023.
55
Philips Group The Lives Improved model helps us to track our performance on a country-by-country basis
Total waste by composition in tonnes
in line with UN Sustainable Development Goal 3, allowing us to shape strategies to ensure
Waste Waste diverted from Waste directed to
generated disposal disposal healthy lives and promote well-being for all at all ages.
Wood waste 4,140 4,104 36
Paper/cardboard waste 3,527 3,522 5 In 2023, Philips improved 1.88 billion lives, an increase of around 67 million compared to
Metal waste 3,338 3,291 48 2022. This increase was driven by steady growth across all segments, improved statistics and
Plastic waste 2,381 2,237 144 the addition of the Ambulatory Monitoring & Diagnostics (AM&D) and Clinical Data Services
Municipal (mixed) waste 2,136 1,156 980 (CDS) business units in the Lives Improved model. From a zone perspective, we saw
Chemical waste 2,020 1,532 487 significant growth mainly in Latin America, Asia Pacific, Japan, Indian Subcontinent, Middle
Electrical and electronic 626 622 4 East & Turkey, and Africa.
waste
Other 1,208 983 225
Philips believes that improving access to healthcare requires meaningful innovation. It also
requires a deep understanding of the relationship between all stakeholders and their
For all waste types and waste destinations, preparation for proper treatment takes place. specific needs in underserved communities. We have an additional commitment to improve
This preparation is case specific; in some cases it includes separation, inspection and the lives of 300 million people in underserved communities with our health-related products
cleaning. by 2025, rising to 400 million by 2030. This commitment allows us to increase our focus on
those populations where we can make a positive impact by providing access to effective and
Philips included reduction targets for the substances that are most relevant for its businesses affordable healthcare for those in greatest need. By combining the strengths of Philips,
in its ESG commitments. For more details on emissions from substances, please refer to Philips Ventures, Philips Foundation, and its partners, we can provide better healthcare and
Sustainable Operations , starting on page 249. improve health outcomes for all. In 2023, our health-related solutions improved the lives of
221 million people in underserved communities (an increase of some 20 million compared to
2022).
5.3 Social performance
As a leading health technology company, it is our purpose is to improve people’s health and For more information, please refer to our Lives Improved methodology document.
well-being through meaningful innovation, in line with UN SDG 3 ‘Ensure healthy lives and
promote well-being for all at all ages’. In pursuing this purpose, we act responsibly towards
society and partner with our stakeholders.
We aim to be the best place to work for people who share our passion, promoting personal
development, inclusion and diversity.
5.3.1 Improving people’s lives

Lack of access to affordable, quality care is one of the most pressing issues of our time.
Climate change is exacerbating this situation and putting the lives of millions of people at
risk. At Philips, we are conscious of our responsibilities towards society and the planet. It is
our purpose to improve people’s health and well-being through meaningful innovation. As
such, we aim to improve the lives of 2.5 billion people a year by 2030. To ensure we remain
on track to achieve this goal, we have developed an integrated approach that tells us how
many lives have been improved by our products and solutions in a given year. We call this
our Lives Improved model.
56
Lives Improved per region/zone 5.3.2 Our organization, people and culture
The following table shows the number of Lives Improved per region/zone. 2023 has been a year of change, focused on building the foundation to deliver greater
impact in all we do by addressing challenges and shifting to our new operating model,
Philips Group whilst continuing to deliver for patients, customers and consumers. We laid the groundwork
Lives improved per region/zone
for our updated People strategy and the key pillars of growing our people, igniting our
Lives Improved Population Saturation rate
(million) (million) (as % of population) culture, simplifying how we work, and bringing oxygen to the organization through simple
APAC 132 1,023 13% adaptive people processes and a focus on well-being and inclusion.
Benelux 26 30 86%
Central Eastern Europe 79 166 48% Aligned with these pillars, we continued driving the broader Talent agenda, with a strong
DACH 87 101 86% focus on Executive Committee successor identification and development. This resulted in
France 46 69 66% two internal executive appointments, our new Chief People Officer and Market Leader
Greater China 506 1,442 35% North America, and the appointment of two critical external executive female talents, Chief
Iberia 48 58 83% Business Leader Monitoring & Connected Care and Chief Medical Officer, further
IIG 47 81 58% strengthening our MedTech expertise. We continued to support the development of our
Indian Subcontinent 99 1,628 6% internal talents resulting in 33% internal mobility (vs. target 30%) and further improved our
Japan 49 125 39% diversity ambitions with over 31% women in senior leadership. Overall, employee turnover is
Latam 169 650 26% slightly up to 17.6% from 2022 (17.5%) and top talent has seen an increase to 12.3% from
META 113 1,763 6%
10.2% in 2022.
Nordics 21 28 74%
North America 363 372 98%
In 2023, we began reinvigorating our culture using a phased approach to emphasize action
Russia, Central Asia 52 253 21%
over words, laying the groundwork for scaling this work in 2024. This included working on
UK & Ireland 42 73 58%
our culture through our most pressing challenges with the Philips Leadership Team and how
to understand our disabling patterns as an organization so that we can begin to disrupt
them. Deeper culture work was started in the businesses with specific needs, and
preparations to ignite, embed and embody our culture at scale are under way. This culture
work will run in parallel with our priority of scaling development for all 7,500 people leaders.
Building on 2023 progress, we will enable leaders to model the skills and behaviors that
align with our refreshed culture and position us to deliver results through our teams.
As a result of the shift in the operating model, we have made progress in simplifying how
we work and are trending below the target headcount (69,656 actual vs. 72,295 target).
Despite the amount of change in the organization, we saw an improvement in engagement
scores between March and October 2023 by 5% to 73% indicating that the organization is
starting to recover from the change, although the number is still below 2022 (78%) and
benchmark levels.
In 2023, we gained momentum towards our strategy of becoming a more people-centric

organization and we have put in place the foundations that will help us to deliver value with
sustainable impact through our people.
57
Our culture • Collaborate impactfully, simplifying how we work to bring additional efficiency into the
Our culture is crucial to meeting our goal of improving the lives of 2.5 billion people by 2030. organization and create opportunities to come together, build strong teams, and solve
The way we act and behave shapes our shared understanding of what is important and how problems together.
we deliver. As a leader in health technology, we are on a journey to reinvigorate our culture
so that we become even more people-focused, reduce complexity, and drive greater This comprehensive and people-centric strategy – combined with our operating model and
accountability to meet the needs of our patients, consumers, and customers more targeted interventions – is designed to transform Philips into an even more agile, high-
consistently. performing organization with a thriving culture at the core.
We have launched a new global People strategy to accelerate this mission and significantly 5.3.3 Workforce of the Future
shape our organizational culture. This strategy rests on three pillars. Firstly, we simplify and Through 2023, our Strategic Priority recruitment team continued to focus on delivery of the
enhance our core operations to empower employees to address pressing needs efficiently, roles most critical to the delivery of our strategy. Together, the Strategic Priority team
all to prioritize patient safety and customer experience. Secondly, we focus on nurturing our delivered 1,427 hires within R&D, Q&R and Clinical roles at Corporate Grade 70 and above,
workforce's skills and capabilities, adapting to the ever-evolving health technology industry. and all Informatics roles. To further enhance our workforce of the future, Talent Acquisition
Thirdly, we instill a culture of inclusivity and belonging by integrating health, well-being, and delivered 20.2% of external candidates with MedTech experience.
diversity into our work practices, ensuring that every employee feels valued and connected
to our shared mission. These pillars form the foundation of our talent ecosystem and reflect Early Career Talent
our commitment to fostering innovation and excellence on a global scale. Our Philips-wide Graduate Development Program (GDP) continues to perform well and
increased from 40 participants in 2021 to 240 in 2023. The GDP lasts two years and includes
But our culture is more than words; it is also shaped by how our organization is structured. two job rotations, as well as offering the graduates a comprehensive learning and
Our new operating model, implemented in 2023, defines how we work in a regulated development track, and access to career centers to help guide future steps. Philips also gave
environment to safely develop innovations that improve people's health and well-being meaningful work experience to 1,802 interns, offering 321 of them permanent employment
responsibly and sustainably. We prioritize patient safety, quality, compliance, and integrity in after their internship.
everything we do. With this new structure, our culture-defining initiatives and programs are
expected to have a greater impact as we focus on consistency and tangible action. Total Workforce Strategy
We continue our Total Workforce Strategy, which considers all sources of skills, capabilities,
For example, in October we held a global Timeout for Patient Safety and Quality, where our locations and changes in the labor market in order to deliver the Workforce of the Future.
entire company took time to reflect on how our daily work affects patient safety and quality, Our Right Shoring & Sourcing methodology is used to implement this strategy. This
where we can commit to taking personal and collective responsibility, and how to create a methodology steers improvements in workforce composition towards the ‘right shore’
culture centered on patients and people. Initiatives like this, along with targeted learning (onshore, nearshore and offshore) and the ‘right source’ (employees, contingent workers
activities like our Clinical and Medical Learning Hub, which provides world-class clinical and external services). The program delivered EUR 11.4 million in savings in 2023.
training and resources, contribute to making our culture ‘real’ and deliver a sense of pride
for our people. In 2023 we started with the implementation of our external workforce strategy. In addition,
we have been looking at how we are attracting contingent workforce talent. Direct sourcing
Considering the ever-changing economic, political, and health environment, we also remain has been expanded to 32% in the Netherlands, to 14% in the United States, and has been
flexible in our approach to how we work. We continue to adapt our hybrid model for more rolled out to India. To strengthen the way we directly source contingent workforce talent,
flexibility and collaboration, with a stronger focus on policies and programs that prioritize our own Philips employer value proposition is utilized for the different Functions to attract
people and are tech-enabled for easier access and efficiency. This means we continue to: these contingent workers.
• Embrace flexibility, making innovative choices about how and where we work, giving More information on training and learning programs can be found in People development,
employees more autonomy. starting on page 257.
• Be at our best, investing in and growing our Talent through on-going learning and
development.
58
5.3.4 Diversity, Inclusion and Well-Being monthly review with the Executive Committee. We closely monitor the inflow, advancement
As a health technology leader, we attach great importance to the health and well-being of and outflow of talent, which makes it possible to customize goals and intervene where
our workforce and to creating an environment of inclusion and belonging, where all appropriate. We continue important initiatives that address unconscious bias, health and
employees feel psychologically safe. Our company’s success depends on our employees well-being, inclusion and development of underrepresented talent.
feeling valued, respected, and empowered to contribute fully. We are a diverse team made
up of approximately 70,000 individuals across over 100 countries, all with different Philips Group
Gender diversity in %
backgrounds, perspectives, and experiences. We fully value and leverage these differences to
ensure that creativity and innovation can flourish. Philips’ commitment towards Inclusion &
Diversity is reflected in our General Business Principles and the company-wide Inclusion & Staff Professionals Management Executives Total
Diversity Policy and Fair Employment Policy. 50 52 52 66 65 65 71 69 68 75 76 75 60 61 61 Male
Representation
We continue to put in place measures to enhance representation of diverse talent at all
levels within the organization, and to ensure that representation at senior management
levels reflects the diversity of our stakeholders, including consumers, our customers and their
patients.
50 48 48 34 35 35 29 31 32 25 24 25 40 39 39 Female
To this end, in 2022, Philips restated its commitment to having 35% of senior management '21 '22 '23 '21 '22 '23 '21 '22 '23 '21 '22 '23 '21 '22 '23
positions held by women, by the end of 2025. Senior management positions (including
senior directors and executives) amount to approximately 1,155 employees, 363 females
(31.4%), 792 males (68.6%) at the end of 2023. As of year-end 2023, we had reached our
Philips Group
initial goal (set in 2020) of a 30% representation of women in senior management. Generation diversity in %
2023
Our Supervisory Board has adopted the Diversity Policy for the Supervisory Board, Board of
Generation Z (1997 and onwards) 11%
Management and Executive Committee, which also includes the Supervisory Board’s aim Generation Y / Millennials (1981 - 1996) 48%
that at least one-third of the members of each of the Board of Management and the Generation X (1965 - 1980) 33%
Executive Committee are women and at least one-third are men. For more information on Baby Boomers (1946 - 1964) 8%
the Diversity Policy, please refer to Report of the Corporate Governance and Nomination &
Selection Committee, starting on page 110.
Philips Group
Employees by age group
At year-end, the three members of the Board of Management remained male, with three
Employee age group Under 30 30 to 50 Above 50 Total
out of 10 members of the Executive Committee being female. The Executive Committee
% 18 59 23 100
numbers reflect a slight increase compared to 2022, where there were two women out of
twelve in total, pending expected announcements of new leaders. The company generally
seeks to fill vacancies by considering candidates that bring a diversity of (amongst others) At Philips, we remain committed to a multi-generational workforce, as the presence of
gender. The selection of candidates is based on merit and there have been and may be generational diversity is a key factor to foster creativity, productivity and innovation. The
pragmatic reasons – such as other relevant selection criteria and the availability of suitable different life experiences of a multi-generational workforce support collaborative decision
candidates – that have impacted the achievement of our gender diversity goals. making and the inclusion of different beliefs and points of view.
Long-term Inclusion & Diversity ambitions are embedded in our People strategy. In our
ongoing effort to increase transparency and accountability, we share data on the
representation of women throughout our Businesses, Regions and Functions, including a
59
Global Diversity Council External awards

Our Global Diversity Council is comprised of 10 senior leaders representing our Businesses, Many stakeholders, including customers and potential partners and employees, view third-
Regions and Functions. The Council provides governance and oversight on diversity efforts, party assessments as objective indications of the strength of our commitment. Awards
promotes company-wide behavior change, and communicates on progress. Additionally, received in 2023 included Forbes Best Employers for Women, Forbes Best Employers for
every Council member is an Executive Sponsor to one of our Employee Resource Groups. Diversity, and Forbes Best Employers in Texas.
Employee Resource Groups External partnerships

Employee Resource Groups (ERGs) provide an inclusive space for employees to support and As we continue to focus on integrating inclusion, belonging and equity into the employee
care for one another, develop skills, experience meaningful cultural connections, expand experience, we see value in partnering with diverse professional network organizations and
their knowledge, all while strengthening relationships among the Philips community. job boards to sharpen our focus on the development and retention of our internal diverse
talent and increasing representation of diverse talent across our organization. In 2023, we
Philips currently has 11 ERGs globally, with over 10,000 employees participating: Able & renewed a partnership with the National Black MBA Association and introduced
Allies; Asian Employee Resource Group; Black Employee Resource Group; Future Leaders and partnerships with the National Sales Network, Circa and Mogul.
Rising Employees; Latinx Employee Resource Group; Middle Eastern Employee Resource
Group; Philips Empowering Parents; Philips Women Lead; Pride Network; Veterans and 5.3.5 Employee engagement
Family Coalition; and Neurodiversity Network. We continue to keep a close pulse on our employee sentiment through our bi-annual
Employee Engagement Survey. Amidst the changes across the company, our Employee
Health & Well-being Engagement Survey (EES) saw an extremely high response rate of 73%, which means that
In 2023, we evolved our (mental) health and well-being framework to incorporate two almost 50,000 employees participated.
additional pillars of well-being – career and environmental – enhancing our holistic
approach and integrating global and local programs. We continued to address mental In 2023, average employee engagement scores decreased to 73% – lower than the Fortune
health by further rolling out the Employee Assistance Program (EAP). 500 benchmark. The decrease in employee engagement scores, specifically in the first half of
the year, did not come as a surprise, as we announced employee reductions and
We grew our Mental Health Champion program to 250 Champions across the globe, organizational changes in January and many of our employees were (pre-) informed of how
providing accredited training for peer-to-peer confidential support. We developed they would be impacted. There was significant improvement (5 percentage points) in the
Compassionate leadership training for all our people managers, as well as encouraging EES scores in the second half of the year, as the employees settled within the new
dialogues around self-care, building trust and resilience. We also launched a Manager organization structure.
Mental Health toolkit, complemented by training sessions.
Philips Group
Employee Engagement Index
Along with International Women’s Day and PRIDE, Philips also recognized World Health Day
2021 2022 2023
and World Mental Health Day, with a variety of virtual mental well-being sessions and
Favorable 79% 77% 73%
resilience practices that engaged employees across our Regions. In collaboration with Philips
Neutral 14% 15% 17%
University, the Philips Energy Management well-being program was further extended across
Unfavorable 7% 8% 10%
the organization.
Building capability In a changing environment, we listened actively to our employees to provide them with
In 2023, we deployed bias training to all recruiters, continued the learning journey for greater clarity on future direction and enable them to proactively deal with change to meet
employees with a focus on emotional wellness, and launched a learning series for all our customer and patient needs. In 2023, we introduced specific sessions around Patient
employees called Learn With Us, where we featured Diversity, Inclusion and Well-being best Safety and Quality. We saw that our employees feel comfortable reporting a patient safety
practices from across the globe. or quality concern, while some employees feel that we can learn more from reviewing
quality and regulatory events, and that there is an opportunity to improve training and
60
recognition on these topics. This is critical given the culture of people- and patient-centricity Philips Group
Employment in FTEs
that we aspire to.
2021 2022 2023
Balance as of January 1 75,001 78,189 77,233
Using the Customer Experience Index, we look at how well employees think we focus on
Consolidation changes:
customer needs. These inputs are actively exchanged with the Customer Experience team.
Acquisitions 2,594 87 27
Divestments (744) (33) (353)
Our employee engagement is primarily driven by a clear understanding of our customer Other changes 1,338 (1,010) (7,251)
needs and delivering on commitments that we make to each other. The results of the EES Balance as of December 31 78,189 77,233 69,656
indicate that employees feel they can be themselves and have trusting relationships at work.
Another significant factor driving engagement is our high scores on the Inclusion & Diversity
index, which remains above the industry benchmark. Geographic footprint
Approximately 56% (2022: 58%) of the Philips workforce is located in Mature geographies
5.3.6 Employment and 44% (2022: 42%) in Growth geographies. In 2023, the number of employees in Mature
The total number of Philips Group employees was 69,656 at the end of 2023, compared to geographies decreased by 5,392. The number of employees in Growth geographies
77,233 at the end of 2022, a decrease of 7,577 FTEs. decreased by 2,184.
On January 30, 2023, we launched a multi-year plan to create value with sustainable impact. Philips Group
Employees per geographic area in FTEs at year-end
Part of this plan is to improve performance and simplify our way of working to improve our
2021 2022 2023
agility and productivity. This includes the difficult, but necessary reduction of our workforce
Western Europe 19,775 19,297 16,900
by around 6,000 roles globally by 2025. This is in addition to the 4,000 reductions announced
North America 21,807 20,618 18,094
in 2022. As we went through this change, we did it with the utmost care and respect for our
Other mature geographies 4,683 4,576 4,105
people, with a strong focus on supporting those who were directly impacted by the Mature geographies 46,265 44,491 39,099
reductions in finding a new role. Growth geographies 31,923 32,742 30,558
Philips Group 78,189 77,233 69,656
Subject to local country legislation, our support offers include:
• Social Plan or respective severance policy Employee turnover

• Outplacement services and support through our Employee Assistance Program In 2023, employee turnover amounted to 17.6%, of which 9.5% was voluntary, compared to
• Work placement agency, where applicable, for Employment-to-Employment support 17.5% (11.1% voluntary) in 2022. External benchmarks show that our voluntary employee
• Redeployment – where possible – as applicable by local legislation and in the context of turnover remains in line with similar-sized companies, and that we are reasonably successful
the hiring restrictions in retaining our employees.

Employees per segment in FTEs at year-end Employee turnover 2023 in number of employees
2021 2022 2023 Staff Professionals Management Executives Total
Diagnosis & Treatment 29,094 30,335 28,397 Female 2,935 2,261 237 19 5,452
Connected Care 21,047 19,241 17,549 I choose not to self-identify 1 1
Personal Health 10,134 9,319 9,085 Male 2,583 3,676 527 50 6,836
Other 17,913 18,337 14,626 Philips Group 5,518 5,938 764 69 12,289
Philips Group 78,189 77,233 69,656
61
Philips Group understanding the underlying factors contributing to these unexplained gaps, and
Employee turnover 2023
formulating proactive measures to prevent such occurrences in the future.
Staff Professionals Management Executives Total
Female 23.1% 16.8% 17.9% 26.8% 19.7%
Specifically focusing on the United States, Philips embarked on a significant initiative in the
I choose not to self-identify 6.3% 3.9%
form of a company-wide Pay Equity & Transparency Project starting in 2022 and culminating
Male 18.7% 14.5% 18.3% 23.4% 16.1%
Philips Group 20.8% 15.2% 18.1% 24.3% 17.6%
in 2023. This project builds upon the successful groundwork laid during pay equity reviews at
the state level in the US. The objective has been to create a comprehensive and standardized
approach to pay equity and pay transparency, ensuring that all employees across the US are
Philips Group remunerated fairly, in accordance with their skills and responsibilities. All US employees have
Voluntary turnover 2023
the right to request pay transparency and understand their position against peers, which is
Staff Professionals Management Executives Total
over and above the current legislative requirements.
Female 11.9% 9.6% 7.5% 9.9% 10.6%
I choose not to self-identify 6.3% 3.9%
The Pay Equity Project is a testament to our commitment to not only meeting but exceeding
Male 11.1% 7.8% 7.1% 6.1% 8.8%
legal and regulatory requirements. By proactively addressing pay equity concerns, we aim to
Philips Group 11.5% 8.4% 7.2% 7.0% 9.5%
create an inclusive work environment that fosters diversity and promotes equal
opportunities for everyone within the organization. This initiative reinforces our belief that
The rate of employee turnover reported, is calculated in headcount as a monthly average fair compensation is not only a legal obligation but a fundamental ethical responsibility that
across the reporting period. contributes to the overall success and sustainability of our company.
5.3.7 Equal opportunities and equal pay Through this proactive approach, we strive to set an industry standard for pay equity,
As a company, Philips is committed to remunerating equal pay for equal work. We ensure demonstrating that a commitment to fairness and equality is not only beneficial for our
that all employees are compensated fairly and without inequity based on gender, race, or employees but also the long-term success and reputation of Philips as a global leader in
any other characteristic protected by law. innovation and healthcare solutions.
A pay equity review is a crucial process that reflects our commitment to fostering fairness, 5.3.8 Living wage
equality, and transparency within our organization. Annually, Philips conducts a Philips can only achieve its aim to improve the lives of 2.5 billion people per year by 2030 if
comprehensive analysis of its compensation structure to ensure that all employees are we support and empower our people, so they can be their best and perform effectively. To
remunerated fairly for their skills, experience, and contributions, regardless of human this end, we conducted a living wage analysis on the lowest salaries in every country in
characteristics that can lead to potential biases. The systematic measurement of gender pay which we currently operate.
gaps within Philips is an integral aspect of our operational practices. This commitment
ensures that we not only provide equal opportunities, but also uphold fairness in The living wage is a concept defined by Anker and Anker (2017) as “Remuneration received
compensation for the work undertaken by our diverse workforce. This dedication to by a worker in a particular place sufficient to afford a decent standard of living for the
transparency and proactive correction reflects our overarching commitment to fostering an worker and her or his family. Elements of a decent standard of living include food, water,
environment of equality and inclusivity within the company. housing, education, healthcare, transport, clothing, and other essential needs, including
provision for unexpected events”.
In alignment with our global ethos, many countries in which Philips operates have already
embraced the practice of regular pay equity reviews over several years. Notable examples Based on the Living Wage analysis conducted in 2023, all Philips employees received wages
include Australia, the United Kingdom, Sweden, India, and certain states within the United and benefits that are consistent with at least the minimum Living Wage standard for an
States. This demonstrates our unwavering dedication to upholding the principles of equity individual. Furthermore, approximately 97% of Philips employees received wages and
and inclusivity on a global scale. When an unexplained gap is brought to light, immediate benefits that are consistent with at least the minimum Living Wage standard for a family
actions are taken to rectify the situation. Furthermore, Philips is committed to (based on reference data and guidance from Wage Indicator).
62
5.3.9 Health and Safety In addition, a cross-functional project team, comprised of a Human Rights Manager and
In 2023, the safety of our employees remained paramount. As the COVID-19 pandemic professionals from several business functions, is in place to drive several human rights
continued the endemic phase, the centralized controls put in place during the pandemic initiatives. The project team is overseen by the Human Rights Steering Committee, consisting
were relaxed in line with local governments’ advice. As Philips resumed normal operations, of senior leaders from Operations, Legal, Human Resources and Sustainability.
office occupancy started to rise, and business travel restarted. However, critical control
measures were maintained. Philips has emerged from the pandemic with a good record of In 2023, we continued to develop our due diligence strategy by conducting Human Rights
management and control that restricted the impact of the pandemic on employees and the Impact Assessments (HRIA). Philips conducted Human Rights Impact Assessments (HRIAs) at
wider business operations. its sites in Pune (India) and Varginha (Brazil), living up to its commitment of conducting
HRIAs at 100% of its at-risk sites by 2023. Philips intends to monitor the progress and
At Philips, we strive for an injury-free and illness-free work environment. Since 2016, the findings from these sites and take them on a continuous improvement journey regarding
Total Recordable Cases (TRC) rate has been defined as a Key Performance Indicator (KPI). A human rights topics.
TRC is a case where an injured employee is unable to work for one or more days, has medical
treatment, or sustains an industrial illness. We set yearly TRC targets for the company, Although the Human Rights Impact Assessment of selected sites is primarily focused on
businesses and industrial sites. Philips own operations, a derived deep-dive approach for certain suppliers has been rolled
out since 2022. For 8 suppliers, a focused assessment on human rights was conducted,
We recorded 172 TRCs in 2023, the same as in 2022. While our workforce decreased in 2023, compared with the broader Supplier sustainability assessment approach which covers
the TRC rate increased from 0.23 per hundred FTEs in 2022 to 0.24 in 2023. sustainability more holistically and is detailed in Supplier sustainability, starting on page 263.
In 2023 we recorded 90 Lost Workday Injury Cases (LWIC). These are occupational injury Our Human Rights Report contains detailed information regarding our progress, targets,
cases where an injured person is unable to work for one or more days after the injury. This and plans for continuous improvement.
represents a 9% increase compared with 81 in 2022. The LWIC rate increased to 0.12 per 100
FTEs in 2023, compared with 0.11 in 2022. The number of Lost Workdays caused by injuries 5.3.11 Supplier sustainability
decreased by 1,471 days (37%) to 2,549 days in 2023. Philips’ purpose to improve people’s health and well-being applies throughout our value
chain. An important area of focus for the Integrated Supply Chain is sustainability, and we
For more information on Health and Safety, please refer to Health and Safety performance, are actively working on this together with our partners, whether these be component
starting on page 260 suppliers or energy or logistics providers. Close cooperation with our suppliers not only helps
us deliver health technology innovations, it also supports new approaches that help us
5.3.10 Human rights minimize our environmental impact and maximize the social and economic value we create.
Philips strongly believes that companies have both the responsibility to respect human rights
and the ability to protect them. Philips’ Human Rights Policy, General Business Principles, The sustainability performance of our suppliers is fully embedded in our procurement
Supplier Sustainability Declaration and other relevant policies detail how Philips respects strategy and way of working. We want to make a difference through sustainable supply
human rights, in line with the International Bill of Human Rights and the International Labor management and responsible sourcing. This is more than just managing compliance – it is
Organization’s Declaration on Fundamental Principles and Rights at Work. about collaborating with our supply partners to make a positive and lasting impact.
In this regard, Philips follows the guidance given in the UN Guiding Principles on Business Since 2003, our sustainability strategy has included dedicated supplier sustainability
and Human Rights and the Organization for Economic Co-operation and Development programs. We have a direct (tier 1) business relationship with approximately 4,900 product
(OECD) Guidelines for Multinational Enterprises. Philips has also been a signatory to the UN and component suppliers and 16,100 service providers. Social and environmental issues
Global Compact since 2007. Philips’ Board of Management is responsible for strategy and deeper in our supply chain also require us to intervene beyond tier 1 suppliers. In 2023, our
oversight of all company activities across the three ESG dimensions, including human rights. programs focused specifically on improving supplier sustainability performance, human
The Board also monitors progress and takes corrective action where needed. rights, responsible sourcing of minerals, and reducing the environmental footprint of our
supply base by driving the adoption of Science Based Targets.
63
Through the Supplier Sustainability Performance program, our maturity-based approach to Philips has a Tax Control Framework in place that forms part of its standard set of Internal
drive continuous improvement, we improved the lives of approximately 723,000 workers in Controls over Financial Reporting (ICFR). Philips' tax position is therefore reflected in its
our supply chain in 2023 (2022: 459,000). Collaborating with our strategic partners, we financial statements and covered by the Board of Management's report on ICRF and its
increased the number of deep-dives at second-tier suppliers, actively supporting them to conclusion regarding the effectiveness thereof, as referred to in the section Risk
become more effective in their own sustainability engagement approaches towards their management and internal control framework , starting on page 136.
suppliers.
Philips also endorses the ambitions expressed in the Tax Governance Code published by
Detailed information on our supplier sustainability programs is available in section Supplier Dutch employers' organization VNO-NCW. We comply with the principles prescribed in the
sustainability, starting on page 263 of this Annual Report. Code, available at www.vno-ncw.nl/taxgovernancecode, and we have touched upon the
elements of this code in our Country Activity and Tax Report.
5.3.12 Total tax contribution
To fulfill our company purpose, a responsible tax approach is required. We fully In 2023, Philips contributed to the communities where we operate through taxes paid (e.g.
acknowledge our societal role when it comes to paying taxes in the geographies where corporate income tax) and taxes collected (e.g. VAT). Philips' total tax contribution in 2023,
value is created. We consider our tax payments as a contribution to the communities in amounting to EUR 3,051 million, is presented by tax type in the following table. Please refer
which we operate, and part of our social value creation. to our 2023 Country Activity and Tax Report for more details.
Our Approach to Tax sets the standard for our conduct, by which individual employees, the Philips Group
Total contribution 2023 per tax type in millions of EUR
company and its subsidiaries must abide. We consider tax in the context of the broader
Corporate income tax Customs Payroll Other
society, inspired by our stakeholder dialogues, global initiatives of the Organization for paid duties VAT 1) tax taxes Total
Economic Cooperation and Development and United Nations, human rights, international Western Europe (17) 9 206 844 66 1,107
tax laws and regulations, and relevant codes of conduct. North America (31) 38 123 721 8 859
Other mature 35 3 77 116 1 232
Under the ultimate responsibility of the Board of Management, the Chief Financial Officer geographies
annually reviews, evaluates, approves and where necessary adjusts Philips’ approach to tax. Growth geographies 65 77 332 340 40 853
Part of our approach is to acknowledge the importance of transparency in respect of our tax Philips Group 52 127 737 2,021 115 3,051
contributions. Philips supports and participates in transparency initiatives such as the Dow 1)
Includes VAT, GST and sales tax.
Jones Sustainability Index (DJSI) and the Tax Transparency Benchmark of the Dutch
Association of Investors for Sustainable Development (VBDO). The Tax Transparency
Benchmark is a study conducted by the VBDO on tax transparency practices among Dutch 5.3.13 Philips Foundation
and European listed companies. The 2023 benchmark assessed the tax transparency Stichting Philips Foundation, an independent foundation organized under Dutch law, is a
practices of 51 Dutch companies and 65 listed companies from Belgium, Denmark, France, registered charity established in 2014. In 2023, Royal Philips supported Philips Foundation
Germany, Italy, Spain, and Sweden. Philips scored the maximum achievable 40 points. The with a contribution of EUR 6.7 million and provided the operating staff as well as the expert
jury noted our comprehensive Country Activity and Tax Report 2022, which explicitly linked assistance of skilled volunteers in the execution of the Foundation’s programs.
to the GRI 207 Tax Standard and included information on environmental and social factors.
Furthermore, the jury commended Philips for the clear description of the role taxes play Philips Foundation’s mission is to reduce healthcare inequality by providing access to quality
within its value creation model. In addition, Philips scored a top score (100 out of 100) in the healthcare for underserved communities through meaningful innovation. It does this
Tax Strategy section of the 2023 Dow Jones Sustainability Index. through the provision and application of Philips’ healthcare expertise, innovation power,
talent and resources and by financial support. Together with key partners around the globe
Since 2020, we have been providing certain voluntary disclosures about taxes paid and (NGOs, academic partners, entrepreneurs), Philips Foundation seeks to identify challenges
collected in the countries in which we operate. The 2023 Country Activity and Tax Report is where a combination of healthcare technology expertise and partner experience can be
published on our website, in addition to, and simultaneously with the disclosures on tax used to create meaningful solutions that have a positive impact on people’s lives.
included in this Annual Report.
64
Philips Foundation works in projects (grant-based) and through impact investments (loans WageIndicator. We also engage with a variety of investors, analysts, institutional advisory
and equity). The instrument depends on the status and self-sustainability of the respective and other organizations, such as Eumedion, ISS, Glass Lewis, VEB and VBDO. Please also refer
healthcare technology in serving the more disadvantaged communities. to Investor information, starting on page 301.
For more information on the Philips Foundation, please refer to Philips Foundation, starting In addition to our many stakeholder engagement sessions, our sustainability e-mail account
on page 262. (philips.sustainability@philips.com) enables stakeholders to share their issues, comments
and questions, also about this Annual Report. The following table provides a non-exhaustive
5.3.14 Working with stakeholders and advocacy overview of our stakeholder engagement, which is also used for our materiality analysis.
Our stakeholder engagement is closely aligned with the company’s purpose to improve
people’s health and well-being through meaningful innovation. One of our key ESG
commitments is to be transparent about our plans, activities, targets, results and
contributions to society, and to engage with shareholders, customers, business partners,
governments and regulators through a variety of platforms. The purpose of our
engagement efforts is to pursue and foster an open, meaningful, effective, and informed
dialogue regarding our activities and our internal and external stakeholders’ needs,
concerns and expectations. Please refer to the Philips Stakeholder Engagement Policy
available at our website.
The purpose of our advocacy efforts is to contribute to policy development and legislative
processes and to support business opportunities in the areas relevant to Philips and its
businesses, for example: health system resilience policies and investment plans; ESG, in
particular on climate, circularity and green procurement; and Digital Health, such as AI, data
protection, interoperability, cybersecurity, and technological sovereignty. For information on
our advocacy activities and expenses in 2023, please refer to Advocacy activities and
expenses, starting on page 269.
In organizing ourselves around customers and markets, we conduct dialogues with our
diverse stakeholders in order to explore common ground for addressing societal challenges,
building partnerships and jointly developing supporting ecosystems for our innovations
around the world. We derive significant value from our stakeholders across all our activities
and engage with, listen to and learn from them. Working in partnerships is crucial to
delivering on our purpose to improve people’s health and well-being through meaningful
innovation. We incorporate feedback on specific areas of our business into our planning,
actions, targets, policies and disclosures. In addition, we participate in meetings and task
forces as a member of organizations including the World Economic Forum, WBCSD,
Responsible Business Alliance (RBA), EFRAG, Dutch Sustainable Growth Coalition, the Ellen
MacArthur Foundation, European Round Table for Industry, Platform for Accelerating the
Circular Economy (PACE) and the European Partnership for Responsible Minerals.
Furthermore, we engage with the leading Dutch labor union (FNV) and a number of NGOs,
including Enough, GoodElectronics, the Chinese Institute of Public and Environmental
Affairs, UNICEF, Amnesty International, Greenpeace, Friends of the Earth, and
65
Stakeholder engagement overview (non-exhaustive)

Stakeholders Processes Results
Employees • European Works Council Regular meetings, quarterly Employee Survey, employee Engaged and informed employees, action plans, policies
• Local Works Councils development process, quarterly update webinars. For more
• Individual employees information, refer to Social performance, starting on page 56
Regular mail updates, team meetings, webinars
Customers • Hospitals Joint (research) projects, business development, Lean value New technologies and processes, Frustration Free Packaging
• Retailers chain projects, strategic partnerships, consumer panels, Net solutions, green consumer propositions, Life Cycle Analysis of
• Consumers Promoter Scores, Philips Customer Experience Centers, Philips products, EU Product Environmental Footprint pilots
Customer Care centers, Training centers, social media
Suppliers • Chinese suppliers in the Supplier Development program Supplier development activities (including topical training Supplier improvement projects, supplier commitments to
• Randstad, Lenovo sessions), supplier forums, supplier website, participation in Science Based Targets to reduce CO2 emissions, joint projects
industry working groups like COCIR and RBA. For more
information, refer to Supplier sustainability, starting on page
263.
Governments, • European Commission Topical meetings, research projects, policy and legislative Feedback on proposed legislation, investment plans, transition
municipalities, etc. • US government developments, business development, multi-stakeholder plans to a circular and low carbon society
• Chinese government projects. For more information, refer to Advocacy activities and
expenses, starting on page 269
NGOs • UNICEF, International Red Cross Topical meetings, multi-stakeholder projects, joint (research) Projects to increase access to care in underserved communities,
• Friends of the Earth, Greenpeace projects, innovation challenges, renewables projects, social action plans, policies
investment program and Philips Foundation. For more
information, refer to Advocacy activities and expenses, starting
on page 269
Investors • Mainstream investors Webinars, roadshows, capital markets day, Investor relations Green and Sustainability Innovation Bonds, visits to Philips
• ESG investors and Sustainability accounts Customer Experience Centers
• Investor platforms
66
5.4 Governance ESG is also embedded in our core business processes, like innovation (EcoDesign), sourcing
(Supplier Sustainability Program), manufacturing (Sustainable Operations), logistics (Green
Logistics) and programs like the Circular Economy initiative.
5.4.1 Corporate governance
Koninklijke Philips N.V. (Royal Philips), a company organized under Dutch law, is the parent 5.4.2 Philips Operating Model
company of the Philips group. Royal Philips has a two-tier board structure consisting of a Our operating model integrates key aspects of how we operate – from our strategy,
Board of Management and a Supervisory Board, each of which is accountable to the General structure & governance, policies, processes, systems & data, to our people & culture and
Meeting of Shareholders for the fulfillment of its respective duties. The Board of performance management.
Management is entrusted with the management of the company. The other members of the
Executive Committee have been appointed to support the Board of Management in the In 2023 we continued the process of simplifying the way we work to drive clear
fulfilment of its managerial duties. See the chapter Corporate governance, starting on page accountability and agility, and to unlock significant productivity and margin gains. This
130 of this Annual Report, where the company addresses the main elements of its corporate simplification – with end-to-end accountable businesses supported by a much leaner Group
governance structure, reports on how it applies the principles and best practices of the layer and strong Regions, together with a strengthened culture of patient- and people-
Dutch Corporate Governance Code, and provides other information required under Dutch centricity, innovation impact and clear accountability – is a primary enabler to create value
law. with sustainable impact.
Under the chairmanship of the President/Chief Executive Officer (CEO) and supported by the It is designed to help us to fulfill our purpose of improving the health and well-being of
other members of the Executive Committee, the members of the Board of Management billions of people and ensure the highest standards of quality and integrity in everything we
drive the company’s management agenda and share responsibility for the continuity of the do.
Philips group, focusing on sustainable long-term value creation. In fulfilling their duties, the
members of the Board of Management and Executive Committee are guided by the 5.4.3 Risk management and internal control framework
interests of the company and its affiliated enterprise, taking into account the interests of its The company’s risk management and internal control framework forms an integral part of
stakeholders. the Philips business planning and performance review cycle. The purpose of our risk
management is to identify and analyze the risks Philips faces in executing its strategy and
The Supervisory Board supervises the policies, management and general affairs of Philips, activities, to set the risk appetite of the company, and to monitor its effectiveness. The
and assists the Board of Management and the Executive Committee with advice on general objective of internal control is to maintain integrated management control of the
policies related to the activities of the company, including setting and executing the strategy company’s operations and reporting, as well as safeguard compliance with applicable laws
of the Philips Group. and regulations. Key elements of our framework include (but are not limited to) our General
Business Principles, our corporate governance, authorization structures, our policy
Philips’ strategy, and the way it has been developed by the Board of Management under the framework, internal reporting structures. Furthermore, it comprises various frameworks to
supervision of the Supervisory Board, clearly integrates the company’s impact in the field of help manage and control risk in line with our risk appetite. These include (but are not
sustainability, including the effects on people and the environment. The Board of limited to) our Enterprise Risk Management framework (refer to Risk management, starting
Management regularly convenes on ESG matters with other Executive Committee members on page 85), and other management systems and frameworks relevant to specific risk areas
(the Chief Operating Officer, the Chief Strategy & Innovation Officer, the Chief Human such as patient safety and quality, health & safety, environmental, tax, business continuity,
Resources Officer, the Chief Business Leader Precision Diagnosis and the Chief International information security and privacy.
Markets Market Leader) and certain functional executives. Together they define Philips’ ESG
strategy, commitments, programs, targets and policies, they monitor and evaluate progress As a key part of its risk management and internal control framework, Philips has
and take corrective action where needed. Progress on ESG is reported on a quarterly basis to implemented a standard set of Internal Controls over Financial Reporting (ICFR). Philips has
the Audit Committee of the Supervisory Board, which assist the Supervisory Board in designed its ICFR framework based on the COSO Internal Control-Integrated Framework
fulfilling its oversight responsibilities for the integrity and quality of the company’s (2013). Together with Philips’ established accounting procedures, this standard set of
sustainability statements, internal controls is designed to provide reasonable assurance that assets are safeguarded,
that the books and records properly reflect transactions necessary to permit preparation of
67
financial statements, that policies and procedures are carried out by qualified personnel, similar sign-off is in place for Finance and Procurement staff for their respective codes of
and that published financial statements are properly prepared and do not contain any conduct.
material misstatements. In each reporting unit, management is responsible for customizing
the controls set for their business, risk profile and operations. The Executive Committee is responsible for the effective deployment of the GBP and for
generally promoting a culture of compliance and ethics within the company. Furthermore,
Each year, management’s accountability for ICFR is evidenced through the formal each quarter all our key Regions convene market compliance committees dealing with GBP-
certification statement sign-off. Any deficiencies noted in the design and operating related matters in the local context. They are also responsible for the design and execution
effectiveness of ICFR that were not completely remediated are evaluated at year-end by the of localized compliance plans that are tailored to their market-specific risks and
Board of Management and the outcome reported to the Supervisory Board. The Board of organizational set-up, and regularly review the relevant compliance metrics for their
Management’s report on ICFR, including its conclusions regarding the effectiveness thereof, respective market through dashboards delivered by the legal compliance monitoring team.
can be found in this report in the section Management’s statements and report, starting on The GBP Program Office, together with a worldwide network of GBP Compliance Officers,
page 274 . supports the implementation of GBP initiatives.
5.4.4 Philips General Business Principles (GBP) As part of our continuous effort to raise GBP awareness and foster dialogue throughout the
While pursuing our business objectives, we aim to be a responsible partner in society, acting organization, each year a global GBP communications and training plan is deployed,
with integrity towards our employees, customers, patients, business partners and including structured dialogues led by managers where quality, integrity and speaking up are
shareholders, as well as the wider community in which we operate. To that end, our GBP – discussed. This is part of a company-wide initiative aimed at reinforcing a culture of dialogue
part of the Philips Operating Model – and their underlying policies incorporate and using ethical dilemma case studies that are relevant to our workforce. All functions at risk
represent the fundamental principles by which all Philips businesses and employees around also receive annual training which includes content on, amongst others, antibribery and
the globe must abide. They set the minimum standard for our business conduct as a health anticorruption and healthcare compliance via tailored case studies. Almost 60,000 (94%) of
technology company, for our individual employees and for our subsidiaries, and Philips our assigned employees completed their yearly GBP e-learning. Specifically in 2023, we again
rigorously enforces compliance of its GBP throughout the company. Our GBP also serve as a focused on increasing awareness on integrity and on the importance of speaking up,
reference for the business conduct, we expect from all our business partners. through and following the deployment of our biennial Business Integrity Survey. Through
this survey, more than 22,500 employees trusted us with their views and opinions on
The GBP include principles of doing business with integrity at work, integrity in the market integrity within Philips. Ninety-four percent of employees expressed the belief that we act
and professional integrity outside work. They also set our integrity standard on inside with integrity with Philips. To gain deeper insights into the results of the Business Integrity
information, aiming to prevent trading on or disclosure of non-public information, the Survey, we execute deep-dive initiatives amongst our employees.
publication of which would be likely to have a significant influence on the trading price of
Philips securities or securities of companies that Philips is seeking to acquire. More A key control to measure implementation of our GBP is the GBP monitoring and reporting
specifically, Philips has adopted Rules of Conduct with respect to trading in Philips securities program, which is part of our Internal Control framework. In addition, we continue to
to promote compliance with applicable insider trading and other market abuse laws, rules expand the capabilities of our legal compliance monitoring team, serving our business
and regulations, in particular the EU Market Abuse Regulation. The Rules of Conduct apply customers as well as our compliance networks with actionable data, thus further improving
to all employees, the members of the Board of Management and the Supervisory Board of our compliance control framework.
Royal Philips.
The GBP are supported by established mechanisms with the aim of ensuring standardized
The GBP form an integral part of labor contracts in virtually every country in which Philips reporting and enabling employees and third parties to escalate concerns 24/7. Concerns
operates. Translations of the GBP text are available in 30 languages, allowing almost every raised are registered consistently in a single database hosted outside of Philips servers to
employee to read the GBP in their native language. Detailed underlying policies, manuals, ensure confidentiality and security of identity and information. Encouraging people to
training, and tools are in place to give employees practical guidance on how to apply and speak up through the available channels if they have a concern will continue to be a
uphold the GBP in their daily work environment. Details can be found at www.philips.com/ cornerstone of our GBP communications and awareness campaigns. At least twice a year,
gbp. Each year, employees reconfirm their commitment to the code of conduct after the Executive Committee and Audit Committee of the Supervisory Board are informed on
completing their GBP e-learning, and there is an additional annual sign-off for Executives. A relevant GBP metrics, cases, trends and learnings.
68
In 2023, a total of 764 concerns were reported via Philips Speak Up (Ethics Line) and through This year, we created the new role of Chief Patient Safety and Quality Officer, who is a
our network of GBP Compliance Officers. This represents an increase of 8% from the total of member of the Philips Executive Committee and reports directly to the Chief Executive
706 concerns in the previous reporting period (2022). This is a continuation of a year-on-year Officer. Additionally, we hired a new Chief Medical Officer to lead the team that is focused
upward trend. See Philips SpeakUp (Ethics Line), starting on page 267 for further details. on clinical research, medical safety, and medical support for our global businesses.
Through the Audit Committee of the Supervisory Board, the company also has procedures in Early in 2023, we organized CAPA management, Quality Management Systems, compliance
place for the receipt, retention and treatment of complaints specifically relating to training, internal quality audits, and other crucial areas for patient safety and quality into a
accounting, internal accounting controls, or auditing matters, enabling the confidential, Compliance and Quality shared service team. We set up a Transformations team, responsible
anonymous submission of complaints. for project management of Patient Safety and Quality programs. Regulatory Affairs formed
new teams that are responsible for expanding our engagement with external stakeholders
The results of the monitoring measures in place are given in Philips SpeakUp (Ethics Line), and regulators, and for the delivery of effective tools, processes, and services to facilitate
starting on page 267. The GBP and underlying policies, including the Financial Code of Ethics timely and compliant market access. We appointed a new leader for Product Safety and
and Procurement Code of Ethics, are published on the company website, at Surveillance, Corrections and Removals, and strengthened our post-market processes and
www.philips.com/gbp. ways of working.
5.4.5 Remuneration policy Across Philips, teams in all Businesses, Regions, and Functions continued to foster a quality
Our remuneration policy is designed to encourage employees to deliver on our purpose and culture and mindset, where all employees are encouraged to speak up and share ideas for
strategy and create stakeholder value, and to motivate and retain them. Our executive long- improving the safety and efficacy of our products. In October, our employees took part in a
term incentive plan includes environmental and social commitments. A description of the Timeout for Patient Safety and Quality to solidify commitment and planning.
composition of the remuneration of the individual members of the Board of Management
and the Supervisory Board is included in the Report of the Remuneration Committee, Quality
starting on page 111. We strive to continuously raise our performance to deliver safe and high-quality products,
services, and solutions, which are compliant with quality and safety standards and all
5.4.6 Quality & Regulatory and patient safety applicable laws. In 2023, as part of our plan to create value with sustainable impact, we
Enabling the delivery of patient-centric, safe, and high-quality care – the essence of patient introduced a new operating model that enables us to simplify how we work and improve
safety and quality – is foundational to Philips' purpose to improve the health and well-being accountability and ownership. We are strengthening our engineering capabilities for new
of people through meaningful innovation. This year we formed the Patient Safety and product development in areas such as quality systems engineering, reliability and software
Quality organization, which brings together the Quality, Regulatory Affairs, and Clinical and design.
Medical functions as one unified team. Positioned to support and enable the entire Philips
organization and to foster the quality culture at Philips, the Patient Safety and Quality team We further reduced the number of Quality Management Systems in which we operate to
is instrumental in ensuring we have the capabilities, processes, and tools required for increase focus, reduce complexity, and minimize risk. This year we closed nine QMS for a
operating in a highly regulated healthcare technology industry. total of 66 Quality Management Systems by year-end 2023, with further significant
reductions planned for 2024.
Throughout 2023, we continued to accelerate our work in crucial areas, with the goal of
achieving and maintaining the highest level of patient safety and quality. Specific areas of In 2023, our Accelerating Patient Safety & Quality program instituted an improved approach
focus included: preparation and manufacturing site readiness for audits and inspections; a for management of skills and launched a training program on patient safety and quality
review of quality records; new ways of undertaking product quality reviews; planning for IT topics. In collaboration with business units and Innovation & Strategy, we established
and data enhancements; and simplification of our process framework and Quality programs to improve product design and reliability.
Management Systems.
All Philips businesses are accountable for patient safety and quality. This year, we instituted a
new Patient Safety and Quality performance review meeting with each business and at the
Philips level in aggregate. We set Patient Safety and Quality key performance indicators for
69
the company, and Quality performance metrics are part of the remuneration of all Philips Medical Office
Executives. Additionally, every employee has a patient safety and quality goal as part of In 2023, we formed a centralized medical office with expertise in clinical research, medical
people performance management. safety, healthcare economics, and a breadth of care specialties. This team is focused on
supporting the global business, navigating the intricacies of addressing patients' and
Regulatory Affairs customers’ unmet needs across a variety of ecosystems, and looking across the entire
Under Philips' new operating model, Regulatory Affairs sits on the leadership team of each product lifecycle to help teams develop solutions that are safe, effective, and relevant for
Business and Region as a key partner. In 2023, we established internal governance and patients, providers, and payers.
requirements for engagements with national government regulatory authorities (e.g. the US
Food and Drug Administration (FDA), European Medicines Agency (EMA), China National In 2023, we hosted our second Patient Safety Advisory Board, where external leaders from
Medical Products Administration, Notified Bodies, and National Competent Authorities in across the world, from a variety of professional backgrounds, participated in intensive
the European Union. workshops focused on themes identified as key to improving the safety and efficacy of our
solutions. Experts from outside and within Philips exchanged ideas ranging from the role of
As a global business in a dynamic regulatory environment, we must ensure compliance with innovation in human interface models, patient safety and clinical education programs and
evolving regulations related to innovations in areas such as Artificial Intelligence, and capability building at Philips, and other topics that are key to our overall way forward in
healthcare informatics and software design. This year, we increased levels of investment in innovation and safety. This year, Philips also introduced an extensive Clinical and Medical
regulatory science and policy and in enterprise informatics. Teams are working on global curriculum, available to all employees.
harmonization of requirements, safe and innovative applications of AI, and secure
transmission and storage of protected health information. Sought as strategic partners, the The team continued our advocacy and investment in topics such as radiation safety, medical
Regulatory Affairs team participated in international consensus standards groups alongside device testing, and improved access to physician and staff training. At Harbor-UCLA
regulators and engaged with international regulators as invited experts and speakers at the Lundquist Institute, we host a facility for R&D pre-clinical testing, clinical and medical
International Medical Device Regulators Forum, Global Harmonization Working Party, and education proctoring, and fellows training. Our team continues to design, generate, and
other meetings. We are working with the National Institutes of Health to establish ethical disseminate clinical and economic evidence to show the value of our solutions in improving
applications of Artificial Intelligence in medical devices. patient outcomes.
In 2023, we also increased our collaborations with organizations supporting regulatory Our Health Economics and Outcomes Research team continued to contribute economic
science like the Food, Drug, and Law Institute and the Regan-Udall Foundation for the FDA. evidence to support innovation and expand access to high-quality care, authoring 12
In partnership with the Boston Globe and the Washington Post, we hosted an industry and publications and 18 studies during 2023. The Ambulatory Monitoring & Diagnostics business
customer panel on Transforming Healthcare with AI: Harnessing Technology to Promote unit increased in-network access to ambulatory patient monitoring for an additional 35
Safety and Quality for Patients. Regulatory Affairs leaders moderated panel discussions million patients in the United States through payer contracting initiatives. Our Image Guided
among key international regulators and were featured speakers at events such as MedTech Therapy-Devices team advocated with the Centers for Medicare and Medicaid (CMS) to
Europe and the AdvaMed annual conference. improve Medicare payment to ambulatory surgery centers for cardiovascular and peripheral
vascular treatments, ensuring patients have access to care in the setting that their providers
Throughout 2023, we continued transitioning our portfolio to become European Union determine is most appropriate.
Medical Device Regulation (EU-MDR)-compliant. In March 2023, the grace period was
extended until year-end 2027 or 2028, under strict conditions and depending on risk class. Philips Respironics voluntary recall
We continue to use this available grace period for placing a portion of our portfolio on the On June 14, 2021, Philips’ subsidiary, Philips Respironics, initiated a voluntary recall
market under the European Union Medical Device Directive (EU-MDD). notification in the United States, and field safety notice outside the US, for certain sleep and
respiratory care products related to the polyester-based polyurethane (PE-PUR) sound
Regulatory Affairs deployed a digital regulatory information management tool to all abatement foam in these devices.
Regions in 2023, with continued deployments planned to Businesses in 2024. This tool will be
a single source for regulatory data that will help increase speed to market.
70
Since June 2021, together with five independent, certified testing laboratories and third- Philips Respironics regularly communicates on product remediation and testing associated
party experts, Philips Respironics has conducted extensive testing. Based on the results to with the recall with global regulators and customers through a variety of channels. Philips
date, Philips Respironics and the third-party experts concluded that use of the sleep therapy Respironics continues to monitor complaints received following the recall/field safety notice
devices is not expected to result in any appreciable harm to health in patients. Further via our Quality Management Systems, in accordance with the medical devices regulations
testing remains ongoing. Following ongoing communications, Philips Respironics agreed in and laws.
October 2023 to the FDA’s recommendations to implement additional testing on the sleep
and respiratory care devices to supplement current test data. Philips Respironics is in Consent decree – Emergency Care & Resuscitation
discussions with the FDA on the details of that further testing. Further testing remains In October 2017, Philips North America LLC reached agreement on a consent decree with the
ongoing. Since the start of the test and research program, Philips Respironics has DOJ, representing the FDA, related to compliance with current good manufacturing practice
endeavored to work cooperatively with the FDA on the program and to publish regular test requirements arising from inspections conducted in 2015 and prior. The consent decree
updates as agreed with the FDA. focuses primarily on Philips' Emergency Care and Resuscitation (ECR) business operations in
Andover, Massachusetts, and Bothell, Washington.
Following the FDA’s inspection of a Philips Respironics manufacturing facility in the US and
the subsequent inspectional observations, the US Department of Justice (DOJ), acting on Following a successful inspection in Bothell, Washington, in April 2020, the FDA determined
behalf of the FDA, began discussions with Philips in July 2022 regarding the terms of a Philips had met the conditions for resuming manufacturing and distribution of defibrillators
proposed consent decree. On January 29, 2024, as part of the announcement of Philips’ in the US. The consent decree remains in effect for several years, during which the
fourth quarter and full year 2023 financial results, the company provided an update stating Emergency Care (formerly Emergency Care and Resuscitation) business unit will be subject
that Philips agrees on the terms of a consent decree with the DOJ and FDA. The consent to a series of annual assessments by an independent expert. Hospital Patient Monitoring
decree primarily focuses on Philips Respironics’ business operations in the US. The consent (formerly Monitoring & Analytics), also named in the consent decree, is also under a
decree is being finalized and will be submitted to the relevant US court for approval. The heightened level of scrutiny over the same period.
decree will provide Philips Respironics with a roadmap of defined actions, milestones, and
deliverables to demonstrate compliance with regulatory requirements and to restore the We continue to make substantial progress in our compliance efforts. In October 2022, the
business. FDA inspected Emergency Care in Bothell as a consent decree follow-up. Three observations
(Form 483) were issued and subsequently remediated and reported to the FDA. In June
In the US, Philips Respironics will continue to service sleep and respiratory care devices 2023, Emergency Care in Bothell received the October 2022 Establishment Inspection Report
already with healthcare providers and patients, and supply accessories (including patient marking closure. In late October 2023, the FDA conducted a follow-up inspection to the 2022
interfaces), consumables (including patient circuits), and replacement parts (including repair inspection that resulted in a 483 with two observations, which were rapidly addressed in
kits). Until the relevant requirements of the consent decree are met, Philips Respironics will formal responses and subsequently acknowledged by the FDA the first week of January
not resume selling new CPAP or BiPAP sleep therapy devices or other respiratory care devices 2024 as closed. Efforts in 2024 are focused on ensuring the sustained demonstrated state of
in the US. Outside the US, Philips Respironics will continue to provide new sleep and substantial compliance to support seeking formal relief in the first half of 2025, which is the
respiratory care devices, accessories, consumables, replacement parts and services, subject to earliest time allowed in the consent decree.
certain requirements. Further details will become available once the proposed Respironics
consent decree has been finalized and submitted to the relevant US court for approval. For We cannot predict the outcome of this matter, and the consent decree authorizes the FDA,
more information, refer to Contingencies, starting on page 198. in the event of any violations in the future, to order us to cease manufacturing and
distributing Emergency Care or Hospital Patient Monitoring devices, recall products, pay
In 2023, we also maintained manufacturing capacity to produce the necessary devices and liquidated damages, and take other actions. We cannot predict whether additional
rework kits required for remediation of the Respironics recall. As of December 31, 2023, over monetary investment will be incurred to resolve this matter or the matter’s ultimate impact
99% of the sleep therapy device registrations that are actionable had been remediated, on our business.
while the remediation of the ventilator devices remains ongoing. We expect to continue
such remediation activities in 2024.
71
5.4.7 Cybersecurity The Group Security function is also responsible for addressing security risks, including
As a health technology company operating in a highly competitive industry, Philips’ brand monitoring cybersecurity threats and responding to cybersecurity incidents. Philips’ Global
reputation depends on the safety, quality and security of our products and services. Failure Security Operations Center monitors the prevention, detection, mitigation and remediation
to meet cybersecurity standards may cause patient harm, negatively impact customer of cybersecurity incidents on global enterprise systems, supported by certain external
operations and their ability to provide healthcare or provide unauthorized access to patient services and periodic/intermittent assessments. The severity and materiality of incidents are
records and medical devices. Philips furthermore relies on information technology to assessed through a dedicated security incident reporting process and, if necessary, incidents
operate and manage its businesses, as well as store and process confidential data (relating are escalated through central crisis management and (potentially) to the Philips Disclosure
to patients, employees, customers, intellectual property, suppliers and other partners). For a Committee, which assesses the need for public disclosure of (material) incidents. Incidents,
discussion of cybersecurity risks facing our business, see “Products and services may fail where needed, are further escalated to Global Crisis Management.
quality or security standards, which could adversely affect patient safety or customer
operations" and “Philips could be exposed to a significant enterprise cybersecurity breach” Additionally, in order to address the security risks associated with our suppliers and the
in section Operational risks, starting on page 93. As of the date of this Annual Report, there services they provide, security controls are embedded in our procurement and supplier
are no breaches of cybersecurity or other related risk threats that have, or are reasonably management processes, covering due diligence when engaging with new suppliers,
likely to, materially affect our business. contracting, monitoring and managing existing supplier relationships, and terminating
supplier relationships. These security controls check for existing security certificates and
Security risk management is part of our broader risk management processes, and its aim is to assurances reports for the services in scope, validate suppliers’ answers to security
protect the confidentiality, integrity, and availability of Philips’ products and services. To this questionnaires in due diligence, and ensure that security schedules are part of the signed
end, the company has established a Group Security function and implemented security contracts.
management processes, requirements and controls for the assessment, identification and
management of material risks from, amongst others, cybersecurity threats. Our Head of The Board of Management is ultimately responsible for Philips’ cybersecurity management,
Group Security, reporting to our Chief Financial Officer, leads the Group Security function in which is overseen by the Supervisory Board (and specifically its Audit Committee). As part of
supporting the Board of Management in evaluating and setting the Group’s security this process, quarterly reports on cybersecurity risks and incidents are prepared by the IT
strategy, issuing security policies and evaluating the progress and effectiveness of the Audit & Risk Committee (consisting of representatives from the Group Security and Group IT
deployment of the company’s security management framework. Our Chief Information functions, Philips Internal Audit and the external auditor and submitted to the Board of
Security Officer, reporting to our Head of Group Security, has nearly 26 years of technology Management and the Supervisory Board. This reporting includes the overall risk level,
and information security management experience in the industry, including prior roles with relevant changes in the risk environment, challenges in reaching and/or maintaining current
the Dutch Government and multinationals in the Consumer goods, Manufacturing, risk levels and actual risk responses in the form of actions and owners.
Chemical and Food processing industries, in various roles ranging from Chief Information
Security Officer to IT security officer and Security Architect. Our Chief Information Security
Officer is informed of and monitors the prevention, detection, mitigation and remediation
of cybersecurity incidents through the Global Security Operations Center.
The company’s security management framework, including its cybersecurity policies and
procedures, is maintained by the Group Security function and is designed to implement
security requirements into all applicable business processes, information processing systems
and infrastructure pertaining to our products and services and our supporting and enabling
functions, during the entire lifecycle. The framework includes risk, vulnerability and
penetration assessments, mandatory yearly security training for all employees, (including
new hires Regular Phishing simulations for all employees three times a year), monitoring
and response activities for vulnerabilities identified in products, services and infrastructure.
72
5.5 Philips' ESG performance at a glance

Below we show how Philips performed in 2023 on the 21 Core metrics of the WEF ESG reporting framework, mapped to the three dimensions of our ESG commitments, as well as a number of
additional Philips-specific metrics that we consider fundamental to the strategy and operation of our business.
Environmental Social Governance

Green House Gas (GHG) emissions Lives Improved *) Setting purpose
• 100% electricity from renewable sources 1.88 billion, of which 221 million in underserved communities Philips’ purpose is to improve the health and well-being of
• 0 kilotonnes CO2-equivalent (net operational carbon people through meaningful innovation
footprint) Diversity & Inclusion
• 31.4% gender diversity in senior management positions Governance body composition
Taskforce on Climate-related Financial Disclosures (TCFD) • 39% gender diversity in total workforce Philips has a Board of Management and an independent
implementation • 73% Employee Engagement Index Score *) Supervisory Board
Updated 1.5, 2 and 4 °C global warming scenarios and
assessed their impact on our supply chain, Philips and Pay equality Material issues impacting stakeholders
customers (disclosed in separate report) US Nationwide Pay Equity project completed in 2023 Detailed double Materiality Analysis performed
Land use and ecological sensitivity Wage level Anti-corruption

• 2.7 tonnes waste sent to landfill • EUR 6,903 million employee benefit expenses 60,000 employees completed General Business Principles
• All 23/23 industrial sites 'Zero Waste to Landfill' at year- • Philips pays all employees at least a living wage training
end
Risk for incidents of child, forced or compulsory labor Protected ethics advice and reporting mechanisms
Water consumption and withdrawal in water-stressed Addressed in Philips GBP, Supplier Sustainability Declaration Whistleblower mechanism in place
areas and Supplier Sustainability program
3
• 661,076 m total water intake Integrating risk and opportunity in business processes
3
• 211,063 m in water-stressed areas Health & Safety Included in Risk Management section
• 0.24 Total Recordable Case rate per 100 FTEs
Circular revenues *) • 172 Total Recordable Cases Economic contribution
20.0% of revenues • EUR 18,169 million revenues
Training provided • EUR 749 million dividend declared
Closing the loop *) • 2,987,260 training hours in Philips University • EUR 6.7 million contribution to Philips Foundation
We reclaimed more than 11,500 systems or pieces of • 3,578,199 training completions • EUR 95 million government grants
equipment in 2023
Absolute number and rate of employment Financial investment contribution
69,656 employees, 17.6% turnover • EUR 2,483 million total tangible assets
• EUR 345 million capital expenditures on property, plant
Supplier development program *) and equipment
392 companies, 723,000 employees impacted
Total R&D expenses
Volunteering *) EUR 1.9 billion invested in R&D (10.4% of revenues)
17 new projects in 2023 reaching 12.0 million people
Total tax contribution
EUR 3,051 million
*)
Philips-specific metric 73
5.6 ESG by key country

On the following pages we show how Philips performed in a number of key countries in
2023 on a subset of the WEF Core metrics, as well as a number of additional Philips-specific
metrics that we consider fundamental to the strategy and operation of our business. In this
section, revenues are on a stand-alone country basis (unconsolidated).
74
Brazil Main business activities

•
•
Research and Development
Holding and/or managing of intellectual property
• Purchasing
Environmental • Manufacturing
• Sales, marketing and distribution
Net operational carbon footprint 0 kilotonnes CO2-equivalent • Administrative, management and support services
• Provision of services to unrelated parties
Land use and ecological sensitivity 0 tonnes waste sent to landfill • Holding shares or other equity instruments
3
Water withdrawal 4,892 m
*) Inclusion and diversity
Circular revenues 9.3%
The I&D Committee has some 115 volunteers engaged in Women,
Race, Disabilities & Mental Health and LGBTQIA+, and Well-
being. Philips Brazil has over 100 professionals with disabilities, and
Social corporate meetings now have sign language interpreters. Focus
remains on actions to increase psychological safety and well-being.
*) in 2023, Philips Brazil delivered an internship program focused on
Lives improved 104 million
Women in Tech and Race.
Absolute number and rate of employment 1,840 employees, 21.8% employee turnover
Philips Foundation and volunteering
Training provided 88,900 hours Philips Foundation continued to partner with SAS Brazil in bringing
specialized healthcare to remote areas through technology and
Wage level EUR 79 million employee benefit expenses
telemedicine. Primary healthcare units are equipped with digital
virtual healthcare solutions to provide early diagnosis and remote
physician referral. In 2023, new remote regions have been reached
Governance through the deployment of mobile health units.
Economic contribution EUR 271 million revenues Stakeholder engagement

Philips has engaged with health authorities at the federal, state and
EUR 172 million cost of sales municipal levels to discuss the digital transformation of health and
the development of innovative projects. Philips also attended
Financial investment contribution EUR 65 million tangible assets stakeholder meetings as a board member of local medical
technology trade associations.
EUR 3 million capital expenditure
Total tax contribution EUR 75 million
*)
China Main business activities

•
•
Purchasing
• Manufacturing
Environmental • Sales, marketing and distribution
• Administrative, management and support services
Net operational carbon footprint 0 kilotonnes CO2-equivalent • Provision of services to unrelated parties
• Internal Group Finance
3
We continued to focus on gender diversity and achieved significant
progress on women in leadership roles by building out our female
talent pipeline. We are cultivating a culture of inclusion by rolling
Social out our ‘be yourself’ storytelling campaign throughout the
organization. We were recognized as a ‘Top Employer’ for the third
*) consecutive year.
Absolute number and rate of employment 7,150 employees, 15.5% employee turnover Philips Foundation and volunteering
Through a collaborative effort with the Chinese Red Cross
Training provided 332,682 hours Foundation, Philips Foundation and Tsinghua University introduced
high-risk pregnancy referral cards in rural China to reduce neonatal
mortality rates. These easy-to-understand visual aids – initially
introduced in sub-Saharan Africa – empower expectant mothers to
identify potential pregnancy risks and seek timely medical care.
Governance
Stakeholder engagement
Economic contribution EUR 2,294 million revenues Philips has collaborated with government entities at central and
local level, stakeholders from trade associations and academic
EUR 1,502 million cost of sales institutions to discuss how to build up a resilient and sustainable
healthcare system. Philips also continues to engage healthcare
Financial investment contribution EUR 391 million tangible assets professionals on green hospital development and raise awareness in
the healthcare community.
*)
France Main business activities

•
•
Environmental • Administrative, management and support services
Net operational carbon footprint 0 kilotonnes CO2-equivalent • Holding shares or other equity instruments
Land use and ecological sensitivity - tonnes waste sent to landfill

3
Inclusion and diversity
Water withdrawal -m
Philips scored an overall rating of 94/100 in the government index
*) on gender equity at work. There is continued focus on building a
pipeline of talented women. Communication efforts around well-
being and prevention of mental health problems were intensified
with deployment of the project CARE. This project enables
Social employees to attend meetings around mental health, physical
health, disability, parenting, charity, and caring for others.
*)
Absolute number and rate of employment 913 employees, 15.7% employee turnover Philips Foundation and Philips France did not deploy specific
volunteering activities in 2023. Philips France followed the global
Training provided 28,571 hours initiatives like supporting the recovery from the earthquake in
Turkey.
Philips France continued to help accelerate the digital
Governance transformation of the healthcare system, contributing to the
deployment of the program 'Le Ségur du numérique'. It is also
Economic contribution EUR 381 million revenues partnering with Assistance Publique-Hôpitaux de Paris, Hôpitaux
Civils de Lyon and Incepto (a PACS AI application platform) to make
EUR 245 million cost of sales Artificial Intelligence more accessible to radiologists.
Financial investment contribution EUR 53 million tangible assets
*)
Germany Main business activities

•
•
• Purchasing
3
We embedded I&D in the recruitment process to include non-
discriminatory gender-equitable language, jobs also being
advertised part-time, safeguarding the rights of people with
Social disabilities, and promoting an open-minded mindset among
recruiters and decision-makers. We have active Employee Resource
*) Groups at our German locations, including Philips Women Lead.
In Hamburg, a substantial volunteer effort saw 70 Philips employees
Training provided 129,295 hours team up with 60 other volunteers to plant 3,150 native trees and
2
shrub seedlings. Covering an area of 1,050 m , this initiative is poised
to evolve into a self-sustaining forest by 2026. In December, in an
initiative with Signify and Versuni, employees fulfilled more than
350 Christmas wishes for children from challenging backgrounds.
Governance
Economic contribution EUR 2,114 million revenues Philips has been working closely with industry associations to help
shape the Ministry of Health’s drafts for the 'Digital Law', 'Hospital
EUR 1,142 million cost of sales Reform', and 'Health Data Use Act'. These drafts have also been
discussed with members of the Bundestag. Philips continues to
Financial investment contribution EUR 520 million tangible assets maintain good relations with hospitals, health institutions, and the
Federal State Governments.
*)
India Main business activities

•
•
Purchasing
• Manufacturing
• Other
Land use and ecological sensitivity 0 tonnes waste sent to landfill
3
Water withdrawal 18,018 m Inclusion and diversity
*) ISC Philips Women’s League held PCOS and Cancer awareness
sessions and sponsored financial, psychological and medical expert
consultations for over 1,000 colleagues. Philips won a Bronze
category award in the India Workplace Equality Index for its
Social diversity and inclusion efforts. Psychological Safety Week focused on
creating awareness with the launch of the #yourvoicematters
*) campaign.
Employees fulfilled over 1,000 children's wishes through 'The Philips
Training provided 368,871 hours Wish Tree', donated 110 units of blood in a drive with the Armed
Forces Medical College, and supported heart surgeries for 300
children. Additionally, they conducted a Telemedicine Drive in
Varude Village and partnered with Rotary Indiranagar for pediatric
heart surgeries.
Governance
Economic contribution EUR 858 million revenues Philips continues to work with industry associations and ministries to
advance healthcare product regulations, sustainability initiatives,
EUR 440 million cost of sales manufacturing and healthcare digital transformation. Furthermore,
Philips inaugurated a state-of-the-art R&D facility in Bangalore in
Financial investment contribution EUR 295 million tangible assets the presence of Karnataka's Chief Minister.
*)
Japan Main business activities

•
•
Sales, marketing and distribution
Administrative, management and support services
Environmental • Other
Net operational carbon footprint 0 kilotonnes CO2-equivalent

Land use and ecological sensitivity - tonnes waste sent to landfill To create an inclusive environment, employees from diverse
3 backgrounds are introduced monthly as ‘Our Shining Stars’. In 2023,
Water withdrawal -m
various I&D initiatives were conducted to raise breast and prostate
*) cancer awareness, learn about LGBTQ+ and psychological safety,
and promote internal and external networking.

Social Employees volunteered at the Yamathon Charity Event in Tokyo,
with 21 participants completing a walk of the 30 stations of the JR
*)
Lives improved 49 million Yamanote Line within 12 hours. This event raised JPY 8,500,000 for a
children's hospice. At an internal event around the UN Sustainable
Absolute number and rate of employment 2,003 employees, 13.9% employee turnover Development Goals, employees focused on environmental efforts,
cut fuel consumption by 4%.
Training provided 75,366 hours
Wage level EUR 131 million employee benefit expenses Stakeholder engagement
Philips has been liaising with the Ministry of Health, Labor and
Welfare on topics including reduction of healthcare professionals'
working hours, digital transformation of healthcare, and
Governance reimbursement. Philips is a member of the European Business
Council (EBC), one of Japan's main medical device trade associations,
Economic contribution EUR 986 million revenues and represents EBC in a public-private study group developing
government guidelines on sustainability of medical device supply.
EUR 765 million cost of sales
Financial investment contribution EUR 297 million tangible assets
*)
Netherlands Main business activities

•
•
• Purchasing
Land use and ecological sensitivity 1 tonnes waste sent to landfill • Internal Group Finance
• Holding shares or other equity instruments
3
*)
The dedicated Health & Well-being program for the Netherlands
was extended with a pilot program for people leaders. The
Social Employability & Vitality program offered Neuro Diversity Coaching, a
Generational Differences seminar and Coping with Menopause.
*) Also, Gender Transition Leave was embedded in the new Collective
Labor Agreement. Site-specific initiatives continued to develop, with
Absolute number and rate of employment 8,882 employees, 19.2% employee turnover the help of Employee Resource Groups.
Training provided 238,389 hours Philips Foundation and volunteering

The Princess Máxima Center and Philips Foundation developed the
Wage level EUR 1,631 million employee benefit expenses
KLIK Pain Monitor app. Children with cancer or their parents can
self-report 'pain scores' at home 24 hours a day, thereby quickly
getting in touch with caregivers from the Máxima Center. This app
Governance provides a sense of comfort to families, as they know that someone

from the hospital is available to observe and provide advice.
Economic contribution EUR 8,282 million revenues

EUR 5,360 million cost of sales Philips is a member of the European Round Table for Industry (ERT),
which strives for a strong, open and competitive Europe. Philips is on
Financial investment contribution EUR 1,523 million tangible assets the board of, among others, employers’ organization VNO-NCW
and trade association FME, as well as public-private committees on
innovation, talent, AI, cybersecurity, and health.
In 2023, Philips signed the Green Deal 3.0 'Working together on
sustainable healthcare', supported by the Ministry of Health,
Welfare and Sport, to share knowledge and contribute to the
sustainable transition in healthcare.
*)
Poland Main business activities

•
•
Sales, marketing and distribution
Administrative, management and support services
Environmental • Holding shares or other equity instruments
Net operational carbon footprint 0 kilotonnes CO2-equivalent

Land use and ecological sensitivity - tonnes waste sent to landfill We continue to support Philips Women Network Poland, with a
3 focus on coaching to support the career development of women at
Water withdrawal -m
Philips. We also organized over 200 ultrasound examinations and 40
*) prostate-specific antigen (PSA) tests for our employees as part of
breast and prostate cancer awareness campaigns, Pink October and
Movember.
Social Philips Foundation and volunteering

Philips Poland, together with other Eastern European countries,
*)
Lives improved 27 million supported Ukrainian war victims by donating three advanced
image-guided therapy systems to Ukraine. These systems, vital in
Absolute number and rate of employment 2,087 employees, 19.6% employee turnover performing low-invasive orthopedic and cardiovascular
interventions, have been installed at a medical center conducting
Training provided 58,182 hours over 60,000 surgeries annually. Additionally, a new Philips
Foundation project was established to create an educational
program focused on positive health attitudes for young patients.
Governance Philips Poland partnered 15 high-level representatives of Polish state
hospitals on a study visit to the Netherlands, organized by the Think-
Economic contribution EUR 270 million revenues Thank INNOWO to build awareness about innovative and
sustainable healthcare solutions, technologies and processes. The
EUR 140 million cost of sales English version of the ‘Green hospitals’ report by United Nations
Global Compact Network Poland, of which Philips is a partner, was
Financial investment contribution EUR 22 million tangible assets published. Philips also attended stakeholder meetings as a board
member of local medical technology trade associations (POLMED,
AmCham, NPCC).
*)
United Kingdom Main business activities

•
•
• Purchasing
• Holding shares or other equity instruments
Land use and ecological sensitivity - tonnes waste sent to landfill
3
Water withdrawal -m Inclusion and diversity
*) Philips made the ‘Mental Health at Work Commitment’, which is
backed by a structured, long-term mental health action plan. Other
diversity and inclusion activities included PRIDE, Black History Month
and Cultural Awareness. We also achieved the next level of the
Social ‘Disability Confident Committed’ Badge.
Lives improved
*)
40 million Philips Foundation and volunteering
The roll-out of Philips UK & Ireland’s refugee program continued in
Absolute number and rate of employment 960 employees, 15.4% employee turnover 2023, with opportunities for refugees to attend career workshops
and soft-skills training programs at one of Philips' offices. The
Training provided 39,708 hours program provided job-seeking and mentoring support, with
opportunities to exchange experiences and build connections with
mentoring volunteers. Employees also contributed to communities
via volunteering days and events organized by the Philips UKI
Armed Forces Network.
Governance
Economic contribution EUR 449 million revenues Philips continues to champion health system transformation,
engaging with the government, AXREM and the NHS to help create
EUR 383 million cost of sales a health system fit for the future through medical innovations with
sustainable impact. Relations are maintained with the Association of
Financial investment contribution EUR 92 million tangible assets British Health Technology Industries and Office of Life Sciences, and
partnerships established with key academic institutions. In October,
Philips UKI was named 'Company of the Year' at the Better Society
National Sustainability Awards.
*)
United States Main business activities

•
•
• Purchasing
3
We progressed on our I&D strategy, including increasing
representation of under-represented talent, with a focus on Black
and Latinx talent and women in leadership roles, increasing
Social retention of internal diverse talent, and embedding inclusion, equity
and belonging into the employee experience. We received multiple
*) recognitions as a ‘best place to work’, e.g. on Forbes' Best Employer
for Women, Best Employers for Diversity, and World’s Best
Absolute number and rate of employment 17,541 employees, 18.8% employee turnover Employers rankings.
Training provided 912,160 hours Philips Foundation and volunteering

Philips Foundation and Philips North America entered into a new
Wage level EUR 2,720 million employee benefit expenses
partnership with March of Dimes to improve access to and quality of
care for women and infants in the US. This collaboration involves
equipping three mobile health trucks with handheld ultrasound
Governance devices and telehealth capabilities, specifically targeting women of

childbearing age in underserved communities.
Economic contribution EUR 10,162 million revenues

EUR 6,515 million cost of sales Philips connected with government leaders and key stakeholders at
the federal and state level to advance our maternal health and
Financial investment contribution EUR 2,719 million tangible assets remote monitoring solutions. Philips also continues to engage with
the US Department of Health & Human Services' Office of Climate
Change and Health Equity to discuss how to make healthcare more
sustainable.
*)
At a glance Risk management is integrated into our standard
Risk management
Operating Model
Explicitly connects our strategy and improvement

initiatives to risk assessment
Evaluates the risk dynamics that could impact

achievement of objectives and our main responses
Puts dedicated focus on risks related to Patient Safety

and Quality
85
6 Risk management
6.1 Our approach to risk management standards and requirements are defined and continuously improved, deployed, and
monitored to ensure our employees are aware of and comply with these requirements.
Vision and objectives • Maintaining integrated management control of the company’s operations, reporting,
Philips approaches risk management as a value-creating activity that is integral to and compliance with applicable laws, including the deployment of the Philips standard
innovation and entrepreneurship. As such, it is part of the Philips Operating Model. The key for Internal Controls over Financial Reporting (ICFR).
elements of our risk management and control system are described in this chapter. There • Managing security (including cybersecurity) risks and evaluating the Group’s security
can be no absolute assurance that our risk management will avoid or mitigate all risks that strategy, issuing security policies and evaluating the progress and effectiveness of the
Philips faces. The material risks are described in the section Risk factors, starting on page 88. deployment of the Security Management Framework (SMF).
• Developing the Philips ESG strategy, setting ESG policies, disclosures and planning of
Risk management governance programs and activities in relation to our ESG commitments and obligations.
The Board of Management (BoM) is ultimately responsible for identifying, analyzing and
managing the risks Philips faces in executing its strategy and activities, for setting the risk For further details refer to the section Governance, starting on page 67.
appetite of the company, and for the design, implementation and maintenance of our risk
management and control system, including the monitoring of its effectiveness. As described To ensure clarity and alignment on the status of, and to make recommendations on key risk
below, the Executive Committee (ExCo), several experts, Enterprise functions and areas these functions have recurring items on the BoM meeting agenda. The BoM discusses
committees support the BoM in the discharge of its responsibilities. these topics with participation from relevant ExCo members and other senior executives and
subject matter experts. Furthermore, dedicated reports on these key risk areas are shared
The ExCo is primarily responsible for identifying and mitigating materials risks to Philips. The and discussed with the Supervisory Board and external auditors in the relevant Audit & Risk
ExCo is supported by the Risk Management Support Team, consisting of experts on various Committees facilitated by Internal Audit.
categories of risk, through regular analysis of the enterprise risk profile and enhancement of
the risk management framework. In addition, management across the company is The Internal Audit function assesses the quality of risk management and controls through
responsible for identifying critical risks and implementing appropriate risk responses within the execution of a risk-based audit plan, as approved by the Audit Committee of the
their areas of responsibility. Supervisory Board. The BoM and leadership from Businesses, Regions/Zones and key
Functions meet quarterly with Internal Audit in Audit and Risk Committees to discuss
Various Enterprise functions (e.g. Legal & ESG, Patient Safety & Quality, Finance and Group strengths and weaknesses of risk management and controls – as evaluated by internal and
Security) support the ExCo and management with the process of risk identification, risk external auditors and by means of other (self) assessments – and take corrective action
management, and monitoring of key risk areas. With the support of these functions certain where necessary.
designated frameworks and activities to structurally manage specific risk areas are
maintained and deployed, such as: The Disclosure Committee oversees the company’s disclosure activities and assists the BoM in
fulfilling its responsibilities in this respect. The Disclosure Committee seeks to ensure that the
• Deploying the Philips General Business Principles (GBP), which set the minimum standard company implements and maintains internal procedures for the timely collection,
for our business conduct as a health technology company for our individual employees evaluation, and disclosure of information potentially subject to public disclosure under the
and for our subsidiaries, and generally promoting a culture of compliance and ethics legal, regulatory and stock exchange requirements to which the company is subject.
within the company.
• Maintaining Quality Management Systems (QMS) with the aim of ensuring the quality The Supervisory Board oversees Philips’ risk management including the identification of
and safety of product design, manufacturing, distribution, and servicing in compliance material risks, in relation to the risk appetite of the company, the response measures put in
with regulation from various government and regulatory agencies, e.g., FDA (US), EMA place and the effectiveness thereof. The Audit Committee and the Quality & Regulatory
(Europe), NMPA (China). Through specialist teams at the global, regional or local level, Committee of the Supervisory Board assist the full Supervisory Board in fulfilling its risk
86
management oversight responsibilities. The Audit Committee reviews the quality of risk
management and controls, and the reported findings of internal and external audits. The
Quality & Regulatory Committee’s role particularly relates to the quality and regulatory
compliance of the company’s products (including software), services and systems
throughout their lifecycle.
The chapter Corporate governance, starting on page 130 of this report addresses the main
elements of the company’s corporate governance structure, reports on how it applies the
principles and best practice provisions of the Dutch Corporate Governance Code and
provides other information relevant to risk management governance.
Risk appetite
Philips seeks to manage risks consistently within its risk appetite. Risk appetite is set by the
BoM, reviewed at least annually and published in the Philips risk management policy. It is
effectuated through our Operating Model, of which various elements – such as our strategy,
Philips General Business Principles (GBP) and behaviors, authority schedules, policies, process
standards and performance management systems – include or reflect risk-taking guidance.
Philips’ risk appetite differs depending on the type of risk, ranging from an averse to a
seeking approach. Philips operates within the dynamics of the health technology industry
and aims to take the risks needed to ensure we continually revitalize our offerings and the
way we work. At the same time, Philips is committed to act with integrity always and is
averse to risks impacting our GBP, which include (but are not limited to) the Philips behavior Risk management process
‘Patient safety, Quality, and Integrity always’. Our employees are expected to ensure To provide a comprehensive view of Philips’ risks, structured risk assessments take place
compliance with our GBP, laws, and regulations, and to take action in the case of concerns or according to the Philips risk management process standard, applying a top-down and
violations to our GBP. Please refer to the Philips General Business Principles (GBP), starting on bottom-up approach. Our process standard is designed based on ‘Enterprise Risk
page 68 for more information. Philips’ risk appetite for the main risk categories is visualized Management: Integrating with Strategy and Performance’ (2017) from the Committee of
below. Philips does not classify these risk categories in order of importance. Sponsoring Organizations of the Treadway Commission (COSO) and on ISO 31000 - Risk
Management.
87
The measures taken during 2023 to further strengthen risk management include:
• Improved clarity and efficiency of our risk management governance by streamlining the
reviews and decision making on several key risk areas.
• Implemented various improvements to our risk management process standards in several
risk areas, for example for compliance risk and operational risk management.
• Strengthened our capabilities via upgrades to our risk management tooling and use of
data analytics.
• Conducted various analytics to further increase knowledge about risks within the
company, via deep dives, risk interdependency analysis, and risk velocity analysis using
statistical scenario modelling.
• Further standardization and alignment of controls in Philips process standards.
• Further developed our regulatory landscape monitoring to enhance foresight in and
internal communication on upcoming regulatory change to enable a more proactive
response.
• Continued strengthening the risk dialogue as an integrated part of regular performance
and strategy execution dialogues.
• Further improved our supplier risk management, and diversification of critical-
component sourcing to further reduce supply dependencies.
• Continued analysis of global warming and weather scenarios on the geographical
Key elements of the Philips risk management process are: footprint of our facilities as well as suppliers’, in line with the recommendations of the
Task Force on Climate-Related Financial Disclosures.
• Management of Businesses, Zones/Regions and key Functions perform a risk assessment
at least once a year, with the update of their strategic plans, to identify and prioritize 6.2 Risk factors
risks, assign ownership, and implement appropriate risk responses. Risk workshops are Philips believes the risks set out below are the material risks affecting Philips and its
facilitated by Internal Audit with senior management across the company to further securities. These risk factors may not, however, include all the risks that ultimately may affect
support these risk assessments, and during 2023 several of such risk workshops were Philips. Some risks not yet known to Philips, or currently believed not to be material, may
held. ultimately have a major impact on Philips’ business, revenue, income, assets, liquidity, capital
• Senior management discusses and monitors the risk profile and risk response resources, reputation and/or ability to achieve its business and ESG objectives. Please note
effectiveness at least quarterly in its performance reviews and during Audit & Risk that this section is not intended to describe risks that have materialized, as these are
Committees, which cover all Businesses, Zones/Regions and selected Functions. addressed in other sections and referenced where relevant. Philips defines risks in four main
• Developments in the enterprise risk profile and management’s initiatives to improve risk categories: Strategic, Operational, Compliance and Financial. Philips presents the risk factors
responses are discussed and monitored during the quarterly Audit & Risk update session within each category in order of our current view of their expected significance. Compared
of the BoM. to the previous year we have further prioritized risk factors relating to patient safety and
• As an integral part of the strategy review, each year the ExCo assesses the enterprise risk quality, supply chain, and the simplification of how we work. Although still relevant, we
profile and the potential risk impact versus Enterprise risk appetite. The assessment also have de-emphasized risk factors related to pandemics. This does not mean that a lower-
covers the effectiveness of the risk management framework and potential improvements listed risk factor may not have a material and adverse impact on Philips’ business, revenue,
thereto. income, assets, liquidity, capital resources, reputation, and/or ability to achieve its business
• The Philips risk profile and the risk management framework, including the outcomes of and ESG objectives. Furthermore, other risk factors not listed below may ultimately prove to
the annual ExCo risk workshop, are presented to the full Supervisory Board. The have more significant adverse consequences than the listed risk factors.
underlying risks and response plans are discussed at the end of the year with the Audit
Committee of the Supervisory Board.
88
The visual below lists our material risks and how these relate to our plan for creating value
with sustainable impact.
In the following sections we provide a description of each material risk factor, as well as our
main risk mitigating responses, which we believe help us to manage these risks. However,
we may not be successful in deploying some or all of these mitigating actions effectively, or
these actions may not achieve the anticipated effect. If specific circumstances occur or are
not sufficiently mitigated, our value creation objectives could be materially adversely
affected. In addition, risks and uncertainties could cause actual results to vary from those
described (including those described in forward-looking statements), could impact our
ability to meet our targets, or could be detrimental to our reputation. The risk responses
described below are designed to manage risks toward, and should be read in conjunction
with, the Risk appetite as described above.
89
6.3 Strategic risks uncertainty over the future direction of public healthcare policy and the risk of declining
public investment in healthcare ecosystems.
Philips’ global operations are exposed to geopolitical and macroeconomic
changes The Russia-Ukraine war has increased global economic and political uncertainty.
Philips’ business environment can be adversely impacted by macroeconomic and Governments in the US, the UK, the EU, Canada, and Japan have each imposed export
geopolitical conditions in global and individual markets. In 2023, Mature geographies controls on certain products and sanctions on certain industry sectors and institutions in
accounted for 72% of Philips’ revenue, while Growth geographies accounted for the Russia, and additional controls and sanctions could be enacted in the future. Similarly, the
remaining 28%. Mature economies are currently the main source of Philips’ revenues, while conflict in Israel will further increase economic and political uncertainty and may affect the
growth economies are an increasing source of revenues. Philips produces, sources, and company’s results of operations, financial position and cash flows. Philips is present in Israel
designs its products and services mainly from the United States (US), the European Union with several subsidiaries, mainly in Diagnosis & Treatment and Connected Care, that are
(EU) (primarily the Netherlands) and China, and the majority of Philips’ assets are located in primarily involved in manufacturing and research and development (R&D) activities.
these geographies. Changes in politics and monetary, trade and tax policies in the US, the EU Upcoming elections in the US, the UK and the EU could also have an impact on the course of
and China may trigger reactions and countermeasures and may also have an adverse impact these conflicts. The ongoing conflicts may heighten the impact of other risks factors
on other economies and international markets in which Philips is active. Philips continues to described herein, including but not limited to: volatility in prices for transportation, energy,
expect global market conditions to remain highly uncertain and volatile due to geopolitical commodities and other raw materials; disruptions in the global supply chain; decreased
and macroeconomic factors, whether or not they are related to or caused by the Russia- customer and consumer confidence and spending; increased cyberattacks; intensified
Ukraine war and/or the current situation in Israel and the larger Middle East region. protectionism; political and social instability; increased exposure to foreign currency
fluctuations; rising inflation and interest rates; and constraints, volatility or disruptions in the
Philips observes a trend of geopolitical tensions and deglobalization which intensifies credit and capital markets. It is possible that the conflict in Ukraine may escalate or expand
protectionism. Examples of protectionism measures are trade policies, tariffs, sanctions, local and current or future sanctions and resulting geopolitical and macroeconomic disruptions
value creation and production requirements to obtain market access, custom duties, could be significant. We cannot predict the impact the conflict may have on the global
taxation, technology and data restrictions, cyberattacks, import or export controls, talent economy in the future.
mobility restrictions, nationalization of assets, restrictions on repatriation of returns from
foreign investments. In addition, there is general uncertainty on the development of local Changes in geopolitical and macroeconomic conditions are difficult to predict, and the
regulations and compliance thereto. Philips observes this trend in the major markets in factors described above, or other factors, may lead to adverse impacts on global trade levels
which it operates and has a particular concern on the development of the US-China and flows, economic growth, and financial market and political stability, all of which could
relationship and China’s drive to expand its global political footprint and become self- adversely affect the demand for, and supply of, Philips’ products and services. This may result
sufficient in critical technologies, including health-related ones. in a material adverse impact on Philips’ business, financial condition, and operating results.
These factors could also make it more difficult to budget and to make reliable financial
If this trend continues, geopolitical relations deteriorate, and economies decouple, it is forecasts or could have a negative impact on Philips’ access to funding.
expected that existing global trade and investment restrictions will remain, and further
regulatory and compliance challenges for doing business globally may emerge, resulting in Risk response: Philips monitors economic, political, and general societal changes and, where
continued pressure on market growth and investments. necessary, develops response strategies to such events. High-risk markets (for example,
markets exposed to high volatility) are regularly assessed for emerging risks, and if necessary,
Uncertainty and challenges regarding various global macroeconomic factors continue to capital structure planning is performed. The Philips Group Crisis Operations team has
persist. Examples of general factors are an overall weakening economic growth outlook, activated response teams that are running programs on Russia and Ukraine as well as Israel.
reduced government spending, declining customer and consumer confidence and spending, To be less exposed to the uncertainty caused by the Russia-Ukraine war we actively reduced
high inflation and interest rates, and the emergence of economic impacts related to the balance sheet exposure in this market. The response to the conflict in Israel is more complex as
climate crisis. Although the ability to manage pandemics (for example, resurgences of we also maintain a manufacturing footprint in the country. Developments in Israel are being
COVID-19 or mutations thereof) has improved, pandemics may continue to affect Philips’ monitored carefully by the response team to ensure the safety of our workforce in the
operations in the future. Examples of healthcare-specific potential factors include rising country.
90
Philips is active in more than 100 countries, and we believe that this global footprint allows us Furthermore, we pursue the end-to-end alignment of our governance, processes and IT
to better deal with adverse local market developments. Philips establishes a strong local systems to maintain a people- and patient-centric portfolio of offerings. We are making our
presence in both mature and growth geographies through market-specific strategies (for solutions and insights available through software as a service (SaaS) and platform-as-a-service
example for China, the US, and the EU). These market strategies cover various local value- (PaaS). We are also expanding digital customer engagement and e-commerce channels, as
creation aspects such as innovation, manufacturing and assembly; hosting of health data; and well as activation of our offerings in markets, either directly or through our managed network
capability development. These strategies also leverage our in-depth knowledge of healthcare, of partners. We run a partner management program aimed to ensure a strong network of
Research & Development, Quality Management Systems, sustainable global business models, committed partners who share our patient-centric mindset. Where Philips engages in long-
and brand. This local presence enables Philips to create value and tailor its propositions to term service-based business models, we aim to run a disciplined deal process with strict
local market needs. In addition to local measures, Philips also optimizes its integrated supply acceptance criteria. Our integrated portfolio of products, solutions and services covers the
chain organization, supplier base, and global manufacturing footprint to enable agile various stages in health, including healthy living, prevention, diagnosis, treatment and home
responses to large and rapid shifts in demand and supply globally. care, without significant dependence on a single product, solution, service or market.
Philips may be unable to keep pace with the changing health technology Philips may be unable to gain leadership in health informatics
environment New digital technologies and ways of conducting business are fundamentally changing the
With Philips’ focus on health technology, our business model is transforming from health technology industry, and thus our competitive business environment. A key trend,
transactional, product-focused business models to customer- and patient-centric, outcome- started in radiology, is the application of artificial intelligence (AI) and machine learning
oriented business models, with multi-year customer partnerships enabled by a portfolio of (ML) to drive quality and efficiency in clinical and operational workflows. Customers need
innovative devices, solutions, platforms, insights and value-added services. If this workflow-aware solutions that convert data from our imaging and monitoring systems into
transformation is made too slowly or is not successful, Philips may not meet the expectations actionable insights. Another trend, accelerated by the pandemic, is the shift toward cloud-
of patients and other stakeholders in the health technology business environment. We may based Software as a Service (SaaS) business models and remotely upgradable and
face a loss of customer relevance, fail to capture growth, and lose market share. In addition, serviceable systems with suites of apps. These new types of offerings are enabled by hybrid
because of our health technology focus, Philips may have a reduced ability to offset cloud/on-premise digital platforms. Our informatics and systems businesses may fall behind
potential negative impacts (including, but not limited to, impacts on sales, operating results, established and new ‘born digital’ competitors if Philips fails to, in a timely way, develop the
liabilities, compliance, and financing) on its health technology business by other businesses requisite capabilities, adjust its business models, and find ways to globally commercialize
through a more diversified portfolio. As a result of its focus on health technology, Philips is new products and services at scale. This could result in an inability to satisfy customer and
deepening customer engagement and entering into long-term solutions and services patient needs, thereby missing out on revenue and margin growth opportunities, which
business arrangements and, as a result, is becoming more dependent on a number of key may have a material adverse impact on Philips’ business, financial condition and operating
customers for long-term recurring revenues, thus increasing the risk that the loss of, or a results.
significant reduction in, orders from one or more of our key customers could cause a
significant decline in our revenues. As Philips looks to increase our use of indirect sales Risk response: In 2023 Philips brought all informatics businesses together into one end-to-end
channels, Philips will increasingly rely on successfully leveraging new and existing partners to business, called Enterprise Informatics. Taking this enterprise-wide view, Philips unlocks
support end customers and patients. Any of these factors may have a material adverse insights at scale from combined imaging and monitoring data pools to improve workflows,
impact on Philips’ brand value and reputation, business, financial condition, and operating enhance the caregiver and patient experience, and elevate care delivery. Enterprise
results. More specific health technology risks and their potential impacts are included in the Informatics will position Philips as a global leader and trusted partner in integrated
Operational, Financial and Compliance risk sections below as well as in the note diagnostics, though enterprise imaging capabilities, insights and analytics from patient
Contingencies, starting on page 198. monitoring and management, service line delivery, virtual care enablement and enterprise
operations. The business has a software-oriented operating model, value chain and go-to-
Risk response: Philips is running multiple interconnected initiatives intended to enable, market capabilities tailored for informatics, and corresponding business model to enable it to
strengthen and accelerate various aspects of our business model to the standards of the scale. Philips embeds a coherent set of initiatives within this end-to-end Enterprise Informatics
health technology solutions business environment including, but not limited to, patient safety, business to accelerate the transformation of informatics-enabled propositions. Some
quality, patient-centric innovation, social impact, productivity and compliance. For examples examples of these initiatives are mentioned here (without limitation). We are migrating and
of responses to these various aspects we refer to the related risk factors in this section. modernizing existing informatics propositions (such as Radiology Picture Archiving and
91
Communications System (PACS) and image viewing) to the cloud, with a SaaS business model. value-creation progress reviews with the responsible business leader throughout the
This is done in an end-to-end approach, including IT backbone and go-to-market adjustments. integration of each acquisition.
We are developing new informatics propositions with explicit data and AI strategies, such as
acute care management with clinical decision support. We are partnering, with technology Philips may be unable to meet internal or external aims or expectations
providers and others, across our value chain to further enable the business to extend our with respect to ESG-related matters
propositions with state-of-the-art data and AI (including generative AI) capabilities, enabling Environmental, Social and Governance (ESG) factors may directly and indirectly impact the
Philips businesses to easily generate AI-enabled applications that can offer insights at scale to business environment in which Philips operates. Philips may, from time to time, disclose ESG-
our customers. We are accelerating the rollout of our global cloud strategy, together with related initiatives or aims in connection with the conduct of its business and operations (for
leading industry partners, such as Amazon Web Services (AWS). We are also transforming our example, with respect to reducing greenhouse gas emissions in its supply chain). However,
traditional modality businesses, such as imaging and monitoring, toward offering ‘software there is no guarantee that Philips will be able to implement such initiatives or meet such
defined systems’ with features, functions, and services that are primarily defined in software aims within anticipated timeframes, or at all. In addition, there is an increasing focus from
and continually upgraded over the lifetime to enable continuous value delivery to our Philips’ stakeholders – including customers, employees, regulators, and investors – on ESG
customers (such as the enhancement of magnetic resonance systems with AI-based matters, and those stakeholders may also have ESG-related expectations with respect to
reconstruction or remote sensing capabilities, and preventative maintenance services). Philips’ business and operations. For example, customers may focus on ESG-related criteria in
buying our products, and any inability by Philips to address concerns about ESG-related
Acquisitions could fail to deliver on Philips’ business plans and value matters could negatively impact sentiment towards Philips and our products and brands.
creation expectations, and we may not be able to successfully integrate There are an increasing number of regulatory and legislative initiatives in the EU and other
acquired operations jurisdictions to address ESG issues, which will (once implemented) require Philips to
Although Philips focusses on organic growth to deliver patient and people driven significantly increase the scope of mandatory ESG disclosures, including the Corporate
innovation at scale, selected acquisitions remain part of Philips’ growth strategy. We may Sustainability Reporting Directive (CSRD), European Sustainability Reporting Standards
not be able to integrate acquisitions successfully or efficiently with our existing operations, (ESRS) and the SEC’s proposed climate disclosure rules. They will introduce or extend a duty
culture and systems, which may expose Philips to risks in areas such as sales and service, of care, requiring Philips to identify and act on adverse environmental and human rights
logistics, quality, regulatory compliance, legal claims, information technology, and finance. impacts across the organization and potentially the entire value chain, beyond or different
Integration challenges may adversely impact the realization of value creation expectations. from our current efforts. These regulatory and legislative initiatives, in turn, could also affect
Transactions may incur significant costs, result in unforeseen operating difficulties, divert how customers or other stakeholders perceive our products or business operations. If our
management attention from other business priorities, and may ultimately be unsuccessful. products or business operations do not meet the criteria for sustainability according to, for
Cost savings expected to be implemented, or other assumptions underlying the business example, the EU Taxonomy Regulation (including the related delegated regulations) or any
case relating to a particular acquisition, may not be realized. If we are unable to accomplish other similar regulations, this may negatively affect how customers or other stakeholders
any of our objectives in respect of any of our new acquisitions, we may not realize the view Philips. Philips may fail to fulfill internal or external ESG-related initiatives, aims or
anticipated benefits of such acquisitions and we may experience lower than anticipated expectations, or be perceived to do so, or we may fail to report performance or
profits, or even incur losses. Acquisitions may also lead to a substantial increase in long-lived developments adequately or accurately with respect to such initiatives, aims or expectations.
assets, including goodwill, which may later be subject to write-down if an acquired business In addition, Philips could be criticized or held responsible for the scope of its initiatives or
does not perform as expected, which may have a material adverse effect on Philips’ goals regarding ESG matters. Any of these factors may have an adverse impact on Philips’
earnings. reputation and brand value, or on Philips’ business, financial condition and operating
results.
Risk response: Philips maintains an active Mergers and Acquisitions funnel per business to
ensure organizational fit. Philips aims to use a structured and disciplined acquisition process Risk response: We have raised our 2025 ESG commitments and have adopted a
with strict acceptance criteria, budgets and tollgates, and time allocated for critical review of comprehensive ESG framework. Environmental: We are working to minimize our impact on
due diligence, including integration risks and expected integration benefits. A broad range of the planet by taking climate actions, driving the transition to a circular economy,
internal and external functional experts are involved in this process. Philips develops and implementing EcoDesign in our products, and partnering with our suppliers to reduce their
deploys a high-quality post-acquisition integration playbook with set milestones and conducts environmental footprint. Social: We aim to deliver social impact by improving people’s health
and well-being, offering the best place to work, and engaging with our suppliers and the
92
communities where we operate. Governance: At Philips, everything we do is anchored by 6.4 Operational risks
ethical and responsible practices. Our management structure, Operating Model, ethics
framework and robust risk management help us maintain the highest standards. Our Board of Products and services may fail quality or security standards, which could
Management monitors progress and assesses risks in relation to our ESG strategy and makes adversely affect patient safety or customer operations
recommendations for the continuous improvement of our ESG endeavors. For more The safety of patients and our brand reputation depends on the safety and quality of our
information, please refer to the chapter Environmental, Social and Governance, starting on products and services. Failure to meet product quality and security standards may cause
page 42. For our perspective on ESG-related compliance risk, please refer to this specific risk patient harm, negatively impact customer operations and their ability to provide healthcare,
factor in the section Compliance risks, starting on page 99. provide unauthorized access to patient records and medical devices through cybersecurity
incidents, and damage Philips' reputation and brand.
Philips may be unable to secure and maintain intellectual property rights
for its products and services or may infringe others’ intellectual property As a health technology innovator, our products and services must comply with rules and
rights regulations that govern our operations, processes, and ways of working. Risks associated
Philips is dependent on its ability to obtain and maintain licenses and other intellectual with non-compliance with quality, regulatory, and security assessments apply to pre-market
property (IP) rights covering its products and services and its design and manufacturing activities (such as product design, production and supplier quality activities) and post-market
processes. The IP portfolio is the result of an extensive IP generation process that could be activities. There are risks involving hardware, software and human error, spanning across the
influenced by a number of factors, including innovation and acquisitions. The value of the IP lifecycle, and involving third-party suppliers and components. Many of our products have
portfolio is dependent on the successful promotion and market acceptance of standards (co- multiple third-party software components, which may be exposed to security threats. We
)developed by Philips. This is particularly applicable to the segment ‘Other’, where licenses are subject to risk from known issues, and emerging potential issues. Potential consequences
from Philips to third parties generate IP royalties and are important to Philips’ results of of these risks include damage to our brand reputation, competitive disadvantage, consent
operations. The timing of licenses from Philips to third parties and associated revenues from decrees (for example, the proposed Respironics consent decree described in
IP royalties are uncertain and may vary significantly from period to period. Additionally, note Subsequent events, starting on page 219 to the Consolidated financial statements), and
royalties are often based on sales by third parties, creating an exposure to macroeconomic losing our licenses to operate in specific markets, all of which may have a material adverse
effects and continuity of these third parties. A loss or impairment in connection with such impact on Philips' business, financial condition, and operating results.
licenses to third parties could have a material adverse impact on Philips’ financial condition
and operating results. Philips is also exposed to the risk that a third party may claim to own Risk response: Through a variety of Quality Operations improvement efforts, we are working
IP rights to technology applied in Philips’ products and services. If any such claims of to ensure that our products and services -- new and in-use in the field by our customers --
infringement of these IP rights are successful, Philips may be required to pay damages to meet product quality and security standards. All employees across Philips recognize the need
such third parties or may incur other costs or losses. to meet product quality or security standards – and that failure could result in patient harm,
negative impact to customers delivery of care, unauthorized access to patient records and
Risk response: Philips has an Intellectual Property & Standards organization (IP&S) that medical devices and damage to Philips reputation and brand. Through a focus on fostering a
proactively pursues the creation of new IP and the protection of existing IP in close co- culture of quality and patient safety, Philips employees are working together to mitigate
operation with Philips’ operating businesses and the Innovation & Strategy function. IP&S is a operational and compliance risks.
leading industrial IP organization providing IP solutions to Philips’ businesses to support their
growth, competitiveness and profitability. In addition, Philips believes our business is not Quality Operations efforts are carried out to strengthen processes involved in the design,
materially dependent on any particular third-party patent or license, or any particular group development, materials, supplier quality, production manufacturing, installation, monitoring,
of third-party patents and licenses. and servicing of Philips health technology, products, and services. These activities apply to
new and in-market products, hardware and software, third-party suppliers and more. Teams
are addressing currently known issues and risks and safeguarding against potential emerging
issues. For example, we are focused on Design Controls to verify and validate that product
designs are robust prior to manufacture. We are emphasizing testing and inspection quality
checks across the product lifecycle, which also involve in-process manufacturing, product
release, installation, and servicing controls. We are addressing cost of design, yield, non-
93
conformance, market activation and de-activation, stop-use orders, field recalls, repairs, Philips purchases raw materials, including rare-earth metals, copper, steel, aluminum, noble
financial claims, and liabilities. gases and oil-related products. While the macroeconomic trend of improved materials
availability also positively impacts the raw materials and energy cost compared to 2022,
This year, we also focused on strengthening post-market surveillance, implementing a global there is no assurance that these raw materials will be available for purchase in the future or
product safety and surveillance, corrections and removals team that is responsible for available at current costs.
identifying issues (including detecting emerging issues), monitoring, and correcting issues
related to our devices and software as early as possible. We closely monitor the quality of Commodities have been subject to volatile markets, and such volatility is expected to
production and performance of suppliers. Strengthening processes such as Corrective and continue and costs to increase. Costs may also increase as a result of stricter climate-change-
Preventive Action (CAPA) is contributing to continuous improvement across all businesses of related laws and regulations. Such legislation could require investments in technology to
Philips. Moreover, we are investing in improvements to our overall ways of working through reduce energy use and greenhouse gas emissions, beyond what we expect in our existing
our Quality Management Systems (QMS), standardizing where possible, reducing complexity, plans, or could result in additional and increased carbon pricing. If Philips is not able to
and reducing the number of QMSs in which we operate for more effective and efficient compensate for increased costs of energy, (sub-)components, (raw) materials, and
operations. transportation – either by reducing reliance thereon or passing on increased costs to
customers – then price increases could have a material adverse impact on Philips’ business,
For further details refer to the section Quality & Regulatory and patient safety, starting on financial condition, and operating results.
page 69, as well as the notes Provisions, starting on page 188 and Contingencies, starting on
page 198. Philips may increase its dependency on a concentration of external suppliers, as a result of
the continuing process of creating a leaner supply base and launching initiatives to replace
Philips may be unable to ensure a resilient supply chain internal capabilities with less costly outsourced products and services. These initiatives also
Most of Philips’ operations are conducted internationally, which exposes Philips to supply need to be balanced with local-market value-creation requirements, including those relating
chain challenges and uncertainties. Philips produces and procures products and parts in to local manufacturing and data storage.
various countries globally. The production and shipping of products and parts, whether from
Philips or from third parties, could be interrupted and may face increasing costs by various Although Philips works closely with its suppliers to avoid supply discontinuities, there can be
external factors, such as regional conflicts (e.g. the Middle East region), natural disasters, no assurance that Philips will not encounter future supply issues, causing disruptions or
extreme weather events (the effects of which may be exacerbated by climate change) and unfavorable conditions. Furthermore, while the materials supply has improved in 2023, the
geopolitics. challenges in our capability for the planning and synchronization of supply with demand
continue, which combined with a drive for inventory reduction and cash flow improvements,
While macro trends around materials availability have improved in 2023, Philips’ medical can lead to further materials running out of stock, which could have a material adverse
systems stay in production for longer periods than the lifecycle of their semi-conductors and impact on Philips’ business, financial condition and operating results.
require continuous rejuvenation of their electronic components. Philips may fail to timely
obtain or replace such components from existing supplies, and alternative sources of Risk response: Philips has put in place a process to assess and reduce the supply risk of its
components could involve significant costs and regulatory challenges and may not be critical products. The two-pronged mitigation approach addresses the supplier risk and the
available to us on reasonable terms, adversely affecting our business and financial component obsolescence risk of its printed circuit board assembly (PCBA). The supplier risk
performance. management framework assesses and manages suppliers from various perspectives, such as
strategic fit, financial stability, operational performance and quality, sustainability, compliance,
Our suppliers and our third-party service providers may also be exposed to labor shortages and location. We also maintain close relationships with our suppliers and maintain an
and potentially worsening macroeconomic and geopolitical trends. These factors may cause ongoing dialogue on our forecast. The PCBA Refresh process identifies components that are
increased lead times and adversely impact our production capacity, which may negatively either obsolete or that have an announced future obsolescence date, and proactively replaces
affect the delivery of products and services to customers, for example the postponement of them, ensuring continuous availability of active components. Furthermore, Philips is engaging
equipment installations in hospitals. If Philips is not able to respond swiftly to those factors, with senior government officials, strategic suppliers and foundries to prioritize healthcare
this may result in an inability to deliver on customer needs, ultimately resulting in loss of supplies, directly working on component issues across all tiers of suppliers and diversifying
revenue and margin. sourcing of high-risk components. These actions, together with a trend in improved materials
94
availability in markets, have yielded a normalized materials supply in 2023 and have reduced insufficient or unsuccessful, which may lead to a material adverse impact on Philips’
the cost of spot buys. Internally, Philips is making balanced investments in global and local business, financial condition, and operating results.
supply chain capabilities to improve end-to-end planning, synchronization of supply with
demand, and data management. Risk response: By implementing the new Operating Model, Philips strengthened the
governance and clarified roles and responsibilities in the organization. In addition, Philips
We continue to deploy our strategy for a more regional versus global approach to our end-to- makes multiple focused efforts to simplify the way we work; drive accountability, increase
end network design, taking into account factors such as customer proximity, leveraging agility; and realize significant productivity gains. Simplification of the organization and ways
manufacturing capabilities, our environmental footprint, and efficiency. We are using our of working is a primary enabler for better orchestrated execution. Philips has established an
multi-modality sites, in combination with contract manufacturing partners, to regionally Enterprise Excellence organization to drive end-to-end orchestration of this change. The
‘multi-source’ many of our products. Enterprise Excellence organization comprises, among others, Enterprise Process excellence, IT,
and Global Business Services (GBS), and it works closely with the established Process & System
Philips manages carbon pricing risk by reducing its full value-chain carbon footprint, as well as Excellence teams in Business Units and Centers of Excellence to ensure effective
partnering with suppliers to reduce their environmental footprint and closely monitor carbon implementation of the strategy. In addition, the Enterprise Excellence organization provides
regulations, including carbon taxes. Philips manages the risk of rising commodity prices by best practices such as Lean, Agile, and Project and Performance Management to support
several means, including engaging in long-term contracts and keeping physical inventories. Business Units, Regions, and Functions in simplifying ways of working and realizing their
Philips closely monitors price developments and takes pricing action where appropriate. strategic ambitions. The regional organization is execution-focused, with account
Philips conducts various scenario assessments and develops response strategies to events management, indirect partner management, local (service) delivery, government relations,
potentially impacting its supply chain, such as geopolitical changes, regional conflicts, natural and local infrastructure to support an integral customer approach.
disasters, emerging markets volatility, and pandemics. We run various global warming and
weather scenarios on the geographical footprint of our facilities, as well as our suppliers’ Philips will simplify its Process Framework to provide critical enterprise standards and best
facilities, in line with the recommendations of the Task Force on Climate-Related Financial practices to secure quality and compliance, while at the same time enabling Business Units
Disclosures. and Regions to simplify and optimize ways of working to meet to specific patient, customer,
consumer and business needs.
Philips may face challenges in simplifying the organization and the ways
of working Philips uses structured IT risk management methodologies to identify and address risks to our
As announced in January 2023, a simplified, more agile operating model is a priority to critical business applications. Our ongoing IT Business Continuity Management activities
improve the execution of our strategy. If we do not effectively simplify the organization and include real-time monitoring of availability and redundancies, as well as testing and
our ways of working, which changes include, but are not limited to, changes in governance, upgrading of applications. We regularly validate IT systems with our IT change management
roles, processes, and IT landscape and architecture, this may result in limiting our ability to capabilities, we make sure that changes of an IT system are executed in a controlled way and
fully realize our business ambitions with respect to delivering sustainable impact, meeting sufficiently tested to minimize the impact of business disruptions in the case of failures of the
critical patient and customer needs, delivering integral value proposition, growing the system.
business, and/or maintaining business continuity. While Philips has implemented a new
operating model to simplify the organization and improve its ways of working, Philips may Philips is dependent on its people for leadership and specialized skills and
need to undertake further changes and related restructuring in the future if the operating may be unable to attract and retain personnel
model ultimately proves to be wholly or partly unsuccessful. The attraction and retention of talented employees is critical to Philips’ success, and the loss
of employees with specialized skills could result in business interruptions. There is strong
To simplify ways of working and improve performance, Philips continuously seeks to create a competition for talent in key capability segments, and Philips needs to attract and retain
more open, standardized, and cost-effective IT landscape. Approaches include outsourcing, critical talent. If employees perceive the workload following the recent operating model
offshoring, integration, and consolidation of IT systems. These changes may elevate third- transformation and workforce reduction to be overly burdensome or prefer more flexibility
party dependency risks regarding the delivery of IT services, the availability of IT systems, and than offered by our hybrid working policies, to mention two, employees may choose to
the functionality offered by IT systems. Although Philips has sought to strengthen security terminate their employment with us. In this case, efficiencies in workflow may be impacted,
measures and quality controls related to these systems, these measures may prove to be or we may experience employee unrest, slowdowns, stoppages or other demands, such as
95
overburden of the remaining employees. Philips is competing for the best talent and most While Philips deals with the operational threat of cybercrime on a continuous basis and has
sought-after skills, and there is no assurance of succeeding compared to other companies in so far been able to prevent significant damage or significant monetary cost in taking
attracting and retaining the highly qualified employees needed in the future. Wage corrective action, there can be no assurance that future cyberattacks will not result in
inflation is increasing the competition for talent as well as the cost of labor. This may material or other consequences than as described above, which may result in a material
negatively impact our ability to realize our plan for creating value with sustainable impact, adverse impact on Philips’ business, financial condition and operating results.
and if we are unable to offset the increased costs of labor through higher selling prices and
increased productivity, then rising costs could also have a material adverse impact on Philips’ Risk response: Philips has established a Group Security function and implemented security
business, financial condition and operating results. management processes and controls, and monitors risk trends on material security topics,
such as the risk of security breaches and ransomware attacks, in our information systems and
Risk response: Philips continuously assesses capability gaps for its key positions and has our products and services. The Philips Board of Management continually monitors the risks, as
initiatives in place to close any employee capability gaps. This includes monitoring and well as required investments and progress made on the programs to reduce security risk. Risk
understanding the drivers behind attrition, maintaining appropriate remuneration structures workshops are held across the company to calibrate cybersecurity risks. Philips is deploying
aimed at attracting and retaining talent, and leveraging its purpose and contribution to security risk management further into our Businesses and Functions to enhance the
societal and environmental challenges, as a differentiating proposition for employees. Philips completeness and quality of overall risk reporting, and to manage identified improvement
measures employee engagement through regular surveys and benchmarks the results across actions.
the organization against high-performing external norms. Philips performs deep-dives where
necessary and drives improvement actions to address any gaps. For example, the company is Philips assesses and continuously improves key security controls (e.g., strengthening
running a Future of Work program to drive a hybrid-model approach, with continued endpoints, email security, and network security, and conducting global vulnerability scans,
emphasis on embracing flexibility, being at our best, and engaging in impactful collaboration. including mitigation of vulnerabilities). We have strengthened the IT function to ensure IT
systems are kept up to date and applications are designed and developed with security in
Philips could be exposed to a significant enterprise cybersecurity breach mind. We run initiatives to enhance security awareness for all Philips staff. For example, there
Philips relies on information technology to operate and manage its businesses, as well as are mandatory security trainings and specific phishing trainings, and we give additional focus
store and process confidential data (relating to patients, employees, customers, intellectual to groups who need it across the company. Philips evaluates its supply chain and continuously
property, suppliers and other partners). Philips’ products, solutions and services increasingly monitors the security maturity of critical suppliers, as well as their performance against
contain sophisticated and complex information technology. The healthcare industry is contractually agreed security standards. Philips continuously improves the Philips Operating
subject to strict privacy, security and safety regulations with regard to a wide range of health Model to ensure adequate security management of products and services via the Quality
information. At the same time, geopolitical conflicts and criminal activity continue to drive Management Systems. Philips maintains relationships and cooperates with several
increases in the number, severity, and sophistication of cyberattacks globally. Considering government intelligence and law enforcement agencies, as well as with healthcare-specific
the general increase in cybercrime, our customers and other stakeholders are becoming Information Sharing and Analysis Centers (ISACs) and Cyber Emergency Response Teams
more demanding regarding the cybersecurity of our products and services. As a global (CERTs), to remain abreast of new threats.
health technology company, Philips is inherently and increasingly exposed to the risk of
cyberattacks and potential impact of attacks on our suppliers. Information systems may be Philips may face challenges to drive excellence and speed in bringing
damaged, disrupted (including the provision of services to customers), or shut down due to innovations to market
cyberattacks. In addition, breaches in the security of our systems (or the systems of our To gain sustainable competitive advantage and create value with sustainable impact, Philips
customers, suppliers, or other partners) could result in the misappropriation, destruction, or aims to deliver scalable, people-centric, and patient-centric innovations. It is important that
unauthorized disclosure of confidential information (including intellectual property) or Philips innovates and delivers these innovations in close collaboration with its customers on
personal data belonging to us or our employees, customers, suppliers or other partners. a timely basis and at scale. The emergence of new low-cost competitors, particularly in Asia,
These risks are particularly significant with respect to patient medical records. Cyberattacks the rise of artificial intelligence (AI) and data driven solutions, and the increasing importance
may result in substantial costs and other negative consequences, which may include, but are of product and cyber security, further underlines the importance of improvements in the
not limited to, lost revenues, reputational damage, remediation and enhancement costs, innovation process. Success in launching innovations depends on a number of factors,
penalties, and other liabilities to regulators, customers and other partners. Philips has not including development of value propositions, architecture and platform creation, product
encountered any material breaches or other significant cybersecurity incidents in 2023. development, market acceptance, production, and delivery ramp-up. It is also dependent on
96
addressing potential quality issues or other defects in the early stages of introduction, and which may impact its ability to finance future growth and to pursue potential future
on attracting and retaining skilled employees. Costs of developing new products and strategic opportunities. Any share-buyback program or dividend payment will depend on
solutions may partially be reflected on Philips’ balance sheet and may be subject to write- factors such as availability of financing, liquidity position, business outlook, cash flow
down or impairment depending on the performance of such products or services. The requirements and financial performance, the state of the market and the general economic
significance and timing of such write-downs or impairments are uncertain, as is the ultimate climate, and other factors, including tax and other regulatory considerations. Philips and its
commercial success of new product introductions. Accordingly, Philips cannot determine in subsidiaries may also be subject to limitations on the distribution of shareholders’ equity
advance the ultimate effect that innovations will have on its financial condition and under applicable law.
operating results. If Philips fails to create and commercialize its innovations at scale, it may
lose market share and competitiveness, which could have a material adverse effect on its Philips operates in over 100 countries and its reported earnings and equity are therefore
financial condition and operating results. inevitably exposed to fluctuations in the exchange rates of foreign currencies against the
euro. Philips’ sales and net investments in its foreign subsidiaries are sensitive in particular to
Risk response: In 2023, innovation activities have moved from the central Innovation & movements in the US dollar, Japanese yen, Chinese renminbi, and a wide range of other
Strategy function to Business Units and as such closer to the customer. Philips is in continuous currencies from developed and emerging economies. Philips’ sourcing and manufacturing
dialogue with customers to understand their needs and to reaffirm that its strategy is spend is concentrated in the EU, the US and China. Income from operations is particularly
translated into a balanced portfolio of products, software, services and integrated solutions sensitive to movements in currencies of countries where Philips has no or very small-scale
with a corresponding innovation pipeline close to its strategic core. Ways of working are manufacturing/local sourcing activities but significant sales of its products or services, such
anchored in standardized processes and tools in all aspects of customer-needs-focused as Japan, Canada, Australia, the United Kingdom, and a range of emerging markets, such as
innovation (from exploration to launch in the market and eventually customer success South Korea, Indonesia, India and Brazil.
management). In addition, a number of initiatives are running to improve innovation
capabilities, in areas such as software and systems engineering, data and AI, product and In view of the long lifecycle of health technology solution sales and long-term strategic
cybersecurity, and usability. These initiatives, taken together, will improve innovation partnerships, the financial risk of counterparties with outstanding payment obligations
effectiveness, efficiency, quality, and regulatory compliance. creates exposure risks for Philips, particularly in relation to accounts receivable from
customers, liquid assets, and the fair value of derivatives and insurance contracts with
financial counterparties. A default by counterparties in such transactions can have a material
6.5 Financial risks adverse effect on Philips’ financial condition and operating results.
Philips is exposed to a variety of treasury and financing risks, including Contingent liabilities may have a significant impact on the company’s consolidated financial
liquidity, currency, credit and country risk position, results of operations and cash flows. For an overview of current cases please refer
Negative developments impacting the liquidity of global capital markets could affect Philips’ to the note Contingencies, starting on page 198.
ability to raise or re-finance debt in the capital markets or could lead to significant increases
in the cost of such borrowing in the future. If the markets expect a downgrade by the rating Risk response: At Philips, liquidity is monitored by the Group Treasury department, which
agencies, or if such a downgrade has actually taken place, this could increase the cost of tracks the actual cash flow for the Group against forecasts of the liquidity requirements on
borrowing, reduce our potential investor base and adversely affect our business. both a short- and longer-term basis. This includes regular reviews of liquidity versus credit
rating constraints and scenario analysis to assess the risk of potential downgrades in credit
Philips’ financing and liquidity position may also impact its ability to implement or complete ratings. Philips manages the available liquidity for the Group in several ways, e.g., by
any share-buyback program or distribute any dividends in accordance with its dividend spreading maturities of external debt over time and by having appropriate standby credit
policy or at all. Any announced share-buyback program or dividend policy may also be facilities available. As an example, on August 30, 2023, Philips issued EUR 500 million fixed
amended, suspended or terminated at any time, including at Philips’ discretion or as a result rate notes due 2031 under its Euro Medium Term Note program. Proceeds were used to repay
of applicable law, regulation or regulatory guidance, and any such amendment, suspension an outstanding term loan in the same amount. Weighted average maturity of long-term debt
or termination could negatively affect the trading price of, increase trading price volatility of, increased from 6.5 years to 7.1 years. Additionally, in the first quarter of 2023 the maturity of
or reduce the market liquidity of Philips’ shares or other securities. Additionally, any share- the EUR 1bn revolving standby credit facility was extended by one year to March 2028.
buyback program or distribution of dividend could diminish Philips’ cash or other reserves,
97
Philips hedges the anticipated net exposure of developed-market foreign currencies resulting uncertain. Accordingly, there can be no absolute assurance that all deferred tax assets, such
from sales, purchases and net investments in its foreign subsidiaries in those currencies. For as (net) tax losses and credits carried forward, will be realized.
emerging markets, Philips mainly relies on pricing adjustments for its products and services to
counteract any expected depreciation of emerging-market currencies. Philips performs Risk response: Philips has a globally organized and experienced tax function, which is
ongoing evaluations of the financial and non-financial condition of its customers and other accountable for the definition and execution of the tax strategy and for the tax position of
counterparties and uses various tools to manage credit risks. Philips worldwide. It advises management on the tax implications of intended decisions,
performs appropriate tax planning to support business goals, and ensures compliance with all
Please also refer to the note Details of treasury and other financial risks, starting on page 213. local and international tax laws. Philips has a Tax Control Framework in place, which creates
awareness of and ensures adherence to current tax policies.
Philips is exposed to tax risks which could have a significant adverse
financial impact Philips will be in full compliance with Pillar Two whereby we will be leveraging our existing
Philips is exposed to tax risks that could result in double taxation, penalties and interest digital tax systems to ensure an efficient and high-quality process to determine countries in
payments. The source of the risks could originate from local tax laws and regulations as well scope, calculate the additional tax liability (if any) and enable timely filing.
as international and EU regulatory frameworks. These include transfer pricing risks on
internal cross-border deliveries of goods and services, as well as tax risks relating to changes Potential risks are carefully monitored and dealt with by tax specialists from relevant areas
in the transfer pricing model. Examples of initiatives that may result in changing tax rules (e.g., corporate income tax, transfer pricing, indirect taxes, wage tax and tax accounting).
include, but are not limited to, the plans adopted by the Dutch parliament to abolish the tax There are extensive controls in place on processes and systems to address these risks, which
exemption for dividend withholding tax on share buy backs with effect from 2025 and the are discussed in detail in the Country Activity and Tax Report and in the note Income taxes,
OECD/G20 Inclusive Framework to address the allocation of income to user markets (Pillar starting on page 164.
One) and a 15% minimum corporate income tax rate (Pillar Two). The formal adoption of
Council Directive (EU) 2022/2523 (the Pillar Two Directive) in December 2022 aims to achieve Flaws in internal controls could adversely affect our financial reporting
a coordinated implementation of Pillar Two in EU member states. The Dutch government and management process
adopted the Minimum Tax Rate Act 2024 (MTR Act) in December 2023 and the Pillar Two Accurate disclosures provide investors and other market professionals with significant
legislation will be applicable in local law with effect from 2024. As for Pillar One, it is too information for a better understanding of Philips’ businesses. Failures in internal controls or
early to assess the potential impact. Philips is closely following the developments of this other issues with respect to Philips’ public disclosures, including disclosures with respect to
initiative. cybersecurity risks and incidents, could create market uncertainty regarding the reliability of
the information (including financial data) presented. This could have a negative impact on
As Philips maintains substance in the form of relevant assets and personnel in the countries the price of Philips securities. In addition, the reliability of revenue and expenditure data is
in which it operates, and with the recently provided transitional safe harbor rules (based on key for steering the businesses and for managing top-line and bottom-line growth. The long
Country-by-Country report) enacted by OECD, Philips currently expects to have limited lifecycle of health technology solution sales, from order acceptance to accepted installation
exposure to taxation under Pillar Two. Pillar Two may still impose an additional tax burden and servicing, together with the complexity of the accounting rules recognizing revenue in
on a jurisdiction-by-jurisdiction basis (which do not meet the transitional safe harbor rules) the accounts, presents a challenge in terms of ensuring consistent and correct application of
and increase Philips’ tax compliance burden significantly. the accounting rules throughout Philips’ global business. Significant changes in the way of
working, such as the changes made to our operating model, restructurings, and shifting
Furthermore, Philips is exposed to tax risks related to acquisitions and divestments, processes to remote Global Business Services locations, may have an adverse impact on the
permanent establishments, tax loss, interest and tax credits carried forward, and potential environment under which controls are executed, monitored, reviewed, and tested. Any flaws
changes in tax law that could result in higher tax expenses and payments. The risks may in internal controls, or regulatory or investor actions in connection with flaws in internal
have a significant impact on local financial tax results, which could adversely affect Philips’ controls, could have a material adverse effect on Philips’ business, financial condition,
financial condition and operating results. The value of the deferred tax assets, such as tax operation results, and reputation and brand.
losses carried forward, is subject to the availability of sufficient taxable income within the tax
loss-carry-forward period. The ultimate realization of the company’s deferred tax assets is
98
Risk response: The Philips’ Business Control Framework (PBCF) sets the standard for risk Furthermore, we closely monitor inflation development to enable timely action if needed.
management and internal control over financial reporting. Key components of the PCBF are Currently Philips mainly relies on pricing adjustments for its products and services, as well as
the standards on management, testing of controls, and our Financial Code of Ethics. The code periodic indexation clauses in long-term contracts, to counteract cost increases as well as to
is designed to deter wrongdoings; to promote honest and ethical conduct; to ensure full, fair, build capabilities to drive value extraction and handle inflation for the foreseeable future, for
accurate, timely, and understandable disclosures; and to encourage internal reporting of example, through training of commercial teams.
(suspected) violations. Please also refer to the section Our approach to risk management,
starting on page 86 for more information on the PBCF.
6.6 Compliance risks
Global inflation could materially adversely impact our business and results
of operations Philips products and services may be exposed to the risk of non-
Changes in macroeconomic conditions, supply chain constraints, labor shortages, the compliance with various regulations and standards involving quality,
conflict in Ukraine, and steps taken by governments and central banks, including in response safety, and security
to the COVID-19 pandemic as well as recent stimulus and spending programs, have led to Our reputation and license to operate depends on our compliance with global regulations
higher inflation, which is likely, in turn, to lead to increased interest rates and adverse and standards. Operating in a highly regulated health-technology industry, our products
changes in the availability and cost of capital. These inflationary pressures could affect our and services, including parts and materials from suppliers, are subject to regulation by
manufacturing costs, operating expenses (including wages), and other expenses. We may various government and regulatory agencies, e.g., FDA (US), EMA (Europe), NMPA (China),
not be able to compensate for increased costs by driving productivity to reduce costs and by MHRA (UK), ASNM (France), BfArM (Germany), and IGZ (the Netherlands). In the EU, the
passing these cost increases on through price measures in a timely manner, if at all, which Medical Device Regulation (EU MDR) became effective in May 2021 and imposes significant
could have an impact on our gross margins and profitability. Our business also operates in additional pre-market and post-market requirements. Examples of other product-related
certain countries that have experienced hyperinflation, including Argentina and Turkey, and regulations are the EU’s Waste from Electrical and Electronic Equipment (WEEE), Restriction
hyperinflationary conditions in any of the markets in which we operate may have a material of Hazardous Substances (RoHS), Registration, Evaluation, Authorization and Restriction of
adverse effect on our business, result of operations and financial condition. Inflation may Chemicals (REACH) and Energy-using Products (EuP) regulations. We are subject to various
also cause our customers to reduce or delay orders for our products, which could have a European, United States, and domestic, and foreign environmental laws and regulations,
material adverse effect on our business, results of operations, and cash flows. which are continuing to develop. Any failure to comply with such laws and regulations could
jeopardize product quality, safety, and security or expose us to lawsuits, administrative
Risk response: To improve agility and productivity, Philips has stepped up its performance penalties, and civil remedies, all of which may have a material adverse impact on Philips’
initiatives to remove organizational complexity, optimize quality and simplify ways of business, financial condition, and operating results.
working. The following sentences summarize key initiatives. Procurement spend reduction
through consolidation of suppliers and leveraging low-cost locations. Investing in the Philips has observed an increase in safety and security requirements in a variety of new and
relationships with our suppliers and maintain an ongoing dialogue to align our demand upcoming legislation dealing with market access of consumer goods, medical devices,
forecast to their supply allocation and manage the risk of rising prices by several means, information and communication technology products, Cloud services, and specific areas
including engaging in long-term contracts and keeping physical inventories. Reductions of such as data protection, cybersecurity, AI, and supply chain.
Supply chain cost through rationalization of manufacturing, warehousing, logistics providers,
digitalization, and remote servicing. R&D productivity increases through platforms and Both regulators and customers require us to demonstrate legal compliance and adequate
footprint simplification, and simplification of our product designs. And general productivity security management using national and international standards and associated
measures, including organizational restructuring, headcount reduction, real estate certifications. Non-compliance with conditions imposed by regulatory authorities, including
optimization and the expansion of our Global Business Services and automation initiatives. in connection with the proposed Respironics consent decree relating to the Respironics
recall or any similar regulatory undertakings, could result in product recalls, a temporary ban
Refer to the note Details of treasury and other financial risks, starting on page 213 for on products, stoppages at production facilities, remediation costs, fines, disgorgements of
financing costs management examples. profits, and/or claims for damages. Product safety incidents or user concerns could
jeopardize patient safety and/or trigger inspections by the FDA or other regulatory
agencies, which, depending on the results of such inspections, could trigger the impacts
99
described above, as well as other consequences. These issues could adversely impact Philips’ additional risk of exposure to governmental investigations, inquiries and legal proceedings
financial condition or operating result through lost revenue and cost of any required and fines. In various jurisdictions, ESG disclosure requirements are currently being drafted. In
remedial actions, penalties or claims for damages. They could also negatively impact Philips’ Europe, the Corporate Sustainability Reporting Directive and European Sustainability
reputation, brand, relationship with customers and market share. In particular, Philips is Reporting Standards have been approved. The latter will significantly increase the scope of
exposed to the ongoing impact of the Respironics voluntary recall/field action and related mandatory ESG disclosures. Philips needs to report over FY 2024 in line with the
matters. Please refer to the section Quality & Regulatory and patient safety, starting on page requirements of the CSRD and the ESRS. In addition, the proposed European Corporate
69 and the note Contingencies, starting on page 198. Sustainability Due Diligence Directive and similar regulations and directives or other rules
will (if implemented) require companies to identify and act on adverse environmental and
Risk response: Philips is committed to complying with all applicable laws, regulations, and human rights impacts across their organization – and potentially their entire value chain.
standards as a means of delivering safe, effective, and high-quality products, services, and Failure to meet these requirements could trigger the additional risk of exposure to inquiries
solutions. Our Regulatory Affairs team closely monitors developments across the regulatory from supervisory bodies and adversely affect Philips’ reputation and brand or could
landscape, with specialist teams operating at central, business, and regional levels. A new adversely impact Philips’ financial condition or operating result through lost revenue and
Regulatory Science and Policy team is helping to shape and define industry standards. cost of any required remedial actions, penalties or claims for damages.
Additionally, this team is involved with improving processes, and offers programs to ensure
that employees are aware of and able to comply with requirements. In the event of For further details, please refer to the sub-section Legal proceedings within the
compliance issues, we actively engage with the regulatory authorities to resolve, mitigate, and note Contingencies, starting on page 198.
work on remediation, as required.
We are actively working on remediation related to the June 2021 voluntary recall notification Risk response: Over the years, we have extensively transformed the company and
for certain sleep and respiratory care products by our subsidiary, Respironics. Philips is actively strengthened our business processes. As part of that, we have invested substantially in
collaborating with United States Department of Justice, acting on behalf of the FDA, to adherence to our General Business Principles (patient safety, quality and integrity always)
finalize the proposed Respironics consent decree. We publish updates on the Respironics field through the deployment of compliance and awareness programs, as well as the
action on our corporate website,www.philips.com. establishment of policies and processes that reinforce adherence. With respect to privacy and
data protection, Philips has established a privacy compliance framework, which includes
For more information, refer to the sub-section Quality & Regulatory and patient safety, policies, standards and procedures (such as the Binding Corporate Rules), with the aim of
starting on page 69 in the Governance section of the ESG chapter in this report and the notes ensuring and demonstrating compliance with applicable data protection laws and
Provisions, starting on page 188 and Contingencies, starting on page 198 regulations. Philips has a strong track record on ESG disclosures, often ahead of legislation,
and has been closely involved in the development of ESRS. The company already has
Philips is exposed to the risks of non-compliance with business conduct reasonable assurance on all its ESG disclosures and runs a project to meet the increased
rules and regulations, including privacy and upcoming ESG disclosure and requirements of ESRS.
due diligence requirements
In the execution of its strategy, Philips could be exposed to the risk of non-compliance with
business conduct rules and regulations and our General Business Principles, including, but
not limited to, patient safety, quality, anti-bribery, healthcare compliance, privacy and data
protection, as well as upcoming ESG disclosure requirements and due diligence
requirements. This risk is heightened in Growth geographies, as the legal and regulatory
environment is less developed compared to Mature geographies. Examples of compliance
risk areas include commission payments to third parties and remuneration payments to
agents, distributors, consultants and similar entities, as well as the acceptance of gifts, which
may be considered in some markets to be normal local business practice. The ongoing
digitalization of Philips’ products and services, including its processing of personal data,
increases the importance of compliance with privacy, data protection and similar laws. These
risks could adversely affect Philips’ financial condition, reputation and brand and trigger the
100
7 Supervisory Board
In the two-tier corporate structure under Dutch law, the Supervisory Board is a separate body that is independent of the Board of
Management and the company. The Supervisory Board supervises the policies, management and general affairs of Philips, and
assists the Board of Management and the Executive Committee with advice. Please also refer to Supervisory Board, starting on
page 131 within the chapter Corporate governance.
Feike Sijbesma 2) 3) Liz Doherty 1) Peter Löscher 1) 4)

Born 1959, Dutch Born 1957, British/Irish Born 1957, Austrian
Chairman of the Supervisory Board since May 2021 Chairwoman of the Audit Committee Member of the Supervisory Board since 2020; first
Chairman of the Corporate Governance and Member of the Supervisory Board since 2019; second term expires in 2024
Nomination & Selection Committee term expires in 2027 Former President and CEO of Siemens AG, President of
Member of the Supervisory Board since 2020; first Former CFO and board member of Reckitt Benckiser Global Human Health and Member of the Executive
term expires in 2024 Group PLC, former CFO of Brambles Ltd, former non- Board of Merck & Co., President and CEO of GE
Former CEO of Koninklijke DSM NV (Honorary Chairman) executive director and audit committee member at Healthcare Bio-Sciences and member of GE’s Corporate
and former non-executive Director of Unilever NV. Co- Delhaize Group, Nokia Corp., SABMiller PLC and Dunelm Executive Council, CEO and Delegate of the Board of
Chair of the Global Climate Adaptation Center and Group PLC. Currently, member of the Supervisory Board Directors of Renova Management AG. Currently member
Member of the Board of Trustees of the World Economic and Chairwoman of the audit committee of Novartis AG of the Board of Directors of Telefónica S.A. and
Forum. and of Corbion N.V. Fellow of the Chartered Institute of CaixaBank S.A. and Chairman of the Supervisory Board of
Management Accountants. Former non-executive board Telefónica Deutschland Holding AG, Non-Executive
member of the UK Ministry of Justice and of Her Director of Thyssen-Bornemisza Group AG and Doha
Chua Sock Koong 1) Majesty’s Courts and Tribunals Service (UK) and advisor Venture Capital LLC.
Born 1957, Singaporean to GBfoods SA and Affinity Petcare SA, subsidiaries of
Member of the Supervisory Board since 2021; first Agrolimen.
term expires in 2025 Indra Nooyi 3)
Former Group CEO of Singapore Telecommunications Born 1955, American
Limited and currently member of the Board of Directors Marc Harrison 4) Member of the Supervisory Board since 2021; first
of Prudential plc, Bharti Airtel Limited, Bharti Telecom Born 1964, American term expires in 2025
Limited and Ayala Corporation. Member of the Council of Member of the Supervisory Board since 2018; second Former CFO, President, Chairman and CEO of PepsiCo.
Presidential Advisors of Singapore, Deputy Chairman of term expires in 2026 Currently member of the Board of Directors and Chair of
the Public Service Commission of Singapore. Former President and Chief Executive Officer of the Audit Committee of Amazon, Inc. Member of the
Intermountain Healthcare and former Chief of International Board of Advisors of Temasek, member of
International Business Development for Cleveland Clinic the Board of Trustees of the Memorial Sloan Kettering
and Chief Executive Officer of Cleveland Clinic Abu Hospital, trustee of the national gallery of art.
Dhabi. Currently CEO HATCo (Health Assurance
Transformation Corporation) at General Catalyst.
101
Sanjay Poonen 1) Paul Stoffels 2) 3)

Born 1969, American Born 1962, Belgian
Member of the Supervisory Board since 2022; first Vice-Chairman and Secretary
term expires in 2026 Chairman of the Remuneration Committee
Former Chief Operating Officer at VMware and President Member of the Supervisory Board since 2018; second
at SAP. Currently CEO and President of Cohesity and term expires in 2026
member of the Board of Directors of Snyk. Former CEO of Virco, Chairman of Tibotec, worldwide
Chair of Pharmaceuticals at Johnson & Johnson and Chief
Scientific Officer & member of the Executive Committee
David Pyott 2) 4) at Johnson & Johnson. Currently CEO and Chairman of
Born 1953, British/American the Board of Directors of Galapagos NV.
Chairman of the Quality & Regulatory Committee
Member of the Supervisory Board since 2015; third
term expires in 2025 Herna Verhagen 2)
Former Chairman and Chief Executive Officer of Allergan, Born 1966, Dutch
Inc. and former Lead Director of Avery Dennison Member of the Supervisory Board since 2022; first
Corporation. Currently member of the Board of Directors term expires in 2026
of Alnylam Pharmaceuticals Inc., BioMarin Currently CEO of PostNL, member of the Supervisory
Pharmaceutical Inc. and Pliant Therapeutics. Chairman of Board of ING Groep N.V., member of the Supervisory
the Governing Board of London Business School, Board of Het Concertgebouw N.V. and member of the
member of the Board of Trustees and Executive Advisory Board of Goldschmeding Foundation.
Committee of the California Institute of Technology, Vice
President of the Ophthalmology Foundation and
President of the Advisory Board of the Foundation of the
American Academy of Ophthalmology.
1) member of the Audit Committee

2) member of the Remuneration Committee
3) member of the Corporate Governance and Nomination & Selection Committee
4) member of the Quality & Regulatory Committee
For a current overview of the Supervisory Board members, see also

https://www.philips.com/a-w/about/supervisory-board.html
102
At a glance Strong focus on patient safety, quality, supply chain,
Supervisory Board
business and financial performance, organization,
succession planning and strategy
report Exor stake in share capital a sign of confidence in Philips’

growth and value potential; provides for Exor to
nominate one member to the Supervisory Board
Changes in Supervisory Board composition
Reports of Supervisory Board committees
103
8 Supervisory Board report

Letter from the Chairman of the Supervisory Board We also discussed developments around the supply chain frequently and in depth – both
the external situation and the further improvements planned internally to improve business
and financial performance. The progress made in this area has been a strong driver of the
Dear Stakeholder, company's increased growth.
2023 was a challenging as well as an encouraging year for Philips, as the company started to
deliver on its three-year plan to create value with sustainable impact. Improved operational The Supervisory Board endorses the simplification of Philips’ organizational structure, where
performance was driven by a strong focus on execution to enhance patient safety and the Businesses are leading, supported by the Regions and global Functions, with more
quality, strengthen supply chain reliability, and establish a simplified operating model. The focused KPIs. The workforce reduction of approximately 8,000 roles to date, out of the
company succeeded in achieving its raised 2023 outlook with strong sales growth, improved planned reduction of 10,000 roles by 2025, was an impactful and difficult, yet necessary,
profitability, and strong cash flow. All despite the uncertainties brought about by an measure as the company drives a major step-up in productivity, including focusing its R&D
increasingly volatile geopolitical environment. That said, order intake and the Respironics activities on fewer, yet more impactful projects. The impact of this reduction became visible
recall, including litigation and the investigation by the US Department of Justice (DOJ), in the P&L in 2023. Philips will strive to implement the remaining reductions with due respect
remain key areas of attention. for every employee affected and in line with all local rules and regulations.
The Supervisory Board remains fully committed to its responsibilities to supervise and advise We welcome the decision by Exor, the Netherlands-based diversified holding company, to
management in leading the company towards a future of progressive value creation with become a long-term investor in Philips, supporting the company’s strategy. Their purchase of
sustainable impact. As we explain in our Report, we spent many sessions in 2023 engaging a 15% shareholding underlines their confidence in Philips’ growth and value potential, and
with the Board of Management and closely and actively reviewing key priority issues and their trust in the leadership, and provides for Exor to nominate one member to our
actions to build further momentum and keep Philips on a value creation track for its Supervisory Board. We are pleased with the availability of Mr. Benoît Ribadeau-Dumas as
stakeholders. The main topics discussed were patient safety and quality, supply chain Exor nominee, and we will propose his appointment at the upcoming 2024 General Meeting
strengthening, the workforce reduction, the new operating model and strategy for future of Shareholders.
business growth, as well as the composition of the Board of Management and Supervisory
Board, the remuneration of the Board of Management, and the succession slate/bench We appreciate the support expressed by the shareholders for the current management and
across the organization. direction of Philips. The Supervisory Board has every confidence in CEO Roy Jakobs and his
leadership team, as they focus on implementing the plan to create value with sustainable
Strengthening patient safety and quality across Philips is the highest priority, and resolving impact for our shareholders and all other stakeholders.
the consequences of the Respironics recall for our patients and customers is a key focus area.
We feel encouraged by the progress made on the recall, as the company completes Together with my fellow members of the Supervisory Board, I look forward to providing
remediation of the sleep devices and strives to finalize remediation of the ventilator devices. continued oversight of Philips as the company continues its value creation trajectory and
Philips is fully committed to complying with the terms of the consent decree agreed with the delivers on its purpose of improving people’s health and well-being through meaningful
DOJ, representing the US Food and Drug Administration (FDA), which primarily focuses on innovation.
Philips Respironics in the US. The consent decree will provide Philips Respironics with a
roadmap of defined actions, milestones, and deliverables to demonstrate compliance with Feike Sijbesma
regulatory requirements and to restore the business. In 2023, the Supervisory Board spent Chairman of the Supervisory Board
time on further anchoring patient safety and quality in the organization, and it remains
actively involved in the further outstanding steps which are expected to follow in respect of
litigation and the investigation by the DOJ. For more information, please refer to Quality &
Regulatory and patient safety, starting on page 69.
104
Introduction Supervisory Board report the rest of the world, and reviewed its plans to keep on serving patients with affected
The Supervisory Board supervises, advises and challenges the Board of Management in devices until market re-entry.
performing their management tasks as well as setting and executing the strategy of the
Philips Group. The members of the Supervisory Board act in the interests of Royal Philips, its Recognizing the importance of patient safety and quality of products and solutions sold by
businesses and all its stakeholders. This report includes a more specific description of the the Philips Group generally, significant time was spent in 2023 on reviewing and tracking
Supervisory Board’s activities during the financial year 2023 and other relevant information progress of the company-wide program Accelerating Patient Safety and Quality to improve
on its functioning. and foster a culture, behaviors and a mindset that puts quality and patient safety first. In the
context of this program, the Supervisory Board also discussed the process framework for
2023 focus areas and activities of the Supervisory Board product design and production controls in the company.
Against the background set forth in the Chairman’s letter above, the Supervisory Board was
regularly updated by management on the company’s performance and outlook. The As presented on January 30, 2023, the Supervisory Board and the Board of Management
Supervisory Board engaged in discussions with management on improving performance together with the Executive Committee interacted on the company’s overall strategy to
and increasing productivity and agility, by addressing the enhancement of patient safety extend its leadership as a health technology company and its plan to create value with
and accelerating the focus on quality, strengthening the supply chain reliability and sustainable impact towards 2025 and beyond, based on focused organic growth and
establishing a simplified operating model at Philips. Progress, as well as the near-term and scalable innovation with improved execution as the key value driver. This plan is designed to
longer-term actions on those three priorities were reviewed and monitored by the restore Philips' value creation based upon sales growth and improvement of profitability
Supervisory Board. and cash generation by strong focus on execution. It includes, amongst other things, the
strategic plans and priorities of each of the Segments and Regions and at Enterprise level.
In this context, the Supervisory Board and management also discussed the external The Supervisory Board engaged in multiple deep dive sessions on the strategy. These
environment in which the company operates, and the impact that the macro-economic interactions led to more detailed strategy plans that were reviewed and signed-off by the
outlook has on its performance. Supervisory Board. Each strategic plan is supplemented with milestones and an execution
plan to achieve the company’s ambitions. Specific attention was given to the role of China in
In 2023, the Supervisory Board devoted considerable time to the Respironics recall, as a the strategy moving forward given the dynamics of the China market.
recurring agenda item for each of its (regular) meetings. The Supervisory Board was kept
apprised of the progress made with the repair and replacement program, and in particular Our oversight over the company’s overall strategy also included the restructuring and other
discussed and tracked the comprehensive test and research program for the affected CPAP, actions designed to improve the operations and performance, to invest in quality, to simplify
BiPAP and mechanical ventilator devices. Putting the interest of patients first, the ways of working, to remove organizational complexity by putting businesses with single
Supervisory Board challenged management to remain focused on keeping patients regularly accountability in the lead enabled by strong Regions and lean Functions, and to reduce
updated on the status of the repair or replacement of their devices and to accelerate the operational expenses in close alignment with the respective works councils and unions and
repair and replacement program where possible, despite operational and supply challenges. with respect for the impacted employees and their colleagues.
The Supervisory Board was also regularly updated on other aspects of the recall. This The overview below indicates other key matters that were reviewed and/or discussed during
includes, amongst other things, the negotiations and preliminary approval of the economic one or more meetings in the course of 2023:
loss class settlement, the ongoing engagements with the FDA and other competent
authorities globally, and the discussions with the DOJ, acting on behalf of the FDA, • Capital allocation, including the dividend policy and pay-out and the M&A framework,
regarding a proposed consent decree. It also includes the criminal and civil investigation and specifically the company’s flexibility under its capital structure and credit ratings to
opened by the DOJ’s Consumer Protection Branch and Civil Fraud Section, and the US pay dividends and to fund capital investments, including share repurchases and other
Attorney’s Office for the Eastern District of Pennsylvania to which Philips Respironics is corporate finance initiatives.
subject and the ongoing class-action lawsuits and individual personal injury claims in which • The company’s liquidity position and leverage, including the measures taken to
Philips Respironics and other entities are defendants. The Supervisory Board specifically strengthen it in light of the financial performance of the company. These measures
engaged with management on the potential impact of the consent decree as well as the include the issue of bonds through the Euro Medium Term Note (EMTN) program to
litigation and investigations on the Philips Respironics business, both in North America and repay the EUR 500 million term loan in August 2023.
105
• Geopolitical developments and their impact on Philips’ business, in particular the impact • Significant civil litigation claims against, and public investigations into, Philips.
of the war in Ukraine, the situation in Russia, and the Israel/Hamas conflict on Philips’ • Philips’ Environmental, Social and Governance (ESG) approach, comprising an update on
employees and the (potential) implications on continuity of Philips’ business in these progress made with respect to the 2025 ESG key programs and sustainability
countries. commitments and aims (including circular revenues) and Philips’ aim to improve the
• Regular review of the dashboard, tracking the performance of the 2023 key performance health and well-being of 2.5 billion people per year by 2030 through meaningful
indicators for the Executive Committee versus target. innovation. The Supervisory Board was also educated on sustainability reporting
• Philips’ annual management commitments, including the 2024 key performance requirements and requirements related to sustainability-related financial disclosures, as
indicators for the Executive Committee, the 2024 targets for such key performance well as European Union regulatory developments in this context. These include but are
indicators, and the annual operating plan for 2024. not limited to education on the European Union Corporate Sustainability Reporting
• Quality & Regulatory compliance, systems and processes. The Supervisory Board was Directive and European Union Sustainability Reporting Standards and the impact thereof
regularly updated on past and upcoming FDA inspections at various company sites, on reporting by the Philips Group.
including the preparations for and outcomes of such inspections. Also, referred to the • The agenda for the 2023 Annual General Meeting of Shareholders (held on May 9, 2023)
Report of the Quality & Regulatory Committee. and the proposed agenda for the upcoming 2024 Annual General Meeting of
• Oversight of the adequacy of the company’s Internal Control over Financial Reporting. Shareholders (to be held on May 7, 2024).
• Enterprise risk management, including updates on and improvements to the relevant • The re-appointment of Ernst & Young Accountants LLP as the company’s external auditor
processes; the outcome of the annual risk assessment dialogue with the Executive for a term of one year, starting on January 1, 2024, as well as the appointment of Price
Committee; and an update of the top risks faced by the Philips Group, including the Waterhouse Coopers LLP as the company’s external auditor for a term of 4 years starting
possible impact of such risks, as well as control and mitigation measures. Refer to Our on January 1, 2025, both at the 2023 Annual General Meeting of Shareholders.
approach to risk management, starting on page 86. • The market environment for global M&A activities that offered limited opportunities in
• The terms and conditions of the Relationship Agreement between the company and 2023 driven by growing macro-economic challenges, inflationary pressure and rising
long-term minority investor Exor. interest rates, as well as the company’s selective approach towards M&A going forward
• Engagements with shareholders and institutional advisory firms on the remuneration for and the (business) performance of companies previously acquired by the company.
the Board of Management and the negative shareholder vote against the discharge of
the Board of Management at the 2023 Annual General Meeting of Shareholders. Refer to The Supervisory Board conducted four dedicated dialogues on Philips' positioning in the
the Letter from the Remuneration Committee Chair, starting on page 111 below for more market and versus its competitors. Subsequently, the Supervisory Board ’deep dived’ into the
information. overall Philips strategy and the strategy and performance of:
• The revised Remuneration Policy for the Board of Management and the revised
Remuneration Policy for the Supervisory Board, to be proposed for adoption at the • The Diagnostic Imaging, Enterprise Informatics, Personal Health businesses; and
upcoming 2024 Annual General Meeting of Shareholders. Refer to the Letter from the • Philips Greater China Region, including market trends, business performance and key
Remuneration Committee Chair, starting on page 111 below for more information. strategic and transformation initiatives and priorities.
• Continuous succession planning for the Supervisory Board, as well as for the Board of
Management and Executive Committee, including the re-appointment of Abhijit The Supervisory Board reviewed Philips’ annual and interim financial statements, including
Bhattacharya as member of the Board of Management for a 2-year term at the 2023 information related to ESG, prior to publication.
Annual General Meeting of Shareholders, and the appointments of Steve C de Baca, Jeff
DiLullo, Julia Strandberg and Heidi Sichien as members of the Executive Committee. Supervisory Board meetings and attendance
• The company’s People strategy and priorities, employee engagement and retention of In 2023, the members of the Supervisory Board convened for seven regular meetings and
employees, review of talent management, leadership and talent development, four extraordinary meetings. Moreover, the Supervisory Board members collectively and
leadership culture, inclusion and diversity. individually interacted with members of the Board of Management, with members of the
• Evaluation of the Board of Management and the Executive Committee based on the Executive Committee and with senior management outside the formal Supervisory Board
achievement of specific group and individual targets approved by the Supervisory Board meetings. The Chairman of the Supervisory Board and the CEO frequently had bilateral
at the beginning of the year, as well as the assessment of the main findings and discussions about the company’s progress on a variety of matters.
conclusions of the evaluation and the related follow-up.
106
The Supervisory Board meetings were well attended in 2023. All Supervisory Board members The composition of the Supervisory Board furthermore follows its profile (which was
were present during the Supervisory Board meetings in 2023. The committees of the updated in early 2023), as included in the Rules of Procedure of the Supervisory Board. The
Supervisory Board also convened regularly (see the separate reports of the committees profile aims for an appropriate combination of knowledge and experience among the
below) and the committees reported back on their activities to the full Supervisory Board. In members of the Supervisory Board, encompassing general management, international
addition, the Supervisory Board and Committees held private meetings. The members of the business, environmental, social and governance (ESG) and sustainability, (consumer) health
Supervisory Board concluded that they devoted sufficient time to engage (proactively if the and medical technology, quality and regulatory, finance and accounting, human resources,
circumstances so required) in their supervisory responsibilities. manufacturing and supply chain, information technology and digital, marketing, and
governmental and public affairs, all in relation to the global character of Philips’ businesses.
In March 2023, a Supervisory Board member visited the European Congress of Radiology in The Supervisory Board also aims for having members with different nationalities and
Vienna, Austria. In June 2023, the Supervisory Board members visited Philips’ Image Guided (cultural) backgrounds, working experiences or otherwise diverse qualities, as well as one or
Therapy-Devices site in Plymouth, Minnesota, USA. In the course of 2023, various Supervisory more members with an executive or similar position in business or society no more than five
Board members visited Philips’ Diagnosis & Treatment manufacturing site in Best, the years ago. The composition of the Supervisory Board shall furthermore be in accordance
Netherlands. with the Dutch Corporate Governance Code best practice provisions on independence, and
each member of the Supervisory Board shall be capable of assessing the broad outline of the
Supervisory Board: composition, diversity and self-evaluation overall policy of the company. The size of the Supervisory Board may vary as it considers
The Supervisory Board is a separate corporate body that is independent of the Board of appropriate to support its profile.
Management and the company. Its independent character is also reflected in the
requirement that members of the Supervisory Board can be neither a member of the Board Any (re-)appointments of members of the Supervisory Board must meet the gender quota,
of Management nor an employee of the company. The Supervisory Board considers all its in accordance with Dutch law, requiring that at least one-third of the supervisory board
members (i.e. 100%) to be independent under the Dutch Corporate Governance Code. members are women and at least one-third are men. (For calculation purposes, a total
Furthermore, the members of its Audit Committee are independent under the rules of the number of board members that cannot be divided by three, must be rounded up to the next
US Securities and Exchange Commission, applicable to the Audit Committee. number that can be divided by three.) Currently, the statutory quota is met, as out of ten
Supervisory Board members, four members are female and six members are male.
The Supervisory Board currently consists of 10 members. Effective as per (the end of) the
2023 Annual General Meeting of Shareholders, David Pyott was re-appointed for a term of In 2023, each member of the Supervisory Board completed a questionnaire to verify
two years and Liz Doherty was re-appointed for a term of four years. The agenda for the compliance with the applicable corporate governance rules and the Rules of Procedure of
upcoming 2024 Annual General Meeting of Shareholders will include proposals to re- the Supervisory Board. The outcome of this survey was satisfactory.
appoint Feike Sijbesma and Peter Löscher as members of the Supervisory Board. The agenda
will also include the proposal to appoint Benoît Ribadeau-Dumas as new member of the An independent external party facilitated the 2023 self-evaluation process for the
Supervisory Board, who will be nominated pursuant to the commitment of Exor N.V. to be a Supervisory Board and its committees. This included drafting and submitting relevant
long-term minority investor in Philips and its right to propose one member to the questionnaires, interviewing members of the Supervisory Board and aggregating and
Supervisory Board. We are very pleased with the availability of Mr. Benoît Ribadeau-Dumas reporting on the results. The members of the Board of Management also provided their
and welcome him as new member of our Board (subject to his appointment at the 2024 input. The questionnaires covered various topics such as composition, size, skills and
AGM). experience, geographical coverage and diversity of the Supervisory Board, dynamics and
focus of the meetings of the Supervisory Board, the effectiveness of the Supervisory Board’s
The Supervisory Board attaches great value to diversity in its composition and has adopted a oversight of various aspects such as strategy, business performance, risk management,
Diversity Policy for the Supervisory Board, Board of Management and Executive Committee. succession planning and people, and engagement with management. All members of the
For more information on the Diversity Policy, please refer to Report of the Corporate Supervisory Board were invited to share recommendations to improve the Supervisory
Governance and Nomination & Selection Committee, starting on page 110. The Supervisory Board’s functioning and ways of working going forward. Furthermore, the performance of
Board spent time in 2023 considering its composition, as well as the composition of the the Chairman, the other Supervisory Board members individually, and of the Supervisory
Executive Committee (including the Board of Management), taking into account the criteria Board’s committees was evaluated separately.
set forth in the Diversity Policy.
107
The reports on the results of the evaluation were discussed in a meeting of the Supervisory
Board. The results of the self-evaluation indicated that the Supervisory Board is a well-
functioning team of appropriate size that benefits from different expertise, diversity, and
international geographical representation. The meetings and meeting dynamics were rated
positively with good interactions, discussions and feedback and a strong relationship with
management, and suggestions were made to further improve meeting efficiency. Board
members also noted the importance of being challenged constructively and of the need to
maintain a collective understanding of priorities and options for any relevant matters. The
composition of the Supervisory Board and its succession plan is considered adequate.
Already anticipating the expiry of the third term of appointment of Mr. Pyott in 2025, the
Supervisory Board is tasked with identifying a candidate with equivalent MedTech expertise.
In addition, attracting candidates with expertise in artificial intelligence will be part of the
Supervisory Board’s succession planning. Supervisory Board members further noted the
potential benefit from getting external views from various stakeholders, such as Exor,
regulators, suppliers, employees, patients, and investors, to enhance its oversight and
decision-making. Finally, the Supervisory Board members confirmed a number of current
focus areas, such as Patient Safety and Quality, senior executive succession planning,
strategy execution and value creation. Early 2024, the Chairman of the Supervisory Board
had several meetings with individual members of the Supervisory Board to discuss ways to
further enhance the functioning of the Supervisory Board and its individual members going
forward. The Chairman also discussed the evaluation of his own functioning with the Vice-
Chairman.
108
Supervisory Board composition

Feike Paul Chua Liz Marc Peter Indra Sanjay David Herna
Sijbesma Stoffels Sock Koong Doherty Harrison Löscher Nooyi Poonen Pyott Verhagen
Year of birth 1959 1962 1957 1957 1964 1957 1955 1969 1953 1966
Gender Male Male Female Female Male Male Female Male Male Female
Nationality Dutch Belgian Singaporean British/Irish American Austrian American American British/American Dutch
Initial appointment date 2020 2018 2021 2019 2018 2020 2021 2022 2015 2022
Date of (last) (re-)appointment n/a 2022 n/a 2023 2022 n/a n/a n/a 2023 n/a
End of current term 2024 2026 2025 2027 2026 2024 2025 2026 2025 2026
Independent yes yes yes yes yes yes yes yes yes yes
Committee memberships 1) RC & CGNSC RC & CGNSC AC AC QRC AC & QRC CGNSC AC RC & QRC RC
Attendance at Supervisory Board meetings (11/11) (11/11) (11/11) (9/11) (11/11) (10/11) (11/11) (10/11) (10/11) (11/11)
Attendance at committee meetings RC (8/8) RC (8/8) AC (6/6) AC (6/6) QRC (4/4) AC (6/6) CGNSC (6/6) AC (6/6) RC (7/8) RC (8/8)
CGNSC (6/6) CGNSC (6/6) QRC (4/4) QRC (4/4)
General management yes yes yes yes yes yes yes yes yes yes
International business yes yes yes yes yes yes yes yes yes yes
ESG & sustainability yes yes yes yes
(Consumer) health and medical technology yes yes yes yes yes yes
Patient safety, quality & regulatory and product development yes yes yes yes
Finance and accounting yes yes yes yes yes yes yes yes yes yes
Human Resources yes yes yes yes yes yes yes yes yes
Manufacturing and supply chain yes yes yes yes yes
Information technology and digital yes yes yes yes yes yes yes yes yes
Marketing yes yes yes yes yes yes yes
Governmental and public affairs yes yes yes yes yes yes yes yes
1)
CGNSC: Corporate Governance & Nomination and Selection Committee; AC: Audit Committee; RC: Remuneration Committee; QRC: Quality & Regulatory Committee
Supervisory Board committees

While retaining overall responsibility, the Supervisory Board has assigned certain of its tasks
to the three long-standing committees, also referred to in the Dutch Corporate Governance
Code: the Corporate Governance and Nomination & Selection Committee, the
Remuneration Committee and the Audit Committee. In 2015, the Supervisory Board also
established the Quality & Regulatory Committee. The separate reports of these committees
are part of this Supervisory Board report and are published below.
The function of all of the Supervisory Board’s committees is to prepare the decision-making
of the full Supervisory Board, and the committees currently have no independent or
assigned powers. The full Supervisory Board retains overall responsibility for the activities of
its committees.
109
Financial statements 2023 8.1 Report of the Corporate Governance and Nomination & Selection
The financial statements of the company for 2023, as presented by the Board of Committee
Management, have been audited by Ernst & Young Accountants LLP, the independent The Corporate Governance and Nomination & Selection Committee is chaired by Feike
external auditor appointed by the General Meeting of Shareholders. We have approved Sijbesma. Its other members are Paul Stoffels and Indra Nooyi. The Committee is responsible
these financial statements, and all individual members of the Supervisory Board have signed for the review of the overall corporate governance, the selection criteria and appointment
these documents (as did the members of the Board of Management). procedures for the Board of Management, the Executive Committee, certain other key
management positions, as well as the Supervisory Board.
Finally, we would like to express our thanks to the members of the Board of Management,
the Executive Committee and all other employees for their continued contribution In 2023, the Corporate Governance and Nomination & Selection Committee held six
throughout 2023. meetings and all Committee members attended these meetings.
The Supervisory Board The Committee devoted time to the appointment or reappointment of candidates to fill
current and future vacancies on the Supervisory Board. Following those consultations, it
Feike Sijbesma prepared decisions and advised the Supervisory Board, which resulted in the re-
Paul Stoffels appointments of David Pyott and Liz Doherty as members of the Supervisory Board at the
Chua Sock Koong 2023 Annual General Meeting of Shareholders. This also resulted in the proposals to re-
Liz Doherty appoint Feike Sijbesma and Peter Löscher as members of the Supervisory Board, and to
Marc Harrison appoint Exor nominee Benoît Ribadeau-Dumas as new member of the Supervisory Board at
Peter Löscher the upcoming 2024 Annual General Meeting of Shareholders.
Indra Nooyi
Sanjay Poonen Under its responsibility for the selection criteria and appointment procedures for Philips’
David Pyott senior management, the Committee reviewed the functioning of the Board of Management
Herna Verhagen and its individual members, the Executive Committee succession plans and emergency
candidates for key roles in the company. The review and evaluation consists of periodical
performance review meetings with the individual members of the Board of Management
and the Executive Committee, and evaluation of the results of these meetings by the
Committee. The main findings and conclusions from these reviews were also shared with the
Supervisory Board and the Remuneration Committee, and were taken into account in the
performance evaluation of the Board of Management and Executive Committee members
and the selection of succession candidates. Reference is made to 2023 Annual Incentive,
starting on page 116, setting out the performance review of the Board of Management
members by the Remuneration Committee.
The Committee devoted time in 2023 to the selection and/or appointment of candidates to
fill other current and future vacancies on the Board of Management and the Executive
Committee. This resulted in the re-appointment, at the 2023 Annual General Meeting of
Shareholders, of Abhijit Bhattacharya for a two-year’s term to his tenure as CFO that started
in 2015, thereby ensuring continuity and enabling a smooth succession process in parallel.
The Committee’s work furthermore resulted in appointments of four new members of the
Executive Committee: Steve C. de Baca and Jeff DiLullo were appointed, effective February 6,
2023, as Chief Patient Safety & Quality Officer and Chief Market Leader of Philips North
America, respectively. Furthermore, Julia Strandberg was appointed as the Chief Business
110
Leader of the Connected Care segment, effective April 24, 2023, and Heidi Sichien was The Diversity Policy includes the Supervisory Board’s aim that the Board of Management and
appointed as Chief People Officer, effective August 1, 2023. Philips expects to announce a the Executive Committee comprise members with different nationalities and (cultural)
new leader for its Precision Diagnosis business in 2024, which business is currently under the backgrounds, working experiences or otherwise diverse qualities. Effective 2022, Dutch law
temporarily extended leadership of Bert van Meurs (Chief Business Leader for the Image requires listed companies to set appropriate and ambitious gender diversity targets for the
Guided Therapy business). Board of Management and for a management level of a seniority to be determined by the
company. To this end, the Diversity Policy includes the Supervisory Board’s aim that at least
With respect to corporate governance matters, the Committee discussed developments one-third of the members of each of the Board of Management and the Executive
around the revised Dutch Corporate Governance Code, relevant legislation under Committee are women and at least one-third are men. For more information, please refer to
consideration in the Netherlands and the regulatory regimes around disclosure Diversity, Inclusion and Well-Being, starting on page 59.
requirements related to ESG. Finally, the Committee reviewed the Charter of the Corporate
Governance and Nomination and Selection Committee and concluded it remains
appropriate. 8.2 Report of the Remuneration Committee
With respect to the productivity initiatives and other actions to improve the company’s 8.2.1 Letter from the Remuneration Committee Chair
performance (including the unfortunate but necessary reduction of roles), the Committee
was updated by management on the impact on employees and the phased deployment Dear Stakeholder,
approach and reviewed the simplification of the organization. On behalf of the Remuneration Committee, I am pleased to report on the Committee’s
activities in 2023 and to present the 2023 Remuneration Report, providing a comprehensive
Diversity overview of the remuneration paid and owed to the individual members of the Board of
The Diversity Policy for the Supervisory Board, Board of Management and Executive Management and the Supervisory Board, respectively, in the financial year 2023.
Committee was adopted in 2017 and revised in early 2023, and is published on the company
website. The Committee periodically assesses the Diversity Policy and the size and Company performance in 2023 and incentive plan realization
composition of the Supervisory Board and makes recommendations, if relevant, relating to 2023 was a challenging as well as an encouraging year for Philips, as the company started to
the profile for the Supervisory Board. deliver on its three-year plan to create value with sustainable impact. Improved operational
performance was driven by a strong focus on execution to enhance patient safety and
The criteria in the Diversity Policy aim to ensure that the Supervisory Board, the Board of quality, strengthen supply chain reliability, and establish a simplified operating model. The
Management and the Executive Committee have a sufficient diversity of views and the company succeeded in achieving its raised 2023 outlook with strong sales growth, improved
expertise needed for a good understanding of current affairs and longer-term risks and profitability, and strong cash flow. All despite the uncertainties brought about by an
opportunities related to the company’s business. The nature and complexity of the increasingly volatile geopolitical environment. That said, order intake and the Respironics
company’s business is taken into account when assessing optimal diversity, as well as the recall, including litigation and the investigation by the US Department of Justice, remain key
social and environmental context in which the company operates. areas of attention. Please refer to Financial performance, starting on page 26 and
Environmental, Social and Governance, starting on page 42 of our 2023 Annual Report for a
Pursuant to the Diversity Policy, the selection of candidates for appointment to the detailed review of the company’s financial performance and its ESG performance in the year
Supervisory Board, Board of Management and Executive Committee is based on merit. With 2023.
due regard to the criteria set forth in the Diversity Policy, the company shall seek to fill
vacancies by considering candidates that represent a diversity of (among others) ages, For the awards granted under our Long-Term Incentive Plan in 2021, the company
gender, identities and educational and professional backgrounds. Please refer to the performance resulted in a realization significantly above target for the sustainability
Supervisory Board report, starting on page 103 for more information on the diversity of the objectives. For the relative TSR and adjusted EPS metrics in our Long-Term Incentive Plan,
Supervisory Board. however, there was a below-threshold realization based on the performance since the start
of the performance period in 2021. In respect of the financial metrics 2023 Annual Incentive,
performance was also significantly above target. Nevertheless, to acknowledge the decrease
in order intake in 2023, the Supervisory Board decided (upon the proposal of the
111
Remuneration Committee) to lower the Annual Incentive payout. Please refer to our 2023 The composition of the Remuneration Committee and its activities
Remuneration Report for more details. The Remuneration Committee is chaired by Paul Stoffels. Its other members are David Pyott,
Herna Verhagen and Feike Sijbesma. The Committee is responsible for preparing decisions of
Other remuneration matters prepared by the Remuneration Committee the Supervisory Board on the remuneration of individual members of the Board of
Considering the fact that 2022 had been a disappointing year for Philips, the Supervisory Management and the Executive Committee, as well as the policies governing this
Board followed the proposal of the Remuneration Committee to not apply any base salary remuneration. In performing its duties and responsibilities, the Remuneration Committee is
increases for the members of the Board of Management during the 2023 compensation assisted by an external consultant and an in-house remuneration expert. For a full overview
review in April 2023. of the responsibilities of the Committee, please refer to the Charter of the Remuneration
Committee, as set forth in Chapter 3 of the Rules of Procedure of the Supervisory Board
During the Annual General Meeting of Shareholders held in May 2023, our Chief Financial (which are published on the company’s website). Our annual Remuneration Committee
Officer Abhijit Bhattacharya was re-appointed, adding a two-year’s term to his tenure as cycle enables us to have an effective decision-making process supporting the determination,
CFO that started in 2015, thereby ensuring continuity and enabling a smooth succession review and implementation of the Remuneration Policy. The Committee met eight times in
process in parallel. The company and Mr Bhattacharya entered into a new service agreement 2023. All Committee members were present during these meetings.
that was prepared by the Remuneration Committee and published on the company’s
website. I look forward to presenting our 2023 Remuneration report and our proposals for the
renewed 2024 Remuneration Policies at our upcoming Annual General Meeting of
Proposed 2024 Remuneration Policies for the Board of Management and Shareholders.
for the Supervisory Board
Starting in May 2023, the Remuneration Committee carried out a review of the On behalf of the Remuneration Committee,
Remuneration Policy and the Long-Term Incentive Plan for the Board of Management, and
the Remuneration Policy for the Supervisory Board. Dutch law requires the renewal of our Paul Stoffels
policies at least every four years, and we also considered this a good opportunity to test the Chairman of the Remuneration Committee
alignment of our policies with our company’s strategy, to review how they compare to
market practice and to ensure our compliance with updated regulatory and corporate
governance requirements. Building on our stakeholder engagements during the past years,
we engaged with stakeholders through a dedicated remuneration roadshow and other
interactions to solicit their feedback on, and support for the proposals. This process resulted
in the proposals to adopt an amended Remuneration Policy for the Board of Management
and an amended Remuneration Policy for the Supervisory Board, respectively, that will be
submitted for adoption at the upcoming Annual General Meeting of Shareholders to be
held on May 7, 2024. Upon convocation of the 2024 AGM (in March 2024), the proposals will
be published on our website and the main changes following from these proposals,
compared to each of the current 2020 Remuneration Policies, as well as other relevant
information will be explained in the explanatory notes to the relevant agenda items. Please
note that, subject to their adoption, the 2024 Remuneration Policies will have retrospective
effect for the full year 2024, and for that reason our 2023 Remuneration Report includes
certain ex-ante disclosures in respect of the performance metrics for the 2024 Annual
Incentive and 2024 Long-Term Incentive.
112
8.2.2 Remuneration report 2023

In this Remuneration Report, the Supervisory Board provides a comprehensive overview, in
accordance with article 2:135b of the Dutch Civil Code, of the remuneration paid and owed
to the individual members of the Board of Management and the Supervisory Board,
respectively, in the financial year 2023. The report will also be published as a stand-alone
document on the company’s website after the 2024 Annual General Meeting of
Shareholders, the agenda of which will include an advisory vote on this Remuneration
Report.
Board of Management
Summary of 2020 Remuneration Policy

The Remuneration Policy and Long-Term Incentive Plan for the Board of Management have
been adopted and approved, respectively, by the Annual General Meeting of Shareholders
2020, which took place on April 30, 2020.
The objectives of the Remuneration Policy for the Board of Management are: to focus them
on delivering on our purpose and strategy, to motivate and retain them, and to create
stakeholder value.
Thus, the Remuneration Policy:
• Supports improving the company’s overall performance and enhancing the long-term
value of the company;
• Directly supports our purpose by:
a) linking a part of remuneration to achieving our strategic imperatives through the
criteria and targets included in the Annual and Long-Term Incentives;
b) offering market competitive compensation compared to a peer group of business
competitors and companies we compete with for executive talent;
c) enabling us to motivate, retain and attract world-class talent in order to support our
purpose of improving people’s health and well-being through meaningful innovation
and our goal of addressing our customers’ healthcare challenges (delivering on the
Quadruple Aim);
d) stimulating share ownership to create alignment with shareholders and encourage
employees to act as stewards and ambassadors of the company;
• Encourages the company and its employees to act responsibly and sustainably;
• Delivers value for our stakeholders, such as shareholders, customers, consumers and
employees, by continuously engaging with them and make a positive contribution to
society at large;
• Leads to fair and internally consistent pay levels by taking into account internal pay
ratios.
113
Main elements of the Remuneration Policy
Compensation element Purpose and link to strategy Operation Policy Level

Total Direct Compensation To support the Remuneration Policy’s objectives, the The Supervisory Board ensures that a competitive remuneration package for Total direct remuneration is aimed at or close to,
Total Direct Compensation includes a significant Board-level executive talent is maintained and benchmarked. the median of the Quantum Peer Group.
variable part in the form of an Annual Incentive The positioning of Total Direct Compensation is reviewed against benchmark data
(cash bonus) and Long-Term Incentive in the form of on an annual basis and is recalibrated if and when required. To establish this
performance shares. As a result, a significant benchmark, data research is carried out each year on the compensation levels in
proportion of pay is ‘at risk’. the Quantum Peer Group.
Annual Base Compensation Fixed cash payments intended to attract and retain Annual Base Compensation levels and any adjustments made by the Supervisory The individual salary levels are shown in this
executives of the highest caliber and to reflect their Board are based on factors including the median of Quantum Peer Group data Remuneration Report.
experience and scope of responsibilities. and performance and experience of the individual member.
The annual review date for the base salary is typically before April 1.
Annual Incentive Variable cash bonus incentive of which achievement The payout in any year relates to the achievements of the preceding year. Metrics President & CEO
is tied to specific financial and non-financial targets are disclosed ex-ante in the Remuneration Report and there will be no retroactive On-target: 100%
derived from the company’s annual strategic plan. changes to the selection of metrics used in any given year once approved by the Maximum: 200% of Annual Base Compensation.
These targets are set at challenging levels and are Supervisory Board and disclosed. Other BoM members
partly linked to the results of the company (80% On-target: 80%
weighting) and partly to the contribution of the Maximum: 160% of Annual Base Compensation.
individual member (20% weighting).
Long-Term Incentive Our Long-Term Incentives form a substantial part of The annual award size is set by reference to a multiple of base salary. President & CEO
total remuneration, with payouts contingent on The actual number of performance shares to be awarded is determined by Annual grant size: 200% of Annual Base
achievement of challenging EPS targets, relative TSR reference to the average of the closing price of the Royal Philips share on the day Compensation.
performance against a high-performing peer group of publication of the first quarterly results and the four subsequent trading days. Other BoM members
and sustainability objectives that are directly aligned Dependent upon the achievement of the performance conditions, cliff-vesting Annual grant size: 150% of Annual Base
with our purpose to make the world healthier and applies three years after the date of grant. Compensation.
more sustainable through innovation. During the vesting period, the value of dividends will be added to the Maximum vesting opportunity is 200% of the
performance shares in the form of shares. These dividend-equivalent shares will number of performance shares granted.
only be delivered to the extent that the award actually vests.
Mandatory share To further align the interests of executives to those The guideline for members of the Board of Management is to hold at least a The minimum shareholding requirement is 400%
ownership and holding of stakeholders and to motivate the achievement of minimum shareholding in the company. of annual base compensation for the CEO and
requirement sustained performance. Until this level has been reached the members of the Board of Management are 300% for other members of the Board of
required to retain all after-tax shares derived from any Long-Term Incentive Plan. Management.
All Board of Management members have reached the required share ownership
level.
The shares granted under the Long-Term Incentive Plan shall be retained for a
period of at least 5 years or until at least the end of their contract period if this
period is shorter.
The guideline does not require members of the Board of Management to
purchase shares in order to reach the required share ownership level.
Pension Pension plan and pension contribution intended to 1. Defined Contribution plan with fixed contribution (applicable to all executives in
result into an appropriate level at retirement. the Netherlands – capped at EUR 128,810).
2. Gross allowance of 25% of annual base compensation exceeding EUR 128,810.
3. Temporary gross transition allowance offsetting historical plan changes.
Additional arrangements To aid retention and remain competitive within the Additional arrangements include expense and relocation allowances, medical
marketplace insurance, accident insurance and company car arrangements, which are in line
with other Philips executives in the Netherlands.
The members of the Board of Management also benefit from coverage under the
company’s Directors & Officers (D&O) liability insurance.
The company does not grant personal loans to members of the Board of
Management.
114
Peer Groups The Remuneration Policy and the LTI Plan allow changes to the peer groups to be made by
We use a Quantum Peer Group for remuneration benchmarking purposes, and therefore we the Supervisory Board without further approval from the General Meeting of Shareholders
aim to ensure that it includes business competitors, with an emphasis on companies in the in respect of up to three companies on an annual basis (for instance: following a delisting of
healthcare, technology-related or consumer products area, and other companies we a company or, a merger of two peer companies), or six companies in total during the four
compete with for executive talent. The Quantum Peer Group consists of predominantly years following adoption and approval of the Remuneration Policy and the LTI Plan
Dutch and other European companies, plus a minority (up to 25%) of US-based global respectively (or, if earlier, until the adoption or approval of a revised Remuneration Policy or
companies, of comparable size, complexity and international scope. revised LTI Plan).
Philips Group Services agreements

Quantum Peer Group 2023
The members of the Board of Management are engaged by means of a services agreement
European companies Dutch companies US companies
(overeenkomst van opdracht). Termination of the contract by either party is subject to six
Alcon Reckitt Benckiser Ahold Delhaize Baxter
months’ notice period. The severance payment is set at a maximum of one year’s annual
BAE Systems Roche AkzoNobel Becton Dickinson
base compensation. No severance payment is due if the agreement is terminated early on
Capgemini Rolls-Royce ASML Boston Scientific
Ericsson Safran Heineken Danaher
behalf of the Board of Management member or in the case of urgent cause (dringende
Fresenius Medical Care Siemens Healthineers Medtronic reden) as defined in article 7:678 and further of the Dutch Civil Code. The term of the
GlaxoSmithKline Smith & Nephew Stryker services agreement is aligned with the term for which the relevant member has been
Nokia Thales appointed by the General Meeting of Shareholders (which is a maximum period of four
years, it being understood that this period expires no later than at the end of the Annual
General Meeting of Shareholders (AGM) held in the fourth year after the year of
In addition, we use a TSR Performance Peer Group to benchmark our relative Total appointment).
Shareholder Return performance for LTI purposes and against our business peers in the
health technology market and other markets in which we compete. The companies we have Philips Group
Contract terms for current members 2023
selected for this peer group include predominantly US-based healthcare companies. Given
end of term
that a substantial number of relevant competitors are US-headquartered, the weighting of
Roy Jakobs AGM 2026
US-based healthcare companies is more notable than for the Quantum Peer Group.
Abhijit Bhattacharya AGM 2025
Philips Group Marnix van Ginneken AGM 2025

TSR Performance Peer Group 2023
US companies European companies Japanese companies
8.2.3 Remuneration of the Board of Management in 2023
Baxter Alcon Canon
The Supervisory Board has determined the 2023 pay-outs and awards to the members of the
Becton Dickinson Elekta Terumo
Board of Management, upon the proposal of the Remuneration Committee, in accordance
Boston Scientific Fresenius Medical Care
Danaher Getinge
with the 2020 Remuneration Policy and the 2020 LTI Plan. In addition, the Supervisory Board
GE Healthcare Reckitt Benckiser has determined the 2023 vesting of the 2021 LTI grant, of which the performance period
Hologic Siemens Healthineers ended on December 31, 2023. This was done in accordance with the LTI Plan as approved
Johnson & Johnson Smith & Nephew during the 2020 Annual General Meeting of Shareholders.
Medtronic
Resmed The Remuneration Committee annually conducts a scenario analysis. This includes the
Stryker calculation of remuneration under different scenarios, whereby different Philips
performance assumptions and corporate actions are examined. The Supervisory Board
concluded that the relationship between the strategic objectives and the chosen
performance criteria for the 2023 Annual Incentive, as well as for the 2021 LTI, were
adequate.
115
Annual Base Compensation

The annual base compensation of the members of the Board of Management has been
reviewed as part of the regular remuneration review. No increase was applied to
acknowledge the disappointing company performance in 2022 and to reflect the limited
budget available for the annual compensation review for the wider population. As a result,
the annual base compensation of Roy Jakobs, Abhijit Bhattacharya and Marnix van
Ginneken remained unchanged in 2023.
2023 Annual Incentive

The Annual Incentive performance has been assessed based on company financial results as
well as individual results. Details are as follows:
Company financial results (80% weighting)

In line with the Remuneration Policy, the company sets financial targets in advance of the
year for all members of the Board of Management. For the year 2023, the financial targets
*) *) *)
set at Group level cover Comparable Sales Growth , Adjusted EBITA and Free Cash Flow .
The realized performance for all three metrics was above target. Realized performance levels
presented in the table below include the financial impact connected with the Respironics
consent decree, and excluding this impact the Comparable Sales Growth*) and Adjusted
EBITA*) would have been 7.0% and 10.5% respectively. Reviewing these performance levels,
the Supervisory Board decided to apply two downward adjustments. First, to acknowledge
the decrease in comparable order intake reported over 2023, the Supervisory Board lowered
the payout on the Comparable Sales Growth metric from 200% to 175% of target . Second,
to account for the upward effect on Adjusted EBITA resulting from excluding the financial
impact connected with the proposed Respironics consent decree, the Supervisory Board also
lowered the payout from 180% to 175% of target for this metric (corresponding to an
Adjusted EBITA performance of 10.5% which excludes the financial impact referred to).
Assessment of performance
Financial performance Weighting as % of target Annual threshold target maximum realized resulting payout as % of Weighted pay-out as % of target Annual
metric Incentive performance performance performance performance target Incentive
Comparable Sales 30% 0.0% 1.5% 3.5% 6.0% 175.0% 52.5%
Growth 1)
Adjusted EBITA margin 1) 30% 7.5% 9.0% 11.0% 10.6% 175.0% 52.5%
Free Cash Flow 1) 20% 571 871 1,171 1,582 200.0% 40.0%
Total 80% 145.0%
1)
Non-IFRS financial measure. For the definition and reconciliation of the most directly comparable IFRS measure, refer to Reconciliation of non-IFRS information, starting on page 289.
116
Individual targets based on area of responsibility (20% weighting)

The individual performance criteria and assessment targets set at the beginning of the year
have been disclosed in the following table. To determine the payout levels for the individual
goals, the Supervisory Board typically applies a holistic assessment as to the performance
against the set goals as well as the relative weighting of the goal categories. These relative
weightings are not in all cases equal, but such that any goal category remains relevant and
aligned with the strategic priorities for the year.
Board of Management Weighted pay-out as% of target

Member Individual Performance criteria Assessment of performance Annual Incentive
• On track to deliver on plan to create value with sustainable impact
Strategy execution • Strong progress made on establishing a simplified, more agile operating model and generating productivity
savings
• Delivered on the targeted reduction of Quality Management Systems to increase focus, reduce complexity, and
Quality & operational excellence minimize risk
• Progress made on the Patient Safety & Quality culture and mindset
Roy Jakobs 22.0%
• Employee engagement within target range, showing significantly step-up in the year, however behind on target
and high-performance norms
People & organization
• Progress made on driving the broader talent agenda, with a strong focus on ExCo successor identification and
development. This resulted in two internal ExCo appointments and two external ExCo appointments.
Customer results • Significant step-up achieved in on-time delivery of orders as per customer expectations
ESG/Sustainability • Delivered ahead of annual ESG targets, advancing towards the Philips 2025 ESG commitments
• On track to deliver on our plan to create value with sustainable impact
• Significant results delivered from Cash program
Strategy execution
• Strong progress made on establishing a simplified, more agile operating model and generating productivity
savings
Abhijit Bhattacharya • Progress made on the Patient Safety & Quality culture and mindset 21.0%
People & organization and high-performance norms
• Progress made on succession planning for own scope
Customer results • Significant step-up achieved in on-time delivery of orders as per customer expectations
• On track to deliver on our plan to create value with sustainable impact
Strategy execution • Strong progress made on establishing a simplified, more agile operating model and generating productivity
savings
• Progress made on the Patient Safety & Quality culture and mindset
Marnix van Ginneken 23.0%
People & organization and high-performance norms
• Strong progress made on building succession pipeline for own scope
Customer results • Strong performance on managing litigation with major legal cases under management and settlement reached in
US economic loss class action
117
Overall, this leads to the following total Annual Incentive realization: Financial element (70% weighting):
For the year 2024, the following financial performance metrics are selected to ensure
Annual Incentive realization 2023 in EUR unless otherwise stated
alignment with the key (strategic) priorities in the year:
Annual incentive
opportunity Realized annual incentive
Financial Individual Payout as %
• 25% weighting: Comparable Sales Growth*)
Target as a % Target performance performance of target Realized • 25% weighting: Adjusted EBITA*) margin
of base Annual (weighted pay- (weighted pay- Annual annual • 20% weighting: Free Cash Flow*)
compensation Incentive out %) out %) Incentive 1) incentive
Roy Jakobs 100% 1,200,000 145.0% 22.0% 167.0% 2,004,480
Non-Financial element (30% weighting):
Abhijit 80% 648,000 145.0% 21.0% 166.0% 1,075,939
Bhattacharya At the start of each year, two to four performance categories are selected from the
Marnix van 80% 504,000 145.0% 23.0% 168.0% 846,922 following list, whereby each selected category receives an equal weighting:
Ginneken
1) • Patient Safety & Quality
Note that figures may not add up due to rounding.
• Customer
• Strategy and Execution
*) • ESG
For each selected category, one or more performance objectives are determined at the start
of the year for each of the members of the Board of Management.
2024 Annual Incentive For the year 2024, the following categories and objectives are selected to ensure alignment
This section presents incentive performance metrics under the proposed 2024 Remuneration with the key (strategic) priorities in the year:
Policy for the Board of Management. In the event that the proposed 2024 Remuneration
Policy would not be adopted by the 2024 AGM, the current 2020 Remuneration Policy would
continue to apply.
In the proposed 2024 Remuneration Policy, the weighting of the non-financial element has
increased to 30% (from 20%) and, correspondingly, the weighting of the financial element
has decreased to 70% (from 80%). This change reflects the increased relative importance of
factors relating to strategic priorities (such as patient safety and quality, supply chain
reliability, and a simplified operating model), as well as our Environmental, Social and
Governance (ESG) performance.
118
Performance Performance Applicable

Weighting Measurement description
2021 Long-Term Incentive
category objective for The 3-year performance period of the 2021 LTI grant, consisting of performance shares,
This objective measures delivery on our
Drive Patient ended on December 31, 2023. The realization of this grant is based on TSR achievement,
company-wide program to strengthen our
Safety & adjusted EPS growth and sustainability objectives. The following performance achievement
Patient All members Patient Safety & Quality culture, capabilities
Quality as
Safety &
highest
of Board of 7.5% and performance. Additionally, we measure and vesting levels have been determined by the Supervisory Board in respect of the 2021
Quality Management the progress on the Respironics recall and
priority in the grant of performance shares:
delivery of the proposed consent decree
organization
commitments.
Philips Group
Improve Roy Jakobs;
This objective is measured by the Performance achievement and vesting levels
customer Abhijit
improvement of the customer NPS.
experience Bhattacharya achievement weighting vesting level
Improve Roy Jakobs This objective is measured by the on-time TSR 0.0% 50.0% 0.0%
supply chain delivery of orders as per customer EPS 0.0% 40.0% 0.0%
Customer reliability 7.5% expectations.
Sustainability objectives 175.0% 10.0% 17.5%
Improve Abhijit Deliver Reliable Forecast as per plan.
Total 17.5%
financial Bhattacharya
forecasting
Manage legal Marnix van Develop and manage litigation strategy and
issues Ginneken potential liabilities. TSR (50% weighting)
This objective measures delivery on our A ranking approach to TSR applies with Philips itself included in the TSR Performance Peer
Roy Jakobs
value creation plan and market share gain. Group. TSR scores are calculated based on a local currency approach and by taking a
Drive focused Abhijit This objective measures delivery on our 3-month averaging period prior to the start and end of the 3-year performance period. The
strategy to Bhattacharya value creation plan and delivery on cash
win in the program and productivity targets. performance incentive pay-out zone is outlined in the following table, which results in zero
market Marnix van This objective measures delivery on our vesting for performance below the 40th percentile and 200% vesting for performance levels
Strategy and
Ginneken 7.5% value creation plan and delivery on legal & above the 75th percentile. The incentive zone range has been constructed such that the
Execution
compliance commitments as per plan. average pay-out over time is expected to be approximately 100%.
Establish
simplified, All members This objective measures delivery on the Philips Group
more agile of Board of operating model simplification and our
Performance-incentive zone for TSR in %
operating Management headcount reduction plan.
model Position 20-14 13 12 11 10 9 8 7 6 5-1
This objective measures: Vesting % 0 60 80 90 100 120 140 160 180 200
- Performance on our ESG index (which
Deliver on All members includes various elements such as emission-
ESG ESG of Board of 7.5% and diversity targets) The TSR achieved by Philips during the performance period was -51.10%, using a start date of
Commitments Management - Our employee engagement score
- Talent and succession development of
October 2020 and end date of December 2023. This resulted in Philips being positioned at
senior roles in the organization rank 20 in the TSR performance peer group shown in the following table, resulting in a TSR
achievement of 0%.
*)
Reconciliation of non-IFRS information, starting on page 289. Following Oracle’s acquisition of Cerner (completed June 2022), the Supervisory Board
adopted the approach of recognizing Cerner’s performance through the delisting date. As a
proxy for future performance, reinvestment in an index of the remaining 19 peer companies
was assumed (effectively retaining a peer group of 20 companies).
119
TSR results LTI Plan 2021 grant: (51.10%)

proceedings (positive impact). Overall, this resulted in an LTI Plan EPS of EUR 0.26 based on
total return rank number
adjusted net income from continuing operations, leading to a realization of 0% of target.
Canon 119.99% 1
General Electric 109.08% 2 Philips Group
Boston Scientific 48.10% 3 LTI Plan EPS realization in millions of EUR unless otherwise stated
Siemens Healthineers 35.00% 4 Net income EPS (euro)
Stryker 28.06% 5 Income from continuing operations attributable to shareholders (456) (0.50)
Getinge 18.79% 6 Profit and loss impact of:
Alcon 16.73% 7 - Acquisitions and divestitures 1)
1 0.00
Johnson & Johnson 12.57% 8 - Foreign exchange variations versus plan 2)
60 0.07
Cerner 11.12% 9 - Legacy legal proceedings 3)
628 0.69
Becton Dickinson 10.29% 10 Adjusted net income from continuing operations 234 0.26
Terumo 8.71% 11
1)
Danaher 7.33% 12 Profit and loss impact of acquisitions and divestments made after the start of the performance period is excluded.
2)
Hologic (1.37)% 13 Impact of variations of unhedged volatile currencies compared to the performance period plan.
3)
Reckitt Benckiser (11.46)% 14 Costs include the provision of EUR 575 million for the settlement to resolve all economic loss claims in the US Multidistrict
Litigation (MDL) related to Philips Respironics’ voluntary recall of certain sleep and respiratory care devices and legal fees
Elekta (20.67)% 15 related to the recall. The adjustment also includes legal releases.
ResMed (21.05)% 16
Medtronic (24.84)% 17
Smith & Nephew (27.58)% 18 Sustainability objectives (10% weighting)
Fresenius Medical (45.30)% 19
In order to further align the remuneration package for the Board of Management with our
Philips (51.10)% 20
purpose and our ESG commitment, a sustainability criterion was introduced in the 2020 LTI
Plan. Philips believes that ESG performance will improve the company’s performance as a
Adjusted EPS growth (40% weighting) whole and, therefore, that it should be explicitly linked to (long-term) remuneration. The
The LTI Plan EPS payouts and targets set at the beginning of the performance period were as criteria are based on three Sustainable Development Goals (SDGs) as defined by the United
follows: Nations that are included in Philips’ strategy on sustainability (no. 3, 12 and 13). These three
SDGs are translated in five underlying objectives, which are measured against a specific
Philips Group target range.
LTI Plan EPS payouts
Below threshold Threshold Target Maximum Actual
At the beginning of the performance period, challenging target ranges are set for each of
LTI plan EPS (euro) <1.38 1.38 1.54 1.72 0.26
the five objectives. Based on a point-to-point method, performance achievement is
Vesting % 0% 40% 100% 200% 0%
measured at the end of the performance period (i.e., 3 years) versus the beginning of the
performance period. The vesting level is determined based on the following scheme:
In respect of the 2021 LTI grant, the LTI plan EPS is calculated based on a reported net
income attributable to shareholders divided by the number of common shares outstanding No. of measures achieved on or above target Vesting %
(after deduction of treasury shares) on the day prior to the beginning of the performance 1 0%
period (to eliminate the impact of any share buyback, stock dividend, etc.), resulting in an 2 0%
EPS of EUR (0.50). Furthermore, as per the 2020 LTI Plan, the LTI Plan EPS includes 3 50%-100%
adjustments to account for events that were not planned when targets were set or were 4 100%-150%
outside management’s control such as the profit and loss impact of acquisitions and 5 150%-200%
divestments (balance is neutral), the profit and loss impact of unhedged foreign exchange
variations versus plan (positive adjustment) and the profit and loss impact of legacy legal
120
The realized performance is described in the following table. As five out of five objectives
are achieved within or better than target range, the vesting % lies between 150% and 200%
of target. Based on the overall performance of the five objectives, the Supervisory Board has
assessed that a vesting level of 175% would reflect an appropriate positioning within the
target range.
For more information on the realized performance on all five objectives please refer to our
Environmental, Social and Governance, starting on page 42 and Independent auditor's
assurance report on the ESG information and the EU Taxonomy information, starting on
page 285.
Sustainability category Underlying objective Target range realized performance

Ensure healthy lives and Targeted # of Lives 1,517 – 1,695 1,880 million Better than
promote well-being for all at Improved in year 3 1) million target
all ages (SDG3) range
Lives Improved
Ensure sustainable Targeted circular 15.0% – 20.1% 20.0% Within
consumption and revenue in year 3 2) target
production patterns (SDG12) range
Circularity Targeted waste to 3.5% – 0.1% 0.0% Better than
landfill in year 3 3) target
range
Targeted closing the 20.0% – 28.5% 20.5% Within
loop in year 3 4) target
range
Take urgent action to Targeted CO2 equivalent 640 – 574 418 Ktonnes Better than
combat climate change and (in Kilo Tonnes) in year 3 Ktonnes CO2 CO2 target
its impacts (SDG13) range
Carbon footprint
1)
Lives Improved by Philips products, solutions and services and care to those in underserved markets.
2)
Revenue from products, services and solutions contributing to circularity (e.g. optimizing and re-using materials)
3)
Avoiding production of waste materials.
4)
Taking back healthcare equipment.
121
2024-2026
2024 Long-Term Incentive
ESG objective Weighting Rationale Measurement approach
This section presents incentive performance metrics under the proposed 2024 Remuneration
Targeted # of 5.0% Ensure healthy lives and promote Please refer to section Improving
Policy for the Board of Management. In the event that the proposed 2024 Remuneration
Lives well-being for all at all ages people’s lives, starting on page
Policy will not be adopted by the 2024 AGM, the current 2020 Remuneration Policy will Improved in (SDG3) Lives Improved 56 for more details.
continue to apply. year 3 1)
Targeted 5.0% Ensure sustainable consumption and Please refer to section Circular
circular production patterns Economy, starting on page 245
The 2024 Long-Term Incentive grant remains to consist of 100% performance shares of revenue in year (SDG12) Circularity for more details.
which vesting is subject to performance over a period of 3 years. We have broadened the 3 2)
sustainability perspective to the full Environmental, Social and Governance ('ESG') spectrum, Targeted CO2 5.0% Take urgent action to combat climate Please refer to section
and subsequently increased the weighting of the ESG performance metric from 10% to 20%. equivalent change and its impacts (SDG13) Sustainable Operations , starting
(in Kilotonnes) Carbon footprint on page 249for more details.
By doing so, we aim to reflect the importance of ESG to our company and its increasing in year 3
relevance to our stakeholders (as a strategic matter and in the context of our risk Targeted 5.0% Retain an engaged workforce The Employee Engagement
management), and to incentivize management’s focus on our policy objective to deliver Employee Employee Engagement Score Score (EES) is the single measure
Engagement of the overall level of employee
superior, long-term value to our stakeholders, while acting responsibly towards our planet
Score in year 3 engagement at Philips,
and society. As a result of this, the weighting of the relative TSR metric has been slightly measured on a bi-yearly basis.
reduced to 40% (from 50%) to keep a balanced weighting among the three LTI performance
1)
Lives Improved by Philips products, solutions and services and care to those in underserved markets.
metrics. Lastly, the weighting of the adjusted EPS growth metric remains unchanged,
2)
Revenue from products, services and solutions contributing to circularity (e.g. optimizing and re-using materials)
resulting in the following performance metrics and weighting:
• 40% weighting: Relative Total Shareholder Return (‘TSR’) *)

• 40% weighting: Adjusted Earnings per Share growth*) (‘EPS’) Reconciliation of non-IFRS information, starting on page 289.
• 20% weighting: ESG performance
ESG Performance (20% weighting)

At the start of each performance year, we select four ESG objectives in line with our long- Pension
term strategic priorities. There is no exhaustive list of objectives that can be selected. To The following pension arrangement is in place for the members of the Board of
ensure that all objectives are material, auditable and measurable, we only select objectives Management working under a services agreement governed by Dutch law:
which are reported in our Annual Report (in preparation for the Corporate Sustainability
Reporting Directive) and therefore are subject to our external auditor’s reasonable • Flex ES Pension Plan in the Netherlands, which is a Collective Defined Contribution plan
assurance. Furthermore, we make sure that in any measurement year, the ESG objectives do with a fixed contribution of (currently) 30.3% (including an own contribution of 2%) of
not overlap with our non-financial performance objectives for the Annual Incentive. the maximum pensionable salary of EUR 128,810 (effective January 1, 2023) minus the
offset. The Flex ES Plan has a target retirement age of 68 and a target accrual rate of
The objectives selected for the 2024 LTI grant are shown in the following table, including the 1.85%;
rationale for selecting these objectives and more details on the measurement approach. • A gross Pension Allowance equal to 25% of the base compensation exceeding EUR
128,810;
• A temporary gross Transition Allowance, for a maximum period of 8 years (first 5 years in
full; year 6: 75%; year 7: 50%, year 8: 25%) for members of the Board of Management
who were participants of the former Executive Pension Plan. The level of the allowance is
based on the age and salary of the Board member on December 31, 2014.
122
Total remuneration costs in 2023

The following table gives an overview of the costs incurred by the company in 2023 and
2022 in relation to the remuneration of the Board of Management. Costs related to
performance shares are based on accounting standards (IFRS), which prescribe that costs for
each LTI grant are recognized over the full (multi-year) vesting period, proportionate to the
relevant fiscal year. Therefore, the costs for any year reflect costs of multiple LTI grants, as
opposed to the actual value for the holder of an LTI grant at the vesting date. Please refer to
section 2021 Long-Term Incentive, starting on page 119 for more details on the actual vesting
of the performance shares.
Philips Group
Remuneration Board of Management 1) in EUR
Accounting costs in the year
reported annual base compen- base compen- realized annual performance pension pension scheme other compen- Fixed-variable
year sation 2) sation incentive shares 3) allowances 4) costs sation 5) total cost remuneration 6)
2023 1,200,000 1,200,000 2,004,480 968,922 267,798 31,891 109,256 4,582,347 35%-65%
R. Jakobs
2022 1,200,000 256,438 waived 112,737 57,973 6,012 11,507 444,667 75%-25%
A. 2023 810,000 810,000 1,075,939 793,429 197,133 31,891 94,516 3,002,907 38%-62%
Bhattacharya 2022 810,000 806,250 waived 763,140 7) 237,250 28,133 61,308 1,896,081 60%-40%
M.J. van 2023 630,000 630,000 846,922 614,840 125,298 31,891 53,446 2,302,397 37%-63%
Ginneken 2022 630,000 626,250 waived 585,490 7) 141,622 28,133 35,343 1,416,837 59%-41%
2023 2,640,000 3,927,341 2,377,191 590,228 95,673 257,218 9,887,650 36%-64%
Total
2022 1,688,938 waived 1,461,367 436,845 62,278 108,158 3,757,585 61%-39%
1)
Reference date for board membership is December 31, 2023.
2)
Annual base compensation as incurred in the year, base compensation increases are reflected proportionally.
3)
Costs of performance shares are based on accounting standards (IFRS) and do not reflect the value of performance shares at the vesting/release date.
4)
The Pension Transition Allowance was maintained at the current level for Mr Bhattacharya for the term of his 2019 services agreement. In the 2023 services agreement of Mr Bhattacharya the Pension Transition Allowance was no longer applicable. The total pension
cost of the company related to the pension arrangement (including the aforementioned Transition Allowance) is at a comparable level over a period of time to the pension costs under the former Executive Pension Plan.
5)
The stated amounts mainly concern (share of) allowances to members of the Board of Management that can be considered as remuneration. In a situation where such a share of an allowance can be considered as (indirect) remuneration (for example, private use of
the company car), then the share is both valued and accounted for here. The method employed by the fiscal authorities is the starting point for the value stated.
6)
Fixed remuneration is determined as the sum of base compensation, pension allowances, pension scheme costs and other compensation. Variable remuneration is determined as the sum of realized annual incentive and performance shares.
7)
Despite the waiving of the 2020 LTI grant, these amounts are not nil as they reflect accounting costs according to IFRS.
123
5-year development of CEO and BoM versus average employee Historical LTI grants and holdings
remuneration costs compared to company performance
Internal pay ratios are a relevant input factor for determining the appropriateness of the Number of performance shares (holdings)
implementation of the Remuneration Policy, as recognized in the Dutch Corporate Under the LTI Plan the current members of the Board of Management were granted 236,622
Governance Code. For the 2023 financial year, the ratio between the annual total performance shares in 2023. The following table provides an overview at end December
compensation for the CEO and the average annual total compensation for an employee was 2023 of performance share grants.
46:1. The ratio decreased from 55:1 in 2022. Further details on the development of these
amounts and ratios over time can be found in the following table. Please note that the
amounts presented in the following table reflect total remuneration costs to the company
which differ from the actual payout to the members of the Board of Management.
Philips Group
Remuneration costs in EUR
2019 2020 2021 2022 2023
Remuneration
CEO Total Remuneration Costs (A) 1) 5,260,111 6,153,067 5,452,299 5,133,659 4,582,347
CFO Total Remuneration Costs 2,602,606 3,007,990 2,652,864 1,896,081 3,002,907
CLO Total Remuneration Costs 1,856,426 2,203,160 2,029,054 1,416,837 2,302,397
Average Employee (FTE) Total Remuneration 92,645 91,455 86,853 93,373 99,870
Costs (B) 2)
Ratio A versus B 3) 57:1 67:1 63:1 55:1 46:1
Company performance
Annual TSR 4) 25.6% 6.2% (14.5)% (60.0)% 42.9%
Comparable Sales Growth% 5) 4.5% 2.9% (1.2)% (2.8)% 6.0%
Adjusted EBITA% 5) 13.2% 13.2% 12.0% 7.4% 10.6%
Free Cash Flow 5) 923 1,635 900 (961) 1,582
1)
For 2022, CEO refers to Frans van Houten for the period up to October 15, 2022, and to Roy Jakobs for the period from
October 15, 2022, onwards. For 2018 through 2021, CEO refers to Frans van Houten.
2)
Based on Employee benefit expenses (EUR 6.9 billion) divided by the average number of employees (69,115 FTE) as
reported in Income from operations. This results in an average annual total compensation cost of EUR 99,870 per employee.
3)
A consideration when interpreting the ratios between CEO and average employee remuneration is that the remuneration of
the CEO is more heavily dependent on variable compensation than the remuneration of the average employee at Philips.
Furthermore, the costs of performance shares are based on accounting standards (IFRS) and the specific allocation of these
costs to the year. As such, the total remuneration level and costs applicable to the CEO will vary more with Philips’ financial
performance than the remuneration level and costs applicable to the average employee. As a consequence, the ratio will
increase when financial performance is strong and conversely decrease when financial performance is not as strong.
4)
Annual TSR was calculated in line with the method as used for the LTI plan (i.e., based on reinvested dividends and 3-month
averaging)
5)
124
Philips Group
Number of performance shares (holdings) in number of shares unless otherwise stated
number of unvested number of
shares opening shares number of value at unvested closing
originally value at end of holding balance at Jan. awarded in (dividend) shares vested vesting date balance at Dec. 31,
grant date granted grant date vesting date period 1, 2023 2023 shares awarded in 2023 1) in 2023 2023
4/30/2020 17,704 2) 706,250 4/30/2023 4/30/2025 19,073 waived 0
4/30/2021 15,812 2) 750,000 4/30/2024 4/30/2026 16,696 747 17,443
R. Jakobs 4/29/2022 37,630 2) 930,000 4/29/2025 4/29/2027 39,009 1,745 40,754
10/28/2022 24,279 314,137 10/28/2025 10/28/2027 24,279 1,086 25,365
4/28/2023 124,538 2,400,000 4/28/2026 4/28/2028 0 124,538 5,571 130,109
4/30/2020 29,518 1,177,500 4/30/2023 4/30/2025 31,800 waived 0
A. 4/30/2021 25,141 1,192,500 4/30/2024 4/30/2026 26,547 1,187 27,734
Bhattacharya 4/29/2022 49,162 1,215,000 4/29/2025 4/29/2027 50,964 2,280 53,244
4/28/2023 63,047 1,215,000 4/28/2026 4/28/2028 0 63,047 2,820 65,867
4/30/2020 22,373 892,500 4/30/2023 4/30/2025 24,103 waived 0
M.J. van 4/30/2021 19,448 922,500 4/30/2024 4/30/2026 20,535 919 21,454
Ginneken 4/29/2022 38,237 945,000 4/29/2025 4/29/2027 39,638 1,773 41,412
4/28/2023 49,037 945,000 4/28/2026 4/28/2028 0 49,037 2,194 51,231
1)
The shares vested in 2023 are subject to a 2-year holding period.
2)
Awarded before date of appointment as a member of the Board of Management
Share ownership guidelines Remuneration of the Supervisory Board in 2023

To further align the interests to those of stakeholders and to motivate the achievement of
sustained performance, the members of the Board of Management are bound to a Summary of the Remuneration Policy
minimum shareholding requirement. The following table shows the minimum shareholding Please find below a brief summary of the Remuneration Policy for the Supervisory Board, as
requirement, annual base compensation, (vested) shares held and share ownership ratio of adopted at the Annual General Meeting of Shareholders 2020. The fee levels in this
each Board of Management member as per December 31, 2023. Until the minimum Remuneration Policy are the same as the Supervisory Board fee levels as determined by our
shareholding requirement is reached, the members of the Board of Management are shareholders at the 2018 Extraordinary General Meeting of Shareholders.
required to retain all after-tax performance shares that have vested, but they are not
required to make additional share purchases. The overarching objective of the 2020 Remuneration Policy for the Supervisory Board is to
enable its members to fulfill their duties, acting independently: supervising the policies,
Philips Group management and the general affairs of Philips, and supporting the Board of Management
Share ownership Board of Management
and the Executive Committee with advice. Also, the members of the Supervisory Board are
Minimum shareholding Annual Base (Vested) shares Ownership
requirement 1) Compensation held ratio 2) guided by the company’s long-term interests, with due observance of the company’s
R. Jakobs 4.0x 1,200,000 126,809 2.2x purpose and strategy, taking into account the interests of shareholders and all other
A. Bhattacharya 3.0x 810,000 177,088 4.6x stakeholders.
M.J. van Ginneken 3.0x 630,000 129,447 4.3x
To support the objectives mentioned above, the 2020 Remuneration Policy is aimed at
1)
As ratio of Annual Base Compensation
attracting and retaining international Supervisory Board members of the highest caliber and
2)
The Ownership ratio is calculated by multiplying the total shares held by the share price of EUR 21.09 (based on the closing
share price of December 31, 2023) and dividing this by the base compensation. with experience and expertise relevant to our health technology businesses.
125
In compliance with the Dutch Corporate Governance Code, the 2020 Remuneration Policy Remuneration of the Supervisory Board in 2023
provides that the remuneration for the members of the Supervisory Board is not dependent The individual members of the Supervisory Board received, by virtue of the positions they
on the results of the company and does not include any shares (or rights to shares). held, the following remuneration in 2023:
Nevertheless, members of the Supervisory Board are encouraged to hold shares in the
company for the purpose of long-term investment to reflect their confidence in the future Philips Group
Remuneration of the Supervisory Board in EUR
course of the company. The company does not grant personal loans to members of the
membership committees other compensation 1) total
Supervisory Board.
F. Sijbesma 155,000 35,000 16,345 206,345
P.A.M. Stoffels 115,000 35,000 22,269 172,269
The Supervisory Board reviews fee levels in principle every three years, in order to monitor
D.E.I. Pyott 100,000 35,000 19,769 154,769
and take account of market developments and manage expectations of our key A.M. Harrison 100,000 14,000 19,769 133,769
stakeholders. The levels are aimed at broadly median market levels (and around the 25th M.E. Doherty 100,000 27,000 27,269 154,269
percentile market level for the Chairman) paid in the Quantum Peer Group (as used in the P. Löscher 100,000 32,000 17,269 149,269
2020 Remuneration Policy for the Board of Management). I. Nooyi 100,000 14,000 17,269 131,269
S.K. Chua 100,000 18,000 22,269 140,269
The following table provides an overview of the current remuneration structure: H. Verhagen 100,000 14,000 7,269 121,269
S. Poonen 100,000 18,000 19,769 137,769
Philips Group Total 1,070,000 242,000 189,266 1,501,266
Remuneration Supervisory Board in EUR
Chair Vice Chair Member
1)
The amounts mentioned under other compensation relate to the fee for intercontinental travel, inter-European travel, the
entitlement of EUR 2,000 under the Philips product arrangement and the annual fixed net expense allowance.
Supervisory Board 155,000 115,000 100,000
Audit Committee 27,000 n.a. 18,000
Remuneration Committee 21,000 n.a. 14,000
Corporate Governance and Nomination & Selection Committee 21,000 n.a. 14,000
8.3 Report of the Audit Committee
Quality & Regulatory Committee 21,000 n.a. 14,000 The Audit Committee is chaired by Liz Doherty. Its other members are Peter Löscher, Chua
Attendance fee per inter-European trip 2,500 2,500 2,500 Sock Koong and Sanjay Poonen. Feike Sijbesma and Herna Verhagen also attend Audit
Attendance fee per intercontinental trip 5,000 5,000 5,000 Committee meetings. The Committee assists the Supervisory Board in fulfilling its
Entitlement to Philips product arrangement 2,000 2,000 2,000 supervisory responsibilities, including ensuring the integrity of the company’s financial
Annual fixed net expense allowance 11,345 2,269 2,269 statements, reviewing the company’s internal controls and overseeing the enterprise risk
Other travel expenses As reasonably incurred management process.
In 2023, the Audit Committee held five regular meetings and one extraordinary meeting,
The members of the Supervisory Board benefit from coverage under the company’s which all Audit Committee members attended.
Directors and Officers (D&O) liability insurance.
The CEO, CFO, Chief ESG & Legal Officer, Head of Internal Audit, Chief Accounting Officer
and external auditor (Ernst & Young Accountants LLP) were invited to and attended all
regular meetings.
The Committee also met separately in private sessions with the CEO, CFO, Head of Internal
Audit and external auditor after every regular quarterly meeting of the Committee. Prior to
the Committee meetings, the Audit Committee chair met one-on-one with the Group
Treasurer as well as with each of the management who regularly attend the Audit
Committee meetings (as set out in the previous paragraph) and with the external auditor
(Ernst & Young Accountants LLP).
126
The following overview highlights matters that were reviewed and/or discussed during staffing, independence, performance and organizational structure of the Internal Audit
Committee meetings in the course of, or in respect of, the financial year 2023: function.
• The performance of the external auditor in conducting the group and statutory audits as
• The company’s 2023 annual and interim financial statements and non-financial required by the Auditor Policy and the results of the 2022 EY service quality review
information, prior to publication. This review included the legal provision of EUR 575 program for Philips. Taking into account this performance review, the Committee
million in relation to the US economic loss class action provision recorded in Q1 2023, the evaluated the proposal for re-appointment of Ernst & Young Accountants LLP.
charges of EUR 363 million connected with the proposed Respironics consent decree, the Subsequently, Ernst & Young Accountants LLP was re-appointed at the 2023 Annual
restructuring provision, the FCO provisions, the goodwill impairment tests and the legal General Meeting of Shareholders as external auditor for a term of one year, starting on
matters. In each of the regular quarterly meetings of the Committee, the Committee January 1, 2024.
reviewed the draft of the press release on the company’s annual or interim financial • The Committee reviewed the transition plan as proposed by PricewaterhouseCoopers
statements. Accountants N.V. to take over from Ernst & Young Accountants LLP as the company’s new
• Matters relating to accounting policies, financial risks, reporting and compliance with external auditor, starting on January 1, 2025 for a term of four years.
accounting standards. Key accounting judgments were discussed in-depth, and • The proposed 2023 external audit scope, including key audit areas, approach and fees,
treatments were challenged, as were quality of earnings. Compliance with statutory and and non-audit services provided by the external auditor in conformity with the Philips
legal requirements and regulations, particularly in the financial domain, was also Auditor Policy.
reviewed. Important findings, Philips’ top and emerging areas of risk (including the • Review and challenge of the independence as well as the professional fitness and good
internal auditor’s reporting thereon, and the Chief ESG & Legal Officer’s review of standing of the external auditor and its engagement partners. For information on the
litigation and other claims, as well as material investigations, including those related to fees of the Group auditor, please refer to Audit fees in the note Income from operations,
the Philips Respironics voluntary recall), and follow-up actions and appropriate measures starting on page 159.
were examined thoroughly. • The company’s policy on business controls, legal compliance and the General Business
• The company’s cash flow generation, liquidity and financing headroom, and its ability Principles (including deployment). The Committee reviewed, discussed and monitored
under its capital structure and credit ratings to pay dividends and to fund capital closely the company’s internal control certification processes, and in particular,
investments, including share repurchases and other corporate finance initiatives. The compliance with section 404 of the US Sarbanes-Oxley Act and its requirements
Committee also monitored ongoing goodwill impairment indicators, in particular in the regarding assessment, review and monitoring of internal controls. The Committee also
Sleep & Respiratory Care business. Furthermore, the Committee reviewed the goodwill reviewed the status of previously reported significant deficiencies and progress made
impairment tests performed in the fourth quarter, risk management, legal compliance, with respect to the remediation thereof. It also discussed on a regular basis the
and developments in regulatory investigations, as well as legal proceedings, including developments in, and findings relating to, conduct resulting from investigations into
antitrust investigations and related provisions. alleged violations of the General Business Principles and, if required, any measures taken.
• The quarterly Internal Audit reports in which the Head of Internal Audit highlighted key • The company’s structure and system on export controls and sanctions for compliance
findings of internal audits and fraud investigations by the Internal Audit function in the with the international sanctions and export controls.
previous quarter. The Committee discussed the adequacy of the remediation actions • Philips’ Environmental, Social and Governance (ESG) approach, comprising an update on
agreed with management and accountabilities for executing on these actions. In each progress made with respect to the 2025 ESG key programs and sustainability
meeting the Head of Internal Audit also presented the audit schedule for the upcoming commitments and aims (including circular revenues) and Philips’ aim to improve the
quarter. health and well-being of 2.5 billion people per year by 2030 through meaningful
• Specific finance topics, capital spending and the company’s debt financing strategy innovation. The Supervisory Board was also educated on sustainability reporting
(including the issuance of bonds through the Euro Medium Term Note (EMTN) program requirements and requirements related to sustainability-related financial disclosures, as
to repay the EUR 500 million Term Loan in August 2023). well as European Union regulatory developments in this context. These include but are
• A post-investment review of projects in the areas of Information Technology, Research & not limited to education on the European Union Corporate Sustainability Reporting
Development, Real Estate, Operations and Restructuring, and assessment of the actual Directive and European Union Sustainability Reporting Standards and the impact thereof
spend and timing of such projects against the original budget and timing. on reporting by the Philips Group.
• Review and approval of the revised Internal Audit charter, annual audit plan and budget, • Philips’ cybersecurity risk approach, both at an enterprise level as well as at product and
audit scope, and its coverage in relation to the scope of the external audit, as well as the service level, comprising an update on the mitigation of cybersecurity risks and actions
127
taken to comply with relevant laws and regulations including the Cybersecurity Risk • The company’s Quality & Regulatory strategy, focusing on patients and customers to
Management, Strategy, Governance, and Incident Disclosure requirements issued by the ensure the safety and efficacy of the company’s products and solutions and the status
U.S. Securities and Exchange Commission (SEC). and progress of the company’s Accelerating Patient Safety and Quality phase 2 program,
including enhancing the engagement with regulators, ensuring sustainability and
In February 2024, the Committee reviewed, together with the other members of the predictable performance, Patient Safety & Quality Culture Intervention, and the Quality
Supervisory Board, the draft of the Annual Report 2023, as well as the key audit matters and Management System (QMS) transformation to drive process simplification in a tailored
the critical audit matters identified by the external auditor in relation to the 2023 financial manner and Product Quality Reviews (PQRs) to ensure the installed base meets patient
statements included in the Annual Report 2023 and the Annual Report on Form 20-F, safety and design control standards as well as compliance requirements. For more
respectively. In February 2024, the Committee also reviewed the draft of the company’s 2023 information, please refer to Quality & Regulatory and patient safety, starting on page 69.
Country Activity and Tax Report. • The Philips Respironics voluntary recall notification related to the sound abatement foam
in certain sleep and respiratory care products (announced on June 14, 2021) in the
During each regular quarterly Audit Committee meeting, the Committee reviewed the company’s Sleep & Respiratory Care business. Management regularly updated the
quarterly report from the external auditor, in which the auditor set forth its findings and Committee on the trend of the number of devices registered for remediation and on the
attention points during the relevant period. Apart from the Audit Committee meetings, the progress of the repair and replace program for the affected devices, as well as actions
external auditor also attended all private sessions with the Audit Committee, where their taken to accelerate the remediation. The Committee reviewed aspects of this issue, such
observations were, if necessary, further discussed. The Annual Audit Letter was circulated to as the program governance to enable effective execution, ongoing engagements with
the full Supervisory Board, and planned actions to address the items raised were discussed the FDA and the DOJ, amongst others, with respect to the 518(a) Notification order
with management in the subsequent Audit Committee meetings as well as in private issued by the FDA on March 10, 2022, the investigation initiated by the DOJ to which
sessions with management. Philips Respironics is subject, and the proposed consent decree that is currently under
discussion with the DOJ, acting on behalf of the FDA, and engagements with other
Finally, the Committee reviewed the Audit Committee Charter and concluded it remains regulatory authorities globally. Furthermore, the Committee reviewed and discussed
appropriate. with management the engagement with and communication efforts to patients,
physicians, customers and durable medical equipment providers, the testing program
and its outcomes, and health hazard evaluations. The Committee also discussed the level
8.4 Report of the Quality & Regulatory Committee of field action provisions, respectively, as set out in more detail in the report of the Audit
The Quality & Regulatory Committee was established in view of the importance of patient Committee above.
safety and the quality of the company’s products, systems, services and solutions. The • Management updated the Committee regularly with respect to other quality issues
Committee provides broad oversight of compliance with the regulatory requirements that (other than the Philips Respironics voluntary recall notification mentioned in the previous
govern the development, manufacturing, marketing and servicing of the company’s bullet), and the Committee reviewed the progress made with solving and closing such
products, systems, services and solutions. The Quality & Regulatory Committee assists the other issues.
Supervisory Board in fulfilling its oversight responsibilities in these areas. It is chaired by • Review of progress in the transformation of the company’s Quality & Regulatory
David Pyott and its members are Marc Harrison and Peter Löscher. function, aimed at further strengthening expertise and capabilities within the company’s
Quality & Regulatory function, including upscaling Patient Safety & Quality talent at mid-
In 2023, the Quality & Regulatory Committee held four meetings and all Committee level leadership positions.
members attended these meetings. The Quality & Regulatory Committee convened less • Review of the progress made with global initiatives around the transformation,
frequently in 2023 (compared to 2022), as the quality related matters were a regular item on standardization and simplification of the company’s structure and organizational
the agenda of the Supervisory Board meeting. The Chief Executive Officer, the Chief ESG & processes relating to QMSs (the reduction of the current QMSs to one third by the end of
Legal Officer, the Chief Operations Officer and the Chief Quality & Regulatory Officer were 2024), Management Systems, regulated manufacturing sites (Legal Manufacturers),
present during these meetings. CAPA and Complaint Management.
• Review the implementation of a Patient Safety & Quality IT roadmap and ensure
The following overview indicates some of the matters that were discussed during meetings adoption of the IT and data enhancements.
in the course of 2023: • The status and outcome of Quality & Regulatory-related investigations and inspections
128
by regulatory authorities and Notified Bodies globally across the organization.

Management also regularly provided the Committee with an overview of upcoming
scheduled inspections across company sites by the FDA, other regulatory authorities and
Notified Bodies, and the actions taken to prepare for such inspections.
• Review of the product risk per business based on a product assessment approach and
remediation across the company, including findings resulting from internal audits.
• Review of the 2023 dashboard of Quality & Regulatory key performance indicators,
showing the trend of performance. The Committee also reviewed the Quality &
Regulatory key performance indicators for 2024.
129
9 Corporate governance
9.1 Introduction starting on page 26. Furthermore, reference is made to the Philips Operating Model, starting
Koninklijke Philips N.V. (Royal Philips), a company organized under Dutch law, is the parent on page 67, which among others includes standards for behaviors, quality and integrity
company of the Philips group. Its shares have been listed on the Amsterdam stock exchange within Philips.
(Euronext Amsterdam) since 1912. Furthermore, its shares have been traded in the United
States since 1962 and have been listed on the New York Stock Exchange since 1987. Philips’ strategy, and the way it has been developed by the Board of Management under the
supervision of the Supervisory Board, clearly integrates the company’s impact in the field of
Royal Philips has a two-tier board structure consisting of a Board of Management and a sustainability, including the effects on people and the environment. In How we create value
Supervisory Board, each of which is accountable to the General Meeting of Shareholders for with sustainable impact, starting on page 12 we report on resource inputs, value outcomes
the fulfillment of its respective duties. and societal impact across various financial and Environmental, Social and Governance (ESG)
dimensions. We engage with our stakeholders and use a double materiality analysis to
The company is governed by Dutch corporate and securities laws, its Articles of Association, identify the ESG topics that we believe have the greatest impact: those having financial
and the Rules of Procedure of the Board of Management and the Executive Committee and materiality (the impact of society on Philips) as well as those having impact materiality (the
of the Supervisory Board, respectively. Its corporate governance framework is also based on impact of Philips on society); refer to Working with stakeholders and advocacy, starting on
the Dutch Corporate Governance Code (dated December 20, 2022) and US laws and page 65 and Double Materiality Assessment, starting on page 13. The materiality analysis
regulations applicable to Foreign Private Issuers. Additionally, the Board of Management has underpins the relevance of our fully integrated approach to doing business responsibly and
implemented the Philips General Business Principles (GBP) and underlying policies, as well as sustainably, including a comprehensive set of key commitments across all the ESG
separate codes of ethics that apply to employees working in specific areas of our business, dimensions that guide execution of our strategy; refer to Philips' ESG commitments, starting
i.e., the Financial Code of Ethics and the Procurement Code of Ethics. Many of the on page 44. As one of these commitments, Philips considers its tax payments as a significant
documents referred to are published on the company’s website and more information can contribution to the communities in which it operates, and an integral part of its social value
be found in Our approach to risk management, starting on page 86. creation; refer to Total tax contribution, starting on page 64.
In this section of the Annual Report, the company addresses the main elements of its
corporate governance structure, reports on how it applies the principles and best practices 9.2 Board of Management and Executive Committee
of the Dutch Corporate Governance Code, and provides the information required by the
Dutch governmental Decree on Corporate Governance (Besluit inhoud bestuursverslag) and Introduction
governmental Decree on Article 10 Takeover Directive (Besluit artikel 10 overnamerichtlijn). The Board of Management is entrusted with the management of the company. Certain key
When deemed necessary in the interests of the company, the company may deviate from officers have been appointed to support the Board of Management in the fulfilment of its
aspects of the company’s corporate governance structure, and any such deviations will be managerial duties. The members of the Board of Management and these key officers
disclosed in the company’s corporate governance report. together constitute the Executive Committee. In this Corporate governance report,
wherever the Executive Committee is mentioned, this also includes the members of the
In compliance with the Dutch Corporate Governance Code, other parts of the management Board of Management, unless the context requires otherwise. Please refer to Board of
report (within the meaning of article 2:391 of the Dutch Civil Code) included in the Annual Management and Executive Committee, starting on page 7 for an overview of the current
Report address the strategy and culture of Philips aimed at sustainable long-term value members.
creation. As described in more detail in Our strategic focus , starting on page 10, Philips’
strategy of focused organic growth scalable patient- and people-centric innovation, and Under the chairmanship of the President/Chief Executive Officer (CEO), and supported by
focus on reliable execution, is driven by our purpose: to improve people’s health and well- the other members of the Executive Committee, the members of the Board of Management
being through meaningful innovation. The Message from the CEO , starting on page drive the company’s management agenda and share responsibility for the continuity of the
5explains how this strategy was executed in 2023; refer also to Financial performance, Philips group, focusing on sustainable long-term value creation. Please refer to the Rules of
130
Procedure of the Board of Management and the Executive Committee, which are published The CEO and the other members of the Board of Management are appointed for a
on the company’s website, for a description of further responsibilities and tasks, as well as (maximum) term of four years, it being understood that this term expires at the closing of
procedures for meetings, resolutions, and minutes. the General Meeting of Shareholders to be held in the fourth calendar year after the year of
their appointment or, if applicable, at a later retirement date or other contractual
In fulfilling their duties, the members of the Board of Management and Executive termination date in the fourth year, unless the General Meeting of Shareholders resolves
Committee are guided by the interests of the company and its affiliated enterprise, taking otherwise. The same applies in the case of re-appointment, which is possible for consecutive
into account the interests of its stakeholders. The Board of Management and the Executive terms of (a maximum of) four years. A (re-)appointment schedule for the Board of
Committee have adopted a division of responsibilities based on the functional and business Management is published on the company’s website.
areas, each of which is monitored and reviewed by the individual members. The Board of
Management is accountable for the actions and decisions of the Executive Committee and Pursuant to Dutch law, the members of the Board of Management are engaged by means of
has ultimate responsibility for the company’s external reporting (including reporting to the a services agreement (overeenkomst van opdracht). The term of the services agreement is
shareholders of the company). aligned with the term for which the relevant member has been appointed by the General
Meeting of Shareholders. In the event of termination of the services agreement by the
The Board of Management and the Executive Committee are supervised by the Supervisory company, severance payment is limited to a maximum of one year’s base salary. The services
Board. Members of the Board of Management and the Executive Committee will be present agreements provide no additional termination benefits.
in the meetings of the Supervisory Board, if so invited. In addition, the CEO and other
members of the Board of Management (and if needed, the other members of the Executive Members of the Board of Management may be suspended by the Supervisory Board and by
Committee) meet on a regular basis with the Chairman and other members of the the General Meeting of Shareholders, and members of the Board of Management may be
Supervisory Board. The Board of Management and the Executive Committee are required to dismissed by the General Meeting of Shareholders (in each case in accordance with the
keep the Supervisory Board informed of all facts and developments concerning Philips that Articles of Association). A shareholders’ resolution to suspend or dismiss a member of the
the Supervisory Board may need to be aware of in order to function as required and to Board of Management, other than a resolution proposed by the Board of Management or
properly carry out its duties. the Supervisory Board, may only be adopted by a simple majority of the votes cast,
representing at least one third of the issued share capital. The other members of the
Certain important decisions of the Board of Management require Supervisory Board Executive Committee are appointed, suspended and dismissed by the CEO, subject to
approval, including decisions concerning: the operational and financial objectives of the approval by the Supervisory Board.
company and the strategy designed to achieve these objectives; the issue, repurchase or
cancellation of shares; and major acquisitions or divestments.
9.3 Supervisory Board
Appointment and composition
Members of the Board of Management, including the CEO, are appointed by the General Introduction
Meeting of Shareholders upon a binding recommendation drawn up by the Supervisory The Supervisory Board supervises the policies, management and general affairs of Philips,
Board after consultation with the CEO. This binding recommendation may be overruled by a and assists the Board of Management and the Executive Committee with advice on general
resolution of the General Meeting of Shareholders adopted by a simple majority of the votes policies related to the activities of the company. In fulfilling their duties, the members of the
cast and representing at least one-third of the issued share capital. If a simple majority of the Supervisory Board shall be guided by the interests of the company and its affiliated
votes cast is in favor of the resolution to overrule the binding recommendation, but such enterprise, taking into account the interests of its stakeholders.
majority does not represent at least one-third of the issued share capital, a new meeting
may be convened, at which the resolution may be passed by a simple majority of the votes In the two-tier corporate structure under Dutch law, the Supervisory Board is a separate
cast, regardless of the portion of the issued share capital represented by such majority. In the body that is independent of the Board of Management and the company. Its independent
event that a binding recommendation has been overruled, a new binding recommendation character is also reflected in the requirement that members of the Supervisory Board can be
shall be submitted to the General Meeting of Shareholders. If such second binding neither a member of the Board of Management nor an employee of the company. Currently,
recommendation has been overruled, the General Meeting of Shareholders shall be free to the Supervisory Board considers all its members to be independent under the Dutch
appoint a board member. Corporate Governance Code. Furthermore, the members of its Audit Committee are
131
independent under the rules of the US Securities and Exchange Commission, applicable to In line with the Dutch Corporate Governance Code, members of the Supervisory Board are
the Audit Committee. eligible for re-appointment for a fixed term of four years once, and may subsequently be re-
appointed for a period of two years, which appointment may be extended by at most two
The Supervisory Board must approve certain important decisions of the Board of years. The report of the Supervisory Board must state the reasons for any re-appointment
Management, including decisions concerning the operational, business and financial beyond an eight-year period.
objectives of the company and the strategy designed to achieve these objectives, the issue,
repurchase or cancellation of shares and major acquisitions or divestments. The Supervisory A (re-)appointment schedule for the Supervisory Board is published on the company’s
Board and its individual members each have a responsibility to request from the Board of website.
Management, the Executive Committee and the external auditor all information that the
Supervisory Board needs in order to be able to carry out its duties properly as a supervisory Members of the Supervisory Board may be suspended or dismissed by the General Meeting
body. of Shareholders in accordance with the Articles of Association. A resolution to suspend or
dismiss a member of the Supervisory Board, other than a resolution proposed by the
Please refer to the Rules of Procedure of the Supervisory Board, which are published on the Supervisory Board, may only be adopted by a simple majority of the votes cast, representing
company’s website, for a description of further responsibilities and tasks, as well as at least one third of the issued share capital.
procedures for meetings, resolutions and minutes.
Candidates for appointment to the Supervisory Board are selected taking into account the
In its report (included in the company’s Annual Report), the Supervisory Board describes the company’s Diversity Policy, which is published on the company’s website. The Supervisory
composition and functioning of the Supervisory Board and its committees, their activities in Board’s composition furthermore follows the profile included in the Rules of Procedure of
the financial year, the number of committee meetings held and the main items discussed. the Supervisory Board, and the size of the board may vary as it considers appropriate to
Please refer to Supervisory Board report, starting on page 103. Please also refer to support its profile. Please refer to Supervisory Board report, starting on page 103 by the
Supervisory Board, starting on page 101 for an overview of the current members of the Supervisory Board, starting on page 101. Typically, newly appointed members of the
Supervisory Board. Supervisory Board follow an induction program and interact with Executive Committee
members for deep-dives on matters such as strategy, finance and investor relations, quality,
Appointment and composition governance, legal, sustainability and digitization.
Members of the Supervisory Board are appointed by the General Meeting of Shareholders
upon a binding recommendation drawn up by the Supervisory Board. This binding Effective 2022, Dutch law provides a mandatory gender quota, requiring that at least one-
recommendation may be overruled by a resolution of the General Meeting of Shareholders third of the Supervisory Board members are women and at least one-third men (for
adopted by a simple majority of the votes cast and representing at least one-third of the calculation purposes, a total number of board members that cannot be divided by three
issued share capital. If a simple majority of the votes cast is in favor of the resolution to must be rounded up to the next number that can be divided by three). The quota is
overrule the binding recommendation, but such majority does not represent at least one- applicable to (i) the appointment of new Supervisory Board members, and (ii) the re-
third of the issued share capital, a new meeting may be convened. At this new meeting the appointment of acting board members after eight years following their initial appointment.
resolution may be passed by a simple majority of the votes cast, regardless of the portion of Except in certain exceptional circumstances, any appointment or re-appointment resulting in
the issued share capital represented by such majority. In the event that a binding a Supervisory Board composition that does not meet (or no longer meets) the quota, will be
recommendation has been overruled, a new binding recommendation shall be submitted to invalid (null and void).
the General Meeting of Shareholders. If such second binding recommendation has been
overruled, the General Meeting of Shareholders shall be free to appoint a board member. As announced on August 14, 2023, Philips and Exor N.V. entered into a relationship
agreement on August 13, 2023, as a result of which Exor bought a 15% shareholding in the
The term of appointment of members of the Supervisory Board expires at the closing of the company. The relationship agreement with Exor has been published on the company’s
General Meeting of Shareholders to be held after a period of four years following their website, and includes Exor’s commitment to be a long-term minority investor and it's right
appointment. There is no age limit requiring the retirement of board members. to propose one member to the Supervisory Board. In this context, it is noted that, for as long
as Exor has such nomination right pursuant to the relationship agreement, the
independence exception of best practice provision 2.1.7(iii) of the Dutch Corporate
132
Governance Code is deemed to apply to any Exor nominee that has been appointed upon internal audit programs and their findings. The Committee furthermore supervises the
such nomination in accordance with the Relationship Agreement. It is expected that the Internal Audit function, maintains contact with and supervises the external auditor and
Supervisory Board will, upon Exor’s exercise of its right, submit a proposal for the prepares the nomination of the external auditor for appointment by the General Meeting of
appointment of the relevant nominee at the upcoming 2024 Annual General Meeting of Shareholders.
Shareholders.
The composition of the Audit Committee meets the relevant requirements under Dutch law
Supervisory Board committees and the applicable US rules. All of the members are considered to be independent and
The Supervisory Board, while retaining overall responsibility, has assigned certain tasks to financially literate, and the Audit Committee as a whole has competence relevant to the
four committees: the Corporate Governance and Nomination & Selection Committee, the sector in which the company is operating. In addition, Liz Doherty is designated as an Audit
Remuneration Committee, the Audit Committee, and the Quality & Regulatory Committee. Committee financial expert, as defined under the regulations of the US Securities and
Each committee reports to the full Supervisory Board. Please refer to the charters of the Exchange Commission. The Supervisory Board considers the expertise and experience
respective committees, which are published on the company’s website as part of the Rules of available in the Audit Committee, in conjunction with the possibility to take advice from
Procedure of the Supervisory Board, for a description of their responsibilities, composition, internal and external experts and advisors, to be sufficient for the fulfillment of the tasks
meetings and working procedures. and responsibilities of the Audit Committee.
The Corporate Governance and Nomination & Selection Committee is responsible for The Quality & Regulatory Committee has been established by the Supervisory Board in view
preparing selection criteria and appointment procedures for members of the Supervisory of the central importance of the quality and (patient) safety of the company’s products,
Board, the Board of Management and the Executive Committee. The Committee makes systems, services and software as well as the development, testing, manufacturing,
proposals to the Supervisory Board for the (re)appointment of such members, and marketing and servicing thereof, and the regulatory requirements relating thereto. The
periodically assesses their functioning. The Committee also periodically assesses the Quality & Regulatory Committee assists the Supervisory Board in fulfilling its oversight
Executive Committee succession planning and the Diversity Policy, and supervises the policy responsibilities in this area, while recognizing that the Audit Committee assists the
of the Executive Committee on the selection criteria and appointment procedures for Philips Supervisory Board in its oversight of other areas of regulatory, compliance and legal matters.
executives. At least once a year, the Committee reviews the corporate governance principles
applicable to the company, and advises the Supervisory Board on any changes to these
principles that it deems appropriate. 9.4 Other Board-related matters
The Remuneration Committee is responsible for preparing decisions of the Supervisory Board Remuneration and share ownership
on the remuneration of individual members of the Board of Management and the Executive The remuneration of the individual members of the Board of Management is determined by
Committee. The Committee prepares an annual remuneration report, which is published on the Supervisory Board, taking into account the remuneration policy adopted by the General
the company’s website by the Supervisory Board ahead of the Annual General Meeting of Meeting of Shareholders. The remuneration of the individual members of the Supervisory
Shareholders. In performing its duties and responsibilities, the Remuneration Committee is Board is determined by the General Meeting of Shareholders, also on the basis of a
assisted by an external consultant and an in-house remuneration expert. remuneration policy.
The Audit Committee assists the Supervisory Board in fulfilling its oversight responsibilities The current remuneration policies for the Board of Management and the Supervisory Board,
for: the integrity of the company’s financial statements; the financial and non-financial (ESG) respectively, were adopted in 2020 and are published on the company’s website. Pursuant to
reporting processes; the effectiveness (also in respect of the reporting process) of the risk Dutch law, the shareholders are entitled to vote on the adoption of the separate
management and internal controls framework; the internal and external audit process; the remuneration policies for the Board of Management and the Supervisory Board at the
internal and external auditor’s qualifications, independence and performance; as well as the Annual General Meeting of Shareholders (at least) every four years. The adoption of a
company’s process for monitoring compliance with laws and regulations and the GBP remuneration policy will require a special majority of three-quarters of the votes cast (as the
(including related manuals, training and tools). It reviews the company’s annual and interim Articles of Association do not provide for a lower majority).
financial statements, including non-financial information, prior to publication and advises
the Supervisory Board on the adequacy and appropriateness of internal control policies and
133
A description of the composition of the remuneration paid and owed to the individual Transactions in Philips shares carried out by members of the Board of Management and the
members of the Board of Management and the Supervisory Board is included in the annual Supervisory Board are reported to the Dutch Authority for the Financial Markets (AFM) in
remuneration report (as prepared by the Remuneration Committee, adopted by the accordance with the EU Market Abuse Regulation and, if necessary, to other relevant
Supervisory Board and published on the company’s website). Shareholders have an advisory authorities.
vote at each Annual General Meeting of Shareholders on the remuneration report relating
to the preceding financial year. Indemnification
Unless Dutch law provides otherwise, the members of the Board of Management and of the
Pursuant to Dutch law, the Supervisory Board is authorized to reduce or eliminate unpaid Supervisory Board shall be reimbursed by the company for various costs and expenses, such
bonuses awarded to members of the Board of Management if payment or delivery of the as the reasonable costs of defending claims, as formalized in the Articles of Association.
bonus would be unacceptable according to the principles of reasonableness and fairness. Under certain circumstances, described in the Articles of Association, such as an act or failure
The company, which in this respect may also be represented by the Supervisory Board or a to act by a member of the Board of Management or a member of the Supervisory Board that
special representative appointed for this purpose by the General Meeting of Shareholders, can be characterized as intentional (opzettelijk), intentionally reckless (bewust roekeloos) or
may also request return of bonuses already paid or delivered insofar as these have been seriously culpable (ernstig verwijtbaar), there will be no entitlement to this reimbursement
granted on the basis of incorrect information on the fulfillment of the relevant performance unless the law or the principles of reasonableness and fairness require otherwise. The
criteria or other conditions. Bonuses are broadly defined as ‘non-fixed’ (variable) company has also taken out liability insurance (D&O – Directors & Officers) for the persons
remuneration – either in cash or in the form of share-based compensation – that is concerned.
conditional in whole or in part on the achievement of certain targets or the occurrence of
certain circumstances. The explanatory notes to the balance sheet shall report on any Diversity
moderation and/or claim for repayment of Board of Management remuneration. No such Candidates for appointment to the Supervisory Board, the Board of Management and the
reduction of unpaid bonuses or requests for repayment occurred during the financial year Executive Committee are selected taking into account the company’s Diversity Policy for the
2023. Supervisory Board, the Board of Management and the Executive Committee. This Diversity
Policy aims at a sufficient diversity of views and the expertise needed for a good
In compliance with the Dutch Corporate Governance Code, the company does not grant understanding of current affairs and longer-term risks and opportunities related to the
personal loans to or guarantees on behalf of, members of the Board of Management or the Company’s business, and is published on the company’s website. Effective 2022, Dutch law
Supervisory Board. No such loans were granted and no such guarantees were issued in 2023, provides that (re-)appointments of members of the Supervisory Board must be in
nor were any loans or guarantees outstanding as of December 31, 2023. accordance with a mandatory gender quota, requiring that at least one-third of the
supervisory board members are women (and at least one-third are men). There are certain
Also in compliance with the Dutch Corporate Governance Code, the Articles of Association exceptions where the gender quota does not apply, such as the re-appointments within
provide that shares or rights to shares shall not be granted to members of the Supervisory eight years of the initial appointment and (re-)appointments made in exceptional
Board. circumstances.
Members of the Board of Management and the Supervisory Board may only hold shares in For more details on the Diversity Policy for the Supervisory Board, the Board of Management
the company for the purpose of long-term investment and must refrain from short-term and the Executive Committee, refer to Report of the Corporate Governance and Nomination
transactions in Philips securities. According to Philips’ internal rules of conduct with respect & Selection Committee, starting on page 110; for more information on the profile and
to inside information, members of the Board of Management and the Supervisory Board are composition of the Supervisory Board refer to Supervisory Board report, starting on page
only allowed to trade in Philips securities (including the exercise of stock options) during 103.
‘windows’ of 20 business days following the publication of annual and quarterly results
(provided further the person involved has no inside information regarding Philips at that Philips’ commitment to Inclusion & Diversity is also reflected in the company-wide General
time, unless an exemption is available). Furthermore, members of the Board of Management Business Principles, the Inclusion & Diversity Policy and the Fair Employment Policy. Please
and the Supervisory Board are prohibited from trading, directly or indirectly, in securities of refer to Diversity, Inclusion and Well-Being, starting on page 59 for information on the
any of the companies belonging to Philips’ peer group (as determined by the Supervisory company’s group-wide approach to inclusion and diversity, including the gender diversity of
Board) during one week preceding the disclosure of Philips’ annual or quarterly results. the Board of Management and the Executive Committee.
134
Conflicts of interest 9.5 General Meeting of Shareholders

Dutch law on conflicts of interest provides that members of the Board of Management or
Supervisory Board may not participate in the adoption of resolutions if they have a direct or Meetings
indirect personal conflict of interest with the company or related enterprise. If all members The Annual General Meeting of Shareholders shall be held no later than six months after the
of the Board of Management have a conflict of interest, the resolution concerned will be end of the financial year. The agenda for the meeting typically includes: an advisory vote on
considered by the Supervisory Board. If all members of the Supervisory Board have a conflict the remuneration report; discussion of the Annual Report; the adoption of the financial
of interest, the resolution concerned must be considered by the General Meeting of statements; policy on additions to reserves and dividends; any proposed dividends or other
Shareholders. distributions; discharge of the members of the Board of Management and the Supervisory
Board; and any other matters proposed by the Supervisory Board, the Board of
In compliance with the Dutch Corporate Governance Code, the company’s corporate Management or shareholders in accordance with Dutch law and the Articles of Association.
governance includes rules to specify situations in which a potential or actual conflict may
exist, procedures to avoid such conflicts of interest as much as possible, and procedures to Shareholders’ meetings are convened by public notice via the company’s website, and
deal with such conflicts should they arise. Relevant matters relating to conflicts of interest, if registered shareholders are notified by letter or by electronic means of communication at
any, must be mentioned in the Annual Report (specifically the management report) for the least 42 days prior to the day of the relevant meeting. Shareholders who wish to exercise the
financial year in question. No decision to enter into any such material transaction in which rights attached to their shares in respect of a shareholders’ meeting are required to register
there is a conflict of interest with a member of the Board of Management or the Supervisory for such meeting. Shareholders may attend a meeting in person, vote by proxy (via an
Board, or with any major shareholder (holding at least 10% of the company’s shares) was independent third party) or grant a power of attorney to a third party to attend the meeting
taken during the financial year 2023. and vote on their behalf. Details on registration for meetings, attendance and proxy voting
will be included in the notice convening the relevant meeting.
Outside directorships
In compliance with the Dutch Corporate Governance Code, members of the Board of Pursuant to Dutch law, the record date for the exercise of voting rights and rights relating to
Management require the approval of the Supervisory Board before they can accept a shareholders’ meetings is set at the 28th day prior to the day of the relevant meeting.
position as a member of a supervisory board or a position as a non-executive director on a Shareholders registered on such date are entitled to attend the meeting and to exercise the
one-tier board (Non-Executive Directorship) at another company. The Supervisory Board other shareholder rights (at the relevant meeting) notwithstanding any subsequent sale of
must be notified of other important positions (to be) held by a member of the Board of their shares after the record date.
Management.
In accordance with the Articles of Association and Dutch law, requests from shareholders for
Dutch law provides for certain limitations on the number of Non-Executive Directorships a items to be included on the agenda will generally be honored, subject to the company’s
member of the Board of Management or Supervisory Board may hold. No member of the rights to refuse to include the requested agenda item under Dutch law, provided that such
Board of Management shall hold more than two Non-Executive Directorships at ‘large’ requests are made in writing at least 60 days before a General Meeting of Shareholders to
companies (naamloze vennootschappen or besloten vennootschappen) or ‘large’ the Board of Management and the Supervisory Board by shareholders representing at least
foundations (stichtingen), as defined under Dutch law, and no member of the Board of 1% of the company’s outstanding capital or, according to the official price list of Euronext
Management shall hold the position of chairman of another one-tier board or the position Amsterdam, representing a value of at least EUR 50 million. Written requests may be
of chairman of another supervisory board. No member of the Supervisory Board shall hold submitted electronically and shall comply with the procedure stipulated by the Board of
more than five Non-Executive Directorships at such companies or foundations, with a Management, which is posted on the company’s website.
position as chairman counting for two. During the financial year 2023 all members of the
Board of Management and the Supervisory Board complied with the limitations described Pursuant to Dutch law, shareholders requesting an item to be included on the agenda of a
above in this paragraph. meeting have an obligation to disclose their full economic interest (i.e., long position and
short position) to the company. The company has the obligation to publish such disclosures
on its website.
135
Main powers of the General Meeting of Shareholders Only Euroclear shares are traded on Euronext Amsterdam. Only New York Registry Shares
The main powers of the General Meeting of Shareholders are: are traded on the New York Stock Exchange. Pursuant to article 10:138(2) of the Dutch Civil
Code, the laws of the State of New York are applicable to the proprietary regime with
• to appoint, suspend and dismiss members of the Board of Management and the respect to the New York Registry Shares, which proprietary regime includes the
Supervisory Board; requirements for a transfer of, or the creation of an in rem right in, such New York Registry
• to adopt remuneration policies for the Board of Management and the Supervisory Board, Shares. Euroclear shares and New York Registry Shares may be exchanged for each other.
to determine the remuneration of the individual members of the Supervisory Board and
to approve long-term incentive (equity-based) plans for the Board of Management; As per December 31, 2023, approximately 90% of the common shares were held through the
• to adopt the annual accounts, to declare dividends and to discharge the Board of system of Euroclear Nederland (Euroclear shares) and approximately 10% of the common
Management and the Supervisory Board from any liability in respect of the performance shares were represented by New York Registry Shares issued in the name of approximately
of their respective duties for the previous financial year; 820 holders of record. The latter include Cede & Co. Cede & Co acts as nominee for The
• to appoint the company’s external auditor; Depository Trust Company, which holds the shares (indirectly) for individual investors as
• to adopt amendments to the Articles of Association and proposals to dissolve or beneficiaries. Deutsche Bank Trust Company Americas is Philips’ New York transfer agent,
liquidate the company; registrar and dividend disbursing agent. Since certain shares are held by brokers and other
• to issue shares or rights to shares; nominees, these numbers may not be representative of the actual number of United States
• to restrict or exclude pre-emptive rights of shareholders and to repurchase or cancel beneficial holders or the number of New York Registry Shares beneficially held by US
outstanding shares; and residents.
• in accordance with Dutch law, to approve decisions of the Board of Management that
are so far-reaching that they would greatly change the identity or nature of the company At the 2023 Annual General Meeting of Shareholders, it was resolved to authorize the Board
or the business. of Management, subject to the approval of the Supervisory Board, to issue shares or to grant
rights to acquire shares in the company, as well as to restrict or exclude the pre-emption
The company applies principle 4.1 of the Dutch Corporate Governance Code within the right accruing to shareholders up to and including November 8, 2024. This authorization is
framework of the Articles of Association and Dutch law and in the manner described in this limited to a maximum of 10% of the number of shares issued as of May 9, 2023.
corporate governance report. All issued and outstanding shares carry voting rights and each
share confers the right to cast one vote in a shareholders’ meeting. Pursuant to Dutch law, In addition, at the 2023 Annual General Meeting of Shareholders, it was resolved to
no votes may be cast at a General Meeting of Shareholders in respect of shares that are held authorize the Board of Management, subject to the approval of the Supervisory Board, to
by the company. There are no special statutory rights attached to the shares of the company, acquire shares in the company within the limits of the Articles of Association and within a
and no restrictions on the voting rights of the company’s shares exist. Subject to certain certain price range up to and including November 8, 2024. The maximum number of shares
exceptions provided by Dutch law and/or the Articles of Association, resolutions of the the company may hold will not exceed 10% of the issued share capital as of May 9, 2023. The
General Meeting of Shareholders are passed by an absolute majority of votes cast and do number of shares may be increased by 10% of the issued capital as of that same date in
not require a quorum. connection with the execution of share repurchase programs for capital reduction programs.
Share capital: issue and repurchase of (rights to) shares

The authorized share capital of the company amounts to EUR 800 million, divided into 2 9.6 Risk management and internal control
billion common shares with a nominal value of 20 eurocents each and 2 billion preference The company’s risk management and internal control framework forms an integral part of
shares also with a nominal value of 20 eurocents each. On December 31, 2023, the issued the Philips business planning and performance review cycle. The purpose of our risk
share capital amounted to EUR 182,703,193.20 divided into 913,515,966 common shares and management is to identify and analyze the risks Philips faces in executing its strategy and
no preference shares. All shares are fully paid-up. There are currently no limitations, either activities, to set the risk appetite of the company, to take appropriate risk responses and to
under Dutch law or the Articles of Association, to the transfer of the common shares. monitor its effectiveness. The objective of internal control is to maintain integrated
management control of the company’s operations, reporting, and safeguarding compliance
with applicable laws and regulations. As part of its internal control framework, Philips has
implemented a standard set of Internal Controls over Financial Reporting (ICFR). Please refer
136
to Risk management and internal control framework , starting on page 67for a description 9.7 Annual financial statements and external audit
of the key elements of our framework, and to Risk management, starting on page 85 for a The annual financial statements are prepared by the Board of Management and reviewed
more detailed description of Philips’ approach to risk management and more information by the Supervisory Board upon the advice of its Audit Committee, taking into account the
on the risk factors that have been identified, and the risk responses that help to manage report of the external auditor. Upon approval by the Supervisory Board, the accounts are
such risks in accordance with the relevant level of risk appetite. signed by all members of both the Board of Management and the Supervisory Board and
are published together with the opinion of the external auditor. The Board of Management
Together with Philips’ established accounting procedures, our standard set of internal is responsible, under the supervision of the Supervisory Board, for the quality and
controls over financial reporting is designed to provide reasonable assurance that assets are completeness of such publicly disclosed financial reports. The annual financial statements
safeguarded, that the books and records properly reflect transactions necessary to permit are presented for discussion and adoption at the Annual General Meeting of Shareholders,
preparation of financial statements, that policies and procedures are carried out by qualified to be convened subsequently.
personnel, and that published financial statements are properly prepared and do not
contain any material misstatements. With respect to financial reporting, a structured self- The external auditor is appointed by the General Meeting of Shareholders in accordance
assessment and monitoring process is used company-wide to assess, document, review and with the Articles of Association. Philips’ current external auditor, Ernst & Young Accountants
monitor compliance with ICFR. LLP, was appointed by the General Meeting of Shareholders held on May 7, 2015, for a term
of four years starting January 1, 2016, was re-appointed at the Annual General Meeting of
On the basis of the outcome of these processes, the Board of Management confirms that: (i) Shareholders held on May 9, 2019 for a term of three years starting January 1, 2020, was re-
the management report (within the meaning of section 2:391 of the Dutch Civil Code) appointed at the Annual General Meeting of Shareholders held on May 10, 2022 for a term
provides sufficient insights into any failings in the effectiveness of the internal risk of one year starting January 1, 2023, and was re-appointed at the Annual General Meeting
management and control systems; (ii) such systems provide a reasonable level of assurance of Shareholders held on May 9, 2023 for a term of one year starting January 1, 2024.
that the financial reporting does not contain any material inaccuracies; (iii) based on the
current state of affairs, it is justified that the financial reporting is prepared on a going PricewaterhouseCoopers Accountants N.V. was appointed at the Annual General Meeting of
concern basis; and (iv) the management report states those material risks and uncertainties Shareholders held on May 9, 2023 as the company’s new external auditor for a term of four
that are relevant to the expected continuity of the company for a period of 12 months after years starting January 1, 2025.
the preparation of the report. The financial statements fairly represent the financial
condition and result of operations of the company and they provide the required European and Dutch law requires the separation of audit and certain non-audit services. The
disclosures. external auditor may only provide audit and audit-related services and is prohibited from
providing any other services. This is reflected in the Auditor Policy, which is published on the
In view of the above, the Board of Management believes that it is in compliance with best company’s website. The policy is also in line with (and in some ways stricter than) applicable
practice provision 1.4.2 of the Dutch Corporate Governance Code. It should be noted that US rules, under which the appointed external auditor must be independent from the
the above does not imply that the internal risk management and control systems provide company both in fact and appearance.
certainty as to the realization of operational and financial business objectives, nor can they
prevent all misstatements, inaccuracies, errors, fraud or non- compliances with rules and The Auditor Policy specifies certain audit services and audit-related services (also known as
regulations. The above statement on internal control should not be construed as a assurance services) that will or may be provided by the external auditor, and includes rules
statement in response to the requirements of section 404 of the US Sarbanes-Oxley Act. The for the pre-approval by the Audit Committee of such services. Audit services must be pre-
statement as to compliance with section 404 is set forth in Management’s statements and approved on the basis of the annual audit services engagement agreed with the external
report, starting on page 274. auditor. Proposed audit-related services may be pre-approved at the beginning of the year
by the Audit Committee (annual pre-approval) or may be pre-approved during the year by
the Audit Committee with respect to a particular engagement (specific pre-approval). The
annual pre-approval is based on a detailed, itemized list of services to be provided, which is
designed to ensure that there is no management discretion in determining whether a
service has been approved, and to ensure that the Audit Committee is informed of each of
the services it is pre-approving. Unless pre-approval with respect to a specific service has
137
been given at the beginning of the year, each proposed service requires specific pre- circumstances authorized to exercise all powers vested in them to promote the interests of
approval during the year. Any annually pre-approved services where the fee for the Philips.
engagement is expected to exceed pre-approved cost levels or budgeted amounts will also
require specific pre-approval. The term of any annual pre-approval is 12 months from the The company has issued certain corporate bonds, the provisions of which contain a 'Change
date of the pre-approval unless the Audit Committee states otherwise. During 2023, there of Control Triggering Event' or a 'Change of Control Put Event’. Upon the occurrence of such
were no services provided to the company by the external auditor that were not pre- events, the company might be required to offer to redeem or purchase any outstanding
approved by the Audit Committee. bonds at certain pre-determined prices. Please also refer to Debt, starting on page 186.
Furthermore, the Relationship Agreement entered into between the company and its long-
term minority investor Exor N.V. (published on the company’s website) includes certain
9.8 Stichting Preferente Aandelen Philips temporary lock-up obligations for Exor which fall away when any third party has ‘Acquired’
Stichting Preferente Aandelen Philips, a Foundation (stichting) organized under Dutch law, an ‘Interest’ of fifty percent (50%) or more in the company.
has been granted the right to acquire preference shares in the capital of Royal Philips, as
stated in the company’s Articles of Association. In addition, the Foundation has the right to
file a petition with the Enterprise Chamber of the Amsterdam Court of Appeal to commence 9.9 Investor relations
an inquiry procedure within the meaning of article 2:344 of the Dutch Civil Code. Philips is continuously focused on maintaining strong and open relations with its
shareholders. In addition to communication with its shareholders at shareholders’ meetings,
The object of the Foundation is to represent the interests of Royal Philips, the enterprises the company may discuss its financial results during conference calls, which are broadly
maintained by the company and its affiliated companies within the company’s group, in accessible. The company also publishes annual, semi-annual and quarterly reports and press
such a way that the interests of the company, these enterprises and all parties involved with releases, and informs investors via its website.
them are safeguarded as effectively as possible, and that they are afforded maximum
protection against influences which, in conflict with those interests, may undermine the From time to time the company communicates with investors and analysts via roadshows,
autonomy and identity of Philips and those enterprises, and also to do anything related to broker conferences and a Capital Markets Day, which are announced in advance on the
the above ends or conducive to them. The Foundation's object includes the protection of company’s website. The purpose of these engagements is to further inform the market of
Philips against (an attempt at) an unsolicited takeover or other attempt to exert (de facto) the results, strategy and decisions made, as well as to receive feedback from shareholders. It
control of the company. The arrangement will allow Philips to determine its position in is the company’s policy to post presentations to investors and analysts on its website. Philips
relation to the relevant third party (or parties) and its (their) plans, to seek alternatives and applies the best practice provision 4.2.3 of the Dutch Corporate Governance Code, which it
to defend the company’s interests and those of its stakeholders. does not view (in line with market practice) as extending to less important analyst meetings
and presentations.
The mere notification that the Foundation exercises its right to acquire preference shares
will result in such shares being effectively issued. The Foundation may exercise this right for Furthermore, Philips engages in bilateral communications with investors and analysts. These
as many preference shares as there are common shares in the company outstanding at that communications take place either at the initiative of the company or at the initiative of
time. No preference shares have been issued as of December 31, 2023. investors/analysts. The company is generally represented by its Investor Relations
department during these interactions, however, on a limited number of occasions the
The members of the self-electing Board of the Foundation are Messrs J.P. de Kreij, J.V. Investor Relations department is accompanied by one or more members of the senior
Timmermans, J. van der Veer and P.N. Wakkie. No Philips Supervisory Board or Board of management. The subject matter of the bilateral communications ranges from individual
Management members or Philips officers are represented on the board of the Foundation. queries from investors/analysts to more elaborate discussions following disclosures that the
company has made, such as its annual and quarterly reports. Philips complies with applicable
Other protective measures rules and regulations on fair and non-selective disclosure and equal treatment of
Other than the arrangements made with the Foundation referred to above, the company shareholders.
does not have any measures that exclusively or almost exclusively have the purpose of
defending against unsolicited public offers for shares in the capital of the company. It should
be noted that the Board of Management and the Supervisory Board remain under all
138
9.10 Major shareholders as filed with the AFM 9.11 Corporate information
The Dutch Act on Financial Supervision imposes an obligation on persons holding certain The company began as a limited partnership with the name Philips & Co in Eindhoven, the
interests to disclose (inter alia) percentage holdings in the capital and/or voting rights in the Netherlands, in 1891, and was converted into the company with limited liability N.V. Philips’
company when such holdings reach, exceed or fall below 3, 5, 10, 15, 20, 25, 30, 40, 50, 60, 75 Gloeilampenfabrieken on September 11, 1912. The company’s name was changed to Philips
and 95 percent (as a result of an acquisition or disposal by a person, or as a result of a Electronics N.V. on May 6, 1994, to Koninklijke Philips Electronics N.V. on April 1, 1998, and to
change in the company’s total number of voting rights or capital issued). Certain derivatives Koninklijke Philips N.V. on May 15, 2013.
(settled in kind or in cash) are also taken into account when calculating the capital interest.
The statutory obligation to disclose capital interest relates not only to gross long positions, The majority of the shares in Royal Philips are held through the system maintained by the
but also to gross short positions. Required disclosures must be made to the Dutch Authority Dutch Central Securities Depository (Euroclear Nederland). In the past, Philips has also issued
for the Financial Markets (AFM) without delay. The AFM then notifies the company of such (physical) bearer share certificates ('Share Certificates'). A limited number of Share
disclosures and includes them in a register, which is published on the AFM’s website. Certificates have not been surrendered yet, although the holders of Share Certificates are
Furthermore, an obligation to disclose (net) short positions is set out in the EU Regulation on still entitled to a corresponding number of shares in Royal Philips. It is noted that, as a result
Short Selling. of Dutch legislation that became effective in July 2019, the relevant shares were registered in
the name of Royal Philips by operation of law per January 1, 2021. Owners of Share
The AFM register shows the following notifications of substantial holdings and/or voting Certificates will continue to be entitled to a corresponding number of shares, but may not
rights at or above the 3% threshold: Exor N.V.: substantial holding of 15.00% and 15.00% of exercise the rights attached to such shares until they surrender their Share Certificates.
the voting rights (August 13, 2023); BlackRock, Inc.: substantial holding of 5.08% and 6.56% Owners of Share Certificates may come forward to do so and to receive a corresponding
of the voting rights (December 1, 2023); UBS Group AG: substantial holding of 3.61% and number of shares until January 1, 2026, at the latest. As per January 2, 2026, entitlements
3.61% of the voting rights (September 1, 2023); Mondrian Investment Partners Limited: attached to the Share Certificates not surrendered will expire by operation of law. For more
substantial holding of 3.02% and 3.02% of the voting rights (February 17, 2023). information, please contact the Investor Relations department by email
(investor.relations@philips.com) or telephone (+31-20-59 77222).
The statutory seat of the company is Eindhoven, the Netherlands, and the statutory list of all
subsidiaries and affiliated companies, prepared in accordance with the relevant legal
requirements (Dutch Civil Code, Book 2, articles 379 and 414), forms part of the notes to the
financial statements and is deposited at the office of the Commercial Register in Eindhoven,
the Netherlands (file no. 17001910). The executive offices of the company are located at the
Philips Center, Amstelplein 2, 1096 BC Amsterdam, the Netherlands, telephone +31-20-59
77777.
The Board of Management and the Supervisory Board are of the opinion that the principles
and best practice provisions of the Dutch Corporate Governance Code that are addressed to
the boards are being applied. The full text of the Dutch Corporate Governance Code can be
found on the website of the Monitoring Commission Corporate Governance Code
(www.mccg.nl).
139
Group financial statements contents
10.1 Consolidated statements of income 141 10.6 Notes to the Consolidated financial statements 147
10.2 Consolidated statements of comprehensive income 142 1 General information to the Consolidated financial 147
10.3 Consolidated balance sheets 143 statements
10.4 Consolidated statements of cash flows 144 2 Information by segment and main country 149
10.5 Consolidated statements of changes in equity 145 3 Discontinued operations and assets classified as held 154
for sale
4 Acquisitions and divestments 156
5 Interests in entities 158
6 Income from operations 159
7 Financial income and expenses 164
8 Income taxes 164
9 Earnings per share 168
10 Property, plant and equipment 170
11 Goodwill 173
12 Intangible assets excluding goodwill 176
13 Other financial assets 178
14 Other assets 180
15 Inventories 180
16 Receivables 181
17 Equity 182
18 Debt 186
19 Provisions 188
20 Post-employment benefits 192
21 Accrued liabilities 196
22 Other liabilities 196
23 Cash flow statement supplementary information 197
24 Contingencies 198
25 Related-party transactions 201
26 Share-based compensation 202
27 Information on remuneration 206
28 Fair value of financial assets and liabilities 208
29 Details of treasury and other financial risks 213
30 Subsequent events 219
140
10 Group financial statements

10.1 Consolidated statements of income

Consolidated statements of income in millions of EUR Earnings per common share attributable to shareholders of Koninklijke Philips N.V. in EUR
For the year ended December 31
2021 2022 2023 2021 2022 2023
6 Sales 17,156 17,827 18,169 Basic earnings per common share attributable to shareholders of Koninklijke
Philips N.V. 1)
Cost of sales (9,988) (10,633) (10,721)
Income from continuing operations 0.64 (1.76) (0.50)
Gross margin 7,168 7,194 7,448
Net income 3.52 (1.75) (0.51)
Selling expenses (4,258) (4,621) (4,524)
General and administrative expenses (599) (671) (608)
Diluted earnings per common share attributable to shareholders of Koninklijke
Research and development expenses (1,806) (2,091) (1,890)
Philips N.V. 1)
11 Impairment of goodwill (15) (1,357) (8)
Income from continuing operations 0.64 (1.76) (0.50)
6 Other business income 186 127 112
Net income 3.50 (1.75) (0.51)
6 Other business expenses (123) (109) (645)
Income from operations 553 (1,529) (115)
1)
6 Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the
share dividend in respect of 2022.
7 Financial income 149 58 63
7 Financial expenses (188) (258) (376)
Investments in associates, net of income taxes (4) (2) (98)
Income before taxes 509 (1,731) (526)
8 Income tax (expense) benefit 103 113 73
Income from continuing operations 612 (1,618) (454)
3 Discontinued operations, net of income taxes 2,711 13 (10)
Net income 3,323 (1,605) (463)
Attribution of net income:

Net income attributable to shareholders of Koninklijke Philips N.V. 3,319 (1,608) (466)
Net income attributable to non-controlling interests 4 3 2
Amounts may not add up due to rounding.

141
10.2 Consolidated statements of comprehensive income
Philips Group
Consolidated statements of comprehensive income in millions of EUR
2021 2022 2023
Net income for the period 3,323 (1,605) (463)
20 Pensions and other-post employment plans:

Remeasurement, before tax 134 101 (26)
8 Income tax effect on remeasurements (21) (20) 3
Financial assets fair value through OCI:

Net current-period change, before tax (39) (32) (20)
Income tax effect on net current-period change 1 1 3
Total of items that will not be reclassified to Income Statement 74 49 (40)
Currency translation differences:

Net current period change, before tax 1,078 748 (579)
8 Income tax effect on net current-period change (5) 2 -
Reclassification adjustment for (gain) loss realized 36 - (26)
Reclassification adjustment for (gain) loss realized, in discontinued operations 69
Cash flow hedges:
Net current-period change, before tax (52) (29) 29
8 Income tax effect on net current-period change 18 (10) (2)
Reclassification adjustment for (gain) loss realized (14) 63 (19)
Total of items that are or may be reclassified to Income Statement 1,129 774 (597)
Other comprehensive income for the period 1,203 823 (637)
Total comprehensive income for the period 4,527 (782) (1,100)
Total comprehensive income (loss) attributable to:

Shareholders of Koninklijke Philips N.V. 4,520 (786) (1,101)
Non-controlling interests 7 4 1

142
10.3 Consolidated balance sheets
Philips Group
Consolidated balance sheets in millions of EUR unless otherwise stated
As of December 31
2022 2023 2022 2023
Non-current assets 17 Equity

2 10 Property, plant and equipment 2,638 2,483 Shareholders' equity 13,249 12,028
2 11 Goodwill 10,238 9,876 Common shares 178 183
2 12 Intangible assets excluding goodwill 3,526 3,190 Capital in excess of par value 5,025 5,827
16 Non-current receivables 279 193 Reserves 1,488 879
5 Investments in associates 537 381 Other 6,558 5,139
13 Other non-current financial assets 660 619 17 Non-controlling interests 34 33
28 Non-current derivative financial assets 4 3 Group equity 13,283 12,061
8 Deferred tax assets 2,449 2,627
14 Other non-current assets 98 93 Non-current liabilities
Total non-current assets 20,429 19,466 18 Long-term debt 7,270 7,035
28 Non-current derivative financial liabilities 4 3
Current assets 19 20 Long-term provisions 1,097 1,035
15 Inventories 4,049 3,491 8 Deferred tax liabilities 91 71
13 Other current financial assets 11 3 22 Non-current contract liabilities 515 469
14 Other current assets 490 500 8 Non-current tax liabilities 435 390
28 Current derivative financial assets 123 45 22 Other non-current liabilities 60 54
Income tax receivable 222 220 Total non-current liabilities 9,471 9,058
16 25 Current receivables 4,115 3,733
3 Assets classified as held for sale 77 79 Current liabilities
29 Cash and cash equivalents 1,172 1,869 18 Short-term debt 931 654
Total current assets 10,259 9,940 28 Current derivative financial liabilities 207 40
Total assets 30,688 29,406 Income tax payable 40 83
25 Accounts payable 1,968 1,917
21 Accrued liabilities 1,626 1,887
22 Current contract liabilities 1,696 1,809
19 20 Short-term provisions 1,018 1,463
Dividend payable - 11
Liabilities directly associated with assets held for sale - 9
22 Other current liabilities 448 414
Total current liabilities 7,934 8,287
Total liabilities and group equity 30,688 29,406

143
10.4 Consolidated statements of cash flows
Philips Group
Consolidated statements of cash flows in millions of EUR
2021 2022 2023 2021 2022 2023

Cash flows from operating activities Cash flows from investing activities
Net income (loss) 3,323 (1,605) (463) Net capital expenditures (729) (788) (554)
Results of discontinued operations, net of income tax (2,711) (13) 10 Purchase of intangible assets (107) (105) (96)
Adjustments to reconcile net income to net cash provided by (used Expenditures on development assets (259) (257) (203)
for) operating activities: Capital expenditures on property, plant and equipment (397) (444) (345)
Depreciation, amortization, and impairment of assets 1,323 1,602 1,261 Proceeds from sales of property, plant and equipment 33 18 90
Impairment of goodwill 15 1,357 8 23 Net proceeds from (cash used for) derivatives and current financial 48 (72) (46)
Share-based compensation 108 95 88 assets
Net loss (gain) on sale of assets 55 (115) (71) 23 Purchase of other non-current financial assets (124) (116) (92)
Interest income (18) (25) (46) 23 Proceeds from other non-current financial assets 124 78 48
Interest expense on debt, borrowings, and other liabilities 152 226 255 5 4 Purchase of businesses, net of cash acquired (3,098) (712) (73)
Investments in associates, net of income taxes 4 112 107 Net proceeds from sale of interests in businesses, net of cash disposed 107 124 80
Income taxes (103) (113) (71) Net cash provided by (used for) for investing activities (3,672) (1,487) (636)
Decrease (increase) in working capital (401) (862) 913 Cash flows from financing activities
Decrease (increase) in receivables and other current assets (39) (342) 298 23 18 Proceeds from issuance (payments on) short-term debt (25) 47 29
Decrease (Increase) in inventories (581) (572) 257 23 18 Principal payments on current portion of long-term debt (302) (1,472) (754)
Increase (decrease) in accounts payable, accrued and other current 219 52 358 23 18 Proceeds from issuance of long-term debt 76 2,516 544
liabilities Re-issuance of treasury shares 23 12
Decrease (increase) in non-current receivables and other assets (46) 1 (33) 17 Purchase of treasury shares (1,636) (187) (662)
Increase (decrease) in other liabilities 33 (84) (38) Dividends paid to shareholders of Koninklijke Philips N.V. (482) (412) (2)
19 Increase (decrease) in provisions 427 (199) 422 Dividends paid to shareholders of non-controlling interests (2) (6) (3)
Other items (164) (39) 129 Net cash provided by (used for) financing activities (2,347) 500 (848)
Interest received 17 15 53 Net cash provided by (used for) continuing operations (4,390) (1,160) 652
Interest paid (151) (205) (250) 3 Net cash provided by (used for) discontinued operations 3,403 (12) 123
Dividends received from investments in associates 14 12 13 Net cash provided by (used for) continuing and discontinued (986) (1,172) 776
Income taxes paid (249) (333) (152) operations
Net cash provided by (used for) operating activities 1,629 (173) 2,136 Effect of changes in exchange rates on cash and cash equivalents 65 41 (79)
Cash and cash equivalents at the beginning of the period 3,226 2,303 1,172
Cash and cash equivalents at the end of the period 2,303 1,172 1,869

144
10.5 Consolidated statements of changes in equity
Philips Group
Consolidated statements of changes in equity in millions of EUR
Capital in Currency Total Non-
excess of par Fair value Cash flow translation Retained Treasury shareholders' controlling Group
Common shares value through OCI hedges differences earnings shares equity interests equity
Reserves Other
Balance as of January 1, 2021 182 4,400 (305) 23 (58) 7,828 (199) 11,870 31 11,901
Total comprehensive income (loss) (39) (48) 1,175 3,432 4,520 7 4,527
Dividend distributed 1 290 (773) (482) (2) (484)
Minority Buy-out - -
Transfer of result on disposal of equity investments at - - -
FVTOCI to retained earnings
Purchase of treasury shares - (758) (757) (757)
Re-issuance of treasury shares - (150) 18 143 11 11
Forward contracts 48 (869) (821) (821)
Share call options 12 (21) (9) (9)
Cancellation of treasury shares (7) (1,221) 1,228
Share-based compensation plans 110 110 110
Income tax share-based compensation plans (4) (4) (4)
Balance as of December 31, 2021 177 4,646 (344) (25) 1,117 9,344 (476) 14,438 36 14,475
Total comprehensive income (loss) (32) 23 749 (1,527) (786) 4 (782)
Minority Buy-out - -
Transfer of result on disposal of equity investments at (1) 1 - -
Purchase of treasury shares - (24) (24) (24)
Re-issuance of treasury shares (43) (28) 77 7 7
Share call options 5 (12) (6) (6)
Cancellation of treasury shares (2) (298) 299
Income tax share-based compensation plans 1 1 1
145
10.5 Consolidated statements of changes in equity (continued)
Philips Group
Consolidated statements of changes in equity in millions of EUR
Capital in Currency Total Non-
excess of par Fair value Cash flow translation Retained Treasury shareholders' controlling Group
Common shares value through OCI hedges differences earnings shares equity interests equity
Reserves Other
Total comprehensive income (loss) (17) 8 (604) (488) (1,101) 1 (1,100)
Transfer of result on disposal of equity investments at 4 (4) - -
Purchase of treasury shares - - -
Re-issuance of treasury shares (29) (24) 54 - -
Share call options - -
Income tax share-based compensation plans 2 2 2
Balance as of December 31, 2023 183 5,827 (390) 6 1,263 5,402 (262) 12,028 33 12,061

146
10.6 Notes to the Consolidated financial statements The areas involving a higher degree of judgment and complexity in applying accounting
principles and for which changes in the assumptions and estimates could result in
significantly different results than those recorded in the consolidated financial statements
are the following:
1 General information to the Consolidated financial statements
• Assessment of control (below paragraph Basis of consolidation and Interests in entities,
Reporting entity and its operations starting on page 158)
Koninklijke Philips N.V. (‘Royal Philips’), incorporated and domiciled in the Netherlands, is a • Revenue recognition (Income from operations, starting on page 159)
public limited liability company organized under Dutch Law. Philips is headquartered in • For acquisitions, the identification and valuation of acquired assets and liabilities
Amsterdam, the Netherlands and has its registered address at High Tech Campus 52, 5656 including contingent considerations provisions (Acquisitions and divestments, starting on
AG Eindhoven, the Netherlands. The consolidated financial statements of Royal Philips as of page 156, Provisions, starting on page 188)
December 31, 2023 comprise Royal Philips and its subsidiaries (together referred to as the • Determination of deferred tax assets for losses carried forward and uncertain tax
'company’ or ‘Philips’ or the 'Group’). Philips is a leading health technology positions (Income taxes, starting on page 164)
company primarily involved in diagnostic imaging, image-guided therapy, patient • Assumptions used for impairment testing (Goodwill, starting on page 173, Intangible
monitoring and health informatics, as well as in consumer health and home care. assets excluding goodwill, starting on page 176)
• Assessments of exposure to credit risk of financial instruments (Other financial assets,
Basis of preparation starting on page 178, Receivables, starting on page 181, Debt, starting on page 186, Fair
The Consolidated financial statements are: value of financial assets and liabilities, starting on page 208, Details of treasury and other
financial risks, starting on page 213)
• prepared in accordance with International Financial Reporting Standards (IFRS) as • Assumptions used to determine the net realizable value of inventories (Inventories,
adopted by the European Union (EU) and comply with the statutory provisions of Part 9, starting on page 180)
Book 2 of the Dutch Civil Code; • Actuarial assumptions of future events that are used in calculating post-employment
• authorized for issue by the Board of Management of Royal Philips on February 19, 2024; benefit expenses and liabilities (Post-employment benefits, starting on page 192)
• prepared under the historical cost convention, unless otherwise indicated; • Estimates and assumptions regarding the timing and the amount of outflow of
• prepared on a going concern basis; resources, as well as estimating the likelihood of a potential outflow of resources and the
• presented in euro, which is the presentation currency; ability to make a reliable estimate of the obligation relating to provisions and contingent
• rounded to the nearest million euro unless stated otherwise; liabilities (Provisions, starting on page 188, Contingencies, starting on page 198)
• subject to rounding, whereby amounts may not add up precisely to the totals provided.
The company regularly updates its significant assumptions and estimates to support the
Accounting estimates and judgments reported amounts of assets, liabilities, income and expenses.
The preparation of financial statements requires management to make a number of
estimates and judgments that affect the application of accounting policies and the In preparing the consolidated financial statements management has considered the impact
reporting amounts of assets and liabilities, revenues and expenses, and the disclosure of of climate change, specifically the financial impact of Philips meeting its internal and
contingent assets and liabilities. Amounts recognized are based on factors that are by external climate related aims, the potential impact of climate related risks and the costs
default associated with uncertainty. Actual results may therefore differ from estimates. incurred to pro-actively manage such risks. These considerations did not have a material
Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to impact on the financial reporting judgments, estimates or assumptions. The specific financial
estimates are recognized prospectively. Where applicable, the estimates and judgments of impacts considered include, for example: specific climate mitigation measures, such as the
specific financial statement items are described in the respective note to the consolidated use of lower carbon energy sources, the costs of developing more sustainable product
financial statements. offerings and expenses incurred to mitigate against the impact of extreme weather
conditions. Philips uses 100% electricity from renewable sources, mainly through long-term
Power Purchase Agreements thereby mitigating the impact of carbon taxes. The
development of more sustainable products are covered through our EcoDesign program
147
and already included in our R&D expenses. The physical risk related to climate change on our Non-monetary assets and liabilities denominated in foreign currencies that are measured at
sites resulting from our TCFD-assessment is currently considered limited. fair value are retranslated to the functional currency using the exchange rate at the date the
fair value was determined. Non-monetary items in a foreign currency that are measured
Material accounting policies based on historical cost are translated using the exchange rate at the transaction date.
The material accounting policies as generally applied throughout the financial statements
are described below. Material accounting policies relating to specific financial statement Foreign operations
items are included in the respective notes to the financial statements. The assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on acquisition, are translated to euros at the exchange rates prevailing
Basis of consolidation at the reporting date. The income and expenses of foreign operations are translated to
The Consolidated financial statements comprise the financial statements of Koninklijke euros at the exchange rates prevailing at the dates of the transactions.
Philips N.V. and all subsidiaries that the company controls on a consolidated basis. Control
exists when the company is exposed or has rights to variable returns from its involvement Foreign currency differences arising upon translation of foreign operations into euros are
with the investee and the company has the ability to affect those returns through its power recognized in Other comprehensive income and presented as part of Currency translation
over the investee. Generally, there is a presumption that a majority of voting rights results in differences in Equity. However, if the operation is not a wholly-owned subsidiary, the
control. To support this presumption and in cases where Philips has less than a majority of proportionate share of the translation difference is allocated to Non-controlling interests.
the voting or similar rights of an investee, Philips considers all relevant facts and
circumstances in assessing whether it has power over an investee, including the contractual When a foreign operation is disposed of such that control, significant influence or joint
arrangement(s) with the other vote holders of the investee, rights arising from other control is lost, the cumulative amount in the Currency translation differences related to the
contractual arrangements and the company’s voting rights and potential voting rights. foreign operation is reclassified to the Consolidated statements of income as part of the
Subsidiaries are fully consolidated from the date that control commences until the date that gain or loss on disposal. When the company disposes of only part of its interest in a
control ceases. All intercompany balances and transactions have been eliminated in the subsidiary that includes a foreign operation while retaining control, the respective
Consolidated financial statements. Unrealized losses are eliminated in the same way as proportion of the cumulative amount is reattributed to Non-controlling interests. When the
unrealized gains, but only to the extent that there is no evidence of impairment. company disposes of only part of its investment in an associate or joint venture that includes
a foreign operation while retaining significant influence or joint control, the relevant
Foreign currency transactions proportion of the cumulative amount is reclassified to the Consolidated statements of
The financial statements of all group entities are measured using the currency of the primary income.
economic environment in which the entity operates (functional currency). The euro (EUR) is
the functional currency of the company and the presentation currency of the consolidated New accounting policies effective in 2023
financial statements. Foreign currency transactions are converted into the functional No new IFRS accounting standards or amendments to existing standards, effective in 2023,
currency using the exchange rates prevailing at transaction date or the valuation date in had a significant impact on the consolidated financial statements. The company has not
cases where items are remeasured. Gains and losses resulting from the settlement of foreign early adopted any standards or amendments to existing standards. Consistent with the IAS
currency transactions and those resulting from the conversion of foreign currency 12 amendment regarding Pillar Two taxation as issued by the IASB and adopted by the EU,
denominated monetary assets and liabilities at period-end exchange rates are recognized in Philips does not recognize and disclose deferred taxes arising from tax laws that implement
the Consolidated statements of income, except for qualifying cash flow hedges, qualifying Pillar Two model rules published by the Organisation for Economic Co-operation and
net investment hedges and equity investments measured at fair value through OCI which Development. Furthermore, Philips will recognize and disclose the impact (if any) from Pillar
are recognized in other comprehensive income. Two income taxes on current tax effective from 2024.
All foreign exchange differences are presented as part of Cost of sales, apart from tax items New accounting policies effective after 2023
and financial income and expense, which are recognized in the same line item as they relate The IASB has issued several IFRS accounting standards, or amendments to standards, with an
to in the Consolidated statements of income. effective date after 2023. The company does not anticipate that the application of these
standards, or amendments to standards, will have a significant effect on the consolidated
financial statements upon adoption.
148
Changes in presentation from the prior year business as a discontinued operation. Refer to Discontinued operations and assets classified
Accounting policies have been applied consistently for all periods presented in these as held for sale, starting on page 154.
consolidated financial statements. Certain prior-year amounts have been reclassified to
conform to the current year presentation due to immaterial organizational changes. Philips focuses on improving people’s lives through meaningful innovation. The Diagnosis &
Treatment segment unites the businesses related to the goal of precision diagnosis and
Philips has realigned the composition of its reporting segments effective from April 1, 2023. disease pathway selection, and the businesses related to image-guided, minimally invasive
The most notable change is the shift of the previous Enterprise Diagnostic Informatics treatment. The Connected Care segment focuses on patient care solutions, advanced
business from the Diagnosis & Treatment segment to the Connected Care segment. This informatics and analytics, and patient and workflow optimization inside and outside the
business, together with other informatics solutions in the Connected Care segment, now hospital, and aims to unlock synergies from integrating and optimizing patient care
forms the Enterprise Informatics business. Accordingly, the comparative figures for the pathways, and leveraging provider-payer-patient business models. The Personal Health
affected segments have been restated in the consolidated financial statements. segment focuses on healthy living and preventative care.
Per share calculations have been adjusted retrospectively for all periods presented to reflect Philips has realigned the composition of its business segments effective from April 1, 2023.
the issuance of shares for the share dividend in respect of 2022. The most notable change is the shift of the previous Enterprise Diagnostic Informatics
business from the Diagnosis & Treatment segment to the Connected Care segment. This
2 Information by segment and main country business, together with other informatics solutions in the Connected Care segment, now
forms the Enterprise Informatics business. Accordingly, the comparative figures for the
Accounting policies affected segments have been restated. The realignment did not impact the presentation of
the business segments or the key segmental performance measure, which continues to be
Segment accounting policies are the same as the accounting policies applied by the Adjusted EBITA.
company. Operating segments are components of the company’s business activities about
which separate financial information is available that is evaluated regularly by the Chief
Operating Decision-Maker (the Board of Management of the company). The Board of
Management decides how to allocate resources and assesses performance. Reportable
segments comprise the operating segments Diagnosis & Treatment, Connected Care and
Personal Health. Additionally, besides these reportable segments, segment Other contains
the items Innovation & Strategy, IP Royalties, Central costs, and other small items.
Accounting estimates and judgments
Determining reportable segments requires significant judgment and involves evaluating

the information which is reviewed by the Chief Operating Decision-Maker (the Board of
Management) to assess performance and allocate resources, in accordance with IFRS 8
'Operating Segments'.
The Philips business segments are Diagnosis & Treatment, Connected Care and Personal
Health, each being responsible for the management of its business worldwide. As of the first
quarter of 2021 the Domestic Appliances business was presented as a discontinued
operation and therefore no longer part of the Personal Health segment. The comparative
results prior to that were restated to reflect the treatment of the Domestic Appliances
149
Philips Group The term Adjusted EBITA is used to evaluate the performance of Philips and its segments.
Information on income statements in millions of EUR
Adjusted EBITA represents Income from operations excluding amortization and impairment
sales including depreciation and Adjusted
sales intercompany amortization 1) EBITA of acquired intangible assets and impairment of goodwill (EBITA) and excluding gains or
2023 losses from restructuring costs, acquisition-related charges and other items.
Diagnosis & Treatment 8,818 9,253 (306) 1,026
Connected Care 5,138 5,149 (445) 369 Adjusted EBITA is not a recognized measure of financial performance under IFRS. Presented
Personal Health 3,602 3,685 (115) 597 in the following table is a reconciliation of Adjusted EBITA to the most directly comparable
Other 612 428 (394) (71) IFRS measure, Net income, for the years indicated. Net income is not allocated to segments
Inter-segment (346) as certain income and expense line items are monitored on a centralized basis, resulting in
eliminations them being shown on a Philips Group level only.
Philips Group 18,169 18,169 (1,261) 1,921
2022
Diagnosis & Treatment 8,290 8,576 (417) 788
Connected Care 5,268 5,280 (646) 111
Personal Health 3,626 3,684 (132) 538
Other 643 736 (407) (119)
Inter-segment (449)
eliminations
Philips Group 17,827 17,827 (1,602) 1,318
2021
Diagnosis & Treatment 7,825 8,023 (363) 1,028
Connected Care 5,371 5,388 (472) 553
Personal Health 3,429 3,462 (131) 590
Other 530 636 (357) (117)
Inter-segment (353)
eliminations
Philips Group 17,156 17,156 (1,323) 2,054
1)
Includes impairments (excluding goodwill impairment); for impairment values please refer to Property, plant and equipment,
starting on page 170 and Intangible assets excluding goodwill, starting on page 176
150
Philips Group
Reconciliation from net income to Adjusted EBITA In millions of EUR
Diagnosis &
Philips Group Treatment Connected Care Personal Health Other
2023
Net Income (463)
Discontinued operations, net of income taxes 10
Income taxes (73)
Investments in associates, net of income taxes 98
Financial expenses 376
Financial income (63)
Income from operations (115) 720 (1,199) 552 (188)
Amortization and impairment of acquired intangible assets 290 89 178 14 9
Impairment of goodwill 8 8 -
EBITA 183 816 (1,020) 567 (179)
Restructuring and acquisition-related charges 381 118 115 9 140
Other items: 1,358 92 1,275 22 (32)
Respironics litigation provision 575 575
Respironics field-action connected to the proposed consent decree 363 363
Respironics field-action running remediation costs 224 224
Quality remediation actions 175 81 94
Provision for a legal matter 31 31
Investment re-measurement loss 23 23
Gain on divestment of business (35) (35)
Remaining items 2 11 (12) (1) 3
Adjusted EBITA 1,921 1,026 369 597 (71)
151
Philips Group
Diagnosis &
2022
Net Income (1,605)
Discontinued operations, net of income taxes (13)
Income taxes (113)
Income from operations (1,529) 538 (2,347) 515 (235)
Impairment of goodwill 1,357 1,357
EBITA 192 652 (764) 531 (227)
Other items: 925 133 750 (4) 46
R&D project impairments 134 73 59 3
Portfolio realignment charges 109 109
Provision for public investigations tender irregularities 60 60
Quality remediation actions 59 59
Impairments of assets in S&RC 39 39
Remaining items 63 - 24 (6) 46
Adjusted EBITA 1,318 788 111 538 (119)
152
Philips Group
Diagnosis &
2021
Net Income 3,323
Discontinued operations, net of income taxes (2,711)
Income taxes (103)
Income from operations 553 948 (716) 576 (255)
Impairment of goodwill 15 2 13
EBITA 890 1,092 (545) 591 (248)
Restructuring and acquisition-related charges 95 (30) 130 (1) (5)
Other items: 1,069 (35) 968 - 136
Loss on divestment of business 76 76
Remaining items 87 (35) 61 - 61
Adjusted EBITA 2,054 1,028 553 590 (117)
Transactions between the segments are mainly related to components and parts included in
the product portfolio of the other segments. The pricing of such transactions was at cost or
determined on an arm’s length basis. Philips has no single external customer that represents
10% or more of sales.
153
Philips Group 3 Discontinued operations and assets classified as held for sale
Main countries in millions of EUR
tangible and
sales 1) intangible assets 2) Accounting policies
2023
Netherlands 2,390 1,624 Assets classified as held-for-sale
United States 7,178 11,410 Non-current assets (or disposal groups) are classified as held-for-sale if their carrying
China 1,408 234 amounts are expected to be recovered through a sale transaction rather than through
Japan 941 407 continuing use. Non-current assets (or disposal groups) classified as held-for-sale are
Germany 573 348 measured at the lower of their carrying amount or the fair value less costs of disposal.
Other countries 5,679 1,527 Depreciation or amortization of an asset ceases when it is classified as held-for-sale. When
Total main countries 18,169 15,550 non-current assets (or disposal groups) are classified as held-for-sale, comparative balances
prior to such date are not represented in the Consolidated balance sheets.
2022
Netherlands 2,021 1,746 Discontinued operations
United States 7,226 12,087
A discontinued operation is a component of the company that has either been disposed of
China 1,239 260
or is classified as held-for-sale and represents a separate major line of business or
Japan 1,011 436
geographical area of operations or is a part of a single coordinated plan to dispose of a
Germany 642 323
separate major line of business or geographical area of operations. Any gain or loss from
Other countries 5,688 1,550
disposal, together with the results of these operations until the date of disposal, are
Total main countries 17,827 16,402
reported separately as discontinued operations in the Consolidated statements of income.
2021
Netherlands 1,860 1,934 The financial information of discontinued operations is excluded from the respective
United States 6,403 12,615 captions in the Consolidated financial statements and related notes for all periods
China 1,400 258 presented. Comparatives are re-presented for presentation of discontinued operations in
Japan 1,068 480 the Consolidated statements of income and Consolidated statements of cash flows.
Germany 970 305
France 446 49
India 431 85
United Kingdom 426 567
Other countries 4,150 693
Total main countries 17,156 16,986
The determination of the fair value less costs of disposal involves the use of estimates and
assumptions that tend to be uncertain. Circumstances to which these adjustments may
relate include resolution of uncertainties that arise from the terms of the disposal
1)
To better align with the Country Activity and Tax reporting, the allocation of country-level sales was revised from country of
destination to country of origin. Comparative information in this table has been restated to be consistent with the current-
period presentation. transaction, such as the resolution of purchase price adjustments and indemnifications,
2)
Consists of Property plant and equipment, Intangible assets excluding goodwill and Goodwill resolution of uncertainties that arise from and are directly related to the operations of the
component before its disposal, such as environmental and assurance-type product warranty
obligations retained by the company, and the settlement of employee benefit plan
obligations provided that the settlement is directly related to the disposal transaction.
In 2023 and 2022 discontinued operations consist of certain costs related to other
divestments, which were previously reported as discontinued operations. In 2021
discontinued operations consist primarily of the Domestic Appliances business. The
154
following table summarizes the results of discontinued operations, net of income taxes, On September 1, 2021, the company completed the sale of the Domestic Appliances business
reported in the consolidated statements of income. and recognized a transaction gain before tax of EUR 3,241 million. Philips received
consideration of EUR 4,041 million, which is based on an enterprise value of EUR 3,850
Philips Group million, increased by an amount of EUR 191 million for closing adjustments related to
Discontinued operations, net of income taxes in millions of EUR
working capital and net indebtedness. The transaction gain before tax is the net effect of (i)
2021 2022 2023
the EUR 4,041 million consideration (ii) less the derecognition of net assets employed of EUR
Domestic Appliances 2,698 3 (2)
715 million (iii) less transaction related costs of EUR 16 million, (iv) less the release of
Other 13 10 (7)
cumulative translation losses of EUR 69 million included in Other comprehensive income.
Discontinued operations, net of income taxes 2,711 13 (10)
The income tax charges related to the divestment process was EUR 743 million, resulting in
an after-tax transaction gain of EUR 2,499 million. The income tax charge represents the
Discontinued operations: Domestic Appliances consolidated tax expense resulting from asset transactions completed as part of the
On March 25, 2021, Philips signed an agreement to sell its Domestic Appliances business to disentanglement of the business in anticipation of its sale, a significant portion of which
global investment firm Hillhouse Investment. Since the first quarter of 2021, the Domestic relates to taxes payable in the Netherlands. In addition, Philips and the buyer entered into a
Appliances business is presented as a discontinued operation, and comparative results have 15-year brand license agreement with future annual payments that represents an estimated
been restated to reflect the treatment of the Domestic Appliances business as a net present value of approximately EUR 0.7 billion, which will be received and recognized
discontinued operation, because the sale of the Domestic Appliances business constitutes over time.
the discontinuance of a major line of business from the Personal Health segment.
Discontinued operations: Other
The following table summarizes the results of Domestic Appliances included in the Certain costs related to other divestments, which were previously reported as discontinued
consolidated statements of income as a discontinued operation. operations, resulted in a net loss of EUR (7) million in 2023, a net gain of EUR 10 million in
2022 and a net gain of EUR 13 million in 2021.
Philips Group
Results of Domestic Appliances in millions of EUR
Discontinued operations cash flows
2021 2022 2023
The following table presents the net cash provided by (used for) discontinued operations
Sales 1,516 6 -
reported in the Consolidated statements of cash flows.
Costs and expenses (1,322) (2) (2)
Income from operations 194 4 (2) Net cash provided by (used for) discontinued operations in millions of EUR
Result on the sale of discontinued operations 3,241 1 (1)
2021 2022 2023
Income before tax 3,435 5 (3)
Net cash provided by (used for) operating activities 85 (27) 123
Income tax benefit (expense) 1) 6 (2) 1
Net cash provided by (used for) investing activities 3,319 15
Income tax related the sale of discontinued operations (743)
Net cash provided by (used for) discontinued operations 3,403 (12) 123
Results from discontinued operations 2,698 3 (2)
1)
The income tax of discontinued operations is calculated based on the separate return method, as if Domestic Appliances In 2023, net cash provided by discontinued operations was EUR 123 million and consisted
was filing its own separate tax returns.
primarily of a refund received of one-off advance tax payments related to a previously
divested business.
Costs of EUR 64 million incurred in relation to the separation of the Domestic Appliances
business in 2021 have been accounted for in continuing operations, because these costs In 2022, net cash used for discontinued operations was EUR (12) million and consisted
reflect expenses incurred by Royal Philips in the divestment process and are not considered primarily of cash flows related to the tax claims from a previously divested business.
representative of the core business results of the Domestic Appliances business.
In 2021, net cash provided for discontinued operations was EUR 3,403 million and consisted
primarily of the net cash inflow of EUR 3,319 million from the sale of the Domestic
Appliances business on September 1, 2021.
155
Assets classified as held for sale Accounting estimates and judgments

As of December 31, 2023, assets held for sale primarily consisted of assets and liabilities
directly associated with a business held for sale. Intangible assets acquired in a business acquisition and the financial liability related to non-
controlling interest are measured at fair value at the date of the acquisition.
As of December 31, 2022, assets held for sale consists of property, plant and equipment
mainly related to the APAC Center Singapore building. The sale was finalized in January To determine the fair value of intangible assets at the acquisition date, estimates and
2023. assumptions are required. The valuation of the identifiable intangible assets involves
estimates of expected sales, earnings and/or future cash flows and require use of key
4 Acquisitions and divestments assumptions such as discount rate, royalty rate and growth rates.
Accounting policies Estimates are also applied when determining the fair value of legal cases and tax positions
in the acquired entity. The fair value is based on estimates of the likelihood, the expected
Acquisitions timing and the amount of the potential cash outflow. Provisions for legal cases and non-
The company accounts for business combinations using the acquisition method when income tax positions are recognized at fair value even if it is not probable that an outflow
control is transferred to the group. The consideration transferred in the acquisition is will be required to settle the obligation. After initial recognition and until the liability is
generally measured at fair value, as are the identifiable net assets acquired and the liabilities settled, cancelled or expired, the liability is measured at the higher of the amount that
assumed. Transaction costs are expensed as incurred. Any contingent consideration is would be recognized in accordance with IAS 37 'Provisions, contingent liabilities and
measured at fair value at the acquisition date and is initially presented in Long-term contingent assets' and the initial liability amount. For income tax positions, the company
provisions. When the timing and amount of the consideration become more certain, it is applies IAS 12 'Income Taxes', which requires recognition of provisions only when the
reclassified to Accrued liabilities. If the contingent consideration that meets the definition likelihood of cash outflow is considered probable.
of a financial instrument is classified as equity, it is not remeasured and settlement is
accounted for within equity. Otherwise, subsequent changes in the fair value of the 2023
contingent consideration are recognized in the Consolidated statements of income.
Acquisitions
Changes to the initial fair value of the acquired assets and liabilities, based on new On May 5, 2023, Philips completed one acquisition within Ultrasound business unit to
information about the circumstances at the acquisition date, can be made up to twelve accelerate the growth of its Diagnosis & Treatment segment. The total equity purchase price
months after the acquisition date. and the settlement of debt, net of acquired cash, involved an amount of EUR 53 million and
a contingent consideration of EUR 6 million at fair value, the latter recognized as a Long-
Divestments term provision. Upon acquisition, the company recognized Goodwill of EUR 24 million,
Upon loss of control, the company derecognizes the assets and liabilities of the subsidiary, Other intangible assets of EUR 40 million and deferred tax asset and liability of EUR 5 million
any non-controlling interests and the other components of equity related to the subsidiary. and EUR 2 million, respectively. The acquisition is subject to final purchase price allocation
Any surplus or deficit arising from the loss of control is recognized in the Consolidated procedures, which is expected to be finalized in the second quarter of 2024. The primary
statements of income. If the company retains any interest in the previous subsidiary, such provisional accounts subject to change are related to acquired intangible assets and
interest is measured at fair value at the date the control is lost. Subsequently it is accounted goodwill.
for as either an equity-accounted investee (associate) or as a financial asset, depending on
the level of influence retained. Further information on loss of control can be found in Since the acquisition date through December 31, 2023, the contribution to sales to third
Discontinued operations and assets classified as held for sale, starting on page 154. parties and net income of the acquiree was not material. The sales and net income would
not differ materially if the acquisition date had been January 1, 2023. Acquisition-related
costs were recognized in General and administrative expenses and were not material.
156
Divestments The condensed opening balance sheet of Vesper was as follows:

During 2023 Philips completed six divestments for net cash consideration of EUR 80 million
Opening balance sheet in millions of EUR
and a gain of EUR 50 million, which is included in Other business income of the Consolidated
At acquisition date
statements of income. The most notable was the sale of Philips Pharma Solutions in the US.
Vesper Medical Inc,
The divestments were not material.
Assets
Intangible assets excluding goodwill 84
2022
Deferred tax assets 15
Cash 7
Acquisitions Total Assets 106
In 2022 Philips completed three acquisitions. The acquisitions involved aggregated net cash
outflow of EUR 359 million. Including final purchase price adjustments processed in the Liabilities
course of 2023, the company recognized contingent consideration of EUR 96 million Accounts payable and other payables (1)
measured at fair value, aggregated Goodwill of EUR 307 million, Other intangible assets of Deferred tax liabilities (20)
EUR 179 million, Deferred tax assets of EUR 20 million and Deferred tax liabilities generated Total Liabilities (21)
from the intangible assets of EUR 43 million.
Total identifiable net assets at fair value 85
Vesper Medical Inc. (Vesper) was the most notable acquisition and is discussed below. The Goodwill arising on acquisition 177
remaining two acquisitions involved aggregated net cash outflow of EUR 139 million. Total purchase consideration 262
Including final purchase price adjustments processed in the course of 2023, the company Of which:
recognized contingent consideration of EUR 61 million measured at fair value, aggregated Purchase consideration transferred 227
Goodwill of EUR 130 million, Other intangible assets of EUR 95 million and Deferred tax Contingent consideration 34
liabilities of EUR 23 million.

Goodwill recognized in the amount of EUR 177 million mainly represents revenue synergies
Since the respective acquisition dates through December 31, 2022, the contribution to sales expected from the combination of Philips’ peripheral vascular portfolio and Vesper's venous
to third parties and net income of the three acquired entities was not material. The sales and stenting solution to address the root cause of chronic deep venous disease (DVD). Strong
net income of the combined entities would not differ materially from these amounts if the clinical synergies between Vesper’s innovative stenting solution and Philips' existing
acquisition date had been January 1, 2022. Acquisition-related costs were not material. peripheral vascular offering will help to better support clinicians to decide, guide, treat and
confirm during the procedure, thereby enhancing patient care. Vesper goodwill is not tax-
Vesper deductible.
On January 11, 2022, Philips acquired all shares of Vesper for an amount of EUR 227 million in
cash and EUR 34 million contingent consideration at fair value. Vesper, headquartered in The majority of the intangible assets balance relates to capitalized development costs, the
Wayne, Pennsylvania, US, is a medical technology company that develops minimally-invasive fair value of which is determined using the multi-period excess earnings method, which is a
peripheral vascular devices. The company is developing the Vesper DUO Venous Stent valuation technique that estimates the fair value of an asset based on market participants’
System®, commercialization of which is estimated to start after approval by the US Food and expectations of the cash flows associated with that asset over its remaining useful life. The
Drug Administration (FDA), expected in 2024. The Vesper DUO Venous Stent System® fair value of capitalized development costs is based on an estimate of positive future cash
consists of venous stents intended to treat deep venous obstruction. It provides physicians flows associated with incremental profits related to excess earnings, discounted at a rate of
with a modular portfolio to customize therapy, restore venous flow, and resolve the painful 12.0%. Capitalized development costs are tested for impairment on an annual basis until
symptoms of deep venous disease for the broad range of patients suffering from chronic FDA approval is obtained and the asset is reclassified to an intangible asset that is
venous insufficiency. As of the acquisition date, Vesper forms part of the Image-Guided depreciated over its economical useful life.
Therapy business portfolio of the Diagnosis & Treatment segment.
157
The contingent consideration arrangement requires Philips to pay the former owners of Group companies
Vesper up to a maximum undiscounted amount of EUR 44 million contingent upon FDA Below is a list of material subsidiaries as of December 31, 2023 representing greater than 5%
approval of the Vesper DUO Venous Stent System. The fair value of the contingent of either the consolidated group Sales, Income from operations or Income from continuing
consideration arrangement of EUR 34 million has been estimated by calculating the present operations (before any intra-group eliminations) of Group legal entities. All of the entities
value of the future expected cash flows. The estimate is based on a discount rate of 12% and are fully consolidated in the Group financial statements.
assumed probability adjusted likelihood of FDA approval at a certain point in time.
Philips Group
Interests in group companies in alphabetical order by country
2023
Divestments
Legal entity name Principal country of business
During 2022 Philips completed two divestments that were not material.
Philips (China) Investment Company, Ltd. China
Philips Medizin Systeme Böblingen GmbH Germany 1)
5 Interests in entities Philips Japan, Ltd. Japan
Philips Consumer Lifestyle B.V. Netherlands
Accounting policies Philips Medical Systems (Cleveland), Inc. United States
ATL International LLC United States
Associates are all entities over which the company has significant influence, but not control Philips North America LLC United States
or joint control. Significant influence is presumed with a shareholding of between 20% and Philips RS North America LLC United States
50% of the voting rights. 1)
Application of Sec. 264 (3) and Sec. 264b HGB (German Commercial Code) for fully consolidated legal entities: Philips
GmbH, Hamburg; Philips Medical Systems DMC GmbH, Hamburg; Respironics Deutschland GmbH & Co. KG, München;
Investments in associates are accounted for using the equity method of accounting and are Philips Medizin Systeme Hofheim-Wallau GmbH, Hamburg; Philips Medizin Systeme Böblingen GmbH, Böblingen; TomTec
Imaging Systems GmbH, Unterschleißheim; Forecare GmbH, Ratingen.
initially recognized at cost. The carrying amount of an investment in associate includes the
carrying amount of goodwill identified on acquisition. An impairment loss on such
investment is allocated to the investment as a whole. Information related to non-controlling interests
As of December 31, 2023, four consolidated subsidiaries are not wholly owned by Philips
The company’s share of the net income of these associates is included in Investments in (December 31, 2022: four). In 2023, Sales to third parties and Net income for these
associates, net of income taxes, in the Consolidated statements of income, after subsidiaries in aggregate are EUR 492 million (December 31, 2022: EUR 472 million) and EUR
adjustments to align the accounting policies with those of the company. Dilution gains and 27 million (December 31, 2022: EUR 28 million), respectively.
losses arising from investments in associates are recognized in the Consolidated statements
of income as part of Investments in associates, net of income taxes. Impairment losses and Investments in associates
gains or losses on sale of investments are recorded in the Consolidated statements of Philips has investments in a number of associates. During 2023, Philips made two
income, more specifically on the line item ’Investments in associates, net of income taxes’. investments in associates for a total amount of EUR 3 million.
When the company’s share of losses exceeds its interest in an associate, the carrying Due to the loss of significant influence in Candid Care during 2023, Philips reclassified the
amount of that interest is reduced to zero and recognition of further losses is discontinued investment to Other non-current financial asset at FVTOCI (Level 3). On reclassification
except to the extent that the company has an obligation or made payments on behalf of Philips recorded a loss of EUR 23 million in Other business expenses. For more information
the associate. about Other non-current financial asset at FVTOCI, refer to Other financial assets, starting on
page 178 and Fair value of financial assets and liabilities, starting on page 208.
The nature of the company’s interests in its consolidated entities and associates, and the
effects of those interests on the company’s financial position and financial performance are In 2023, Philips recorded its share in negative results of associates of EUR 51 million and
discussed below. impairment of EUR 58 million. The impairment losses mainly related to HALO Dx (EUR 33
million) and were recorded within the Investments in associates, net of income taxes line
item.
158
Cumulative translation adjustments related to investments in associates were EUR (21) customer (depending on the delivery conditions) and acceptance of the product has been
million as of December 31, 2023 (2022: EUR (22) million). obtained.
Involvement with unconsolidated structured entities Revenues from transactions relating to distinct goods or services are accounted for
Philips founded three Philips Medical Capital (PMC) entities, in the US, France and Germany, separately based on their relative stand-alone selling prices. The stand-alone selling price is
in which Philips holds a minority interest. Philips Medical Capital, LLC in the US is the most the price that would be charged for the goods or service in a separate transaction under
significant entity. PMC entities provide healthcare equipment financing and leasing services similar conditions to similar customers. The transaction price is determined (considering
to Philips customers for diagnostic imaging equipment, patient monitoring equipment, and variable considerations) and allocated to performance obligations based on their relative
clinical IT systems. stand-alone selling prices. These transactions mainly occur in the segments Diagnosis &
Treatment and Connected Care and include arrangements that require subsequent
The company concluded that it does not control, and therefore should not consolidate the installation and training activities to make distinct goods operable for the customer. As
PMC entities. In the US, PMC operates as a subsidiary of De Lage Landen Financial Services, such, the related installation and training activities are part of equipment sales rather than
Inc. The same structure and treatment is applied to the PMC entities in the other countries, separate performance obligations. Revenue is recognized when the performance obligation
with other majority shareholders. Operating agreements are in place for all PMC entities, is satisfied, i.e., when the installation has been completed and the equipment is ready to be
whereby acceptance of sales and financing transactions resides with the respective majority used by the customer in the way contractually agreed.
shareholder. After acceptance of a transaction by PMC, Philips transfers control and does not
retain any obligations towards PMC or its customers, from the sales contracts. Variable consideration is included in the transaction price to the extent that it is highly
probable that a significant reversal in the amount of cumulative revenue recognized will
As of December 31, 2023, Philips’ shareholding in Philips Medical Capital, LLC had a carrying not occur once associated uncertainties are resolved. Such assessment is performed on each
value of EUR 27 million (December 31, 2022: EUR 29 million). reporting date to check whether it is constrained. For products for which a right of return
exists during a defined period, revenue recognition is determined based on the historical
The company does not have any material exposures to losses from interests in pattern of actual returns, or in cases where such information is not available, revenue
unconsolidated structured entities other than the invested amounts. recognition is postponed until the return period has lapsed. Return policies are typically
based on customary return arrangements in local markets. A provision is recognized for
6 Income from operations assurance-type product warranty at the time of revenue recognition and reflects the
estimated costs of replacement and free-of-charge services that will be incurred by the
Accounting policies company with respect to the products sold. For certain products, the customer has the
option to purchase the warranty separately, which is considered a separate performance
Revenue recognition obligation on top of the assurance-type product warranty. For such warranties which
The company recognizes revenue when it transfers control over a good or service to a provide distinct service, revenue recognition occurs on a straight-line basis over the
customer, in an amount that reflects the consideration (i.e., transaction price) to which the extended warranty contract period. Occasionally, the company may offer a full or partial
company expects to be entitled to in exchange for the good or service. The consideration refund of consideration previously paid, for example as part of the resolution to warranty
expected by the company may include fixed and/or variable amounts which can be related matters. In such instances, a provision is recognized for the amounts expected to be
impacted by sales returns, trade discounts and volume rebates. The company adjusts the refunded to customers, and remeasured at each reporting date to reflect changes in the
consideration for the time value of money if the period between the transfer of the estimated refunds, with a corresponding adjustment to revenue.
promised goods or services to the customer and payment by the customer exceeds six
months. In the case of loss under a sales agreement, the loss is recognized immediately.
Transfer of control varies depending on the individual terms of the contract of sale. For Sale of goods
consumer-type products in the Personal Health segment, control is transferred when the Revenues are recognized at a point in time when control of the goods passes to the buyer,
product is shipped and delivered to the customer and title and risk have passed to the based on the allocation of the transaction price to the performance obligation.
159
Revenue from services estimates the sales-related accruals associated with these arrangements based on a
Revenues are recognized over time as the company transfers control of the services to the combination of historical patterns and future expectations regarding which promotional
customer which is demonstrated by the customer simultaneously receiving and consuming targets are expected to be met by distributors and retailers. Accrued customer rebates are
the benefits provided by the company. The amount of revenues is measured by reference to presented as other current liabilities, unless there is a right to offset against the respective
the progress made towards complete satisfaction of the performance obligation, which in accounts receivable.
general is evenly over time. Service revenue related to repair and maintenance activities for
goods sold is recognized ratably over the service period or as services are rendered. A breakdown by nature of the income (loss) from operations is as follows:
Income from royalties Philips Group

Sales and costs by nature in millions of EUR
Royalty income from brand license arrangements and from intellectual property rights, such
2021 2022 2023
as technology licenses or patents, is recognized on an accrual basis in accordance with the
Sales 17,156 17,827 18,169
substance of the relevant agreement.
Costs of materials used (4,142) (4,320) (4,626)
Employee benefit expenses (6,246) (6,952) (6,903)
Shipping and handling
Depreciation and amortization 1) (1,323) (1,602) (1,261)
Expenses incurred for shipping and handling are mainly recorded as cost of sales. When Impairment of goodwill (15) (1,357) (8)
shipping and handling are part of a project and billed to the customer, then the related Shipping and handling (645) (756) (668)
expenses are recorded as cost of sales. Shipping and handling related to sales to third Advertising and promotion (752) (739) (700)
parties are partly recorded as selling expenses. When shipping and handling billed to Lease expenses (19) (39) (51)
customers are considered a distinct and separate performance obligation, the fees are Other operational costs (3,524) (3,609) (3,535)
recognized as revenue and costs included in cost of sales. Other business income (expenses) 63 18 (533)
Income from operations 553 (1,529) (115)
Other business income (expenses) 1)
Includes impairments; for impairment values please refer to Property, plant and equipment, starting on page 170 and
Other business income (expenses) includes gains and losses on the sale of property, plant Intangible assets excluding goodwill, starting on page 176
and equipment, gains and losses on the sale of businesses as well as other gains and losses
not related to the company’s operating activities.
Sales composition and disaggregation
Government grants For information related to sales on a segment and geographical basis, refer to Information
Grants from governments are recognized at their fair value when there is a reasonable by segment and main country, starting on page 149.
assurance that the grant will be received and the company will comply with the conditions.
Grants related to costs are deferred in the consolidated balance sheet and recognized in the Philips Group
Sales composition in millions of EUR
consolidated statement of income as a reduction of the related costs that they are intended
2021 2022 2023
to compensate. Grants related to assets are deducted from the cost of the asset and
Goods 11,981 12,139 12,419
presented net in the consolidated balance sheets.
Services 4,374 4,878 4,926
Royalties 383 419 434
Total sales from contracts with customers 16,738 17,435 17,779
Accounting estimates and judgments Sales from other sources 418 391 390
Total sales 17,156 17,827 18,169
Sales-related accruals
The company has sales promotions-related agreements with distributors and retailers
Sales of goods include provisions of EUR 174 million that were recognized as a reduction of
designed to promote the sale of products. Among the programs are arrangements under
sales, primarily for (partial) refunds to customers in connection with the proposed
which rebates and discounts can be earned by the distributors and retailers by attaining
Respironics consent decree. Refer to Provisions, starting on page 188.
agreed upon sales levels, or for participating in specific marketing programs. Management
160
Total sales from other sources mainly relates to operating leases EUR 234 million (2022: EUR Philips Group
Disaggregation of Sales per segment in millions of EUR
258 million 2021: EUR 293 million). Sales represent revenue from external customers.
2021
Sales at a Sales Total sales from Sales from
As of December 31, 2023, the aggregate amount of the transaction price allocated to point in over contracts with other Total
remaining performance obligations from a sale of goods and services was EUR 15,571 million. time time customers sources sales
The company expects to recognize approximately 47% of the remaining performance Diagnosis & Treatment 5,120 2,656 7,776 50 7,825
obligations within 1 year. Revenue expected to be recognized beyond 1 year is mostly related Connected Care 3,399 1,604 5,002 369 5,371
to longer term customer service and software contracts. Personal Health 3,423 6 3,429 3,429
Other 200 330 530 - 530
Sales over time represent services and Other also includes royalties over time (2023: EUR 283 Philips Group 12,142 4,596 16,738 418 17,156
million 2022: EUR 292 million 2021: EUR 220 million).

Sales per geographic area are reported based on country of destination. Philips Group
Disaggregation of Sales per geographic area in millions of EUR
Philips Group 2023
2023 point in over contracts with other Total
Sales at a Sales Total sales from Sales from time time customers sources sales
point in over contracts with other Total Western Europe 2,552 1,221 3,770 49 3,819
time time customers sources sales
North America 4,859 2,608 7,470 92 7,562
Diagnosis & Treatment 5,762 2,978 8,742 76 8,818
Other mature geographies 980 398 1,378 248 1,626
Connected Care 2,970 1,854 4,824 314 5,138
Mature geographies 8,392 4,227 12,618 389 13,007
Personal Health 3,586 16 3,602 3,602
Growth geographies 4,177 984 5,161 1 5,162
Other 251 361 612 - 612
Sales 12,569 5,210 17,779 390 18,169
Philips Group 12,569 5,210 17,779 390 18,169
Philips Group
Philips Group Disaggregation of Sales per geographic area in millions of EUR
2022
2022
Sales at a Sales Total sales from Sales from point in over contracts with other Total
point in over contracts with other Total time time customers sources sales
time time customers sources sales
Western Europe 2,387 1,183 3,572 31 3,603
Diagnosis & Treatment 5,285 2,950 8,234 55 8,290
North America 4,889 2,612 7,502 86 7,588
Connected Care 3,079 1,853 4,932 336 5,268
Other mature geographies 972 399 1,369 274 1,643
Personal Health 3,615 11 3,626 3,626
Mature geographies 8,248 4,194 12,443 390 12,833
Other 284 357 643 - 643
Growth geographies 4,015 978 4,992 1 4,993
Philips Group 12,263 5,172 17,435 391 17,827
Sales 12,263 5,172 17,435 391 17,827
161
Philips Group Employees

Disaggregation of Sales per geographic area in millions of EUR
The average number (full-time equivalents, or FTEs) of employees by category is summarized
2021
as follows:
point in over contracts with other Total
time time customers sources sales Philips Group
Employees by category in FTEs
Western Europe 2,537 1,087 3,624 21 3,645
North America 4,427 2,268 6,695 86 6,781 2021 2022 2023
Other mature geographies 1,000 386 1,386 309 1,694 Production 38,618 39,742 35,281
Mature geographies 7,964 3,741 11,705 415 12,120 Research & development 10,751 11,690 10,833
Growth geographies 4,178 856 5,033 3 5,036 Other 22,543 23,019 23,001
Sales 12,142 4,596 16,738 418 17,156 Employees 71,912 74,451 69,115
Third party workers 4,533 4,086 3,149
Philips Group 76,445 78,538 72,264
Costs of materials used
Cost of materials used represents the inventory recognized in cost of sales.
Employees consist of those persons working on the payroll of Philips and whose costs are
Employee benefit expenses reflected in employee benefit expenses. Other consists of employees in commercial, general
and administrative functions. Third party workers consist of personnel hired on a per-period
Philips Group basis, via external companies.
Employee benefit expenses in millions of EUR
2021 2022 2023 Philips Group
Salaries and wages excluding share-based compensation 5,014 5,594 5,635 Employees by geographical location in FTEs
Share-based compensation 115 104 97 2021 2022 2023
Post-employment benefit costs 396 439 402 Netherlands 11,142 11,180 9,794
Other social security and similar charges: Other countries 65,303 67,357 62,471
Required by law 529 590 567 Philips Group 76,445 78,538 72,264
Voluntary 192 225 202
Employee benefit expenses 6,246 6,952 6,903
Depreciation and amortization
Depreciation of property, plant and equipment and amortization of intangible assets,
The employee benefit expenses relate to employees who are working on the payroll of including impairments, are as follows:
Philips, both with permanent and temporary contracts.
Philips Group
Depreciation and amortization 1) in millions of EUR
For further information on post-employment benefit costs, refer to Post-employment
2021 2022 2023
benefits, starting on page 192.
Depreciation of property, plant and equipment 630 711 689
Amortization of software 88 117 98
For details on the remuneration of the members of the Board of Management and the
Amortization of other intangible assets 322 363 290
Supervisory Board, refer to Information on remuneration, starting on page 206.
Amortization of development costs 284 411 184
Depreciation and amortization 1,323 1,602 1,261
1)
Includes impairments; for impairment values please refer to Property, plant and equipment, starting on page 170 and
Intangible assets excluding goodwill, starting on page 176
162
Depreciation of property, plant and equipment is mainly included in cost of sales. Philips Group
Audit and audit-related fees in millions of EUR
Amortization of software is mainly included in general and administration expenses.
2021 2022 2023
Amortization of other intangible assets is included in selling expenses for brand names and
EY EY EY EY EY EY
customer relationships and is included in cost of sales for technology based and other NL 1) Network Total NL 1) Network Total NL 1) Network Total
intangible assets. Amortization of development costs is included in research and Audit fees 10.3 5.4 15.7 9.5 5.6 15.2 9.7 5.1 14.7
development expenses. consolidated financial 10.3 2.7 13.0 9.5 3.1 12.6 9.7 2.6 12.3
statements
Impairment of goodwill statutory financial 2.7 2.7 2.5 2.5 2.5 2.5
statements
In 2023 a goodwill charge of EUR 8 million was recorded for the partial impairment of
Audit-related fees 2) 0.6 0.3 0.9 0.8 0.2 1.0 0.9 0.2 1.0
goodwill allocated to a business that was classified as held-for-sale as of December 31,
divestment
2023. During 2022, EUR 1,331 million of goodwill impairment charges were recorded in the
sustainability assurance 0.5 0.5 0.6 0.6 0.8 0.8
Sleep & Respiratory Care business, due to revisions to the expected future cash flows. In
other 0.1 0.3 0.4 0.1 0.2 0.3 0.1 0.2 0.3
addition, a EUR 27 million goodwill impairment was recognized in the Precision Diagnosis Tax fees - -
Solutions business. For further information refer to Goodwill, starting on page 173. All other fees
Fees 10.9 5.7 16.6 10.3 5.8 16.2 10.6 5.2 15.8
Shipping and handling
1)
Shipping and handling costs are included in cost of sales and selling expenses in the Ernst & Young Accountants LLP
2)
Consolidated statements of income, starting on page 141. Also known as Assurance fees
Advertising and promotion Other business income (expenses)

Advertising and promotion costs are included in selling expenses in the Consolidated Other business income (expenses) consists of the following:
statements of income, starting on page 141.
Philips Group
Other business income (expenses) in millions of EUR
Lease expense
2021 2022 2023
Lease expense relates to short-term and low value leases.
Result on disposal of businesses:
income - 4 50
Other operational costs
expenses (75) - -
Other operational costs contain items which are dissimilar in nature and individually
Result on disposal of fixed assets:
insignificant in amount to disclose separately. These costs contain among others expenses
income 24 3 12
for outsourcing services, mainly in Information Technology and Human Resources, third expenses (5) (1) (1)
party workers, consultants, warranty, patents, costs for travelling and external legal service. Result on other remaining businesses:
Government grants of EUR 95 million were recognized as cost reduction in 2023 (2022: EUR income 161 121 49
103 million 2021: EUR 104 million). The grants mainly relate to research and development expenses (43) (109) (643)
activities and business development. Other business income (expenses) 63 18 (533)
Total other business income 186 127 112
Audit and audit-related fees Total other business expenses (123) (109) (645)
The following table shows the fees attributable to the fiscal years 2021, 2022 and 2023 for
services rendered by the external auditors.
The result on disposal of businesses mainly relates to divestment of non-strategic businesses.
For more information refer to Acquisitions and divestments, starting on page 156.
The result on disposal of fixed assets mainly relates to the sale of real estate assets.
163
The result on other remaining businesses mainly relates to the revaluation of contingent In 2023, financial income and expenses, net increased by EUR 114 million year-on-year,
consideration and various legal matters. In 2023 Philips Respironics recorded a EUR 575 mainly due to fair value losses and net foreign exchange losses in 2023, compared to gains in
million provision in connection with the anticipated resolution of the economic loss class 2022. The fair value losses mainly relate to power purchase agreements for renewable
action. For more information on contingent consideration, refer to Provisions, starting on energy, limited-life funds (mainly Gilde Healthcare) and other investments recognized at fair
page 188. value through profit and loss. Furthermore, provision-related accretion expenses and net
In 2023 a loss of EUR 23 million related to a minority participation was recognized in Other interest expense were higher in 2023 compared to 2022. Net interest expense in 2023 was
business expenses. For more information refer to Interests in entities, starting on page 158. EUR 21 million higher than in 2022, mainly due the issuance of new debt in 2022 and 2023
and the impact of increasing interest rates.
7 Financial income and expenses
In 2022, Financial income and expenses increased by EUR 161 million year-on-year, mainly
Accounting policies due to higher interest expense and lower fair value gains. The lower fair value gains
compared to 2021 are mainly from investments in limited-life funds (mainly Gilde
Financial income and expenses are recognized on the accrual basis in the consolidated Healthcare) and other investments recognized at fair value through profit or loss. Net
statements of income. Interest income and expense are measured using the effective interest expense in 2022 was EUR 69 million higher than in 2021, mainly due to the financial
interest method. Dividend income is recognized in the consolidated statements of income charges related to early redemption of EUR and USD bonds and the issuance of new EUR
on the date that the company’s right to receive payment is established, which in the case of bonds in 2022. The decrease in 2022 compared to 2021 in other financial income is mainly
quoted securities is normally the ex-dividend date. due to higher interest income on tax in 2021.
8 Income taxes
Philips Group
Financial income and expenses in millions of EUR
Accounting policies
2021 2022 2023
Interest income 18 25 46
Income taxes comprise of current, non-current and deferred tax. Income tax is recognized in
Interest income from loans and receivables 7 7 13
the Consolidated statements of income except to the extent that it relates to items
Interest income from cash and cash equivalents 11 18 33
recognized directly within equity or in other comprehensive income. Current tax is the
Dividend income from financial assets 2 3 2
Net gains from disposal of financial assets - - -
expected taxes payable on the taxable income for the year, using tax rates enacted or
Net change in fair value of financial assets through profit or loss 95 9 substantively enacted at the reporting date, and any adjustment to tax payable in respect of
Other financial income 33 20 15 previous years.
Financial income 149 58 63
Interest expense (159) (235) (277) In cases where it is concluded it is not probable that tax authorities will accept a tax
Interest expense on debt and borrowings (126) (200) (229) treatment, the effect of the uncertainty is reflected in the recognition and measurement of
Finance charges under lease contract (25) (25) (27) tax assets and liabilities or, alternatively, a provision is made for the amount that is expected
Interest expense on pensions (8) (10) (21) to be settled, where this can be reasonably estimated. This assessment relies on estimates
Provision-related accretion expenses (5) (9) (29) and assumptions and may involve a series of judgments about future events. New
Net foreign exchange gains (losses) - 9 (23) information may become available that causes the company to change its judgment
Net change in fair value of financial assets through profit or loss (26) regarding the adequacy of existing tax assets and liabilities. Such changes to tax assets and
Other financial expenses (24) (24) (21) liabilities will impact the income tax expense in the period during which such a
Financial expenses (188) (258) (376)
determination is made.
Financial income and expenses, net (39) (200) (314)
Deferred tax assets and liabilities are recognized, using the consolidated balance sheet
method, for the expected tax consequences of temporary differences between the carrying
amounts of assets and liabilities and the amounts used for taxation purposes. Deferred tax
164
is not recognized for the following temporary differences: (a) the initial recognition of Co-operation and Development. Furthermore, Philips will recognize and disclose the impact
goodwill; or (b) the initial recognition of an asset or liability in a transaction which: (i) is not (if any) from Pillar Two income taxes on current tax effective from 2024.
a business combination, (ii) at the time of transaction, affects neither accounting profit nor
taxable profit (tax loss), (iii) at the time of the transaction, does not give rise to equal
amounts of taxable and deductible differences; or (c) differences relating to investments in
subsidiaries, joint ventures and associates where the reversal of the respective temporary
difference can be controlled by the company and it is probable that it will not reverse in the
Deferred tax recoverability
foreseeable future. Deferred taxes are measured at the tax rates that are expected to be
Deferred tax assets are recognized to the extent that it is probable that there will be future
applied to temporary differences when they reverse, based on the laws that have been
taxable profits against which these can be utilized. Significant judgment is involved in
enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities
determining whether such profits are probable. Management determines this on the basis
are offset if there is a legally enforceable right to offset current tax liabilities and assets, and
of expected taxable profits arising from the reversal of recognized deferred tax liabilities,
they relate to income taxes levied by the same tax authority on the same taxable entity or
appropriate tax planning opportunities to support business goals and on the basis of
on different taxable entities, but the company intends to settle current tax liabilities and
forecasts.
assets on a net basis or their tax assets and liabilities will be realized simultaneously.
Uncertain tax positions

A deferred tax asset is recognized for unused tax losses, tax credits and deductible
Uncertain tax positions are recognized as liabilities if and to the extent it is probable that
temporary differences to the extent that it is probable that there will be future taxable
additional tax will be due and the amount can be reliably measured. Significant judgment is
profits against which they can be utilized. The ultimate realization of deferred tax assets is
involved in determining these positions.
dependent upon the generation of future taxable income in the countries where the
deferred tax assets originated and during the periods when the deferred tax assets become
The income tax benefit of continuing operations amounts to EUR 73 million (2022: EUR 113
deductible. Management considers the scheduled reversal of deferred tax liabilities,
million tax benefit, 2021: EUR 103 million tax benefit).
projected future taxable income and tax planning strategies in making this assessment.
The components of income before taxes and income tax expense are as follows:
Deferred tax liabilities for withholding taxes are recognized for subsidiaries in situations
where the income is to be paid out as dividend in the foreseeable future and for Philips Group
undistributed earnings of unconsolidated companies to the extent that these withholding Income tax expense in millions of EUR
taxes are not expected to be refundable or deductible. Changes in tax rates and tax laws are 2021 2022 2023
reflected in the period when the change was enacted or substantively enacted by the Income before taxes 509 (1,731) (526)
reporting date. Investments in associates, net of income taxes (4) (2) (98)
Income before taxes and Investment in associates 513 (1,729) (429)
Any subsequent adjustment to a tax asset or liability that originated in discontinued
operations and for which no specific arrangements were made at the time of divestment, Current tax (expense) benefit (298) (97) (201)
due to a change in the tax base or its measurement, is allocated to discontinued operations Deferred tax (expense) benefit 401 210 274
(i.e. backwards tracing). Examples are a tax rate change or change in retained assets or Income tax (expense) benefit of continuing operations 103 113 73
liabilities directly relating to the discontinued operation. Any subsequent change to the
recognition of deferred tax assets is allocated to the component in which the taxable gain is
Income tax benefit of continuing operations excludes the tax benefit of the discontinued
or will be recognized. The above principles are applied to the extent the ‘discontinued
operations of EUR 9 million (2022: EUR 18 million benefit, 2021: EUR 737 million expense),
operations’ are sufficiently separable from continuing operations.
mainly related to the release of provisions.
Consistent with the IAS 12 amendment regarding Pillar Two taxation as issued by the IASB
The components of income tax expense of continuing operations are as follows:
and adopted by the EU, Philips does not recognize and disclose deferred taxes arising from
tax laws that implement Pillar Two model rules published by the Organisation for Economic
165
Philips Group The effective income tax rate is lower than the weighted average statutory income tax rate
Current income tax expense in millions of EUR
in 2023 mainly due to the recognition of previously unrecognized tax loss and credit
2021 2022 2023
carryforwards, which is mainly related to a one-off recognition of tax credits and non-
Current year tax (expense) benefit (291) (111) (211)
taxable income and tax incentives which includes recurring favorable tax incentives related
Prior year tax (expense) benefit (7) 14 10
to R&D investments, the innovation box regime in the Netherlands and export activities. This
Current tax (expense) benefit (298) (97) (201)
is partly offset by the changes to recognition of temporary differences, which mostly
represents deferred tax assets not fully recognized in United States.
Philips Group
Deferred income tax expense In millions of EUR
Due to the loss position in 2023, items such as non-deductible expense lead to a decrease of
2021 2022 2023 the effective income tax rate and items such as tax incentives lead to an increase in the
Recognition of previously unrecognized tax loss and credit 138 2 72 effective income tax rate.
carryforwards
Unrecognized tax loss and credit carryforwards (10) (13) (41)
Changes to recognition of temporary differences (1) (4) (112)
Global minimum tax (Pillar Two)
Prior year tax (expense) benefit 20 (1) (2)
In December 2021, the OECD released model rules to introduce a global minimum corporate
Tax rate changes 10 (18) 4 income tax rate of 15% applicable to multinational enterprise groups with global revenue
Origination and reversal of temporary differences, tax losses 245 244 353 over EUR 750 million (“Pillar Two”). The formal adoption of Directive (EU) 2022/2523 in
and tax credits December 2022 aims to achieve a coordinated implementation of Pillar Two in the EU
Deferred tax (expense) benefit 401 210 274 Member States. The Dutch implementation of Pillar Two, the so-called Minimum Tax Rate
Act 2024 (the “MTR Act”), was enacted in December 2023 and will apply to Philips from the
Philips’ operations are subject to income taxes in various foreign jurisdictions. The statutory financial year ending December 31, 2024 and onwards. Under this legislation, Philips may be
income tax rate varies per country, which results in a difference between the weighted required to pay top-up taxes on profits if the related Pillar Two jurisdictional effective tax
average statutory income tax rate and the Netherlands’ statutory income tax rate of 25.8% rate is less than 15%.
(2022: 25.8% 2021: 25.0%).
Philips will be affected by the “MTR Act” as well as the implementation of Pillar Two per local
A reconciliation of the weighted average statutory income tax rate to the effective income law in other jurisdictions and has performed an assessment of the Group’s potential
tax rate of continuing operations is as follows: exposure to the Pillar Two legislation.
Philips Group This assessment indicates potential exposure from the constituent entities in Hong Kong
Effective income tax rate in %
and the United Arab Emirates, where the Pillar Two effective tax rate is below 15%. This
2021 2022 2023 would potentially have resulted in top-up taxes had Pillar Two legislation been effective in
Weighted average statutory income tax rate in % 22.7 23.6 22.0 2023. The assessment of the potential exposure to top-up taxes is based on the profits and
Recognition of previously unrecognized tax loss and credit (26.9) 0.1 16.8 tax expenses determined as part of the preparation of Philips’ consolidated financial
carryforwards
statement, most recent tax fillings and country-by-country reporting. The Pillar Two effective
Unrecognized tax loss and credit carryforwards 1.9 (0.7) (9.6)
Changes to recognition of temporary differences 0.3 (0.2) (26.2)
tax rate is lower in these jurisdictions due to exempted income and domestic tax rates either
Non-taxable income and tax incentives (40.6) 5.8 22.8 below or close to 15%.
Non-deductible expenses 19.3 (22.9) (10.7)
Withholding and other taxes 7.2 (1.4) (5.1) The group effective tax rate, had Pillar Two legislation been effective from 2023, would have
Tax rate changes (1.9) (1.0) 0.9 been 16.4% which is 0.6% lower than the reported effective tax rate of 17% under IFRS. The
Prior year tax (2.4) 0.7 1.9 decrease in the effective tax rate can be attributed to the reduction in the income tax
Tax expense (benefit) due to change in uncertain tax treatments 4.4 2.8 2.3 benefit of continuing operations resulting from the inclusion of potential top-up tax
Others, net (4.0) (0.2) 1.9 exposure (expense).
Effective income tax rate (20.0) 6.5 17.0
166
Deferred tax assets and liabilities Philips Group

Deferred tax assets and liabilities in millions of EUR
Deferred tax assets are recognized for temporary differences, unused tax losses, and unused
Balance as of recognized in Balance as of
tax credits to the extent that realization of the related tax benefits is probable. The ultimate January 1, income December 31,
realization of deferred tax assets is dependent upon the generation of future taxable 2023 statement other 1) 2023 Assets Liabilities
income in the countries where the deferred tax assets originated and during the periods Intangible assets 630 61 (12) 679 826 (147)
when the deferred tax assets become deductible. Management considers the scheduled Property, plant and (2) 18 (103) (88) 44 (132)
reversal of deferred tax liabilities, projected future taxable income, and tax planning equipment
Inventories 464 (26) (78) 360 363 (2)
strategies in making this assessment.
Other assets 44 20 120 184 233 (48)
Pensions and other 153 69 (29) 193 204 (11)
Net deferred tax assets relate to the following underlying assets and liabilities and tax loss employee benefits
carryforwards (including tax credit carryforwards) and their movements during the years Other liabilities 483 (56) 69 496 521 (25)
2023 and 2022 respectively are presented in the following tables. Deferred tax assets 586 188 (44) 730 730
on tax loss
carryforwards
The net deferred tax assets of EUR 2,556 million (2022: EUR 2,358 million) consist of deferred
Set-off deferred tax (294) 294
tax assets of EUR 2,627 million (2022: EUR 2,449 million) and deferred tax liabilities of EUR 71
positions
million (2022: EUR 91 million). Of the total deferred tax assets of EUR 2,627 million as of Net deferred tax 2,358 274 (77) 2,556 2,627 (71)
December 31, 2023 (2022: EUR 2,449 million), EUR 1,676 million (2022: EUR 1,453 million) is assets
recognized in respect of entities in various countries where there have been tax losses in the 1)
Other includes the movements of assets and liabilities recognized in equity and OCI, which includes foreign currency
current or preceding period, primarily the United States (US). The increase is mainly related translation differences, acquisitions and divestments.
to the US where there has been a tax loss in 2023, among others due to the Philips
Respironics’ business operations. Philips assessed the recoverability of the tax losses and Philips Group
recognized the related deferred tax asset only to the extent future tax profits are considered Deferred tax assets and liabilities in millions of EUR
probable. For the recoverability assessment, the income projections were determined using Balance as of recognized in Balance as of
similar methodology as used for goodwill impairment testing (for more information please January 1, income December 31,
2022 statement other 1) 2022 Assets Liabilities
refer to note Goodwill, starting on page 173). The company evaluated multiple risk-adjusted
Intangible assets 587 63 (20) 630 783 (152)
scenarios which support the assumption that it is probable that the results of future
Property, plant and 29 (33) 2 (2) 49 (52)
operations will generate sufficient taxable income to utilize the tax losses as well the equipment
deductible temporary differences. The projections include forward-looking assumptions Inventories 372 75 17 464 473 (8)
whereby the most recent available information was used to determine the expected period Other assets 68 (16) (8) 44 98 (55)
of recovery of the deferred tax assets. Relevant developments potentially impacting the Pensions and other 180 6 (32) 153 175 (22)
period and probability of recovery will be monitored closely. employee benefits
Other liabilities 499 (34) 17 483 560 (77)
Deferred tax assets on 398 149 38 586 586
As of December 31, 2023 the temporary differences associated with investments, including
tax loss carryforwards
potential income tax consequences on dividends, for which no deferred tax liabilities are Set-off deferred tax (275) 275
recognized, aggregate to EUR 444 million (2022: EUR 355 million). positions
Net deferred tax 2,134 210 14 2,358 2,449 (91)
assets
1)
Other includes the movements of assets and liabilities recognized in equity and OCI, which includes foreign currency
translation differences, acquisitions and divestments.
167
The company has available tax loss and credit carryforwards, which expire as follows: Tax risks on general and specific service agreements and licensing
agreements
Philips Group Due to the centralization of certain activities (such as research and development, IT and
Expiry years of net operating loss and credit carryforwards in millions of EUR
group functions), costs are also centralized. As a consequence, these costs and/or revenues
Total Unrecognized Total Unrecognized
balance as of balance as of balance as of balance as of must be allocated to the beneficiaries, i.e. the various Philips entities. For that purpose,
December 31, December 31, December 31, December 31, service contracts such as intra-group service agreements and licensing agreements are
2022 2022 2023 2023 signed with a large number of group entities. Tax authorities review these intra-group
Within 1 year 4 3 17 15 service and licensing agreements, and may reject the implemented intra-group charges.
1 to 2 years 10 5 20 16 Furthermore, buy in/out situations in the case of (de)mergers could affect the cost allocation
2 to 3 years 9 3 7 2
resulting from the intragroup service agreements between countries. The same applies to
3 to 4 years 13 4 9 5
the specific service agreements.
4 to 5 years 38 3 38 16
Later 812 93 808 81
Tax risks due to disentanglements and acquisitions
Unlimited 2,301 920 2,997 1,231
When a subsidiary of Philips is disentangled, or a new company is acquired, tax risks may
Total 3,187 1,032 3,896 1,366
arise. Philips creates merger and acquisition (M&A) teams for these disentanglements or
acquisitions. In addition to representatives from the involved business, these teams consist
The increase in the unrecognized balance as of December 31, 2023 is mainly explained by the of specialists from various group functions and are formed, among other things, to identify
US. tax risks and to reduce potential tax claims.
As of December 31, 2023, the amount of deductible temporary differences for which no Tax risks due to permanent establishments
deferred tax asset has been recognized in the balance sheet was EUR 125 million (2022: EUR A permanent establishment may arise when a Philips entity has activities in another country,
45 million). tax claims could arise in both countries on the same income.
Tax risks 9 Earnings per share

Philips is exposed to tax risks and uncertainty over tax treatments. For particular tax
treatments that are not expected to be accepted by tax authorities, Philips either recognizes Accounting policies
a liability or reflects the uncertainty in the recognition and measurement of its current and
deferred tax assets and tax attributes. For the measurement of the uncertainty, Philips uses The company presents basic and diluted earnings per share (EPS) data for its common
the most likely amount or the expected value of the tax treatment. The expected liabilities shares. Basic EPS is calculated by dividing the Net income (loss) attributable to shareholders
resulting from the uncertain tax treatments are included in non-current tax liabilities (2023: by the weighted average number of common shares outstanding (after deduction of
EUR 390 million, 2022: EUR 435 million, decrease due to release of liabilities, in combination treasury shares) during the period. Diluted EPS is determined by adjusting the Net income
with higher tax losses or similar tax carryforwards that can be used if uncertain tax (loss) attributable to shareholders and the weighted average number of common shares
treatments were settled for the presumed amount at balance sheet date). The positions outstanding (after deduction of treasury shares) during the period, for the effects of all
include, among others, the following: dilutive potential common shares, which comprise performance shares, restricted shares
and share options granted under share-based compensation plans as well as forward
Transfer pricing risks contracts to repurchase shares.
Philips has issued transfer pricing directives, which are in accordance with international
guidelines such as those of the Organization of Economic Co-operation and Development.
In order to reduce the transfer pricing uncertainties, monitoring procedures are carried out
by Group Tax to safeguard the correct implementation of the transfer pricing directives.
However, tax disputes can arise due to inconsistent transfer pricing regimes and different
views on "at arm's length" pricing.
168
Philips Group
Earnings per share in millions of EUR unless otherwise stated 1)
2021 2022 2023
Income from continuing operations attributable to shareholders 608 (1,622) (456)
Income from continuing operations attributable to non-controlling interests 4 3 2
Income from discontinued operations 2,711 13 (10)
Income from discontinued operations attributable to shareholders 2,711 13 (10)
Net income 3,323 (1,605) (463)
Net income attributable to shareholders 3,319 (1,608) (466)
Net income attributable to non-controlling interests 4 3 2
Weighted average number of common shares outstanding (after deduction of treasury shares) during the period 943,606,613 920,950,800 917,440,090
Plus incremental shares from assumed conversions of:
Share options 387,125 25,506
Performance shares 2,548,891 1,147,790 2,623,097
Restricted shares 2,376,736 1,986,538 2,574,738
Forward contracts to repurchase shares 70,329 17,611,920 15,511,844
Dilutive potential common shares 2) 5,383,080 20,771,753 20,709,680
Diluted weighted average number of shares outstanding (after deduction of treasury shares) during the period 948,989,692 920,950,800 917,440,090
Basic earnings per common share in EUR
Income from continuing operations attributable to shareholders 0.64 (1.76) (0.50)
Income from discontinued operations attributable to shareholders 2.87 0.01 (0.01)
Net income attributable to shareholders 3.52 (1.75) (0.51)
Diluted earnings per common share in EUR 2)
Income from continuing operations attributable to shareholders 0.64 (1.76) (0.50)
Income from discontinued operations attributable to shareholders 2.86 0.01 (0.01)
Net income attributable to shareholders 3.50 (1.75) (0.51)
Dividend distributed per common share in EUR 0.85 0.85 0.85

1)
Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2022.
2)
The dilutive potential common shares are not taken into account in the periods for which there is a loss, as the effect would be antidilutive
Per-share calculations adjusted for share dividend

On May 9, 2023, the General Meeting of Shareholders approved a dividend of EUR 0.85 per
common share, in shares only. The dividend was settled in May through the issuance of
39,334,938 new common share. In accordance with IAS 33 Earnings Per Share, per share
calculations have been adjusted retrospectively for all periods presented to reflect the
issuance of shares for the share dividend in respect of 2022.
169
10 Property, plant and equipment Company as a lessee

The company recognizes right-of-use assets and lease liabilities for leases with a term of
Accounting policies more than twelve months if the underlying asset is not of low value. Payments for short-
term and low-value leases are expensed over the lease term. Extension options are included
Owned assets in the lease term if their exercise is reasonably certain. Right-of-use assets are measured at
The cost of property, plant and equipment comprise all directly attributable costs (including cost less accumulated depreciation and impairment losses, adjusted for any
the cost of material and direct labor). remeasurements. Right-of-use assets are depreciated using the straight-line method over
the shorter of the lease term and the useful life of the underlying assets.
Depreciation is generally calculated using the straight-line method over the useful life of
the asset. Land and assets under construction are not depreciated. When assets under Company as a lessor
construction are ready for their intended use, they are transferred to the relevant asset When the company acts as a lessor, it determines at lease inception whether a lease is a
category and depreciation starts. All other property, plant and equipment items are finance lease or an operating lease. Leases in which the company does not transfer
depreciated over their estimated useful lives to their estimated residual values. substantially all the risks and rewards incidental to ownership of an asset are classified as
operating leases. The company recognizes lease payments received under operating leases
The estimated useful lives of property, plant and equipment are as follows: as income on a straight-line basis over the lease term in the Consolidated statement of
income.
Philips Group
Useful lives of property, plant and equipment

Buildings from 5 to 50 years
Machinery and installations from 3 to 20 years
Impairment of owned and right-of-use assets
Other equipment from 1 to 10 years
Judgments are required, not only to determine whether there is an indication that an asset
may be impaired, but also whether indications exist that impairment losses previously
Property, plant and equipment are reviewed for impairment whenever events or changes in recognized may no longer exist or may have decreased (impairment reversal). After
circumstances indicate that the book value of the assets concerned may not be recoverable. indications of impairment have been identified, estimates and assumptions are used in the
An impairment loss is recognized for the amount by which the asset's book value exceeds determination of the recoverable amount of a fixed asset. These involve estimates of
their recoverable amount. Impairments are reversed if and to the extent that the expected future cash flows (based on future growth rates and remaining useful life) and
impairment no longer exists. The recoverable amount is defined as the higher of the asset’s residual value assumptions, as well as discount rates to calculate the present value of the
fair value less costs of disposal and its value in use. future cash flows.
Gains and losses on the sale of property, plant and equipment are included in other Owned assets
business income. Costs related to repair and maintenance activities are expensed in the Estimates are required to determine the (remaining) useful lives of fixed assets. Useful lives
period in which they are incurred unless they extend the asset's original lifetime or capacity. are determined based on an asset's age, the frequency of its use, repair and maintenance
policy, technology changes in production and expected restructuring. The company
Right-of-use assets estimates the expected residual value per asset item. The residual value is the higher of the
The company leases various items of real estate, vehicles and other equipment. The asset's expected sales price (based on recent market transactions of similar sold items) and
company determines whether an arrangement constitutes or contains a lease based on the its material scrap value.
substance of the arrangement at the lease inception. The arrangement constitutes or
contains a lease if fulfillment is dependent on the use of a specific asset and the Right-of-use assets
arrangement conveys a right to use the asset, even if that asset is not explicitly specified in Judgment is required to determine the lease term. The assessment of whether the company
the arrangement. is reasonably certain to exercise extension options impacts the lease term, which could
affect the amount of lease liabilities and right-of-use assets recognized.
170
Property, plant and equipment are fixed assets that are owned or right-of-use assets under a Philips Group
Property, plant and equipment - right-of-use assets in millions of EUR
lease agreement. Owned and right-of-use assets are held for use in Philips' operating
Land and Other
activities. buildings equipment Total
Balance as of January 1, 2023
Philips Group
Property, plant and equipment in millions of EUR Cost 1,365 206 1,571
Accumulated depreciation (543) (108) (651)
2022 2023
Book value 822 98 919
Owned assets 1,718 1,565
Right-of-use assets 919 919
Additions 175 62 236
Total 2,638 2,483
Assets available for use 2 6 8
Depreciation (150) (51) (201)
Philips Group Impairments (23) - (23)
Property, plant and equipment - owned assets in millions of EUR Transfer (to) from AHFS (2) (2)
Land and Machinery and Other Assets under Reclassifications - 4 4
buildings installations equipment construction Total Translation differences and other (18) (5) (23)
Balance as of Total change (16) 15 (1)
January 1, 2023
Cost 1,135 1,779 1,454 309 4,676 Balance as of December 31, 2023
Accumulated (621) (1,291) (1,046) (2,958) Cost 1,425 216 1,641
depreciation Accumulated depreciation (619) (104) (722)
Book value 514 488 408 309 1,718 Book value 806 112 919
Additions 1 115 77 239 433

Assets available for use 20 90 144 (262) (8)
Depreciation (56) (196) (167) (420)
Impairments (5) (23) (17) - (45)
Transfer (to) from AHFS (1) (1) (45) (46)
Reclassifications 15 2 (17) (5) (6)
Translation differences (14) (22) (19) (7) (62)
and other
Total change (39) (35) (45) (35) (154)
Balance as of
December 31, 2023
Cost 1,114 1,731 1,404 274 4,521
Accumulated (638) (1,278) (1,041) (2,957)
depreciation
Book value 476 453 363 274 1,565
171

Property, plant and equipment - owned assets in millions of EUR Property, plant and equipment - right-of-use assets in millions of EUR
Land and Machinery and Other Assets under Land and Machinery and Other
buildings installations equipment construction Total buildings installations equipment Total
Balance as of Balance as of January 1, 2022
January 1, 2022 Cost 1,332 176 216 1,724
Cost 1,097 1,585 1,382 208 4,273 Accumulated depreciation (418) (139) (109) (666)
Accumulated (591) (1,074) (967) (2,632) Book value 914 37 107 1,058
depreciation
Book value 506 511 415 208 1,641 Additions 52 - 54 106
Assets available for use 5 1 6
Additions 1 102 77 314 494
Depreciation (155) (2) (58) (214)
Assets available for use 34 69 111 (220) (6)
Impairments (8) - - (9)
Depreciation (56) (215) (176) - (447)
Transfer (to) from AHFS 3 3
Impairments (3) (20) (18) (1) (42)
Reclassifications (19) (13) - (32)
Transfer (to) from AHFS (3) - (3)
Translation differences and other 31 (23) (6) 1
Reclassifications 18 14 (5) 2 29
Total change (92) (37) (9) (139)
Translation differences 16 26 2 5 50
and other
Balance as of December 31, 2022
Total change 8 (23) (8) 100 78
Cost 1,365 - 206 1,571
Accumulated depreciation (543) (108) (651)
Balance as of
December 31, 2022 Book value 822 - 98 919
Cost 1,135 1,779 1,454 309 4,676
Accumulated (621) (1,291) (1,046) (2,958)
depreciation
Book value 514 488 408 309 1,718
Lease related notes

Below are the references with respect to year-end disclosures as lessee: Below are the references with respect to year-end disclosures as lessor:
• Short-term and low-value leases, are disclosed in Income from operations, starting on • For disclosures on lease income and sublease income, refer to Details of treasury and
page 159; other financial risks, starting on page 213;
• Disclosures regarding interest expenses on lease liabilities, are disclosed in Financial • Other qualitative disclosures regarding the nature of lessors leasing activities and risk
income and expenses, starting on page 164; management, refer to Details of treasury and other financial risks, starting on page 213.
• For disclosure on leasing related cash outflow and the split between interest and
principal payments, refer to Cash flow statement supplementary information, starting on
page 197;
• For disclosure on sale and leaseback transactions, refer to Details of treasury and other
financial risks, starting on page 213;
• For disclosure on lease liabilities and maturity analysis, refer to Debt, starting on page
186;
• Other qualitative and quantitative disclosures regarding the nature of lessee’s leasing
activities and future lease obligations, refer to Debt, starting on page 186.
172
11 Goodwill The changes in 2022 and 2023 were as follows:
Accounting policies Philips Group

Goodwill in millions of EUR
2022 2023
The measurement of goodwill at initial recognition is described in the Acquisitions and
Balance as of January 1
divestments note. Goodwill is subsequently measured at cost less accumulated impairment
Cost 11,793 12,747
losses.
Impairments (1,156) (2,509)
Book value 10,637 10,238
Goodwill is not amortized but is instead tested for impairment annually in the fourth
quarter, or more frequently if indicators of potential impairment exist. Internal and external Acquisitions 1) 317 24
sources of information are considered to assess if there are indicators that an asset or Impairments (1,357) (8)
groups of cash-generating units (CGUs) may be impaired. Goodwill is allocated to groups of Divestments and transfers to assets classified as held for sale 2) (8)
CGUs and tested for impairment at the business level (one level below segment), as this Translation differences and other 641 (370)
represents the lowest level at which goodwill is monitored for internal management Total change (399) (362)
purposes. An impairment loss is recognized in the Consolidated statements of income
whenever and to the extent that the carrying amount of a group of CGUs exceeds the Balance as of December 31
Cost 12,747 12,133
recoverable amount for the group of CGUs, whichever is the greater, its value in use or its
Impairments (2,509) (2,256)
fair value less cost of disposal. Value in use is measured as the present value of future cash
Book value 10,238 9,876
flows expected to be generated by the asset. Fair value less cost of disposal is measured as
the amount obtained from the sale of an asset in an arm’s length transaction, less costs of 1)
Refer to Acquisitions and divestments, starting on page 156
disposal. 2)
Refer to Discontinued operations and assets classified as held for sale, starting on page 154
Effective from April 1, 2023, Philips implemented a simplified operating model (refer to
relevant sections of General information to the Consolidated financial statements, starting
on page 147). As a result, the level at which goodwill is monitored has changed to align with
The cash flow projections used in the value in use calculations for goodwill impairment
the revised governance under the new operating model. Prior to April 1, 2023, goodwill was
testing contain various judgments and estimations as described in the ‘key assumptions’
monitored at the business unit level. From April 1, 2023, goodwill impairment testing is
section.
performed at the business level (one level below segment), as this represents the lowest
level at which goodwill is monitored for internal management purposes. The changes in the
monitoring and management structure for recognized goodwill did not otherwise prevent
recognition of an impairment that existed prior to the change, nor did it result in the
recognition of an impairment charge.
Goodwill impairment testing

For impairment testing, goodwill is allocated to groups of CGUs and tested for impairment
at the business level (one level below segment level), which represents the lowest level at
which the goodwill is monitored internally for management purposes. Goodwill is tested for
impairment annually in the fourth quarter, or more frequently if indicators of potential
impairment exist.
173
An impairment trigger assessment is performed on a quarterly basis to determine whether The compound sales growth rate is the annualized steady nominal growth rate over the
there is an indication based on either internal or external sources of information, that a forecast period calculated with reference to the latest full year of actual sales as the base for
group of CGUs may be impaired. During 2023, interim impairment tests were completed for the growth. The compound sales growth rate used to calculate terminal value is only applied
the Sleep & Respiratory Care (S&RC) business mainly following revisions to the expected to the first year after the extrapolation period, after which no further growth is assumed for
future cashflow assumptions regarding the estimated impact of the proposed Respironics the terminal value calculation.
consent decree, along with updates to expected business performance and changes to the
pre-tax discount rate. The interim goodwill impairment tests did not result in an impairment. The compound sales growth rates and EBITA*) used to estimate cash flows are based on past
performance, external market growth assumptions and industry long-term growth averages.
Goodwill allocated to the businesses (groups of cash-generating units) as of December 31, EBITA*) for each group of CGUs is expected to increase over the projection period as a result
2023, is presented in the following table: of volume growth and cost efficiencies. By their nature, these assumptions involve risk and
uncertainty because they relate to future events and circumstances and there are many
Philips Group factors that could cause actual results and developments to differ materially from the plans,
Goodwill by business in millions of EUR
goals and expectations set forth in these assumptions.
2022 2023
Monitoring 1) 4,110 3,964
The rates used for discounting the projected cash flows in goodwill impairment testing is
Image-Guided Therapy 3,154 3,044
based on a weighted cost of capital (WACC), which in turn is based on business-specific
Precision Diagnosis 1,429 1,363
Sleep & Respiratory Care 731 687
inputs along with other inputs as mentioned below. The WACC is based on post-tax cost of
Personal Health 488 483 equity and cost of debt, and is further calculated based on market data and inputs to
Enterprise Informatics 327 336 accurately capture changes to the time value of money, such as the risk-free interest rate, the
Book value 10,238 9,876 beta factor and country risk premium. In order to properly reflect the different risk-profiles
of different businesses, a WACC is determined for each business. As such, the beta factor is
1)
Monitoring includes the goodwill previously allocated to Hospital Patient Monitoring and Ambulatory Monitoring &
Diagnostics as disclosed in the Annual Report 2022.
determined based on a selection of peer companies, which can differ per business. Different
businesses have different geographical footprints, resulting in business-specific inputs for
variables like country risk. Philips performs the value in use calculations using post-tax
The carrying amount of each group of CGUs is compared to the recoverable amount of the cashflows and discount rate, the implicit pre-tax rate discount rate is derived from an
group of CGUs. Unless otherwise noted, the recoverable amount for each group of CGUs is iterative calculation for disclosure purposes.
based on value in use calculations. Value in use is measured as the present value of future
cash flows expected to be generated from the continuing use of the assets. In the 2023 The values assigned to the key assumptions used for the value in use calculations were as
annual goodwill impairment test, these cash flow projections were determined using Royal follows:
Philips managements’ internal forecasts that cover an initial forecast period from 2024 to
2026. Projections were extrapolated using the growth rates disclosed in the following table Philips Group
Key assumptions 2023
for an extrapolation period of 4 years (2027-2030), after which a terminal value was
compound sales growth rate
calculated per 2031. For the terminal value calculation, growth rates were capped at a
initial forecast extrapolation used to calculate pre-tax discount
historical long-term average growth rate. The company uses scenarios in the business period period terminal value rates
forecasting process and the most reasonable and supportable assumptions which represent Monitoring 8.2% 5.5% 2.5% 9.5%
management’s best estimate are used as the basis for the value in use calculations. Image-Guided Therapy 7.9% 5.2% 2.5% 10.7%
Precision Diagnosis 3.8% 3.4% 2.5% 10.4%
Key assumptions Sleep & Respiratory Care 9.5% 9.3% 2.5% 10.8%
Key assumptions used in the value in use calculations were compound sales growth rates, Personal Health 5.0% 4.6% 2.5% 10.3%
EBITA*) in the terminal value and the rates used for discounting the projected cash flows. Enterprise Informatics 5.3% 5.8% 2.5% 9.0%
174
The assumptions used for the 2022 value in use calculations for cash-generating units to Sensitivity to changes in assumptions
which a significant amount of goodwill was allocated were as follows: In performing the value-in-use calculations for the S&RC CGU, it was necessary for
management to make assumptions regarding the estimated impact on the business of the
Philips Group proposed Respironics consent decree. These assumptions include, amongst others, the
Key assumptions 2022
expected financial impact of the scope of products, geography, and duration of the
compound sales growth rate
proposed consent decree, as well as expected additional costs. These assumptions were
initial
forecast extrapolation used to calculate pre-tax discount determined by management based on the proposed Respironics consent decree and other
period period terminal value rates available sources of information.
Ambulatory Monitoring & 15.4% 9.5% 2.5% 8.5%
Diagnostics 1) The value-in-use of the S&RC CGU remains sensitive to the assumptions set out above. This
Hospital Patient 4.8% 3.4% 2.5% 8.5%
means that there is a higher risk that deviations in the mentioned key assumptions could
Monitoring 1)
Image-Guided Therapy 8.7% 5.0% 2.5% 10.6%
cause the recoverable amount to fall below the level of its carrying value. There continues to
Sleep & Respiratory Care 10.0% 5.0% 2.5% 9.9% be uncertainty associated with the initiated voluntary recall notification in the US and field
safety notice outside the US for certain sleep and respiratory care products and the impact
1)
Effective April 1, 2023, the Hospital Patient Monitoring and Ambulatory Monitoring & Diagnostics CGUs are included in the on the business of the proposed Respironics consent decree.
group of CGUs that comprise the Monitoring business.
Based on the annual impairment test, the estimated recoverable amount of the S&RC CGU
exceeds the carrying value by EUR 326 million. It was noted that an increase of 190 basis
The S&RC compound sales growth rate during the extrapolation period increased from 5.0% points in the pre-tax discount rate, a 690 basis points decline in the compound sales growth
in 2022 to 9.3% in 2023. The growth rate percentage is calculated with reference to the last rate during the extrapolation period or a 27% decrease in terminal value would, individually,
year of the initial forecast period. Although the absolute forecasted sales during the cause its recoverable amount to fall to the level of its carrying value. Additionally, any
extrapolation period used in 2023 decreased compared to that used in 2022, the larger significant adverse changes to the assumptions related to the expected financial impact of
decline in the forecasted sales of the respective reference year results in a higher calculated the proposed Respironics consent decree could cause the recoverable amount of the CGU to
growth rate percentage compared to 2022. fall below its carrying value, resulting in impairment.
Impairment losses The results of the annual impairment tests of Monitoring, Image-Guided Therapy, Precision
Goodwill impairment charges for the years ended December 31, 2023 and 2022, were EUR 8 Diagnosis, Personal Health and Enterprise Informatics indicate that a reasonably possible
million and EUR 1,357 million, respectively. change in key assumptions would not cause the value in use to fall to the level of the
carrying value.
The 2023 charge relates to the partial impairment of goodwill allocated to a business that
was classified as held-for-sale as of December 31, 2023. At the time of classification as held- *)
The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Information by segment
for-sale, goodwill totaling EUR 16 million was allocated from the Precision Diagnosis and main country, starting on page 149
business to the held-for-sale business, of which EUR 8 million was subsequently impaired.
For further information refer to Discontinued operations and assets classified as held for
sale, starting on page 154.
The 2022 charges relate to the impairment charge of EUR 1,331 million in the S&RC CGU
within the Connected Care segment and a charge of EUR 27 million recognized in relation to
the Precision Diagnosis Solutions CGU, which was formerly part of the Diagnosis &
Treatment segment but is now included in the Enterprise Informatics business within the
Connected Care segment.
175
12 Intangible assets excluding goodwill Impairment of intangible assets not yet ready for use
Intangible assets not yet ready for use are not amortized but are tested for impairment
Accounting policies annually and whenever impairment indicators require. In the case of intangible assets not
yet ready for use, either internal or external sources of information are considered to assess
Acquired finite-lived intangible assets are amortized using the straight-line method over if there are indicators that an asset or a CGU may be impaired.
their estimated useful life. The useful lives are evaluated annually. Intangible assets are
initially capitalized at cost, with the exception of intangible assets acquired as part of a Impairment of non-financial assets other than goodwill, intangible assets not yet ready
business combination, which are capitalized at their acquisition date fair value. for use, inventories and deferred tax assets
Non-financial assets other than goodwill, intangible assets not yet ready for use, inventories
The company expenses all research costs as incurred. Expenditure on development activities, and deferred tax assets are reviewed for impairment whenever events or changes in
whereby research findings are applied to a plan or design for the production of new or circumstances indicate that the carrying amount of an asset may not be recoverable.
substantially improved products and processes, is capitalized as an intangible asset if the Recoverability of assets to be held and used is assessed by a comparison of the carrying
product or process is technically and commercially feasible, the company has sufficient amount of an asset with the greater of its value in use and fair value less cost of disposal.
resources and the intention to complete development and can measure the attributable Value in use is measured as the present value of future cash flows expected to be generated
expenditure reliably. by the asset. Fair value less cost of disposal is measured as the amount obtained from a sale
of an asset in an arm’s length transaction, less costs of disposal. If the carrying amount of an
The capitalized development expenditure comprises of all directly attributable costs asset is deemed not recoverable, an impairment charge is recognized in the amount by
(including the cost of materials and direct labor). Other development expenditures and which the carrying amount of the asset exceeds the recoverable amount. The review for
expenditures on research activities are recognized in the Consolidated statements of impairment is carried out at the level where cash flows occur that are independent of other
income. Capitalized development expenditure is stated at cost less accumulated cash flows.
amortization and impairment losses. Amortization of capitalized development expenditure
is charged to the Consolidated statements of income on a straight-line basis over the Impairment losses recognized in prior periods for Intangible assets other than goodwill are
estimated useful lives of the intangible assets. assessed at each reporting date for any indications that the loss has decreased or no longer
exists. An impairment loss is reversed if and to the extent that there has been a change in
The expected useful lives of the intangible assets excluding goodwill are as follows: the estimates used to determine the recoverable amount. The loss is reversed only to the
extent that the asset’s carrying amount does not exceed the carrying amount that would
Philips Group have been determined, net of depreciation or amortization, if no impairment loss had been
Expected useful lives of intangible assets excluding goodwill in years
recognized. Reversals of impairment are recognized in the Consolidated statements of
income.
Brand names 2-20
Customer relationships 2-25
Technology 3-20
Other 1-10 Accounting estimates and judgments
Software 1-10
Product development 3-10
The cash flow projections used in the value in use calculations for intangible assets
excluding goodwill contain various judgments and estimations. For intangible assets
excluding goodwill, estimates are required to determine the (remaining) useful lives.
The weighted average expected remaining life of brand names, customer relationships,
technology and other intangible assets is 9.3 years as of December 31, 2023 (2022: 9.4
years).
176
Philips Group
Intangible assets excluding goodwill in millions of EUR
product development
construction in
brand names customer relationships technology product development progress software other total
Cost 647 2,735 2,947 2,605 648 869 152 10,602
Amortization / impairments (507) (1,665) (1,845) (2,212) (146) (589) (113) (7,077)
Book value 140 1,070 1,102 393 502 280 39 3,526
Additions 33 - 214 70 - 317

Assets available for use 157 (157)
Acquisitions 40 - - 40
Amortization (20) (137) (131) (169) (97) (1) (556)
Impairments - - - (7) (7) (1) - (16)
Transfers to assets classified as held for sale (1) (20) (8) (2) (32)
Translation differences and other (1) (37) (30) (38) 1 18 - (87)
Total change (22) (195) (89) (57) 42 (13) (1) (335)

Cost 629 2,593 2,908 2,432 635 929 139 10,265
Book Value 118 875 1,013 336 544 267 38 3,190
177
Philips Group
Intangible assets excluding goodwill in millions of EUR
product development
brand names customer relationships technology product development construction in progress software other total
Cost 644 2,590 2,605 2,701 505 754 146 9,944
Book value 162 1,143 1,000 599 414 287 44 3,650
Additions (3) - 51 - 257 109 1 416

Assets available for use 118 (118) - - -
Acquisitions 1 3 177 - - - 180
Amortization (24) (141) (140) (206) (1) (100) (3) (614)
Impairments - (6) (46) (123) (81) (17) (2) (276)
Translation differences and other 4 71 59 5 31 1 (2) 169
Total change (22) (74) 102 (206) 88 (7) (6) (125)

Cost 647 2,735 2,947 2,605 648 869 152 10,602
Book Value 140 1,070 1,102 393 502 280 39 3,526
Acquisitions in 2023 involved intangible assets of EUR 40 million in aggregate (2022: EUR 180 150 million and a remaining amortization period of 14 years and 10 years, respectively and
million). For more information, refer to Acquisitions and divestments, starting on page 156. Spectranetics customer relationships and technology with a carrying value of EUR 291
million and EUR 203 million and a remaining amortization period of 15 years and 10 years,
Impairments in 2023 were EUR 16 million (2022: EUR 276 million) and mainly relate to respectively.
product development construction in progress and product development.
13 Other financial assets
The company uses scenarios in the business forecasting process and the most reasonable
and supportable assumptions which represent management’s best estimate are used as the Accounting policies
basis for the value-in-use calculations.
Classification and measurement of financial assets
The amortization and impairment of intangible assets is further specified in Income from The classification of financial assets at initial recognition depends on the financial asset’s
operations, starting on page 159. contractual cash flow characteristics and the company’s business model for managing them.
The most notable intangible assets as of December 31, 2023 relate to the BioTelemetry The company initially measures a financial asset at its fair value plus, in the case of a
customer relationships and technology with a carrying value of EUR 327 million and EUR 123 financial asset not at fair value through profit or loss, transaction costs.
million and a remaining amortization period of 13 years and 9 years, respectively and
Spectranetics customer relationships and technology with a carrying value of EUR 261
million and EUR 175 million and a remaining amortization period of 14 years and 9 years,
respectively. The most notable intangible assets as of December 31, 2022 relate to the
BioTelemetry customer relationships and technology with value of EUR 385 million and EUR
178
For the purposes of subsequent measurement, financial assets are classified into four Other current financial assets
categories: In 2023, Other current financial assets decreased from EUR 11 million to EUR 3 million (2022:
increased from EUR 2 million to EUR 11 million).
• Financial assets at amortized cost (debt instruments).
• Financial assets at fair value through other comprehensive income (OCI) with recycling Other non-current financial assets
of cumulative gains and losses (debt instruments). The company’s investments in Other non-current financial assets mainly consist of
• Financial assets designated at fair value through OCI with no recycling of cumulative investments in common shares of companies in various industries and investments in limited
gains and losses upon derecognition (equity instruments). life funds. The changes during 2023 and 2022 were as follows:
• Financial assets at fair value through profit or loss (debt instruments and equity
instruments). Philips Group
Other non-current financial assets in millions of EUR
Non-current
Impairment of financial assets Non-current financial financial assets at Non-current financial
The company recognizes a loss allowance for expected credit losses for trade receivables, assets at FVTP&L FVTOCI assets at Amortized cost Total
contract assets, lease receivables, debt investments carried at amortized cost and fair value Balance as of 322 284 54 660
through other comprehensive income (FVTOCI). January 1, 2023
Changes:
Acquisitions/ 71 14 20 105
At each balance sheet date, the company assesses whether there is objective evidence that
additions
a financial asset or a group of financial assets is impaired and recognizes a loss allowance Sales/ (33) (14) (11) (58)
for expected credit losses for financial assets measured at either amortized costs or at fair redemptions/
value through other comprehensive income. If, at the reporting date, the credit risk on a reductions
financial instrument has not increased significantly since initial recognition, the company Impairments
measures the loss allowance for the financial instrument at an amount equal to 12 months Value adjustment - (17) (17)
through OCI
of expected credit losses. If, at the reporting date, the credit risk on a financial instrument
Value adjustment (39) - (39)
has increased significantly since initial recognition, the company measures the loss through P&L
allowance for the financial instrument at an amount equal to the lifetime-expected credit Translation (29) (14) (1) (44)
losses. For all trade receivables, contract assets and lease receivables the company measures differences and
other
the loss allowance at an amount equal to lifetime-expected credit losses.
Reclassifications (8) 5 15 12
Balance as of 284 258 77 619
December 31,
2023
The determination of fair value is subject to estimates for investments that are not publicly
traded. Refer to Fair value of financial assets and liabilities, starting on page 208
Financial assets classified at amortized cost and at fair value through OCI are subject to
impairment assessment. The calculation of expected credit losses requires the company to
apply significant judgment and make estimates and assumptions that involve significant
uncertainty at the time they are made. Changes to these estimates and assumptions can
result in significant changes to the timing and amount of expected credit losses to be
recognized.
179
Philips Group Other non-current assets

Other non-current financial assets in millions of EUR
Other non-current assets as of December 31, 2023 were EUR 93 million (2022: EUR 98
Non-current financial Non-current financial Non-current financial
assets at FVTP&L assets at FVTOCI assets at Amortized cost Total million). These are mainly related to prepaid expenses.
Balance as of 283 300 47 630
January 1, 2022 Other current assets
Changes: Other current assets as of December 31, 2023 of EUR 500 million (2022: EUR 490 million)
Acquisitions/ 114 18 18 150 included contract assets of EUR 297 million (2022: EUR 292 million), accrued income of EUR 6
additions
million (2022: EUR 24 million) and prepaid expenses of EUR 197 million (2022: EUR 174
Sales/ (75) (3) (8) (86)
redemptions/
million) mainly related to Diagnosis & Treatment businesses and Connected Care businesses.
reductions
Impairments (3) (1) (5) 15 Inventories
Value adjustment - (35) (35)
through OCI Accounting policies
Value adjustment 5 - 5
through P&L
Inventories are stated at the lower of cost or net realizable value. The cost of inventories
Translation (2) 5 (1) 2
differences and comprises all costs of purchase, costs of conversion and other costs incurred in bringing the
other inventories to their present location and condition. The costs of conversion of inventories
Reclassifications 1 (2) (1) (2) include direct labor and fixed and variable production overheads, considering the stage of
Balance as of 322 284 54 660 completion and the normal capacity of production facilities. Costs of idle facility and
December 31,
2022 abnormal waste are expensed. The cost of inventories is determined using the first-in, first-
out (FIFO) method. The write-down of inventories to net realizable value is included in cost
of sales.
As of December 31, 2023, equity investments of EUR 231 million (2022: EUR 259 million) are
accounted under the FVTOCI category based on the company's election at initial recognition
mainly because such investments are neither held for trading purposes nor primarily for
their increase in value and the elected presentation is considered to reflect the nature and
purpose of the investment.
Inventory is reduced for the estimated losses due to obsolescence. This reduction is
determined for groups of products based on sales in the recent past and/or expected future
14 Other assets demand.
Accounting policies
Inventories are summarized as follows:
The company recognizes contract assets for revenue earned from installation services Philips Group
because the receipt of consideration is conditional on successful completion of the Inventories in millions of EUR
installation. Upon completion of the installation and acceptance by the customer, the 2022 2023
amount recognized as contract assets is reclassified to trade receivables. Raw materials and supplies 1,541 1,309
Work in process 648 552
Other assets are measured at amortized cost minus any impairment losses. Finished goods 1,860 1,629
Inventories 4,049 3,491
180
In 2023, overall global inventories have operationally decreased in all categories due to the Philips Group
Trade accounts receivable, net in millions of EUR
deployment of strategic management of aging and unhealthy inventory accompanied by a
2022 2023
more optimized tracking in both production and commercial inventories.
Diagnosis & Treatment 1,795 1,688
Connected Care 1,332 1,105
The write-down of inventories to net realizable value was EUR 339 million in 2023 (2022: EUR
Personal Health 479 576
215 million), including EUR 82 million related to the proposed Respironics consent decree
Other 226 177
(refer to Provisions, starting on page 188).
Trade accounts receivable, net 3,832 3,546
16 Receivables
The aging analysis of trade accounts receivable, net, representing current and overdue but
Accounting policies not fully impaired receivables, is as follows:
Receivables are held by the company to collect the related cash flows. These receivables are Philips Group
Aging analysis in millions of EUR
measured at fair value and subsequently measured at amortized cost minus any impairment
2022 2023
losses.
Current 3,280 3,132
Overdue 1-30 days 169 117
Receivables are derecognized when the company has transferred substantially all risks and
Overdue 31-180 days 282 234
rewards, which includes transactions in which the company enters into factoring
Overdue more than 180 days 101 63
transactions, or if the company does not retain control over the receivables.
Trade accounts receivable, net 3,832 3,546
The changes in the allowance for doubtful accounts receivable are as follows:
Accounting estimates
Philips Group
Receivables are subject to impairment assessment, which involves estimating expected Allowance for accounts receivable in millions of EUR
credit losses. Refer to Other financial assets, starting on page 178 for accounting policies on 2022 2023
impairment of financial assets. Balance as of January 1 190 226
Additions charged to expense 66 27
Non-current receivables Deductions from allowance 1) (51) (26)
Non-current receivables are associated mainly with customer financing in the Diagnosis & Transfer to assets held for sale (1)
Treatment businesses amounting to EUR 102 million (2022: EUR 69 million), for Signify Other movements 21 (10)
indemnification amounting to EUR 4 million (2022: EUR 26 million), an income tax receivable Balance as of December 31 226 216
amounting to EUR 12 million (which includes an interest receivable of EUR 3 million) for 1)
Write-offs for which an allowance was previously provided.
which Philips expects to get a refund (2022: EUR 126 million) and insurance receivables in the
US amounting to EUR 33 million (2022: EUR 30 million).
The allowance for doubtful accounts receivable has been primarily established for
receivables that are past due. The allowance presented also includes the allowance for Non-
Current receivables
current customer finance receivables of EUR 8 million (2022: EUR 7 million). Other
Current receivables of EUR 3,733 million (2022: EUR 4,115 million) as of December 31, 2023
movements in the current period are mainly related to foreign currency valuations.
included trade accounts receivable (net of allowance) of EUR 3,546 million (2022: EUR 3,832
million), accounts receivable other of EUR 170 million (2022: EUR 228 million) and accounts
Included in the above balances as of December 31, 2023 are allowances for individually
receivable from investments in associates of EUR 18 million (2022: EUR 55 million).
impaired receivables of EUR 210 million (2022: EUR 222 million).
The trade accounts receivable, net, per segment are as follows:
181
17 Equity Treasury shares

In connection with the company’s share repurchase programs, shares which have been
Accounting policies repurchased and are held in Treasury for the purpose of (i) delivery under share-based
compensation plans upon exercise of options, or vesting of restricted or performance shares,
Common shares are classified as equity. Incremental costs directly attributable to the and (ii) capital reduction, are accounted for as a reduction of shareholders’ equity. Treasury
issuance of shares are recognized as a deduction from equity. Where the shares are recorded at cost, representing the market price on the acquisition date. When
company repurchases the company’s equity share capital (treasury shares), the treasury shares are delivered by the company under its share-based compensation plans,
consideration paid, including any directly attributable incremental transaction costs (net of such shares are removed from treasury shares on a first-in, first-out (FIFO) basis.
income taxes), is deducted from shareholders’ equity until such treasury shares are
cancelled or reissued. When treasury shares are delivered by the company upon exercise of options, the difference
between the cost and the cash received is recorded in retained earnings. When treasury
Where such treasury shares are subsequently reissued, any consideration received, net of shares are delivered by the company upon vesting of restricted shares or performance shares
any directly attributable incremental transaction costs and the related income tax effects, is (granted under the company’s share-based compensation plans), the difference between
included in shareholders’ equity. the market price of the shares and the cost is recorded in retained earnings, and the market
price is recorded in capital in excess of par value.
Call options on own shares are treated as equity instruments.
The following table shows the movements in the outstanding number of shares over the last
Dividends are recognized as a liability in the period in which they are declared and three years:
approved by shareholders. The income tax consequences of dividends are recognized when
a liability to pay the dividend is recognized. Philips Group
Outstanding number of shares
2021 2022 2023
Balance as of January 1 905,128,293 870,182,445 881,480,527
Common shares Dividend distributed 6,345,968 14,174,568 39,334,938
As of December 31, 2023, authorized common shares consist of 2 billion shares (December Purchase of treasury shares (45,486,392) (5,080,693) (15,964,445)
31, 2022: 2 billion; December 31, 2021: 2 billion) and the issued and fully paid share capital Delivery of treasury shares 4,194,577 2,204,207 1,552,136
consists of 913,515,966 common shares, each share having a par value of EUR 0.20 Balance as of December 31 870,182,445 881,480,527 906,403,156
(December 31, 2022: 889,315,082; December 31, 2021: 883,898,969).
Preference shares The following table reflects transactions that took place in relation to former and current
As a means to protect the company against (an attempt at) an unsolicited takeover or other share-based compensation plans:
attempt to exert (de facto) control of the company, the ‘Stichting Preferente Aandelen
Philips Group
Philips’ has been granted the right to acquire preference shares in the company. As of
Transactions related to share-based compensation plans
December 31, 2023, no such right has been exercised and no preference shares have been
2021 2022 2023
issued. Authorized preference shares consist of 2 billion shares as of December 31, 2023
Shares acquired 3,996,576 2,142,445 3,000,000
(December 31, 2022: 2 billion; December 31, 2021: 2 billion).
Average market price EUR 36.15 EUR 31.76 EUR 41.59
Amount paid EUR 144 million EUR 68 million EUR 125 million
Options, restricted and performance shares Shares delivered 4,194,577 2,204,207 1,552,136
Under its share-based compensation plans, the company granted stock options on its Average price (FIFO) EUR 34.14 EUR 35.16 EUR 34.59
common shares and other conditional rights to receive common shares in the future such as Cost of delivered shares EUR 143 million EUR 77 million EUR 54 million
restricted shares and performance shares (refer to Share-based compensation, starting on Total shares in treasury at year-end 5,726,708 5,664,946 7,112,810
page 202). Total cost EUR 201 million EUR 191 million EUR 262 million
182
The following transactions took place for capital reduction purposes: On May 19, 2021, Royal Philips announced that it will repurchase up to 2 million shares to
cover certain of its obligations arising from its long-term incentive and employee stock
Philips Group purchase plans. Under this program, Philips entered into one forward contract for an
Transactions related to capital reduction
amount of EUR 90 million to acquire 2 million shares with settlement dates in October 2023
2021 2022 2023
and November 2023 and a weighted average forward price of EUR 44.85. As of December 31,
Shares acquired 41,489,816 2,938,248 12,964,445
2023, all shares under this program were acquired (settled in the fourth quarter of 2023).
Average market price EUR 36.22 EUR 36.61 EUR 37.25
This resulted in a EUR 90 million increase in retained earnings against treasury shares.
Amount paid EUR 1,503 million EUR 108 million EUR 483 million
Cancellation of treasury shares (shares) 33,500,000 8,758,455 15,134,054
Cancellation of treasury shares (EUR) EUR 1,216 million EUR 299 million EUR 566 million On January 29, 2020, Philips announced that it will repurchase up to 6 million shares to cover
Total shares in treasury at year-end 7,989,816 2,169,609 certain of its obligations arising from its long-term incentive and employee stock purchase
Total cost EUR 287 million EUR 83 million plans. Under this program, Philips entered into three forward contracts to acquire in total 5
million for an amount of EUR 174 million to acquire with settlement dates varying between
October 2021 and November 2022 and a weighted average forward price of EUR 34.85. On
Share purchase transactions related to employee option and share plans, as well as October 26, 2022, the original settlement date of two tranches entered into under this
transactions related to the reduction of share capital, involved a cash outflow of EUR 662 program (in total 1.75 million shares) has been extended from November 23, 2022 to
million in 2023. In 2023, the settlement of forward contracts resulted in a withholding tax November 2023, and November 2024, respectively. As of December 31, 2023, a total of 4.3
liability for an amount of EUR 66 million relating to the dividend distribution. As of million shares (December 31, 2022: 3.3 million shares) under this program were acquired
December 31, 2023, the remaining liability to be settled amounted to EUR 11 million. (settled in the fourth quarter of 2021, 2022, and 2023). This resulted in a EUR 35 million
(2022: EUR 57 million) increase in retained earnings against treasury shares.
Share repurchase methods for share-based remuneration plans and
capital reduction purposes As of December 31, 2023, the remaining forward contracts to cover obligations under share-
Philips uses different methods to repurchase shares in its own capital: (i) share buyback based compensation plans related to 11.1 million shares (December 31, 2022: 7.0 million
repurchases in the open market via an intermediary; (ii) repurchase of shares via forward shares) and amounted to EUR 224 million (December 31, 2022: EUR 211 million).
contracts for future delivery of shares; and (iii) the unwinding of call options on own shares.
During 2023, Philips used method (ii) to repurchase shares for capital reduction purposes For capital reduction
and share-based compensation plans. On July 26, 2021, Philips announced a share buyback program for share cancellation
purposes for an amount of up to EUR 1.5 billion. Consequently, in the third quarter of 2021
Forward contracts to repurchase shares Philips entered into three forward contracts for an amount of EUR 731 million to acquire 20
million shares with settlement dates in 2022, 2023 and 2024 and a weighted average
For share-based compensation plans forward price of EUR 37.36. Philips executed the remainder of the program through open
On June 14, 2023, Royal Philips announced that it will repurchase up to 7.1 million shares to market purchases by an intermediary in the fourth quarter of 2021 (acquiring 21 million
cover certain of its obligations arising from its long-term incentive and employee stock shares) and January 2022 (acquiring 0.8 million shares). This resulted in a EUR 781 million
purchases plans. Under this program, Philips entered into one forward contract for an increase in retained earnings against treasury shares. As of December 31, 2023, a total of 15.1
amount of EUR 138 million to acquire 7.1 million shares with settlement dates varying million (December 31, 2022: 2.2 million) shares under this program were acquired (in the
between November 2024 and November 2025 and a weighted average forward price of EUR fourth quarter of 2022 and third and fourth quarters of 2023). This resulted in EUR 483
19.43. million (including dividend adjustment) increase in retained earnings against treasury shares
(2022: EUR 83 million).
On June 13, 2022, Royal Philips announced that it will repurchase up to 3.2 million shares to
cover certain of its obligations arising from its long-term incentive and employee stock As of December 31, 2023, the remaining forward contracts entered into for capital reduction
purchases plans. Under this program, Philips entered into one forward contract for an purposes relate to 4.4 million shares (December 31, 2022: 17.4 million shares) and amounted
amount of EUR 63 million to acquire 3.2 million shares with settlement dates in November to EUR 167 million (December 31, 2022: EUR 648 million).
2024 and December 2024 and a weighted average forward price of EUR 19.75.
183
Share call options Limitations in the distribution of shareholders’ equity

In 2016, Philips purchased EUR-denominated and USD-denominated call options on its own As of December 31, 2023, pursuant to Dutch law, certain limitations exist relating to the
shares to hedge options granted to employees up to 2013. distribution of shareholders’ equity of EUR 2,435 million. Such limitations relate to common
shares of EUR 183 million, as well as to legal reserves required by Dutch law included under
On December 31, 2022, there were 55,750 EUR-denominated call options outstanding. As of retained earnings of EUR 990 million and unrealized currency translation differences of EUR
December 31, 2023, all outstanding EUR-denominated call options have expired. 1,263 million. The unrealized gain related to cash flow hedges of EUR 6 million and
unrealized loss related to fair value through OCI financial assets of EUR 390 million qualify as
Shares cancellation revaluation reserves and reduce the distributable amount due to the fact that these reserves
In December 2023, Philips completed the cancellation of 15.1 million of its common shares are negative.
(with a cost price of EUR 566 million). The cancelled shares were acquired as part of Philips’
EUR 1.5 billion share repurchase program announced on July 26, 2021. The legal reserves required by Dutch law of EUR 990 million included under retained
earnings relates to any legal or economic restrictions on the ability of affiliated companies to
Dividend distribution transfer funds to the parent company in the form of dividends.
2023 As of December 31, 2022, these limitations in distributable amounts were EUR 3,054 million
In May 2023, Philips distributed a dividend of EUR 0.85 per common share, representing a and related to common shares of EUR 178 million, as well as to legal reserves required by
total value of EUR 749 million (including costs). The dividend was distributed in the form of Dutch law included under retained earnings of EUR 1,010 million and unrealized currency
shares only, resulting in the issuance of 39,334,938 new common shares. Per share translation differences of EUR 1,866 million. The unrealized losses related to fair value
calculations have been adjusted retrospectively for all periods presented to reflect the through OCI financial assets of EUR 376 million and unrealized loss related to cash flow
issuance of shares for the share dividend in respect of 2022. Further reference is made to hedges of EUR 2 million qualify as a revaluation reserve and reduce the distributable amount
Earnings per share, starting on page 168. due to the fact that this reserve is negative.
A proposal will be submitted to the 2024 Annual General Meeting of Shareholders to pay a Non-controlling interests
dividend of EUR 0.85 per common share, in common shares only, against retained earnings Non-controlling interests relate to minority stakes held by third parties in consolidated
for 2023. group companies.
2022
In May 2022, Philips distributed a dividend of EUR 0.85 per common share, representing a
total value of EUR 741 million (including costs). Shareholders could elect for a cash dividend
or a share dividend. Approximately 45% of the shareholders elected for a share dividend,
resulting in the issuance of 14,174,568 new common shares. The settlement of the cash
dividend involved an amount of EUR 411 million (including costs).
2021
In June 2021, Philips distributed a dividend of EUR 0.85 per common share, representing a
total value of EUR 773 million (including costs). Shareholders could elect for a cash dividend
or a share dividend. Approximately 38% of the shareholders elected for a share dividend,
resulting in the issuance of 6,345,968 new common shares. The settlement of the cash
dividend involved an amount of EUR 482 million (including costs).
184
Capital management Philips Group

1)
Adjusted income from continuing operations attributable to shareholders in millions of EUR
Philips manages capital based upon the IFRS measures, net cash provided by operating
2021 2022 2023
activities and net cash used for investing activities as well as the non-IFRS measure net debt.
Net income 3,323 (1,605) (463)
The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included
Discontinued operations, net of income taxes (2,711) (13) 10
below.
Income from continuing operations attributable to non-controlling (4) (3) (2)
Net debt is defined as the sum of long and short-term debt minus cash and cash equivalents. interests
Group equity is defined as the sum of shareholders’ equity and non-controlling interests. Income from continuing operations attributable to shareholders 1) 608 (1,622) (456)
This measure is used by Philips Treasury management and investment analysts to evaluate Adjustments for:
financial strength and funding requirements. The Philips net debt position is managed with Amortization and impairment of acquired intangible assets 322 363 290
the intention of retaining the current strong investment grade credit rating. Furthermore, Impairment of goodwill 15 1,357 8
Philips’ aim when managing the net debt position is dividend stability and a pay-out ratio of Restructuring costs and acquisition-related charges 95 202 381
40% to 50% of Adjusted income from continuing operations attributable to shareholders Other items: 1,069 925 1,358
(reconciliation to the most directly comparable IFRS measure, Net income, is provided at the Respironics litigation provision 575
Respironics field-action connected to the proposed consent decree 719 250 363
end of this note).
Respironics field-action running remediation cost 94 210 224
Philips Group Quality remediation actions 94 59 175
Composition of net debt and group equity in millions of EUR unless otherwise stated R&D project impairments 134
2021 2022 2023 Portfolio realignment charges 109
Long-term debt 6,473 7,270 7,035 Impairment of assets in S&RC 39
Short-term debt 506 931 654 Provision for public investigations tender irregularities 60
Total debt 6,980 8,201 7,689 Provision for a legal matter 31
Cash and cash equivalents 2,303 1,172 1,869 Investment re-measurement loss 23
Net debt 4,676 7,028 5,820 Loss (gain) on divestment of business 76 (35)
Shareholders' equity 14,438 13,249 12,028 Remaining items 87 63 2
Non-controlling interests 36 34 33 Net finance income/expenses (84) (4) 18
Group equity 14,475 13,283 12,061 Tax impact of adjusted items and tax only adjusting items (527) (376) (450)
Net debt and group equity ratio 24:76 35:65 33:67 Adjusted Income from continuing operations attributable to 1,497 845 1,148
shareholders 1)
1)
Shareholders in this table refers to shareholders of Koninklijke Philips N.V. Per share calculations have been adjusted
Adjusted income from continuing operations attributable to shareholders is not a retrospectively for all periods presented to reflect the issuance of shares for the share dividend in respect of 2022.
recognized measure of financial performance under IFRS. The reconciliation of Adjusted
income from continuing operations attributable to shareholders to the most directly
comparable IFRS measure, Net income for 2023 is included in the following table.
185
18 Debt EUR 138 million forward contracts relating to the company’s long-term incentive plans.
These forwards mature in the fourth quarters of 2024 (EUR 61m) and 2025 (EUR 77m). In
Accounting policies addition, a total of EUR 125 million forward contracts relating to the long-term incentive and
employee stock purchase plans and EUR 481 million of forwards related to the share
Debt buyback program announced in 2021 matured throughout 2023.
Debt is initially measured at fair value net of directly attributable transaction costs.
Subsequently, debt is measured at amortized cost using the effective interest rate method. In 2022, Philips announced a series of Liability Management transactions to optimize its debt
Amortized cost is calculated by taking into account any discount or premium on acquisition maturity profile. The transactions included the issuance of three series of Notes under its
and fees or costs that are an integral part of the effective interest rate. Debt is derecognized EMTN program for a total of EUR 2 billion with maturities in 2027, 2029 and 2033. Part of the
when the obligation under the liability is discharged, cancelled or has expired. proceeds were used to tender certain of Philips’ outstanding US Dollar denominated bonds
due 2025 and 2026 and Euro-denominated bonds due 2023, 2024 and 2025, as well as make-
Lease liabilities whole and fully redeem the Euro-denominated bonds due 2023 and 2024 that were not
Lease liabilities are measured at the present value of the lease payments due over the lease purchased as part of the Euro tender offer. Philips issued Commercial Paper of EUR 200
term, generally discounted using the incremental borrowing rate. Lease liabilities are million in September 2022 and EUR 101 million in October 2022. These tranches were repaid
subsequently measured at amortized cost using the effective interest method. Lease throughout the fourth quarter of 2022. In addition, in October 2022 Philips entered into a
liabilities are remeasured in case of modifications or reassessments of the lease. EUR 1 billion credit facility that could be used for general corporate purposes. The credit
facility matured in October 2023 and had a 12-month extension option at Philips discretion.
Philips has a USD 2.5 billion Commercial Paper Program and a EUR 1 billion committed Per year-end 2022, EUR 500 million was utilized and outstanding under the credit facility. In
standby revolving credit facility that can be used for general group purposes, such as a 2022, Philips entered into a total amount of EUR 63 million forward contracts relating to the
backstop of its Commercial Paper Program. As of December 31, 2023, Philips did not have any company’s long-term incentive and employee stock purchase plans. A total of EUR 57 million
loans outstanding under either facility. These facilities do not have a material adverse forward contracts relating to the long-term incentive and employee stock purchase plans
change clause, have no financial covenants and no credit-rating-related acceleration and EUR 83 million of forwards related to the share buyback program announced in 2021
possibilities. Philips established a Euro Medium-Term Note (EMTN) program, a framework matured throughout 2022.
that facilitates the issuance of notes for a total amount up to EUR 10 billion. As of December
31, 2023, Philips has EUR 3.3 billion outstanding under this program of which EUR 500 million
fixed rate notes were issued in August 2023 with a maturity date in 2031.
The provisions applicable to all USD-denominated corporate bonds issued by the company
in March 2008 and March 2012 (due 2038 and 2042) contain a ‘Change of Control Triggering
Event’. If the company would experience such an event with respect to a series of corporate
bonds the company might be required to offer to purchase the bonds that are still
outstanding at a purchase price equal to 101% of their principal amount, plus accrued and
unpaid interest, if any. Furthermore, the conditions applicable to the EUR-denominated
corporate bonds issued since 2018 contain a similar provision (‘Change of Control Put
Event’). Upon the occurrence of such an event, the company might be required to redeem or
purchase any of such bonds at their principal amount together with interest accrued. Philips’
outstanding long-term debt do not contain financial covenants.
In 2023, Philips issued EUR 500 million of fixed rate notes under the company’s EMTN
program that mature in 2031 and used the proceeds for general corporate purposes,
including the repayment of EUR 500 million that was outstanding under the credit facility
entered into in the fourth quarter of 2022. In 2023, Philips entered into a total amount of
186
Long-term debt Philips Group

Unsecured Bonds in millions of EUR unless otherwise stated
The following tables present information about the long-term debt outstanding, its
effective rate 2022 2023
maturity and average interest rates in 2023 and 2022.
Unsecured EUR Bonds
Philips Group Due 30/03/2025; 1 3/8% 1.509% 346 346
Long-term debt in millions of EUR unless otherwise stated Due 22/05/2026; 1/2% 0.608% 750 750
2023 Due 05/05/2027; 1 7/8% 2.049% 750 750
Non- Between amount average average Due 02/05/2028; 1 3/8% 1.523% 500 500
amount Current current 1 and 5 due after 5 remaining term rate of Due 05/11/2029; 2 1/8% 2.441% 650 650
outstanding portion portion years years (in years) interest Due 30/03/2030; 2% 2.128% 500 500
USD bonds 1,325 1,325 240 1,085 13.3 6.3% Due 08/09/2031; 4 2/8% 4.330% 500
EUR bonds 4,569 4,569 2,335 2,234 5.1 2.0% Due 05/05/2033; 2 5/8% 2.710% 600 600
Forward 396 321 76 76 0.8 1.4% Unsecured USD Bonds
contracts
Due 15/05/2025; 7 3/4% 7.429% 51 49
Lease 1,074 211 864 505 358 3.9 3.1%
Due 15/05/2025; 7 1/8% 6.794% 78 75
liabilities
Due 01/06/2026; 7 1/5% 6.885% 119 114
Bank 203 1 201 201 1.2 4.2%
borrowings Due 03/11/2038; 6 7/8% 7.210% 683 657
Other - - - - - 7.4 1.2% Due 15/03/2042; 5% 5.273% 470 452
long-term Adjustments 1) (57) (47)
debt Unsecured Bonds 5,439 5,894
Long-term 7,568 532 7,035 3,357 3,678 6.0 2.9%
debt 1)
Adjustments related to both EUR and USD bonds and concern bond discounts, premium and transaction costs.
Philips Group
Long-term debt in millions of EUR unless otherwise stated
Leases
The following table presents a reconciliation between the total of future minimum lease
2022
Non- Between amount average average
payments and their present value.
amount Current current 1 and 5 due after 5 remaining term rate of
outstanding portion portion years years (in years) interest Philips Group
USD bonds 1,378 1,378 250 1,128 14.3 6.3% Lease liabilities in millions of EUR
EUR bonds 4,061 4,061 1,836 2,225 5.7 1.7% 2022 2023
Forward 858 606 252 252 1.0 future future
contracts minimum present value of minimum present value of
lease minimum lease lease minimum lease
Lease 1,082 230 852 504 348 3.9 2.4%
payments interest payments payments interest payments
liabilities
Less than 251 21 230 239 28 211
Bank 705 2 702 702 1.9 1.7%
one year
borrowings
Between 554 49 505 572 67 505
Other 28 4 24 17 6 8.9 2.9%
one and
long-term
five years
debt
More than 376 28 348 388 30 358
Long-term 8,111 842 7,270 3,562 3,706 6.1 2.4%
five years
debt
Lease 1,180 98 1,082 1,200 125 1,074
liabilities
Bonds
The following table presents the amount outstanding and effective rate of bonds.
187
Short-term debt • Product warranty provisions – the provisions for assurance-type product warranty
reflect the estimated costs of replacement and free-of-charge services that will be
Philips Group incurred by the company with respect to products sold and include costs to execute field
Short-term debt in millions of EUR
change orders.
2022 2023
• Environmental provisions – provisions for environmental remediation can change
Short-term bank borrowings 89 122
significantly due to the emergence of additional information regarding the extent or
Current portion of long-term debt 842 532
nature of the contamination, the need to utilize alternative technologies, actions by
Short-term debt 931 654
regulatory authorities as well as changes in judgments and discount rates.
• Legal provisions – provisions for legal claims and investigations reflect the best estimate
During 2023, the weighted average interest rate on the bank borrowings was 8.6% (2022: of the outflow of resources, supported by internal and external legal counsel, when it is
5.7%). This increase was mainly driven by higher interest rate environments across various probable that such outflow of resources will be required to settle an obligation.
countries globally. • Contingent consideration provisions – the provision for contingent consideration
reflects the fair value of the expected payment to former shareholders of an acquired
19 Provisions company for the exchange of control if specified future events occur or conditions are
met, such as the achievement of certain regulatory milestones or the achievement of
Accounting policies certain commercial milestones. The provision for contingent consideration can change
significantly due to changes in the estimated achievement of milestones and changes in
A provision is a liability of uncertain timing or amount. Provisions are recognized if, as a discount rates. Changes in fair value of the contingent consideration liability are
result of a past event, the company has a present legal or constructive obligation, it is reflected in other business income (expenses).
probable that an outflow of economic benefits will be required to settle the obligation and
the amount can be estimated reliably. Provisions are measured at the present value of the
expenditures expected to be required to settle the obligation using a pre-tax discount rate
that reflects current market assessments of the time value of money. The increase in the
provision due to passage of time (accretion) is recognized as interest expense.
Restructuring-related provisions
Provisions for severance and termination benefits are recognized for those costs only when
the company has a detailed formal plan for the restructuring and has raised a valid
expectation with those affected that it will carry out the restructuring by starting to
implement that plan or announcing its main features to those affected by it. Before a
provision is established, the company recognizes any impairment loss on the assets
associated with the restructuring.
By their nature, the recognition of provisions requires estimates and assumptions regarding
the timing and the amount of outflow of resources. The main estimates include:
• Respironics field-action provision – the provision requires management to make

estimates and assumptions about items such as quantities and the portion of products
to be remediated through replacement, repair or (partial) refund.
188
Philips Group
Provisions in millions of EUR
Post-employment Respironics Product Restructuring- Contingent
benefits field-action warranty Environmental related Legal consideration Other Total
Current 366 287 20 134 74 23 112 1,018
Non-current 546 23 57 83 6 14 89 279 1,097
Balance as of December 31, 2022 546 390 344 104 140 89 113 390 2,115
Additions 112 240 313 18 263 644 24 223 1,836

Utilizations (91) (285) (268) (14) (219) (235) (20) (134) (1,266)
Releases (10) (20) (2) (67) (10) (7) (45) (159)
Accretion 5 23 1 (3) 25
Acquisitions 6 6
Changes in discount rate (6) (6)
Translation differences and other - (10) (12) (3) (2) (23) (2) (1) (53)
Total change 12 (55) 13 (2) (24) 399 2 39 383
Current 331 293 22 102 477 57 181 1,463

Non-current 558 3 64 80 14 10 58 248 1,035
Philips Group
Provisions in millions of EUR
Post-employment Respironics Product Restructuring Contingent
benefits field-action warranty Environmental -related Legal consideration Other Total
Current 525 207 26 58 39 52 92 998
Non-current 659 52 32 99 8 53 156 257 1,315
Additions 61 250 320 15 154 89 160 1,049

Utilizations (185) (486) (224) (17) (61) (100) (105) (95) (1,274)
Releases (1) (2) (18) (3) (35) (59)
Accretion 4 - (3) 2
Acquisitions 4 96 99
Changes in discount rate (27) (27)
Fair value changes (86) (86)
Translation differences and other 12 49 9 7 (1) 7 14 97
Total change (113) (187) 105 (21) 74 (3) (95) 41 (198)
Current 366 287 20 134 74 23 112 1,018

Non-current 546 23 57 83 6 14 89 279 1,097
189
Respironics field action provision charges of EUR 363 million in December 2023, mainly consisting of EUR 240 million addition
On June 14, 2021, Philips’ subsidiary, Philips Respironics initiated a voluntary recall to the Respironics field action provision, EUR 82 million inventory write-down (refer to
notification in the United States and field safety notice outside the US for certain sleep and Inventories, starting on page 180), EUR 31 million onerous contract provision and EUR 6
respiratory care products related to the polyester-based polyurethane (PE-PUR) sound million fixed asset impairment.
abatement foam in these devices. The remediation is progressing globally. As of December
31, 2023, the production required for the delivery of replacement devices to patients has In addition to the above, Philips and its affiliates are defendants in a number of consumer
been substantially completed and the total number of units expected to be remediated class action lawsuits from users of the affected devices and a number of individual personal
remained stable during the year at 5.6 million devices (specific CPAP, BiPAP and mechanical injury and other compensation claims. For legal matters including claims refer to the legal
ventilator devices), excluding certain end-of-life-devices which are expected to be retired. provisions section of this note as well as Contingencies, starting on page 198.
Philips has recognized a provision based on Philips’ best estimate of the costs to repair, Product warranty provisions
replace or refund devices, subject to the Respironics field action. The provision is related to The field action provision in connection with the Philips Respironics voluntary recall
the cost to repair, replace or refund affected devices and includes, amongst others, the costs notification is shown separately above.
for the remaining production, the cost of intensified communication with physicians and
patients, material costs, labor cost and logistics, as well as costs relating to the (partial) Additions in 2023 include quality remediation actions of EUR 81 million in the Diagnosis &
refunds provided to customers under the field action. The provision does not include any Treatment segment.
product liability costs or other claims.
The company expects the provisions to be utilized mainly within the next year.
The additions for the year primarily reflect the impact of the revised remediation approach
in relation to the mechanical ventilator devices subject to the recall, following the agreed Environmental provisions
terms of the proposed consent decree (see below). The revised approach, which includes a The environmental provisions include accrued costs recorded with respect to environmental
revised repair program and assumes (partial) refunds to customers (refer to Income from remediation in various countries. In the US, subsidiaries of the company have been named as
operations, starting on page 159), resulted in an increase in the costs associated with the potentially responsible parties in state and federal proceedings for the clean-up of certain
remediation of these devices. Utilizations for the year reflect the costs incurred in executing sites.
the remediation during the year.
The additions and the releases of the provisions originate from additional insights in relation
The completion of the field action continues to be subject to uncertainty, which requires to factors like the estimated cost of remediation, changes in regulatory requirements and
management to make estimates and assumptions about items such as quantities and the efficiencies in completion of various site work phases.
portion to be replaced, repaired and refunded. An increase in the assumption for the refund
portion by 10 percentage points, could have the effect of increasing the provision by an Approximately EUR 63 million of the long-term provision is expected to be utilized after one
estimated EUR 19 million. Actual outcomes in future periods may differ from these estimates to five years, with the remainder after five years. For more details on the environmental
and affect the company’s results of operations, financial position and cash flows. remediation refer to Contingencies, starting on page 198.
Further to the above, running remediation costs of EUR 224 million (2022: EUR 210 million)
related to the remediation, such as testing, external advisory and regulatory response and
additional right-of-return and warranty provisions, have been incurred.
Following the US Food and Drug Administration (FDA) inspection of certain of Philips
Respironics' facilities in the US in 2021 and the subsequent inspectional observations, the US
Department of Justice, acting on behalf of the FDA, in July 2022 started discussions with
Philips regarding the terms of a consent decree to resolve the identified issues, which Philips
has now agreed. As a consequence of addressing the consent decree, the company recorded
190
Restructuring-related provisions Settlement Fund in relation to the economic loss class action settlement announced on
September 7, 2023.
Philips Group
Restructuring-related provisions in millions of EUR
For details of other legal matters, including regulatory and other governmental
December 31, 2022 December 31, 2023
proceedings, refer to Contingencies, starting on page 198.
Diagnosis & Treatment 42 36
Connected Care 42 18
The company expects the provisions to be utilized mainly within the next three years.
Personal Health 10 7
Other 47 56
Philips Group 140 116
Contingent consideration provisions
In 2023, the addition of EUR 24 million is largely offset by utilizations of EUR 20 million. The
acquisition of a business within Ultrasound resulted in a EUR 6 million increase.
Further to the workforce reduction in 2022, measures were announced on January 30, 2023
that primarily focus on the reduction of 6,000 positions by 2025. In 2023, the restructuring Approximately EUR 28 million of the long-term provision is expected to be utilized within
costs, net of releases, for these measures were EUR 140 million. the next three years, with the remainder after four years.
In addition, restructuring projects were executed during the year, of which the most Other provisions
significant impacted Connected Care and Other and mainly took place in the US and The main elements of other provisions are:
Netherlands. The restructuring mainly comprised product portfolio rationalization and the
reorganization of global support functions. The company expects the provisions to be Philips Group
Other provisions in millions of EUR unless otherwise stated
utilized mainly within the next year.
2022 2023
Employee jubilee funds 83 77
Self-insurance 57 63
In 2022, Philips initiated general productivity actions aimed at simplifying the organization
Non-income taxes / social security 46 51
to streamline the way of working and reduce operating expenses. This includes an Rights of return 36 39
immediate reduction of around 4,000 positions globally across the organization, with Decommissioning costs 33 34
severance and termination-related costs of EUR 80 million recorded in 2022. Onerous contracts 38 76
Remaining 97 89
Legal provisions Balance as of December 31 390 429
The company and certain of its group companies and former group companies are involved
as a party in legal proceedings, including regulatory and other governmental proceedings.
Onerous contracts reflect non-cancellable commitments on supplies for which no future
Additions mainly relate to a EUR 575 million in connection with the anticipated resolution of demand or alternative usage has been identified, including EUR 31 million in connection
the economic loss class action in the US. The final cost of the settlement may vary based on, with the proposed Respironics consent decree as of December 31, 2023.
among other things, how many patients and other settlement class members participate in
the settlement. Remaining provisions relate to a variety of positions, for example provision for disability of
employees and provision for royalty obligations.
Utilizations mainly relate to the settlement the company reached with the US Securities and
Exchange Commission (SEC) to resolve the SEC inquiry regarding alleged tender Releases in 2022 and 2023 are due to the reassessment of the positions in other provisions
irregularities in the medical device industry in China, for which the company had recorded a throughout the year.
provision of approximately EUR 60 million in 2022. The settlement reached was in line with
the amount provided for and EUR 58 million was subsequently paid in 2023. In addition the The company expects the other provisions to be utilized mainly within the next five years.
company funded an amount of USD 155 million (EUR 141 million) into the Qualified
191
20 Post-employment benefits Past service costs arising from the introduction of a change to the benefit payable under a
plan or a significant reduction of the number of employees covered by a plan (curtailment)
Accounting policies are recognized in full in the Consolidated statements of income.
Defined contribution plans Short-term employee benefit obligations are measured on an undiscounted basis and are
A defined contribution plan is a post-employment benefit plan for which the company pays expensed as the related service is provided. The company recognizes a liability and an
fixed contributions into a separate entity and will have no legal or constructive obligation expense for bonuses and incentives based on a formula that takes into consideration the
to pay further amounts. Obligations for contributions to defined contribution pension plans profit attributable to the company’s shareholders after certain adjustments.
are recognized as an employee benefit expense in the Consolidated statements of income
in the periods during which services are rendered by employees. The company’s net obligation in respect of other long-term employee benefits is the
amount of future benefit that employees have earned in return for their service in the
Defined benefit plans current and prior periods, such as jubilee entitlements. That benefit is discounted to
A defined benefit plan is a post-employment benefit plan that is not a defined contribution determine its present value. Remeasurements are recognized in the Consolidated
plan. Defined benefit plans define an amount of pension benefit that an employee will statements of income in the period in which they arise.
receive after retirement. That pension benefit typically depends on several factors such as
years of service, age and salary. Further information on other employee benefits can be found in Provisions, starting on
page 188 in the Other provisions section.
The net pension asset or liability recognized in the Consolidated balance sheets in respect of
defined benefit plans is the fair value of plan assets less the present value of the projected
defined benefit obligation at the balance sheet date. The defined benefit obligation is
calculated annually by qualified actuaries using the projected unit credit method.
Recognized assets are limited to the present value of any reductions in future contributions
or any future refunds. The net pension liability is presented as a long-term provision; no
To make the actuarial calculations for the valuation of defined benefit obligations,
distinction is made for the short-term portion.
assumptions are needed for interest rates, healthcare cost increases, future pension
increases, life expectancy and employee turnover rates. The actuarial calculations are made
For the company’s major plans, a full discount rate curve of high-quality corporate bonds is
by external actuaries based on inputs from observable market data, such as corporate bond
used to determine the defined benefit obligation, where available. The curves are based on
returns and yield curves to determine the discount rates to apply, mortality tables to
the Mercer Yield Curve methodology, which uses data of corporate bonds rated AA or
determine life expectancy and inflation rates to determine future salary and pension
equivalent. For the other plans the Mercer Yield Curve/Mercer Methodology has also been
growth assumptions.
used taking into account the cash flows as much as possible in case there is a deep market
in corporate bonds. For plans in countries without a deep corporate bond market, the
Employee post-employment benefit plans have been established in many countries in
discount rate is based on government bonds and the plan’s maturity.
accordance with the legal requirements, customs and the local practice in the countries
involved. The larger part of post-employment benefits are company pension plans, of which
Pension costs in respect of defined benefit plans primarily represent the increase of the
some are funded and some are unfunded. All funded post-employment benefit plans are
actuarial present value of the obligation for post-employment benefits based on employee
considered to be related parties.
service during the year and the interest on the net recognized asset or liability in respect of
employee service in previous years.
Most employees that take part in a company pension plan are covered by defined
contribution (DC) pension plans. The main DC plans are in the Netherlands and the United
Remeasurements of the net defined benefit asset or liability comprise actuarial gains and
States. The company also sponsors a number of defined benefit (DB) pension plans. The
losses, the return on plan assets (excluding interest) and the effect of the asset ceiling
benefits provided by these plans are based on employees’ years of service and
(excluding interest). The company recognizes all remeasurements in Other comprehensive
compensation levels.
income.
192
The company also sponsors a limited number of DB retiree medical plans. The benefits Germany
provided by these plans typically cover a part of the healthcare costs after retirement. None The company has several DB plans in Germany, which are partially unfunded, meaning that
of these plans are individually significant to the company and are therefore not further after retirement the company is responsible for the benefit payments to retirees.
separately disclosed.
Due to the relatively high level of social security in Germany, the company’s pension plans
The larger funded DB and DC plans are governed by independent Trustees who have a legal mainly provide benefits for the higher earners. The plans are open for future pension
obligation to protect the interests of all plan members and operate under the local accrual. Indexation is mandatory due to legal requirements. Some of the German plans have
regulatory framework. a DC design, but are accounted for as DB plans due to a legal minimum return requirement.
The DB plans in Germany and the US make up most of the defined benefit obligation (DBO) Company pension commitments in Germany are partly protected against employer
and the net position. The company also has DB plans in the rest of the world; however these bankruptcy via the “Pensions-Sicherungs-Verein” which charges a fee to all German
are individually not significant to the company and do not have a significantly different risk companies providing pension promises.
profile that would warrant separate disclosure.
Philips is one of the sponsors of Philips Pensionskasse VVaG in Germany, which is a multi-
The adjacent table provides a break-down of the present value of the funded and unfunded employer plan. The plan is classified and accounted for as a DC plan.
DBO, the fair value of plan assets and the net position in Germany, the US and in Other
Countries. The table also provides the value of reimbursement rights. United States
The US DB pension plans are closed plans without future pension accrual. For the funding of
Philips Group any deficit in the US plan the Group adheres to the minimum funding requirements of the
Post-employment benefits in millions of EUR
US Pension Protection Act.
United Other
Germany States Countries Total
2022 2023 2022 2023 2022 2023 2022 2023 The assets of the US funded pension plans are in Trusts governed by fiduciaries. The non-
Present value of funded DBO (489) (511) (440) (404) (179) (182) (1,108) (1,097) qualified pension plans that cover accrual above the maximum salary of the funded
Present value of unfunded DBO (249) (253) (128) (118) (136) (137) (513) (508) qualified plan are unfunded.
Total present value of DBO (738) (764) (568) (522) (315) (319) (1,621) (1,605)
Fair value of plan assets 477 481 474 442 171 166 1,122 1,089 The company’s qualified pension commitments in the US are covered via the Pension Benefit
Net position (261) (283) (94) (80) (144) (153) (499) (516) Guaranty Corporation which charges a fee to US companies providing DB pension plans. The
fee is also dependent on the amount of unfunded vested liabilities.
Value of reimbursement rights 6 8 6 8
Risks related to DB plans
DB plans expose the company to various demographic and economic risks such as longevity
The classification of the net position is as follows: risk, investment risks, currency and interest rate risk and in some cases inflation risk. The
latter plays a role in the assumed wage increase but more importantly in some countries
Philips Group where indexation of pensions is mandatory.
Classification net position in millions of EUR
United Other
Germany States Countries Total The company has an active de-risking strategy in which it constantly looks for opportunities
2022 2023 2022 2023 2022 2023 2022 2023 to reduce the risks associated with its DB plans. Liability-driven investment strategies, lump
Total asset for plans in a surplus 9 - 34 39 4 2 46 41 sum cash-out options, buy-ins, buy-outs and a change to DC are examples of the strategy.
Total liability for plans in a deficit (270) (283) (128) (118) (148) (156) (546) (558)
Provisions for post-employment benefit plans
under AHFS
Net position (261) (283) (94) (80) (144) (153) (499) (516)
193
Investment policy in the largest pension plans Summary of the reconciliations for the DBO and plan assets
Pension fund trustees are responsible for and have full discretion over the investment The adjacent tables contain the reconciliations for the DBO and plan assets.
strategy of the plan assets. The plan assets of the Philips pension plans are invested in well
diversified portfolios. The interest rate sensitivity of the fixed income portfolio is closely Philips Group
Defined benefit obligations in millions of EUR
aligned to that of the plan’s pension liabilities for most of the plans. Any contributions from
2022 2023
the sponsoring company are used to further increase the fixed income part of the assets. As
Balance as of January 1 1,970 1,621
part of the investment strategy, any improvement in the funded ratio over time is used to
Service cost 32 32
further decrease the interest rate mismatch between the plan assets and the pension
Interest cost 36 71
liabilities.
Employee contributions 4 3
Actuarial (gains) / losses
Summary of pre-tax costs for post-employment benefits and - demographic assumptions 2
reconciliations - financial assumptions (366) 48
The adjacent table contains the total of current and past service costs, administration costs - experience adjustment 12 2
and settlement results as included in Income from operations and the interest cost as (Negative) past service cost 16 (9)
included in Financial expenses. Settlements - 2
Benefits paid from plan (95) (104)
Philips Group Benefits paid directly by employer (41) (39)
Pre-tax costs for post-employment benefits in millions of EUR
Translation differences and other 52 (22)
2021 2022 2023 Balance as of December 31 1,621 1,605
Defined benefit plans 36 50 47
- included in income from operations 28 39 25
- included in financial expense 8 10 21 Philips Group
Plan assets in millions of EUR
- included in Discontinued operations 1
Defined contribution plans 375 400 376 2022 2023
- included in income from operations 368 400 376 Balance as of January 1 1,380 1,122
- included in Discontinued operations 7 Interest income on plan assets 26 49
Post-employment benefits costs 411 449 423 Admin expenses paid (1) (1)
Return on plan assets excluding interest income (254) 23
Employee contributions 4 3
Employer contributions 17 14
Settlements
Benefits paid from plan (95) (104)
Translation differences and other 45 (17)
Balance as of December 31 1,122 1,089
The past service cost in 2023 and 2022 mainly relate to the retiree medical plans in Brazil.
194
Plan assets allocation Sensitivity analysis

The asset allocation in the company’s DB plans as of December 31, was as follows: The following table illustrates the approximate impact on the DBO from movements in key
assumptions. The DBO was recalculated using a change in the assumptions of 1% which
Philips Group overall is considered a reasonably possible change. The impact on the DBO because of
Plan assets allocation in millions of EUR
changes in discount rate is normally accompanied by offsetting movements in plan assets,
2022 2023
especially when using matching strategies.
Assets quoted in active markets
- Debt securities 560 513
The average duration in years of the DBO of the DB plans is 10 (Germany: 11, United States: 8,
- Equity securities
and Other countries: 10) as of December 31, 2023 (2022: 8).
- Other 203 182
Philips Group
Assets not quoted in active markets Sensitivity of key assumptions in millions of EUR
- Debt securities 2022 2023
- Equity securities 101 31 Increase
- Other 258 363 Discount rate (1% movement) (122) (123)
Total assets 1,122 1,089 Pension increase (1% movement) 57 60
Salary increase (1% movement) 12 12
Longevity 1) 32 32
The plan assets in 2023 contain 36% (2022: 32%) unquoted plan assets. Plan assets in 2023 Decrease
do not include property occupied by or financial instruments issued by the company. Discount rate (1% movement) 145 147
Pension increase (1% movement) (49) (52)
Assumptions Salary increase (1% movement) (11) (11)
The mortality tables used for the company’s largest DB plans are: 1)
The mortality table (i.e. longevity) also impacts the DBO. The above sensitivity table illustrates the impact on the DBO of a
further 10% decrease in the assumed rates of mortality for the company’s major plans. A 10% decrease in assumed
Germany: Heubeck-Richttafeln 2018 Generational, assuming 93% of mortality rates for male mortality rates equals improvement of life expectancy by 0.5 - 1 year.
retirees between age 60 and 85
US: PRI-2012 Generational with MP2021 improvement scale + white collar adjustment
Cash flows and costs in 2024
The weighted averages of the assumptions used to calculate the DBO as of December 31, Cash outflows in relation to post-employment benefits are estimated to amount to EUR 434
were as follows: million in 2024, consisting of:
Philips Group • EUR 17 million employer contributions to DB plans (Germany: EUR 8 million, US: EUR 0
Assumptions used for defined benefit obligations in %
million, Other Countries: EUR 9 million);
Germany United States Other Countries Total
• EUR 42 million cash outflows in relation to DB plans (Germany: EUR 20 million, US: EUR 10
2022 2023 2022 2023 2022 2023 2022 2023
million, Other Countries: EUR 12 million); and
Discount rate 4.1% 3.7% 5.2% 5.0% 4.9% 4.9% 4.7% 4.3%
• EUR 375 million employer contributions to DC plans (Netherlands: EUR 174 million, US:
Inflation rate 2.0% 2.0% 2.3% 2.3% 2.6% 2.5% 2.2% 2.2%
Salary increase 2.8% 2.8% 0.0% 0.0% 3.3% 4.3% 2.9% 3.0%
EUR 136 million, Other Countries: EUR 65 million).
The service and administration cost for 2024 is expected to amount to EUR 30 million for DB
plans. The net interest cost for 2024 for the DB plans is expected to amount to EUR 21
million. The cost for DC pension plans in 2024 is equal to the expected DC cash flow.
195
21 Accrued liabilities 22 Other liabilities
Accounting policies Accounting policies
Accrued liabilities are initially measured at fair value and subsequently at amortized cost Other liabilities are initially measured at fair value and subsequently at amortized cost and
and are derecognized when the obligation under the liability is discharged, cancelled or has are derecognized when the obligation under the liability is discharged, cancelled or has
expired. expired.
Accrued liabilities are summarized as follows: The company recognizes contract liabilities if a payment is received or a payment is due
(whichever is earlier) from a customer before the company transfers the related goods or
Philips Group services. Contract liabilities are recognized as revenue when the company performs under
Accrued liabilities in millions of EUR
the contract (i.e., transfers control of the related goods or services to the customer).
2022 2023
Personnel-related costs:
- Salaries and wages 490 791
Other non-current liabilities
- Accrued holiday entitlements 97 96
Non-current liabilities were EUR 54 million as of December 31, 2023 (December 31, 2022: EUR
- Other personnel-related costs 101 93
Fixed-asset-related costs:
60 million).
- Gas, water, electricity, rent and other 46 43
Communication and IT costs 64 61 Non-current liabilities are associated mainly with indemnification and non-current accruals.
Distribution costs 110 99
Sales-related costs: Other current liabilities
- Commission payable 8 12 Other current liabilities are summarized as follows:
- Advertising and marketing-related costs 127 133
- Other sales-related costs 20 20 Philips Group
Other current liabilities in millions of EUR
Material-related costs 132 138
Interest-related accruals 71 76 2022 2023
Other accrued liabilities 361 324 Accrued customer rebates 213 186
Accrued liabilities 1,626 1,887 Other taxes including social security premiums 115 129
Other liabilities 120 98
Other current liabilities 448 414
Contract liabilities
Non-current contract liabilities were EUR 469 million as of December 31, 2023 (December 31,
2022: EUR 515 million) and current contract liabilities were EUR 1,809 million as of December
31, 2023 (December 31, 2022: EUR 1,696 million).
The current contract liabilities increased by EUR 113 million, which is mainly driven by an
increase in deferred balances for customer service contracts.
The current contract liabilities as of December 31, 2022 resulted in revenue recognized of
EUR 1,696 million in 2023.
196
23 Cash flow statement supplementary information Reconciliation of liabilities arising from financing activities
Certain items in the statements of cash flows do not correspond to the differences between
Accounting policies the balance sheet amounts for the respective items, principally because of the effects of
translation differences and consolidation changes.
Cash and cash equivalents
Cash and cash equivalents include all cash balances, certain money market funds and short- Philips Group
Reconciliation of liabilities arising from financing activities in millions of EUR
term highly liquid investments with an original maturity of three months or less that are
Balance as of Balance as of
readily convertible into known amounts of cash. Bank overdrafts are included in borrowings December 31, Cash Currency effects and December 31,
in current liabilities. 2022 flow consolidation changes Other 1) 2023
Long term debt 2) 8,111 (210) (96) (238) 7,567
Cash flow statements EUR bonds 4,061 497 11 4,569
The cash flow statement is prepared using the indirect method. Cash flows related to USD bonds 1,378 (53) 1,325
interest and tax are included in operating activities. Assets and liabilities acquired as part of Leases 1,082 (200) (42) 235 1,074
a business combination are included in investing activities (net of cash acquired). Dividends Forward 858 (462) 396
contracts 3)
paid to shareholders are included in financing activities. Dividends received are included in
Bank 705 (502) 203
operating activities. borrowings
Other long- 28 (5) (1) (22)
Cash flows arising from transactions in a foreign currency are translated into the company’s term debt
functional currency using the exchange rate at the date of the cash flow. Cash flows from Short term debt 2) 89 29 3 122
derivative instruments that are accounted for as cash flow hedges are classified in the same Short-term 89 46 (14) 122
bank
category as the cash flows from the hedged items. Cash flows from other derivative borrowings
instruments are classified as investing cash flows. Other short- (17) 17
term loans
Equity (1,133) (666) 1,143 (656)
Income taxes Dividend (4) 4
payable
Income taxes in 2023 include EUR 2 million of interest related to uncertain tax positions.
Forward (858) 465 (394)
contracts 3)
Cash paid for leases Treasury (275) (662) 675 (262)
In 2023, gross lease payments of EUR 271 million (2022: EUR 316 million; 2021: EUR 308 shares 4)
million) included interest of EUR 27 million (2022: EUR 25 million; 2021: EUR 25 million). Total (848)
1)
Besides non-cash, other includes interest paid on leases, which is part of cash flows from operating activities
Net cash used for derivatives and current financial assets 2)
In this table, current portion of long-term debt is included in long-term debt (and excluded from short-term debt).
In 2023, a total of EUR 46 million cash was paid with respect to foreign exchange derivative 3)
The forward contracts are related to the share buyback program and LTI plans
contracts related to activities for liquidity management (2022: EUR 72 million outflow; 2021: 4)
Cash flow in 2023 includes withholding tax for share buyback amounting to EUR 55 million.
EUR 48 million inflow).
Purchase and proceeds from non-current financial assets

In 2023, the net cash outflow is EUR 44 million. In 2022, the net cash outflow is EUR 38
million. In 2021, the net cash flow is EUR 0 million.
197
Philips Group Contingent assets

Reconciliation of liabilities arising from financing activities in millions of EUR
Contingent assets are disclosed if the inflow of economic benefits is probable, but not
Balance as of Balance as of
December 31, Cash Currency effects and December 31, virtually certain. If the inflow of economic benefits becomes virtually certain, the asset
2021 flow consolidation changes Other 1) 2022 would be considered no longer contingent and its recognition appropriate. Contingent
Long term debt 2) 6,933 1,045 107 27 8,111 assets are assessed continually and require management to apply judgment, especially to
EUR bonds 3,233 827 4,061 estimate the likelihood of the inflow of economic benefits.
USD bonds 1,313 (20) 85 1,378
Leases 1,220 (260) 17 105 1,082 Financial guarantees
Forward 934 (76) 858 Philips’ policy is to provide guarantees and other letters of support only in writing. Philips
contracts 3)
does not stand by other forms of support. The company recognizes a liability at the fair
Bank borrowings 203 498 4 705
value of the obligation at the inception of a financial guarantee contract. The guarantee is
Other long-term 30 (1) 1 (1) 28
debt subsequently measured at the higher of the best estimate of the obligation or the amount
Short term debt 2) 47 47 (6) 1 89 initially recognized less, when appropriate, cumulative amortization.
Short-term bank 47 47 (6) 1 89
borrowings
Other short-term
loans Accounting estimates and judgments
Equity (1,410) (593) 869 (1,133)
Dividend payable (418) 418 Significant judgment is required to determine the likelihood of a potential outflow of
Forward (934) 76 (858) resources. In addition, judgment is involved in determining whether the amount of an
contracts 3)
obligation can be measured with sufficient reliability. Contingencies involve inherent
Treasury shares (476) (174) 375 (275)
uncertainties including, but not limited to, court rulings, negotiations between affected
Total 500
parties, governmental actions, tax and environmental remediation.
1)
Besides non-cash, other includes interest paid on finance leases, which is part of cash flows from operating activities
2)
In this table, current portion of long-term debt is included in long-term debt (and excluded from short-term debt). Guarantees
3)
The forward contracts are related to the share buyback program and LTI plans The total fair value of guarantees recognized on the balance sheet amounts to EUR nil
million for both 2023 and 2022. Remaining off-balance-sheet business related guarantees on
behalf of third parties and associates to EUR 2 million in 2023 (December 31, 2022: EUR 2
24 Contingencies
million).
Accounting policies
Environmental remediation
The company and its subsidiaries are subject to environmental laws and regulations. Under
Contingent liabilities
these laws, the company and/or its subsidiaries may be required to remediate the effects of
A contingent liability is a liability of uncertain timing and amount. Contingencies are not
certain manufacturing activities on the environment.
recognized in the balance sheet because they are dependent on the occurrence or non-
occurrence of one or more uncertain future events not wholly within the control of the
Legal proceedings
company or because the risk of loss is estimated to be possible but not probable or because
The company and certain of its group companies and former group companies are involved
the amount cannot be measured reliably. Pursuant to IAS 37, Provisions, Contingent
as a party in legal proceedings, regulatory and other governmental proceedings, including
Liabilities and Contingent Assets, certain information is not disclosed for legal proceedings
discussions on potential remedial actions, relating to such matters as competition issues,
for which the company concludes that disclosure can be expected to seriously prejudice the
commercial transactions, product liability, participations, and environmental pollution.
outcome of the matter.
198
While it is not feasible to predict or determine the outcome of all pending or threatened of the recall. On January 29, 2024, Philips announced that it agrees on the terms of a consent
legal proceedings, regulatory and governmental proceedings, the company is of the opinion decree with the DOJ, representing the FDA. For further details please see Subsequent events,
that the cases described below may have, or have had in the recent past, a significant impact starting on page 219.
on the company’s consolidated financial position, results of operations and cash flows.
DOJ investigation
Public Investigations On April 8, 2022, Philips Respironics and certain of Philips' subsidiaries in the US received a
In May 2023, the company reached a settlement with the US Securities and Exchange subpoena from the DOJ to provide information related to events leading to the Respironics
Commission (SEC) to resolve the SEC inquiry regarding alleged tender irregularities in the recall. The relevant subsidiaries are cooperating with the investigation. The criminal and civil
medical device industry in China, for which the company had recorded a provision of investigation is being conducted by the DOJ's Consumer Protection Branch and Civil Fraud
approximately EUR 60 million in 2022. The settlement reached was in line with the amount Section, and the US Attorney’s Office for the Eastern District of Pennsylvania. Given the early
provided for. In addition, the previously disclosed SEC inquiry regarding alleged similar stages of the investigation, the company is not able to reliably estimate the financial impact,
conduct in Brazil and Bulgaria has been discontinued. The US Department of Justice (DOJ) if any.
has closed its parallel inquiry into these matters.
Product liability claims
In February 2023, the company received a statement of objections from the French Following the voluntary recall notification, a number of civil complaints have been filed in
Competition Authority (FCA) initiating a formal investigation to verify whether the company several jurisdictions against Philips Respironics and certain of its affiliates (including the
and certain other manufacturers of small domestic appliances breached antitrust rules in company) generally alleging economic loss, personal injury and/or the potential for personal
France in the period 2009-2014 through the alleged exchange of commercially sensitive injury allegedly caused by the Recalled Devices.
information. The company filed its response to the statement of objections denying such
allegations in May 2023 and is continuing to defend itself. The FCA is expected to organize a In the United States, consumer and commercial class action lawsuits have been filed alleging
hearing and issue its decision in 2024. It is the company’s assessment that it is possible but economic loss and medical monitoring claims. Individual personal injury lawsuits have also
not probable that this matter could lead to an outflow of economic resources. Given the been filed. On October 8, 2021, a Multi-District Litigation (MDL) in the US District Court for
uncertain outcome of the investigation and subsequent proceedings, the company is not the Western District of Pennsylvania was formed, and most of these class action and
able to reliably estimate the financial impact, if any, and no provision has been recognized as personal injury lawsuits have been consolidated in the MDL for pre-trial proceedings. As of
of December 31, 2023. December 31, 2023, plaintiffs have filed a consolidated economic loss class action complaint
on behalf of device users, hospitals, and insurers and other third-party payers, a
Respironics field action consolidated medical monitoring class action complaint on behalf of device users, and over
On June 14, 2021, Philips’ subsidiary Philips RS North America LLC (Philips Respironics) issued 600 individual personal injury complaints. The company anticipates that the number of
a voluntary recall notification in the United States and field safety notice outside the United individual personal injury complaints will continue to increase in 2024.
States for specific Philips Respironics CPAP, Bi-Level PAP, and mechanical ventilator devices
(the “Recalled Devices”). On September 7, 2023, Philips Respironics reached agreement on a class action settlement in
relation to the economic loss class action complaint, for which the company recorded a EUR
Consent decree 575 million provision in the first quarter of 2023. Under the agreement, which was
On August 26, 2021, the US Food and Drug Administration (FDA) commenced an inspection preliminarily approved by the US District Court for the Western District of Pennsylvania on
of the Philips Respironics manufacturing facility in Murrysville, Pennsylvania and provided October 10, 2023, the Philips defendants will provide predefined cash awards to all eligible
Philips Respironics with its preliminary inspectional observations on November 9, 2021. participants in the US depending on the type of device, extended warranties on all
Philips Respironics responded to the FDA's inspectional observations in December 2021, remediated devices provided as part of Respironics’ recall program, and an additional cash
which described the actions already taken by the company, as well as additional planned award if they return the Recalled Device to Philips Respironics. The settlement also provides
actions. Philips Respironics is also providing periodic updates to the FDA on its progress for for compensation for individuals who acquired replacement devices in the market after the
the planned actions. In July 2022, Philips started discussions with the DOJ, acting on behalf recall and prior to the announcement of the settlement. The settlement also provides for
of the FDA on a consent decree that would, among other things, address compliance compensation to private insurers and other third-party payers. The final cost of the
requirements for future sales, the resolution of the inspectional findings and the completion settlement may vary based on, among other things, how many patients and other
199
settlement class members participate in the settlement. The final approval hearing is For the United States specifically, the lack of clarity around the nature of the specific injury
scheduled for April 11, 2024. each census registrant is claiming and its relation, if any, to use of the Recalled Devices
contribute to the uncertainty. In addition, the MDL court has not yet decided several
In September 2022, the MDL court established a voluntary, court-approved census registry, significant motions, and plaintiffs have not yet filed their motion for class certification in the
and associated tolling, for potential claimants who have not filed claims, but may file claims medical monitoring action. Further, while document discovery has progressed, expert
in the future, relating to the Recalled Devices. The census registry replaced the private tolling discovery has not yet begun, and the Court has not yet been asked to decide the question of
agreement that had been in effect before the establishment of the census registry. At the whether any of the claimed injuries could have been caused by use of the Recalled Devices.
time of termination, approximately 60,000 individuals had entered into the private tolling An adverse outcome with respect to any or all of these lawsuits and/or any future claims
agreement. In the event these individuals wish to pursue or preserve their claims, they will could have a material impact on the company’s consolidated financial position, results of
need to file a lawsuit or register on the census registry. By December 31, 2023, approximately operations and cash flows.
57,000 individuals had joined the census registry. The company anticipates that the number
of individuals on the census registry will increase in 2024. To better assess the claimed The company has product liability insurance in place that it expects to partially cover product
injuries and their relation, if any, to use of the Recalled Devices, Philips Respironics is working liability-related cash outflows. Based on ongoing discussions with certain insurance carriers
to require census registrants to supplement the information they are required to submit in that took place during 2023, management of the company concluded that the likelihood of
the census registry established by the MDL court. cash inflows changed to probable, but (consistent with prior periods) not virtually certain.
Given the uncertainties associated with the cash outflows of the above claims and the
In Australia, a consumer class action lawsuit alleging personal injury was filed against the applicable conditions of insurance coverage, no reliable estimate can be made or disclosed
company’s subsidiary Philips Electronics Australia Ltd on October 4, 2021. In the course of in relation to the expected insurance recovery.
2022, the plaintiff in the case sought leave of the court to discontinue the class action citing
that there is insufficient evidence to warrant the continuation of the class action and that Securities claims
since the issue of proceedings, Philips Respironics has been repairing, replacing, or (partially) On August 16, 2021, a securities class action complaint was filed against the company, its
refunding the devices which are the subject of the recall, meaning that any compensation former CEO and its CFO in the US District Court for the Eastern District of New York alleging
relating to financial loss would be relatively confined. During the process for withdrawal of violations of the Securities Exchange Act of 1934 causing damage to investors. On January 3,
the case, a new lead plaintiff came forward in the second half of 2023 and is now continuing 2022, the lead plaintiff in the case filed its amended complaint seeking to represent
the class action. individuals that purchased Philips shares between February 23, 2016, through November 12,
2021. Following the filing and briefing of the company’s motion to dismiss in the first half of
Philips Respironics and certain of its affiliates (including the company) are also defendants in 2022, plaintiff filed a second amended complaint on November 30, 2022, naming an
consumer class action lawsuits in Canada and Israel and collective actions in Chile, France additional defendant and expanding the alleged damage period to include certain share
and the Netherlands alleging economic loss and/or personal injury. In Canada, where price declines that were allegedly based on disclosures made in 2022. The second amended
various class actions had been filed, the court issued a decision on a carriage motion in April complaint now focuses on share price declines that allegedly occurred as a result of various
2023, deciding that a class action filed in British Columbia may continue as a nationwide disclosures starting on April 26, 2021 through October 2022. The company's motion to
class action while defendants are seeking for all other class actions to be stayed. dismiss the second amended complaint was filed in the first quarter of 2023. As of December
31, 2023, that motion is still pending with the Court.
While the company believes it is probable that these lawsuits will in the aggregate lead to
an outflow of economic resources for Philips Respironics or other Philips entities, given the In the Netherlands, in addition to the September 2022 letter from shareholders
significant uncertainty regarding the nature of the relevant events and potential representative organization European Investors-VEB, holding the company and its directors
obligations, the company is not currently able to reliably estimate the amount of the liable for an alleged failure to make timely disclosures in relation to the Respironics recall,
obligation associated with these various lawsuits. The final outcome of the lawsuits and the the company received letters from two other parties with similar allegations. As of
cost to resolve them cannot currently be determined due to a number of variables, including December 31, 2023, no formal claims have been filed in this respect.
uncertainty regarding the ultimate number of claimants and their allegations. Moreover,
Philips Respironics has not yet completed its test and research program, including the
additional testing requested by the FDA, for the Recalled Devices.
200
It is the company’s assessment that it is possible but not probable that these cases could lead 25 Related-party transactions
to a certain outflow of economic resources. The company is not able to reliably estimate the In the normal course of business, Philips purchases and sells goods and services from/to
financial impact, if any. An adverse outcome of these cases could have a material impact on various related parties in which Philips typically holds between 20% and 50% equity interest
the company’s consolidated financial position, results of operations and cash flows. and has significant influence. These transactions are generally conducted with terms
comparable to transactions with third parties.
Other claims
On October 12, 2021, SoClean, a company offering ozone-based cleaning products for sleep Philips Group
Related-party transactions in millions of EUR
devices, filed a lawsuit against the company and certain of its affiliates alleging that the
2021 2022 2023
defendants’ statements about the potential adverse effect ozone cleaning may have on the
Sales of goods and services 116 111 106
Recalled Devices has significantly damaged its business. Philips believes that the claim is
Purchases of goods and services 41 46 42
without merit and will vigorously defend itself. In November 2023, the Court ruled on one of
Receivables from related parties 40 55 18
the motions to dismiss filed by defendants and partially dismissed some of SoClean’s claims.
Payables to related parties 2 2 2
On January 4, 2024, Philips and its affiliates filed their answer and counterclaims against
SoClean and one of its affiliates.
The above table includes sales transactions between Philips and PMC of EUR 87 million in
In addition, some of Philips Respironics’ business partners such as distributors and durable 2023 (2022: EUR 101 million; 2021: EUR 106 million), under which PMC has leased the
medical equipment providers have filed or threatened to file claims alleging economic losses equipment to the ultimate customer. In addition, as part of its S&RC operations in the US,
suffered as a consequence of the voluntary recall. Philips Respironics is engaging with Philips Medical Capital LLC funded durable medical equipment (DMEs) providers, through
certain of its business partners on the level of compensation they allege to be entitled to loans and leases. PMC-funded transactions these DMEs entered into with Philips amount to
under Philips Respironics’ replacement program of the Recalled Devices. EUR 117 million in 2023 (2022: EUR 117 million; 2021: EUR 162 million). The associated costs of
these funding transactions are borne by the ultimate customer and settled directly with
It is the company’s assessment that it is possible but not probable that these cases could lead Philips Medical Capital LLC. Philips Medical Capital LLC, a Pennsylvania limited liability
to a certain outflow of economic resources. The company is not able to reliably estimate the company, is owned 60% by De Lage Landen Financial Services, Inc. (DLL) and 40% by Philips
financial impact, if any. In the event of an adverse outcome, these matters could have a Electronics North America Corporation (Philips).
material impact on the company’s consolidated financial position, results of operations and
cash flows. On August 14, 2023, it was announced that Exor N.V. acquired a 15% minority stake in Philips’
shares and entered into a relationship agreement with the company. This relationship
To date, other than for the economic loss class action settlement, no provisions have been agreement includes Exor’s right to propose one member to the Supervisory Board. It is
recorded for the litigation and investigations associated with the Respironics field action. expected that the Supervisory Board will, upon Exor’s exercise of its right, submit a proposal
for the appointment of the relevant nominee at the upcoming 2024 Annual General
Other Meeting of Shareholders. Upon such appointment, Exor will be considered a related party
In the second half of 2023, Electro Medical Systems S.A., a manufacturer of among others for reporting purposes.
medical devices for dental prophylaxis, filed a lawsuit against the company alleging that the
company materially breached its duties under a cooperation agreement entered into In light of the composition of the Executive Committee, the company considers the
between the parties in 2016, claiming damages in excess of EUR 300 million, alleging loss of members of the Executive Committee and the Supervisory Board to be the key management
profit and lost increase in brand value. Philips disagrees with the allegations and will personnel as defined in IAS 24 Related Party Disclosures.
vigorously defend itself.
For remuneration details of the Executive Committee, the Board of Management and the
Miscellaneous Supervisory Board see Information on remuneration, starting on page 206.
For details on other contractual obligations, please refer to liquidity risk in Details of treasury
and other financial risks, starting on page 213. For Post-employment benefit plans see Post-employment benefits, starting on page 192.
201
26 Share-based compensation The purpose of the share-based compensation plans is to align the interests of management
with those of shareholders by providing incentives to improve the company’s performance
Accounting policies on a long-term basis, thereby increasing shareholder value.
Philips share-based compensation is an equity-settled plan comprising restricted and The company has the following plans:
performance shares. The restricted shares are subject to a three-year service condition and
the performance shares include both market and non-market-based performance • performance shares: rights to receive common shares in the future based on
conditions, in addition to a three-year service condition. These shares are awarded to the performance and service conditions;
Executive Committee and Senior Management. • restricted shares: rights to receive common shares in the future based on a service
condition; and
The grant date fair value of market-based performance shares is determined through a • options on its common shares, including the 2013 Accelerate! grant.
Monte Carlo valuation model. The grant date fair value of non-market-based performance
shares and restricted shares is determined as the share price at the grant date as Since 2013 the Board of Management and other members of the Executive Committee are
participants receive notional dividends throughout the vesting period. The costs of share- only granted performance shares*). Performance shares as well as restricted shares can be
based compensation plans are revised for expected performance (non-market-based granted to executives, certain selected employees and new employees. Prior to 2013, options
performance shares) and forfeiture and are spread evenly over the service period. were also granted.
In 2023, an additional non-recurring retention option grant was issued for certain key Under the terms of employee stock purchase plans established by the company in various
employees. This grant has an exercise price that was 15% higher than the share price at countries, employees are eligible to purchase a limited number of Philips shares at
grant and will vest in two years and expires ten years after the grant date. The grant date discounted prices through payroll withholdings.
fair value was calculated using the Black-Scholes-Merton option valuation model.
Share-based compensation costs were EUR 97 million (2022: EUR 104 million; 2021: EUR 115
Share-based compensation is recognized over the service period as personnel expense in million). This includes the employee stock purchase plan of EUR 9 million, which is not a
the consolidated statement of income, with a corresponding increase to equity. share-based compensation that affects equity. In the Consolidated statements of changes in
equity EUR 88 million is recognized in 2023 and represent the costs of the share-based
compensation plans. The amount recognized as an expense is adjusted for forfeiture. USD-
denominated performance shares, restricted shares and options are granted to employees in
the United States only.
The use of a valuation model to determine market-based performance share fair value
Performance shares
requires estimates for the expected volatility of the Philips share price and correlation
The performance is measured over a three-year performance period. The performance
among input variables.
shares have three performance conditions, relative Total Shareholders’ Return ('TSR')
compared to a peer group of 20 companies including Philips (2022: 20 companies; 2021: 20
At each reporting date, Philips calculates the expected realization the of non-market-based
companies, 2020: 20 companies), adjusted Earnings Per Share growth**) ('EPS') and a
performance targets and revises the expected share-based compensation expense. The
sustainability criterion. The criterion is based on three Sustainable Development Goals
cumulative effect is recorded in the consolidated statement of income with a corresponding
('SDG') as defined by the United Nations that are included in Philips’ strategy on
adjustment in equity.
sustainability (refer to Environment, Social and Governance, starting on page 42). The
performance conditions are weighted as follows: TSR 50%, EPS 40% and SDG 10%.
No expense is recognized for awards that do not ultimately vest because non-market
performance and/or service conditions have not been met.
The performance shares vest three years after the grant date. The number of performance
shares that will vest is dependent on achieving the performance conditions provided that
the grantee is still employed with the company.
202
The amount recognized as an expense is adjusted for actual performance of adjusted EPS A summary of the status of the company’s performance share plans as of December 31, 2023
growth**) and the actual realization of the SDGs since these are non-market performance and changes during the year are presented in the following table:
conditions. It is not adjusted for non-vesting or extra vesting of performance shares due to a
relative TSR performance that differs from the performance anticipated at the grant date, Philips Group
Performance shares
since this is a market-based performance condition.
2022 2023
weighted average weighted average
The fair value of the performance shares is measured based on Monte-Carlo simulation, shares grant-date fair value shares grant-date fair value
which takes into account dividend payments between the grant date and the vesting date EUR-denominated
by including reinvested dividends as well as the market conditions expected to impact Outstanding as of January 1 3,097,713 45.28 4,385,837 33.13
relative Total Shareholders’ Return performance in relation to selected peers. The following Granted 2,323,435 20.55 2,299,280 23.65
weighted-average assumptions were used for the 2023 grants: Notional dividends 1) 155,067 33.91 240,977 27.15
Vested/Issued (434,329) 40.90 (154,987) 44.08
• Risk-free rate: 2.55% Forfeited (233,556) 38.67 (489,295) 27.05
• Expected share price volatility: 36% Adjusted quantity 2) (522,493) 40.48 (889,777) 44.27
Outstanding as of December 31 4,385,837 33.13 5,392,035 27.22
The assumptions were used for these calculations only and do not necessarily represent an
indication of Management’s expectation of future developments for other purposes. The USD-denominated
Outstanding as of January 1 2,005,000 51.48 2,749,983 36.66
company has based its volatility assumptions on historical experience measured over a ten-
Granted 1,530,585 21.93 1,667,812 25.96
year period.
Notional dividends 1) 98,883 37.15 152,750 29.78
Vested/Issued (248,848) 45.23 (121,760) 48.33
Forfeited (309,570) 44.04 (596,846) 28.95
Adjusted quantity 2) (326,066) 45.26 (590,890) 48.28
Outstanding as of December 31 2,749,983 36.66 3,261,048 29.73
1)
Dividend declared in 2023 on outstanding shares.
2)
Adjusted quantity includes the adjustments made to Performance shares outstanding due to updates on the actual TSR, EPS,
and SDG.
As of December 31, 2023, a total of EUR 102 million of unrecognized compensation costs
relate to non-vested performance shares (as of December 31, 2022 EUR 103 million; as of
December 31, 2021 EUR 110 million). These costs are expected to be recognized over a
weighted-average period of 1.98 years.
203
Restricted shares Option plans

The fair value of restricted shares is equal to the share price at grant date. The
company issues restricted shares that, in general, have a 3 year cliff-vesting period provided Option plans including Accelerate! option plan
that the grantee is still employed with the company. In previous years, the company granted options that expire after ten years. These options
vest after three years, provided that the grantee is still employed with the company. All
A summary of the status of the company’s restricted shares as of December 31, 2023 and outstanding options have vested under this option plan and as of December 31, 2022, there
changes during the year are presented in the following table: were 55,000 Accelerate! EUR-denominated options with weighted average exercise price of
EUR 22.43, 750 EUR-denominated options with weighted average exercise price of EUR
Philips Group 22.43, and 1,950 USD-denominated options with weighted average exercise price of USD
Restricted shares
30.27 exercisable. All outstanding options under this plan have expired as of December 31,
2022 2023
2023.
weighted average weighted average
shares grant-date fair value shares grant-date fair value
EUR-denominated Since all the outstanding options have expired in 2023, there were no cash received from
Outstanding as of January 1 1,618,488 39.93 2,321,250 30.73 exercises under the company's previous option plans including Accelerate! options (2022:
Granted 1,349,003 22.03 1,471,975 16.35 EUR 7 million, 2021: EUR 10 million) and no actual tax deductions realized as a result of
Notional dividends 1) 81,500 35.67 135,791 27.98 options exercises including Accelerate! options (2022: EUR 0.7 million, 2021: EUR 1 million).
Vested/Issued (540,930) 35.82 (595,796) 35.07
Forfeited (186,811) 35.06 (337,968) 24.46 Retention option plan
Outstanding as of December 31 2,321,250 30.73 2,995,252 23.39 In April 2023, the Company granted non-recurring retention options that expire after ten
years. These options vest after two years, provided that the grantee is still employed with
USD-denominated the company.
Outstanding as of January 1 1,611,021 46.26 2,345,263 33.87
Granted 1,463,855 23.60 1,284,761 17.72
The fair value of the options under this plan is measured based on Black-Scholes-Merton
Notional dividends 1) 83,151 39.37 126,498 31.12
option pricing model. The following table list the inputs to the model used for the options
Vested/Issued (541,336) 41.48 (679,430) 37.83
granted:
Forfeited (271,427) 38.51 (422,899) 26.79
Outstanding as of December 31 2,345,263 33.87 2,654,193 26.04 Philips Group
1) Black-Scholes-Merton option pricing model inputs
Dividend declared in 2023 on outstanding shares.
EUR-denominated USD-denominated
listed share listed share
Share price at grant date EUR 18.24 USD 21.12
As of December 31, 2023, a total of EUR 63 million of unrecognized compensation costs Exercise price EUR 22.16 USD 24.42
relate to non-vested restricted shares (as of December 31, 2022 EUR 72 million; as of Risk-free interest rate 2.37% 3.5%
December 31, 2021 EUR 66 million). These costs are expected to be recognized over a Expected dividend yield 4.45% 4.45%
weighted-average period of 1.80 years. Expected option life 6 years 6 years
Expected share price volatility 30.47% 32.31%
The fair value of a EUR-denominated option was EUR 2.61 and the fair value of a USD-
denominated option was USD 3.89.
The assumptions were used for these calculations only and do not necessarily represent an
indication of Management’s expectation of future developments for other purposes.
204
The Company has based its volatility assumptions on historical experience for a period equal Philips Group
Outstanding options in millions of EUR unless otherwise stated
to the expected life of the options. The expected life of the options is calculated as the
weighted average
average between vesting period (2 years) and the total contractual life (10 years). number of remaining contractual term
options intrinsic value in years
The following tables summarize information about the company’s options as of December EUR-denominated
31, 2023 and changes during the year: 20-25 3,660,000 0 9.3
Outstanding options 3,660,000 0 9.3
Philips Group
Options on EUR-denominated listed share USD-denominated
weighted average 20-25 1,929,000 0 9.3
options exercise price
Outstanding options 1,929,000 0 9.3
Granted on April 28, 2023 3,831,000 22.16
Forfeited (171,000) 22.16
Outstanding as of December 31, 2023 3,660,000 22.16 *)
Executive Committee members can receive restricted share rights as a sign-on LTI awards upon hiring.
**)
The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Equity, starting on page
182
There were no exercisable EUR-denominated options as of December 31, 2023. The weighted
average remaining contractual term for options outstanding and options exercisable as of
December 31, 2023, was 9.3 years.
Philips Group
Options on USD-denominated listed share
weighted average
options exercise price
Granted on April 28, 2023 2,179,500 24.42
Forfeited (250,500) 24.42
Outstanding as of December 31, 2023 1,929,000 24.42
There were no exercisable USD-denominated options as of December 31, 2023. The

weighted average remaining contractual term for options outstanding and options
exercisable as of December 31, 2023, was 9.3 years.
As of December 31, 2023, a total of EUR 11 million of unrecognized compensation costs relate
to outstanding options. These costs are expected to be recognized over a weighted-average
period of 1.3 years.
205
27 Information on remuneration Remuneration of the Board of Management

In 2023, the total remuneration costs relating to the members of the Board of Management
Remuneration of the Executive Committee amounted to EUR 9.9 million (2022: EUR 8.4 million; 2021: EUR 10.3 million), see the
In 2023, the total remuneration costs relating to the members of the Executive Committee following table.
(consisting of 16 members throughout the year, including the members of the Board of
Management) amounted to EUR 32.8 million (2022: EUR 25.6 million; 2021: EUR 33.4 million)
consisting of the elements in the following table.
Philips Group
Remuneration costs of the Executive Committee 1) in EUR
2021 2022 2023
Base salary/Base compensation 9,598,588 9,528,279 8,729,458
Annual incentive 2) 5,250,408 208,370 11,405,130
Performance shares 3) 12,610,073 11,242,581 7,272,815
Stock options 13,358
Restricted share rights 3) 1,380,644 1,191,529 1,907,511
Pension allowances 4) 2,107,953 1,949,204 1,346,937
Pension scheme costs 306,694 288,179 260,554
Other compensation 5) 2,104,044 1,216,163 1,900,224
Total 33,358,405 25,624,305 32,835,987
1)
The Executive Committee consisted of 13 members as per December 31, 2023 (2022: 13 members; 2021: 13 members)
2)
The annual incentives are related to the performance in the year reported which are paid out in the subsequent year.
3)
Costs of performance shares and restricted share rights are based on accounting standards (IFRS) and do not reflect the
value of performance shares at the vesting/release date
4)
Pension allowances are gross taxable allowances paid to the Executive Committee members in the Netherlands. These
allowances are part of the pension arrangement
5)
The stated amounts mainly concern (share of) allowances to members of the Executive Committee that can be considered as
remuneration. In a situation where such a share of an allowance can be considered as (indirect) remuneration (for example,
private use of the company car), then the share is both valued and accounted for here. The method employed by the fiscal
authorities is the starting point for the value stated
As of December 31, 2023, the members of the Executive Committee (including the members
of the Board of Management) held 0 stock options (2022: 0; 2021: 184,900).
206
Philips Group
Remuneration costs of individual members of the Board of Management in EUR
base compensation/salary annual incentive 1) performance shares 2) restricted share rights 2) pension allowances 3) pension scheme costs other compensation total costs
2023
R. Jakobs 1,200,000 2,004,480 968,922 267,798 31,891 109,256 4,582,347
A. Bhattacharya 810,000 1,075,939 793,429 197,133 31,891 94,516 3,002,907
M.J. van Ginneken 630,000 846,922 614,840 125,298 31,891 53,446 2,302,397
2,640,000 3,927,341 2,377,191 590,228 95,673 257,218 9,887,650
2022
R. Jakobs 4) 256,438 112,737 57,973 6,012 11,507 444,667
F.A. van Houten 4) 1,041,849 208,370 2,930,068 444,051 22,121 42,533 4,688,992
A. Bhattacharya 806,250 763,140 237,250 28,133 61,308 1,896,081
M.J. van Ginneken 626,250 585,490 141,622 28,133 35,343 1,416,837
2,730,788 208,370 4,391,434 880,896 84,398 150,691 8,446,577
2021
F.A. van Houten 1,325,000 850,915 2,626,295 565,403 27,462 57,224 5,452,299
A. Bhattacharya 790,000 360,103 1,172,533 233,857 27,462 68,908 2,652,864
M.J. van Ginneken 605,000 317,192 886,035 150,755 27,462 42,610 2,029,054
2,720,000 1,528,211 4,684,863 950,014 82,387 168,742 10,134,217
1)
The annual incentives are related to the performance in the year reported which are paid out in the subsequent year.
2)
Costs of performance shares and restricted share rights are based on accounting standards (IFRS) and do not reflect the value of performance shares at the vesting/release date
3)
The stated amounts mainly concern (share of) allowances to members of the Board of Management that can be considered as remuneration. In a situation where such a share of an allowance can be considered as (indirect) remuneration (for example, private use of
the company car), then the share is both valued and accounted for here. The method employed by the fiscal authorities is the starting point for the value stated.
4)
As per October 15, 2022, Roy Jakobs was appointed as CEO of the company. The table includes actual costs incurred in respect of the remuneration received by Mr Van Houten and Mr Jakobs, respectively, as CEO.
The accumulated annual pension entitlements and the pension costs of individual members Remuneration of the Supervisory Board
of the Board of Management are as follows: The remuneration of the members of the Supervisory Board amounted to EUR 1.5 million
(2022: EUR 1.5 million; 2021: EUR 1.3 million). Former members received no remuneration.
Philips Group
Accumulated annual pension entitlements and pension-related costs in EUR unless otherwise stated
The members of the Supervisory Board do not receive any share-based remuneration.
accumulated annual
age at December 31, pension as of December 31, total pension related Therefore, as of December 31, 2023 the members of the Supervisory Board held no stock
2023 2023 costs options, performance shares or restricted shares.
R. Jakobs 49 56,383 299,689
A. Bhattacharya 62 40,324 229,024 The individual members of the Supervisory Board received, by virtue of the positions they
M.J. van Ginneken 50 53,769 157,189 held, the following remuneration:
Pension costs 685,901
When pension rights are granted to members of the Board of Management, necessary
payments (if insured) and all necessary provisions are made in accordance with the
applicable accounting principles. In 2023, no (additional) pension benefits were granted to
former members of the Board of Management.
207
Philips Group Supervisory Board members’ and Board of Management members’

Remuneration of the Supervisory Board in EUR
1)
interests in Philips shares
membership committees other compensation total
Members of the Supervisory Board and of the Board of Management are prohibited from
2023
writing call and put options or similar derivatives of Philips securities.
F. Sijbesma 155,000 35,000 16,345 206,345
P.A.M. Stoffels 115,000 35,000 22,269 172,269 Philips Group
D.E.I. Pyott 100,000 35,000 19,769 154,769 Shares held by Board members 1) 2) in number of shares
A.M. Harrison 100,000 14,000 19,769 133,769 December 31, 2022 December 31, 2023
M.E. Doherty 100,000 27,000 27,269 154,269 R. Jakobs 109,422 126,809
P. Löscher 100,000 32,000 17,269 149,269 A. Bhattacharya 169,517 177,088
I. Nooyi 100,000 14,000 17,269 131,269 M.J. van Ginneken 123,914 129,447
S.K. Chua 100,000 18,000 22,269 140,269 P. Stoffels 17,000 17,759
H. Verhagen 100,000 14,000 7,269 121,269 S. Poonen 3,000 3,133
S. Poonen 100,000 18,000 19,769 137,769 I. Nooyi 3,100 3,238
1,070,000 242,000 189,266 1,501,266 D. Pyott 19,000 19,848
2022 S.K. Chua 2,000 2,089
F. Sijbesma 155,000 35,000 16,345 206,345 F. Sijbesma 12,500 25,000
P.A.M. Stoffels 115,000 35,000 27,269 177,269 M. Harrison 1,500 1,567
N. Dhawan 35,616 6,411 5,808 47,836 P. Löscher 20,732 21,658
D.E.I. Pyott 100,000 35,000 17,269 152,269
1)
A.M. Harrison 100,000 14,000 12,269 126,269 Reference date for board membership is December 31, 2023.
M.E. Doherty 100,000 27,000 24,769 151,769
2)
The total shares held by the members of the Board of Management is less than 1% of the company's issued share capital.
P. Löscher 100,000 32,000 24,769 156,769
I. Nooyi 100,000 14,000 17,269 131,269
S.K. Chua 100,000 18,000 22,269 140,269
28 Fair value of financial assets and liabilities
H. Verhagen 100,000 14,000 7,269.0 121,269
S. Poonen 100,000 18,000 17,269 135,269 Accounting policies
1,105,616 248,411 192,574 1,546,602
2021 Fair value hierarchy
J. van der Veer 53,507 12,082 3,916 69,505 For financial reporting purposes, financial instruments are categorized into Level 1, 2 or 3,
C.A. Poon 39,699 16,915 783 57,397 based on the degree to which the inputs to the fair value measurements are observable and
N. Dhawan 100,000 18,000 2,269 120,269 the significance of the inputs to the fair value measurement in its entirety, which are as
O. Gadiesh 34,521 4,833 783 40,137 follows:
D.E.I. Pyott 100,000 36,370 2,269 138,639
P.A.M. Stoffels 109,863 27,808 4,769 142,440 • Level 1 – inputs are quoted prices (unadjusted) for identical assets or liabilities in active
A.M. Harrison 100,000 14,000 2,269 116,269 markets that the company can access at the measurement date.
M.E. Doherty 100,000 27,000 4,769 131,769 • Level 2 – all significant inputs (other than quoted prices included within Level 1) are
P. Löscher 100,000 32,000 4,769 136,769 observable for the asset or liability, either directly (as prices) or indirectly (derived from
F. Sijbesma 141,301 27,808 8,237 177,346
prices).
I. Nooyi 100,000 14,000 2,269 116,269
• Level 3 – one or more of the significant inputs are not based on observable market data,
S.K. Chua 65,753 11,836 1,492 79,081
such as third-party pricing information without adjustments, for the asset or liability.
1,044,644 242,652 38,595 1,325,891
1)
The amounts mentioned under other compensation relate to the fee for intercontinental travel, inter-European travel, the Transfers between levels of the fair value hierarchy are recognized at the end of the
entitlement of EUR 2,000 under the Philips product arrangement and the annual fixed net expense allowance.
reporting period during which the change has occurred.
208
Offsetting and master netting agreements The fair value of debt is estimated on the basis of the quoted market prices for certain
Financial assets and liabilities are offset and the net amount is reported in the balance sheet issuances, or on the basis of discounted cash flow analysis using market rates plus Philips’
when, and only when, the company has currently a legally enforceable right to set-off the spread for the particular tenors of the borrowing arrangement. Accrued interest is not
amounts and the group intends either to settle them on a net basis or to realize the asset included within the carrying amount or estimated fair value of debt.
and settle the liability simultaneously.
Level 3
If one or more of the significant inputs are not based on observable market data, such as
third-party pricing information without adjustments, the instrument is included in level 3.
Determining the fair value of financial instruments requires the use of estimates according
The fair value of contingent consideration is dependent on the terms of the respective
to the method applied for each type of financial asset of liability. The estimated fair value of
acquisition agreement that may require Philips to pay additional consideration to former
financial instruments has been determined by the company using available market
shareholders if specified future events occur or conditions are met, such as the achievement
information and appropriate valuation methods. The estimates presented are not
of certain regulatory milestones or the achievement of certain commercial milestones. The
necessarily indicative of the amounts that will ultimately be realized by the company upon
fair value of the contingent consideration provision is generally determined using a
maturity or disposal. The use of different market assumptions and/or estimation methods
probability-weighted and a risk-adjusted approach to estimate the achievement of future
may have a material effect on the estimated fair value amounts.
regulatory and commercial milestones, respectively. The discount rates used in the risk
adjusted approach reflect the inherent risk related to achieving the commercial milestones.
Specific valuation techniques used to value financial instruments include:
Both regulatory and commercial milestones are discounted for the time value of money at
risk-free rates. The fair value measurement is based on management’s estimates and
Level 1
assumptions and hence classified as Level 3 in the fair value hierarchy.
Instruments included in level 1 are comprised primarily of listed equity investments classified
as financial assets carried at fair value through profit or loss or carried at fair value through The following tables show the carrying amounts and fair values of financial assets and
other comprehensive income. The fair value of financial instruments traded in active financial liabilities, including their levels in the fair value hierarchy. Fair value information for
markets is based on quoted market prices at the balance sheet date. A market is regarded as financial assets and financial liabilities not carried at fair value is not included if the carrying
active if quoted prices are readily and regularly available from an exchange, dealer, broker, amount is a reasonable approximation of fair value.
industry group, pricing service, or regulatory agency, and those prices represent actual and
regularly occurring market transactions on an arm’s length basis.
Level 2
The fair value of financial instruments that are not traded in an active market (for example,
over-the-counter derivatives or convertible bond instruments) is determined by using
valuation techniques. These valuation techniques maximize the use of observable market
data where it is available and rely as little as possible on entity-specific estimates. If all
significant inputs required to fair value an instrument are based on observable market data,
the instrument is included in level 2. The fair value of derivatives is calculated as the present
value of the estimated future cash flows based on observable interest yield curves, basis
spread and foreign exchange rates. The valuation of convertible bond instruments uses
observable market quoted data for the options and present value calculations using
observable yield curves for the fair value of the bonds.
209
Philips Group
Fair value of financial assets and liabilities in millions of EUR
carrying amount estimated fair value 1) Level 1 Level 2 Level 3
December 31, 2023
Financial assets
Carried at fair value:
Debt instruments 226 226 226
Equity instruments 2 2 2
Other financial assets 56 56 34 22
Financial assets carried at FVTP&L 284 284 34 250
Equity instruments 231 231 14 217
Current financial assets 3 3 3
Receivables - current 32 32 32
Financial assets carried at FVTOCI 293 293 14 26 253
Derivative financial instruments 48 48 48
Financial assets carried at fair value 624 624 14 108 503
Carried at (amortized) cost:

Cash and cash equivalents 1,869
Loans and receivables:
Current loans receivables -
Other non-current loans and receivables 77
Receivables - current 3,701
Receivables - non-current 193
Financial assets carried at (amortized) cost 5,840
Total financial assets 6,465
Financial liabilities
Contingent consideration (115) (115) (115)
Financial liabilities carried at FVTP&L (115) (115) (115)
Derivative financial instruments (43) (43) (43)
Financial liabilities carried at fair value (158) (158) (43) (115)
210

Accounts payable (1,917)
Interest accrual (76)
Debt (Corporate bonds and leases) (6,969) (6,798) (5,724) (1,074)
Debt (excluding corporate bonds and leases) (721)
Financial liabilities carried at (amortized) cost (9,682)
Total financial liabilities (9,840)
1)
For Cash and cash equivalents, Loans and receivables, Accounts payable, interest accrual and Debt (excluding corporate bonds and leases), the carrying amounts approximate fair value because of the nature of these instruments (including maturity and interest
conditions) and therefore fair value information is not included in the table above.
Philips Group
Fair value of financial assets and liabilities in millions of EUR
December 31, 2022
Financial assets
Other financial assets 86 86 35 51
Financial assets carried at FVTP&L 322 322 1 35 285
Current financial assets 9 9 9
Receivables - current 26 26 26
Financial assets carried at FVTOCI 319 319 30 25 264
Derivative financial instruments 127 127 127
Financial assets carried at fair value 768 768 32 187 549

Cash and cash equivalents 1,172
Loans and receivables:
Current loans receivables 2
Other non-current loans and receivables 54
Receivables - current 4,088
Receivables - non-current 279
Financial assets carried at (amortized) cost 5,596
Total financial assets 6,364
211

Financial liabilities
Contingent consideration (113) (113) (113)
Financial liabilities carried at FVTP&L (113) (113) (113)
Derivative financial instruments (211) (211) (211)
Financial liabilities carried at fair value (324) (324) (211) (113)

Accounts payable (1,968)
Interest accrual (71)
Debt (Corporate bonds and leases) (6,520) (6,083) (5,001) (1,082)
Debt (excluding corporate bonds and leases) (1,680)
Financial liabilities carried at (amortized) cost (10,240)
Total financial liabilities (10,564)
1)
For Cash and cash equivalents, Loans and receivables, Accounts payable, interest accrual and Debt (excluding corporate bonds and leases), the carrying amounts approximate fair value because of the nature of these instruments (including maturity and interest
conditions) and therefore fair value information is not included in the table above.
The following table shows the reconciliation from the beginning balance to the end balance Philips Group
Reconciliation of Level 3 fair value measurements in millions of EUR
for Level 3 fair value measurements.
Financial assets Financial liabilities
Philips Group Balance as of January 1, 2022 523 208
Reconciliation of Level 3 fair value measurements in millions of EUR Acquisitions 96
Financial assets Financial liabilities Purchase 131
Balance as of January 1, 2023 549 113 Sales (76)
Acquisitions 6 Utilizations (105)
Purchase 85 Recognized in profit and loss:
Sales (56) other business income (85)
Utilizations (20) financial income and expenses 7 (8)
Recognized in profit and loss: Recognized in other comprehensive income 1) 8
other business income 16 Receivables held to collect and sell (41)
financial income and expenses 1) (43) 1 Reclassification from associates 5
Recognized in other comprehensive income 2) (40) (2) Balance as of December 31, 2022 549 113
Receivables held to collect and sell 6 1)
Includes translation differences
Reclassification 1
Balance as of December 31, 2023 503 115
1)
Refer to Financial income and expenses, starting on page 164 for details.
2)
Includes translation differences
212
Offsetting and master netting agreements 29 Details of treasury and other financial risks
Transactions in derivatives are subject to master netting and set-off agreements. In the case
of certain termination events, under the terms of the master agreement, Philips can Accounting policies
terminate the outstanding transactions and aggregate their positive and negative values to
arrive at a single net termination sum (or close-out amount). This contractual right is subject Derivative financial instruments, including hedge accounting
to the following: The company uses derivative financial instruments principally to manage its foreign
currency risks and, to a more limited extent, interest rate and commodity price risks. All
• The right may be limited by local law if the counterparty is subject to bankruptcy derivative financial instruments are accounted for at the trade date and classified as current
proceedings. or non-current assets or liabilities based on the maturity date or the early termination date.
• The right applies on a bilateral basis. The company measures all derivative financial instruments at fair value that is derived from
the market prices of the instruments, calculated on the basis of the present value of the
Philips Group estimated future cash flows based on observable interest yield curves, basis spread, credit
Financial assets subject to offsetting, enforceable master netting arrangements or similar
agreements in millions of EUR spreads and foreign exchange rates, or derived from option pricing models, as appropriate.
2022 2023
Gains or losses arising from changes in fair value of derivatives are recognized in the
Derivatives Consolidated statements of income, except for derivatives that are highly effective and
Gross amounts of recognized financial assets 127 48 qualify for cash flow or net investment hedge accounting.
Gross amounts of recognized financial liabilities offset in the balance sheet
Net amounts of financial assets presented in the balance sheet 127 48 Changes in the fair value of foreign exchange forward contracts attributable to forward
points and changes in the time value of the option contracts are deferred in the cash flow
Related amounts not offset in the balance sheet hedges reserve within equity. The deferred amounts are recognized in the Consolidated
Financial instruments (54) (34) statements of income against the related hedged transaction when it occurs.
Net amount 73 13
Changes in the fair value of a derivative that is highly effective and that is designated and
Philips Group
qualifies as a cash flow hedge are recorded in OCI until the Consolidated statements of
Financial liabilities subject to offsetting, enforceable master netting arrangements or similar income are affected by the variability in cash flows of the designated hedged item. To the
agreements in millions of EUR extent that the hedge is ineffective, changes in the fair value are recognized in the
2022 2023 Consolidated statements of income.
Derivatives
Gross amounts of recognized financial liabilities (211) (43) The company formally assesses, both at the hedge’s inception and on an ongoing basis,
Gross amounts of recognized financial assets offset in the balance sheet whether the derivatives that are used in hedging transactions are highly effective in
Net amounts of financial liabilities presented in the balance sheet (211) (43) offsetting changes in fair values or cash flows of hedged items. When it is established that a
derivative is not highly effective as a hedge or that it has ceased to be a highly effective
Related amounts not offset in the balance sheet
hedge, the company discontinues hedge accounting prospectively. When hedge accounting
Financial instruments 54 34
is discontinued because it is expected that a forecasted transaction will not occur, the
Net amount (157) (9)
company continues to carry the derivative on the Consolidated balance sheets at its fair
value, and gains and losses that were accumulated in OCI are recognized immediately in the
same line item as they relate to in the Consolidated statements of income.
Foreign currency differences arising upon retranslation of financial instruments designated

as a hedge of a net investment in a foreign operation are recognized directly in the currency
translation differences reserve through OCI, to the extent that the hedge is effective. To the
213
extent that the hedge is ineffective, such differences are recognized in the Consolidated Philips has a USD 2.5 billion Commercial Paper Program and a EUR 1 billion committed
statements of income. standby revolving credit facility that can be used for general group purposes, such as a
backstop for its Commercial Paper Program. As of December 31, 2023, Philips did not have
any loans outstanding under either facility. These facilities do not have a material adverse
change clause, have no financial covenants and no credit-rating-related acceleration
possibilities. As per March 9, 2020, Philips established a Euro Medium-Term Note (EMTN)
program, a framework that facilitates the issuance of notes for a total amount up to EUR 10
Financial assets are subject to impairment assessment, which involves estimating expected
billion. As of December 31, 2023, Philips has EUR 3.3 billion outstanding under this program
credit losses. Refer to Other financial assets, starting on page 178 for accounting policies on
of which EUR 500 million fixed rates notes were issued in August 2023 with maturity date in
impairment of financial assets.
2031. For a description of Philips’ credit facilities, refer to Debt, starting on page 186.
Philips is exposed to several types of financial risks which are further analyzed below. Philips
In addition to cash and cash equivalents, as of December 31, 2023, Philips also held EUR 14
does not purchase or hold derivative financial instruments for speculative purposes.
million of listed (level 1) equity investments at fair value (classified as other non-current
Information regarding financial instruments is included in Fair value of financial assets and
financial assets).
liabilities, starting on page 208.
The following table presents a summary of the Group’s fixed contractual cash obligations
Liquidity risk
and commitments as of December 31, 2023. These amounts are an estimate of future
Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations
payments which could change as a result of various factors such as a change in interest rates,
associated with financial liabilities.
foreign exchange, contractual provisions, as well as changes in business strategy and needs.
Therefore, the actual payments made in future periods may vary from those presented in
Liquidity risk for the group is monitored through the Treasury liquidity committee, which
the following table:
tracks the development of the actual cash flow position for the group and uses input from a
number of sources in order to forecast the overall liquidity position on both short and longer Philips Group
term basis. Philips invests surplus cash in short-term deposits with appropriate maturities to Contractual cash obligations 1) 2) in millions of EUR
ensure sufficient liquidity is available to meet liabilities when due and in money market payments due by period
funds. total less than 1 year 1-3 years 3-5 years after 5 years
Long-term debt 7,615 533 1,934 1,431 3,717
The rating of the company’s debt by major rating agencies may improve or deteriorate. As a Short-term debt 122 122
result, Philips’ future borrowing capacity may be influenced and its financing costs may Interest on debt 1,704 180 328 285 911
fluctuate. Philips has various sources to mitigate the liquidity risk for the group. As of Derivative liabilities 39 38 1
December 31, 2023, Philips had EUR 1,869 million in cash and cash equivalents (2022: EUR Purchase obligations 3) 668 355 286 27
Trade and other payables 1,917 1,917
1,172 million), within which short-term deposits of EUR 1,399 million (2022: EUR 482 million).
Contractual cash obligations 12,065 3,145 2,549 1,716 4,655
Cash and cash equivalents include all cash balances, money market funds and short-term
highly liquid investments with an original maturity of three months or less that are readily 1)
Amounts in this table are undiscounted
convertible into known amounts of cash. Philips pools cash from subsidiaries to the extent 2)
This table excludes post-employment benefit plan contribution commitments and income tax liabilities in respect of tax risks
legally and economically feasible; cash not pooled remains available for the company’s because it is not possible to make a reasonably reliable estimate of the actual period of cash settlement.
3)
operational or investment needs. Purchase obligations are agreements to purchase goods or services that are enforceable and legally binding for the Group.
They specify all significant terms, including fixed or minimum quantities to be purchased, fixed, minimum or variable price
provisions and the approximate timing of the transaction. They do not include open purchase orders or other commitments
Philips faces cross-border foreign exchange controls and/or other legal restrictions in a few which do not specify all significant terms.
countries that could limit its ability to make these balances available on short notice for
general use by the group.
214
Philips has contracts with investment funds where it committed itself to make, under certain Philips Group
Remaining minimum payments under sale-and-leaseback arrangements in millions of EUR
conditions, capital contributions to these funds of an aggregated remaining amount of EUR
153 million (2022: EUR 127 million). As of December 31, 2023 capital contributions already
2024 43
made to these investment funds are recorded as non-current financial assets.
2025 30
2026 21
Philips offers voluntary supply chain finance programs with third parties which provide 2027 12
participating suppliers the opportunity to factor their trade receivables at the sole discretion 2028 5
of both the suppliers and the third parties. Philips continues to recognize these liabilities as Thereafter 26
trade payables and settles them accordingly on the invoice maturity date based on the terms
and conditions of those arrangements. As of December 31, 2023 approximately EUR 114
million (2022: EUR 151 million) of the Philips account payable were transferred under these Philips has leasing activities where it acts as lessor. In such arrangements, Philips provides the
arrangements. customer with a right to use of medical equipment in exchange for a series of payments.
Residual values of assets under lease form an insignificant part of the carrying amount of
With respect to the Respironics field action, please refer to Contingencies, starting on page those assets. Residual values are influenced by asset market prices and are therefore subject
198. The management continues to monitor the risks associated with such potential claims to management estimation. Residual values are at least reassessed on an annual basis, or
and its impact on liquidity position, if any. more often when necessary. Reassessments are based on a combination of realization of
assets sold, expert knowledge and judgment of local markets. For lease receivables, the
Leasing activities value of unguaranteed residual values as of December 31, 2023 was EUR 0.0 million (2022:
The company leases various items of real estate, vehicles and other equipment where it acts EUR 0.6 million). In order to reduce residual value risk exposures there may be residual value
as a lessee. The company has multiple extension and termination options in a number of guarantees or purchase options embedded in the customer contract. Credit risk for lease
lease contracts. These are used to maximize operational flexibility in terms of managing the receivables is reviewed regularly and mitigated, for example, by retaining a security interest
assets used in the company's operations. The options considered reasonably certain are part in the leased asset.
of lease liabilities. In addition, the company is committed to leases not yet commenced to
EUR 128 million. The company's lease contracts do not contain financial covenants. Currency risk
Currency risk is the risk that reported financial performance or the fair value or future cash
The company enters into sale-and-leaseback transactions primarily for its Sleep & flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Respiratory Care businesses. These transactions are accounted for at market value. The Philips operates in many countries and currencies and therefore currency fluctuations may
payments for these leases are considered in determining lease liabilities. Principal impact Philips’ financial results. Philips is exposed to currency risk in the following areas:
repayments are part of cash flows used for financing activities and interest payments are
part of cash flows used for operating activities. The cash inflows arising from the sales • Transaction exposures, related to anticipated sales and purchases and on-balance-sheet
transactions are part of cash flows provided by financing activities. Lease payments under receivables/payables resulting from such transactions
sale-and-leaseback arrangements for 2023 were EUR 55 million (2022: EUR 72 million). The • Translation exposure of foreign-currency intercompany and external debt and deposits
remaining minimum payment under sale-and-leaseback arrangements included in lease • Translation exposure of net income in foreign entities
obligations above are as follows: • Translation exposure of foreign-currency-denominated equity invested in consolidated
companies
• Translation exposure to equity interests in non-functional-currency investments in
associates and other non-current financial assets.
It is Philips’ policy to reduce the potential year-on-year volatility caused by foreign-currency

movements on its net earnings by hedging the anticipated net exposure of foreign
currencies resulting from foreign-currency sales and purchases. In general, net anticipated
exposures for the Group are hedged during a period of 15 months in layers of 20% up to a
215
maximum hedge of 80%. Philips’ policy requires significant committed foreign currency the related hedged transactions affect the income statement. During 2023, nil (2022: EUR 1
exposures to be fully hedged, generally using forwards. However, not every foreign currency million net gain) was recorded in the consolidated statement of income as a result of
can or shall be hedged as there may be regulatory barriers or prohibitive hedging cost ineffectiveness on certain anticipated cash flow hedges. Ineffectiveness arises when
preventing Philips from effectively and/or efficiently hedging its currency exposures. As a anticipated exposures are no longer expected to be highly probable. During 2023, a gain of
result, hedging activities cannot and will not eliminate all currency risks for anticipated and EUR 19 million included in the cash flow hedges reserve in equity pertaining to changes in
committed transaction exposures. fair value of foreign exchange forward and option contracts was released to income
statement.
The following table outlines the estimated nominal value in millions of EUR for committed
and anticipated transaction exposure and related hedges for Philips’ most significant The total net fair value of hedges related to transaction exposure as of December 31, 2023,
currency exposures consolidated as of December 31, 2023: was an unrealized gain of EUR 10 million. The estimated impact of a 10% increase of value of
the EUR is estimated to be EUR 116 million. The following table contains an overview of the
Philips Group instantaneous 10% increase in the value of EUR against major currencies.
Estimated transaction exposure and related hedges in millions of EUR
Sales/Receivables Purchases/Payable Philips Group
exposure hedges exposure hedges Estimated impact of 10% increase of value of the EUR on the fair value of hedges in millions of EUR
Balance as of December 31, 2023 2022 2023
Exposure currency USD 68 64
USD 1,793 (1,449) (888) 805 JPY 15 15
JPY 547 (319) (14) 14 GBP 16 16
GBP 312 (196) (12) 12 CHF 4 5
CNY 439 (304) (98) 95 PLN 2 1
CAD 249 (161) (1) 1 RUB -
PLN 91 (103)
AUD 226 (137)
CHF 103 (63) (1) 1 The EUR 116 million increase includes a gain of EUR 40 million that would impact the income
CZK 63 (70) statement, which would largely offset the opposite revaluation effect on the underlying
SEK 33 (18) (3) 3 accounts receivable and payable, and the remaining gain of EUR 77 million would be
EUR 233 (232) (114) 113 recognized in equity to the extent that the cash flow hedges were effective.
Others 198 (134) (216) 130
Total 2023 4,287 (3,185) (1,346) 1,173 Foreign exchange exposure also arises as a result of inter-company loans and deposits.
Total 2022 3,779 (2,920) (1,468) 1,326
Where the company enters into such arrangements, the financing is generally provided in
the functional currency of the subsidiary entity. The currency of the company’s external
Philips uses foreign exchange spot and forward contracts, as well as zero cost collars in funding and liquid assets is matched with the required financing of subsidiaries, either
hedging the exposure. The derivatives related to transactions are, for hedge accounting directly through external foreign currency loans and deposits, or synthetically by using
purposes, split into hedges of on-balance-sheet accounts receivable/ payable and forecasted foreign exchange derivatives, including cross currency interest rate swaps and foreign
sales and purchases. Changes in the value of on-balance-sheet foreign-currency accounts exchange forward contracts. In certain cases where group companies may also have external
receivable/payable, as well as the changes in the fair value of the hedges related to these foreign currency debt or liquid assets, these exposures are also hedged through the use of
exposures, are reported in the income statement under costs of sales. Hedges related to foreign exchange derivatives. Changes in the fair value of hedges related to this exposure
forecasted transactions, where hedge accounting is applied, are accounted for as cash flow are recognized within financial income and expenses in the statements of income. When
hedges. The results from such hedges are deferred in other comprehensive income within such loans would be considered part of the net investment in the subsidiary, net investment
equity to the extent that the hedge is effective. As of December 31, 2023, a gain of EUR 6 hedging would be applied.
million was deferred in equity as a result of these hedges (2022: EUR 2 million loss). The
result deferred in equity will be released to earnings mostly during 2024 at the time when
216
Translation exposure of foreign-currency equity invested in consolidated entities is generally and total short-term debt of EUR 654 million (2022: EUR 931 million). As of December 31,
not hedged. If a hedge is entered into, it is accounted for as a net investment hedge. Net 2023, Philips had a ratio of fixed-rate long-term debt to total outstanding debt of
current-period change, before tax, of the currency translation reserve of negative EUR 579 approximately 89% compared to 80% one year earlier. Philips debt has a long maturity
million mainly relates to the development of the USD versus the EUR. As of December 31, profile with an average tenor of long-term debt of 6.0 years with maturities up to 2042.
2023, a weakening of USD by 10% versus the EUR would result in a decrease in the currency
translation reserve in equity of approximately EUR 1,146 million, while a strengthening of The following table provides the impact of a 1% increase/decrease of interest rates on the
USD by 10% versus the EUR would result in an increase in the currency translation reserve in fair value of the debt and the annualized net interest expenses.
equity of approximately EUR 1,400 million. Refer to the country risk paragraph for countries
with significant foreign currency denominated equity invested. Philips Group
Net debt 1) and interest rate sensitivity in millions of EUR
2022 2023
As of December 31, 2023, external bond funding for a nominal value of USD 1,474 million
Impact 1% interest increase on the fair value of the fixed-rate long-term debt 2) 3) (274) (283)
(liability at book value: EUR 1,325 million) was designated as a net investment hedge of
Impact 1% interest decrease on the fair value of the fixed-rate long-term debt 2) 3) 274 284
financing investments in foreign operations for an equal amount. During 2023 a total loss of
Impact 1% interest increase on the annualized net interest expense 4) 4 15
EUR 2 million was recognized in the income statement as ineffectiveness on net investment
hedges, arising from counterparty and own credit risk.
1)
The definition of this non-IFRS measure and a reconciliation to the IFRS measure is included in Equity, starting on page 182
2)
The sensitivity analysis conducted shows that if long-term interest rates were to increase/decrease instantaneously by 1%
from their level of December 31, 2023, with all other variables (including foreign exchange rates) held constant.
An instantaneous 10% increase in the value of the EUR against all currencies would lead to 3)
Fixed-rate long-term debt is excluding forward contracts.
an decrease of EUR 52 million in the value of the derivatives, including a EUR 11 million 4)
The impact is based on the outstanding net floating-rate position as of December 31, 2023.
increase related to the USD.
As of December 31, 2022, cross-currency interest rate swaps for a nominal value of USD 500 Equity price risk
million (liability at fair value: EUR 147 million) and external bond funding for a nominal value Equity price risk is the risk that the fair value or future cash flows of a financial instrument
of USD 1,490 million (liability at book value: EUR 1,378 million) were designated as a net will fluctuate because of changes in equity prices.
investment hedge of financing investments in foreign operations for an equal amount.
During 2022 a total gain of EUR 1.1 million was recognized in the income statement as Philips is a shareholder in some publicly listed companies and as a result is exposed to
ineffectiveness on net investment hedges, arising from counterparty and own credit risk. potential financial loss through movements in their share prices. The aggregate equity price
exposure in such financial assets amounted to approximately EUR 14 million as of December
The total net fair value of financing derivatives as of December 31, 2022, was a liability of 31, 2023 (2022: EUR 32 million). Philips does not hold derivatives in the above-mentioned
EUR 147 million. An instantaneous 10% increase in the value of the EUR against all currencies listed companies. Philips also has shareholdings in several privately-owned companies
would lead to an increase of EUR 192 million in the value of the derivatives, including a EUR amounting to EUR 219 million, mainly consisting of minority stakes in companies in various
191 million increase related to the USD. industries. As a result, Philips is exposed to potential value adjustments.
Philips does not currently hedge the foreign exchange exposure arising from equity interests Commodity price risk
in non-functional-currency investments in associates and other non-current financial assets. Commodity price risk is the risk that the fair value or future cash flows of a financial
instrument will fluctuate because of changes in commodity prices.
Interest rate risk
Interest rate risk is the risk that the fair value or future cash flows of a financial instrument Philips is a purchaser of certain base metals, precious metals and energy. Philips may hedge
will fluctuate because of changes in market interest rates. As of December 31, 2023, Philips certain commodity price risks using derivative instruments to minimize significant,
had outstanding debt of EUR 7,689 million (2022: EUR 8,201 million), which constitutes an unanticipated earnings fluctuations caused by commodity price volatility. As of December
inherent interest rate risk with potential negative impact on financial results. As of 31, 2023 and 2022, respectively, Philips did not have any significant outstanding financial
December 31, 2023, Philips held EUR 1,869 million in cash and cash equivalents (2022: EUR commodity derivatives.
1,172 million), and had total long-term debt of EUR 7,035 million (2022: EUR 7,270 million)
217
Credit risk For an overview of the overall maximum credit exposure related to debt instruments,
Credit risk represents the loss that would be recognized at the reporting date, if derivatives and loans and receivables, refer to Fair value of financial assets and liabilities,
counterparties failed completely to perform their payment obligations as contracted. Credit starting on page 208.
risk is present within Philips trade receivables and contract assets. To have better insights
into the credit exposures, Philips performs ongoing evaluations of the financial and non- Country risk
financial condition of its customers and adjusts credit limits when appropriate. In instances Country risk is the risk that political, legal, or economic developments in a single country
where the creditworthiness of a customer is determined not to be sufficient to grant the could adversely impact performance. The country risk per country is defined as the sum of
credit limit required, there are a number of mitigation tools that can be utilized to close the the equity of all subsidiaries and associated companies in country cross-border transactions,
gap, including reducing payment terms, cash on delivery, pre-payments and pledges on such as intercompany loans, accounts receivable from third parties and intercompany
assets. accounts receivable. The country risk is monitored on a regular basis.
Philips invests available cash and cash equivalents with various financial institutions and is As of December 31, 2023, the company had country risk exposure of EUR 13.3 billion in the
exposed to credit risk with these counterparties. Philips is also exposed to credit risks in the United States, EUR 1.4 billion in the Netherlands, EUR 1.3 billion in China (including Hong
event of non-performance by financial institutions with respect to financial derivative Kong). Other countries higher than EUR 500 million are Germany EUR 786 million, United
instruments. Philips actively manages concentration risk and on a daily basis measures the Kingdom EUR 731 million, and Japan EUR 614 million. Other countries with significant
potential loss under certain stress scenarios, should a financial institution default. These exposure are Singapore EUR 202 million and Israel EUR 214 million. The degree of risk of a
worst-case scenario losses are monitored and limited by the company. country is taken into account when new investments are considered. The company does not,
however, use financial derivative instruments to hedge country risk.
The company does not enter into any financial derivative instruments to protect against
default by financial institutions. However, where possible the company requires all financial The impact of hyperinflation is also routinely assessed and was not material for the periods
institutions with which it deals in derivative transactions to complete legally enforceable presented.
netting agreements under an International Swap Dealers Association master agreement or
otherwise prior to trading, and whenever possible, to have a strong credit rating. Philips also Other insurable risks
regularly monitors the development of the credit risk of its financial counterparties. Philips is insured for a broad range of losses by global insurance policies in the areas of
Wherever possible, cash is invested and financial transactions are concluded with financial property damage/business interruption, general and product liability, transport, directors’
institutions with strong credit ratings or with governments or government-backed and officers’ liability, employment practice liability, crime and cybersecurity. The
institutions. counterparty risk related to the insurance companies participating in the above-mentioned
global insurance policies is actively managed. As a rule, Philips only selects insurance
The following table shows the number of financial institutions with credit rating A- and companies with a financial strength of at least A-. Throughout the year the counterparty risk
above with which Philips has cash at hand and short-term deposits above EUR 10 million as is monitored on a regular basis.
of December 31, 2023.
To lower exposures and to avoid potential losses, Philips has a global Risk Engineering
Philips Group program in place. The main focus of this program is on property damage and business
Credit risk with number of counterparties for deposits above EUR 10 million
interruption risks including company interdependencies. Regular on-site assessments take
10-100 million 100-500 million 500 million and above
place at Philips locations and business-critical suppliers by risk engineers of the insurer in
AAA rated bank counterparties 4
order to provide an accurate assessment of the potential loss and its impact. The results of
AA- rated bank counterparties 1
these assessments are shared across the company’s stakeholders. On-site assessments are
A+ rated bank counterparties 2 3
A rated bank counterparties 2 1
carried out against the predefined Risk Engineering standards, which are agreed between
A- rated bank counterparties 1 Philips and the insurers. Recommendations are made in a Risk Improvement report and are
6 8 monitored centrally. This is the basis for decision-making by the local management of the
business as to which recommendations will be implemented.
218
For all policies, deductibles are in place, which vary from EUR 0 million to EUR 10 million per 30 Subsequent events
occurrence and this variance is designed to differentiate between the existing risk categories
within Philips. Above a first layer of working deductibles, Philips operates its own re- Philips Respironics consent decree
insurance captive, which during 2023 retained EUR 25 million per claim and EUR 50 million in On January 29, 2024, Philips announced that it has agreed on the terms of a consent decree
the annual aggregate for general, product, professional liability, and marine cargo claims with the US Department of Justice (DOJ), representing the US Food and Drug Administration
and EUR 15 million aggregate for cyber. (FDA). The proposed consent decree primarily focuses on Philips Respironics’ business
operations in the US. The proposed consent decree is being finalized and will be submitted
New contracts were signed effective December 31, 2023, for the coming year, whereby the to the relevant US court for approval. The decree will provide Philips Respironics with a
re-insurance captive retentions remained the same. roadmap of defined actions, milestones, and deliverables to demonstrate compliance with
regulatory requirements and to restore the business.
• In the US, Philips Respironics will continue to service sleep and respiratory care devices
already with healthcare providers and patients, and supply accessories (including patient
interfaces), consumables (including patient circuits), and replacement parts (including
repair kits). Until the relevant requirements of the proposed consent decree are met,
Philips Respironics will not sell new CPAP or BiPAP sleep therapy devices or other
respiratory care devices in the US.
• Outside the US, Philips Respironics will continue to provide new sleep and respiratory
care devices, accessories (including patient interfaces), consumables (including patient
circuits), replacement parts (including repair kits) and services, subject to certain
requirements.
As a consequence of addressing this proposed consent decree, which is a multi-year plan,

Philips recorded charges of EUR 363 million in December 2023 that relate to remediation
activities, inventory write-downs and onerous contract provisions. Refer to Provisions,
219
Company financial statements contents
11.1 Statements of income 221 11.4 Notes to the Company financial statements 224
11.2 Balance sheets before appropriation of results 222 A General information to the Company financial 224
11.3 Statements of changes in equity 223 statements
B Sales 224
C Other business income (expense) 224
D Sales and costs by nature 224
E Financial income and expense 224
F Income taxes 225
G Employees 225
H Intangible assets 225
I Financial fixed assets 226
J Other financial assets 227
K Receivables 227
L Cash and cash equivalents 227
M Shareholders’ equity 227
N Debt 228
O Other current liabilities 229
P Commitments and contingencies 229
Q Subsequent events 229
220
11 Company financial statements

11.1 Statements of income
Koninklijke Philips N.V.

Statements of income in millions of EUR
2022 2023
B Sales 414 432
Cost of sales (23) (19)
Gross margin 391 413
Selling expenses (9) (11)
General and administrative expenses (47) (25)
C Other business income 68 116
D Income from operations 403 493
E Financial income 130 166
E Financial expenses (284) (368)
Income before taxes 249 290
F Income tax (expense) benefit (62) (66)
Income after tax 187 224
I Results relating to investments in associates (2) (87)
Net income from group companies (1,793) (603)
Net income (1,608) (466)

221
11.2 Balance sheets before appropriation of results

Balance sheets in millions of EUR
As of December 31
2022 2023 2022 2023

M Shareholders' equity
Non-current assets Common shares 178 183
Property, plant and equipment 1 1 Capital in excess of par value 5,025 5,827
H Intangible assets 84 101 Revaluation reserves (379) (384)
I Financial fixed assets 19,768 20,759 Other legal reserves 2,876 2,252
Non-current receivables 44 25 Other reserves 7,156 4,615
Deferred tax assets 531 502 Net income (1,608) (466)
J Other non-current financial assets 242 213 Total shareholders' equity 13,249 12,028
Other non-current assets 3 14
Total non-current assets 20,673 21,615 Non-current liabilities
N Long-term debt 6,391 6,170
Current assets Long-term provisions - 7
J Current financial assets 9 3 Deferred tax liabilities 16 13
K Receivables 8,297 2,239 Non-current tax liabilities 245 243
L Cash and cash equivalents 849 1,605 Other non-current liabilities 86 70
Total current assets 9,155 3,847 Total non-current liabilities 6,738 6,504
Total assets 29,829 25,462
Current liabilities
N Short-term debt 9,463 6,738
O Other current liabilities 379 191
Total current liabilities 9,842 6,929
Total liabilities and shareholders' equity 29,829 25,462

222
11.3 Statements of changes in equity

Statements of changes in equity in millions of EUR
Capital in Currency
Common excess of par Fair value Cash flow translation Affiliated Retained Treasury Shareholders'
shares value through OCI hedges differences companies earnings shares Net income equity
Revaluation reserves Other legal reserves Other reserves
Balance as of December 31, 2021 177 4,646 (344) (25) 1,117 654 5,371 (476) 3,319 14,438
Appropriation of prior year result 3,319 (3,319)
Net income (1,608) (1,608)
Net current period change (32) (29) 747 356 (275) 766
Income tax on net current period change 1 (10) 2 (7)
Reclassification into income 63 - 63
Dividend distributed 3 326 (741) (412)
Transfer of result on disposal of equity investments at FVTOCI to (1) 1 -
retained earnings
Purchase of treasury shares - (24) (24)
Re-issuance of treasury shares (43) (28) 77 7
Forward contracts 76 (140) (64)
Share call options 5 (12) (6)
Share-based compensation plans 95 95
Income tax share-based compensation plans 1 1
Balance as of December 31, 2022 178 5,025 (376) (2) 1,866 1,010 7,431 (275) (1,608) 13,249
Appropriation of prior year result (1,608) 1,608
Net income (466) (466)
Net current period change (20) 29 (578) (20) (6) (595)
Income tax on net current period change 3 (2) - 3 5
Reclassification into income (19) (26) (45)
Dividend distributed 8 741 (816) (68)
Transfer of result on disposal of equity investments at FVTOCI to 4 (4) -
retained earnings
Purchase of treasury shares - -
Re-issuance of treasury shares (29) (24) 54 -
Forward contracts 465 (608) (143)
Share call options - -
Share-based compensation plans 88 88
Income tax on share-based compensation plans 2 2
Balance as of December 31, 2023 183 5,827 (390) 6 1,263 990 4,878 (262) (466) 12,028

223
11.4 Notes to the Company financial statements D Sales and costs by nature
Sales and costs by nature in millions of EUR
A General information to the Company financial statements
2022 2023
Sales 414 432
Accounting policies applied
Costs of materials used (5) (3)
The financial statements including the notes thereon have been prepared in accordance
Employee benefit expenses (28) (15)
with Part 9 of Book 2 of the Dutch Civil Code. In accordance with Section 2:362 (8) of the Depreciation and amortization (13) (10)
Dutch Civil Code, the recognition and measurement principles applied in these company Advertising and promotion (3) (3)
financial statements are the same as those applied in the consolidated financial statements Other operational costs (29) (25)
(refer to General information to the Consolidated financial statements, starting on page 147 Other business income 68 116
and the accounting policies relating to specific financial statement items included in the Income from operations 403 493
respective notes to the consolidated financial statements).
Presentation of Company financial statements For more information about Other business income, refer to Other business income
The structure of the Company balance sheets and Company statements of income are (expense), starting on page 224 and Discontinued operations and assets classified as held for
aligned as much as possible with the Consolidated statements in order to achieve optimal sale, starting on page 154.
transparency between the Group financial statements and the Company financial
statements. For a summary of the audit fees related to the Philips Group, refer to the Group financial
statements, starting on page 140 which is deemed incorporated and repeated herein by
The Company balance sheet is presented prior to the appropriation of results. reference.
B Sales E Financial income and expense

Sales relate to external sales and mainly comprise of license income from intellectual Financial income mainly relates to intercompany financing transactions of EUR 32 million
property rights owned by the company. (2022: EUR 66 million) and interest income from third parties of EUR 26 million (2022: EUR 1
million). Financial income related to intercompany financing transactions decreased mainly
C Other business income (expense) due to settlement of intercompany positions arising from restructuring of US entities, as well
as the conversion of loans in the US to equity. Interest income from third parties increased
Koninklijke Philips N.V. mainly due to increase in free cash available and interest rate.
Other Business Income in millions of EUR
2022 2023
Financial expense mainly relates to interest paid on external debt of EUR 207 million (2022:
Other business income (expense) from sold and deconsolidated businesses (19) 4
EUR 188 million) and the value adjustments related to Other financial assets of EUR 40
Other 87 112
million (2022: EUR 44 million). The value adjustment through P&L mainly comes from the
Other business income 68 116
investment in limited life funds. For further information, refer to Other financial assets,
Other business income (expense) includes the results from various sold and deconsolidated
businesses.
The line Other mainly includes income and expense from transactions with group companies
regarding overhead services and from brand license agreements.
224
F Income taxes G Employees

Koninklijke Philips N.V. is the lead legal entity of the fiscal unity that exists for Dutch The number of persons having a contract with the company as of December 31, 2023 was 9
corporate income tax purposes and reports the income tax expense and deferred tax assets (2022: 13):
and liabilities of the fiscal unity.
• 3 of them had a services contract;
The effective tax rate in 2023 is slightly lower than the Dutch statutory tax rate of 25.8% • 6 of them had a contract of employment.
mainly due to the one-off recognition of tax credits and recurring favorable tax incentives,
partly offset by non-deductible expenses and the increase in Others which mainly represents They were all posted in the Netherlands.
the effect of the inclusion of income of other legal entities that are part of the fiscal unity
contributing to the fiscal unity income tax expense. For the remuneration of past and present members of both the Board of Management and
the Supervisory Board, refer to Information on remuneration, starting on page 206, which is
Koninklijke Philips N.V. deemed incorporated and repeated herein by reference.
Effective income tax rate in %
2023 H Intangible assets
Weighted average statutory income tax rate 25.8
Intangible assets include mainly licenses and patents. The changes during 2023 were as
Unrecognized tax loss and credit carryforwards (24.1)
follows;
Changes to recognition of temporary differences 0.0
Non-taxable income and tax incentives (14.1) Koninklijke Philips N.V.
Non-deductible expenses 10.5 Intangible assets in millions of EUR
Withholding and other taxes (1.1) 2023
Tax rate changes 3.3
Balance as of January 1
Prior year tax 0.9
Cost 213
Tax expenses (benefit) due to other tax liabilities (0.2)
Amortization / impairments (129)
Others, net 21.9
Book value 84
Effective income tax rate 22.8
Additions 27
Disposal
As of December 31, 2023, tax credit carry forwards for which no deferred tax assets have Amortization (9)
been recognized in the balance sheet amount to nil (2022: EUR 20 million). Impairment -
Total change 17
Consistent with the IAS 12 amendment regarding Pillar Two taxation as issued by the IASB
and adopted by the EU, Philips does not recognize and disclose deferred taxes arising from Balance as of December 31
tax laws that implement Pillar Two model rules published by the Organisation for Economic Cost 239
Co-operation and Development. Furthermore, Philips will recognize and disclose the impact Amortization / impairments (138)
(if any) from Pillar Two income taxes on current tax effective from 2024. Refer to section Book Value 101
Global minimum tax (Pillar Two) in Income taxes, starting on page 164.
225
I Financial fixed assets Position Other of EUR 77 million mainly relates to the cost of the share-based compensation
plans and actuarial loss due to decrease of interest rate and increase of salary rate.
Accounting policies
Investments in associates
Investments in group companies and associates are measured on the basis of the equity Investments in associates represent minority investments in various companies with
method. Loans provided to group companies are stated at amortized cost, less impairment. significant influence.
The company makes use of the option to eliminate intercompany expected credit losses
against the book value of loans and receivables to group companies, instead of elimination Due to loss of significant influence in Candid Care during 2023, the company reclassified the
against the investments in group companies. investment to Other non-current financial assets at FVTOCI (Level 3). On reclassification the
company recorded a loss of EUR 23 million in Other business expense. For more information
The changes during 2023 were as follows: about Other non-current financial assets, refer to Other financial assets, starting on page
227.
Financial fixed assets in millions of EUR
In 2023, the company recorded its share in negative results of associates of EUR 47 million
Investments in Investments in Loans to group
group companies associates companies Total
and impairment of EUR 86 million. The impairment losses mainly related to HALO Dx (EUR 33
Balance as of January 1, 2023 18,872 264 632 19,768 million) and were recorded within the Investments in associates, net of income taxes line
Changes: item. For further information about associates, refer to Interests in entities, starting on page
Acquisitions/additions 2,843 19 100 2,962 158.
Sales/redemptions (17) (7) (32) (56)
Net income from group (603) (47) (651) Loans to group companies
companies and associates The EUR 49 million increase in loans is mainly due to the new loans to group companies.
Dividends received (594) (2) (597)
Translation differences (633) (2) (19) (654) List of investments in group companies
Impairment (86) (86)
A list of investments in group companies, prepared in accordance with the relevant legal
Other 77 (6) 71
requirements (Dutch Civil Code, Book 2, Sections 379 and 414), is deposited at the Chamber
Balance as of December 31, 19,945 133 681 20,759
2023 of Commerce in Eindhoven, the Netherlands.
Investments in group companies

Investment in group companies increased by EUR 1 billion. The increase is driven by the
capital injection of EUR 2.5 billion into US group company. The capital injection took place to
settle intercompany debt and in connection with Respironics' claim. The transaction was
cash neutral at a consolidated group level. The increase is offset by negative result from
group companies and dividends paid by group companies to Koninklijke Philips N.V.
Acquisitions and divestments were not material from the point of view of the company
financial statements. For further information about acquisitions and divestments, refer to
Acquisitions and divestments, starting on page 156.
Translation differences of EUR 633 million reflect the depreciation, expressed in EUR, of the
net capital invested in foreign group companies denominated in currencies other than EUR.
226
J Other financial assets K Receivables
Other current financial assets Koninklijke Philips N.V.

Receivables in millions of EUR
Other current financial assets of EUR 3 million (2022: EUR 9 million) is related to earn-out
2022 2023
arising from equity investment.
Trade accounts receivable 97 107
Receivables from group companies 7,891 1,916
Other non-current financial assets
Advances and prepaid expenses 34 60
The changes during 2023 were as follows: Derivative instruments - assets 154 68
Other receivables 121 88
Other non-current financial assets in millions of EUR Receivables 8,297 2,239
Non-current Non-current Non-current

financial assets financial assets financial assets at
at FVTP&L at FVTOCI Amortized cost Total Receivable from group companies mainly relate to in-house bank contracts. The position
Balance as of January 1, 2023 166 69 7 242 decreased mainly due to settlement of intercompany positions arising from restructuring of
Changes: US entities, as well as the conversion of loans in the US to equity. For further details, refer to
Acquisitions/additions 31 4 35 note Debt, starting on page 186 and Financial fixed assets, starting on page 226.
Sales/redemptions/reductions (8) (2) - (10)
Value adjustments through OCI (2) (2) For further details on derivative instruments, refer to note Fair value of financial assets and
Value adjustments through P&L (42) - (42) liabilities, starting on page 208 and Details of treasury and other financial risks, starting on
Translation differences and other (1) (5) - (7)
page 213.
Reclassifications (8) 5 - (3)
Balance as of December 31, 2023 138 68 7 213 L Cash and cash equivalents
Cash and cash equivalents are all freely available. For further details on Cash and cash
The company’s investments in Other non-current financial assets mainly consist of equivalents, refer to note Fair value of financial assets and liabilities, starting on page 208
investments in common shares of companies in various industries and investments in limited and Details of treasury and other financial risks, starting on page 213.
life funds. Acquisitions/additions mainly relate to new investments and capital calls for
certain limited life funds. Sales/redemptions/reductions mainly relate to distribution notes M Shareholders’ equity
from those limited life funds.
Accounting policies
The main movement in Other non-current financial assets at FVTP&L of EUR 42 million
relates to loss in value of funds and equity instruments. The increase of EUR 31 million is The revaluation reserves and other legal reserves are recognized based on the Dutch Civil
mainly related to fulfill commitments to funds and bridge financing of equity investments. Code.
For details, please refer to Group financial statements note 17 Equity, starting on page 182.
Revaluation and Other Legal Reserves

As of December 31, 2023, revaluation reserves relate to unrealized loss on financial assets fair
value through OCI of EUR 390 million (2022: EUR 376 million unrealized losses) and
unrealized currency translation gain of EUR 1,263 million (2022: EUR 1,866 million unrealized
gain). Legal reserves relate to ‘affiliated companies’ of EUR 990 million (2022: EUR 1,010
million) and unrealized gain on cash flow hedges of EUR 6 million (2022: EUR 2 million
unrealized losses).
227
The item ‘affiliated companies’ relates to the ‘wettelijke reserve deelnemingen’, which is Koninklijke Philips N.V.
Long-term debt in millions of EUR, unless otherwise stated
required by Dutch law. This reserve relates to any legal or economic restrictions on the ability
2022
of affiliated companies to transfer funds to the parent company in the form of dividends.
Non- Between Amount Average Average
Amount Current current 1 and 5 due after 5 remaining term rate of
N Debt outstanding portion portion years years (in years) interest
USD bonds 1,378 1,378 250 1,128 14.3 6.3%
Long-term debt EUR bonds 4,061 4,061 1,836 2,225 5.7 1.7%
The following tables present information about the long-term debt outstanding, its Loans from 408 408 0.9 3.2%
group
maturity and average interest rates in 2023 and 2022. companies
Forward 858 606 252 252 1.0
contracts
Long-term debt in millions of EUR
Bank 700 700 700 1.9 1.7%
USD EUR Loans from group Forward Bank Total borrowings
bonds bonds companies contracts borrowings debt
Long-term 7,405 1,013 6,391 3,039 3,352
Balance as of January 1,378 4,061 408 858 700 7,405 debt
1, 2023
New financing 497 720 143 1,360
Repayment (491) (608) (500) (1,599) The decrease of EUR 305 million in Long-term debt mainly comes from maturing forward
Acquisitions contracts related to share buyback program and company's long-term incentive and
Exchange differences (52) (28) (80) employee stock purchase plans. Long-term debt of EUR 7,100 million mainly relates to bonds.
Other changes in value - 11 - 3 14 New EUR bonds were issued for an amount of EUR 497 million, offset by repayment EUR 500
Balance as of 1,325 4,569 609 396 200 7,100
million for term loans drawn from EUR 1 billion credit facility.
December 31, 2023
Short-term debt
Koninklijke Philips N.V. The following table presents information about the short-term debt outstanding in 2023
Long-term debt in millions of EUR, unless otherwise stated
and 2022.
2023
Non- Between Amount Average Average Koninklijke Philips N.V.
Amount Current current 1 and 5 due after 5 remaining rate of Short-term debt in millions of EUR
outstanding portion portion years years term (in years) interest
2022 2023
USD bonds 1,325 1,325 240 1,085 13.3 6.3%
Short-term bank borrowings 1
EUR bonds 4,569 4,569 2,335 2,234 5.1 2.0%
Current portion of external long-term debt 606 321
Loans from 609 609 0.9 3.1%
Current portion of intercompany loans 408 609
group
companies Other debt to group companies 8,448 5,808
Forward 396 321 76 76 0.8 1.4% Short-term debt 9,463 6,738
contracts
Bank 200 200 200 1.2 4.2%
borrowings Short-term debt mainly relates to the other debt to group companies of EUR 5,808 million,
Long-term 7,100 930 6,170 2,851 3,319 consisting of in-house bank contracts. These positions decreased mainly due to the
debt
settlement of intercompany positions arising from restructuring of US entities, refer to
Receivables, starting on page 227. The current portion of outstanding external long-term
debt of EUR 321 million relates to share buyback program.
228
For further details on debt and treasury risk, refer to Debt, starting on page 186 and Details
of treasury and other financial risks, starting on page 213.
O Other current liabilities

Other current liabilities in millions of EUR
2022 2023
Accrued expenses 89 102
Derivative instruments - liabilities 246 72
Other short-term liabilities 44 18
Other current liabilities 379 191
Decrease in Other current liabilities mainly came from derivatives settled in 2023. For further
details on derivative instruments, refer to note Fair value of financial assets and liabilities,
starting on page 208 and Details of treasury and other financial risks, starting on page 213.
P Commitments and contingencies

The company has contracts with investment funds where it committed itself to make, under
certain conditions, capital contributions to their funds up to an aggregated remaining
amount of EUR 122 million (2022: EUR 90 million). As of December 31, 2023, capital
contributions already made to these investment funds are recorded as Other non-current
financial assets.
General guarantees as referred to in Section 403, Book 2, of the Dutch Civil Code, have been
given by the company on behalf of several group companies in the Netherlands. The
liabilities of these companies to third parties and investments in associates totaled EUR 1,304
million as of December 31, 2023 (2022: EUR 1,247 million). Guarantees totaling EUR 369
million (2022: EUR 421 million) have also been given on behalf of other group companies. As
of December 31, 2023 there have been no guarantees given on behalf of unconsolidated
companies and third parties (2022: nil).
The company is the head of a fiscal unity that contains the most significant Dutch wholly-
owned group companies. The company is therefore jointly and severally liable for the tax
liabilities of the tax entity as a whole.
For additional information, refer to Contingencies, starting on page 198, which is deemed
incorporated and repeated herein by reference.
Q Subsequent events
For more information refer to Group financial statements Subsequent events, starting on
page 219
229
12 ESG statements
12.1 Approach to ESG reporting Development Goals (SDGs). In this Annual Report we also included the new ESG framework
Philips has a long tradition of Environmental, Social and Governance (ESG) reporting, from WEF's International Business Council.
beginning with our first Environmental Annual Report published in 1999. Next, in 2003, we
expanded the Environmental Annual Report with the launch of our first Sustainability In 2020, the WEF’s International Business Council (IBC) published its core set of Stakeholder
Annual Report. This report provided details of our social and economic performance in Capitalism Metrics and disclosures. These can be used by companies to align their
addition to our environmental results. In 2008, we published our first integrated financial, mainstream reporting on performance against environmental, social and governance (ESG)
th
social and environmental report. Our 2023 Annual Report is our 16 annual integrated indicators and track their contributions towards the SDGs on a consistent basis. Thus far, 166
financial, social and environmental report. For more information, please refer to the companies reported in line with this framework. Based where possible on existing standards,
company’s website. the full set is comprised as follows:
Royal Philips publishes its integrated Annual Report with reasonable assurance on its • Core metrics: A set of 21 more‑established or critically important metrics and disclosures
financial, social and environmental performance (except for EU Taxonomy disclosures with that focus primarily on activities within an organization’s own boundaries.
limited assurance). With that reasonable assurance level, Philips is a front-runner in our
industry. • Expanded metrics: A set of 34 metrics and disclosures that tend to be less
well‑established in existing practice and have a wider value chain scope or convey impact
12.1.1 Tracking trends in a more sophisticated or tangible way, e.g. in monetary terms.
We follow external trends continuously to determine the issues most relevant for our
company and where we can make a positive contribution to society at large. In addition to The recommended metrics are organized under four pillars that are aligned with the SDGs
our own research, we make use of a variety of sources, including the United Nations and principal ESG domains: Principles of Governance, Planet, People and Prosperity. There is
Environmental Programme (UNEP), World Bank, World Economic Forum, IFRS, EFRAG, World no intention to replace industry- or company-specific metrics (like our Lives Improved
Health Organization, the World Business Council for Sustainable Development (WBCSD), metric). Companies are encouraged to report against as many of the core and expanded
and various rating agencies and analyst reports. Our work also involves tracking topics of metrics as they find material and appropriate, on the basis of ‘disclose or explain’.
concern to governments, non-governmental organizations (NGOs), regulatory bodies,
academia, and following the resulting media coverage. In Philips' ESG performance at a glance, starting on page 73, we show how Philips
performed in 2023 on the above-mentioned 21 Core metrics, mapped to the three
12.1.2 ESG reporting frameworks dimensions of our ESG commitments, as well as a number of additional Philips-specific
Building on our extensive experience of environmental and social impact measurement and metrics that we consider fundamental to the strategy and operation of our business.
of providing transparency on governance, Philips has taken an active role – in collaboration
with, in particular, the International Financial Reporting Standards (IFRS) Foundation, the IFRS and CSRD/ESRS
World Economic Forum (WEF) and the European Union – to help drive the evolution Philips is also contributing to the IFRS Foundation’s endeavors to drive standardization of
towards a standard ESG reporting framework. non-financial reporting as well as the development of sustainability standards by the
European Union by EFRAG. We are preparing for the enhanced disclosure requirements
At the World Economic Forum in January 2017, Philips signed the Compact for Responsive under the EU Corporate Sustainability Reporting Directive (CSRD) that will start to apply as
and Responsible Leadership – an initiative (initiated by WEF and Philips) to promote and from our annual report over the financial year 2024. In preparation for the CSRD
align the long-term sustainability of corporations and the long-term goals of society, with an requirements, Philips has included in this annual report several metrics and textual
inclusive approach for all stakeholders. The WEF secured a commitment from over 200 CEOs disclosures in accordance with reporting criteria developed by Philips, in anticipation of the
to align their corporate values and strategies with the United Nations’ Sustainable upcoming ESRS requirements.
230
GRI
This integrated annual report has been prepared with reference to the GRI Universal
Standards 2021. A detailed overview of the GRI indicators can be found in the GRI content
index on our sustainability website. We also developed additional company-specific
indicators and started to measure the impact we are having on society, for example through
our Environmental Profit & Loss account. The information on definitions, scope and
measurement can be found in this chapter.
IIRC
We have prepared this integrated annual report in line with the International Integrated
Reporting Council (IIRC) Integrated Reporting framework, and complying with the EU Non
Financial Reporting decree (2014/95/EU) and the 'EU Taxonomy'. The European Commission
has published the Corporate Sustainability Reporting Directive and European Sustainability
Reporting Standards. In this report we aim to prepare for this new regulation and already
address a number of the relevant disclosure requirements that will be applicable to us in the
future. We have also created an overview of our value creation process ( please refer to How
we create value with sustainable impact, starting on page 12.)
United Nations Global Compact

We signed up to the United Nations Global Compact in March 2007 to advance 10 universal
principles in the areas of human rights, labor, the environment and anti-corruption. Our
General Business Principles, Human Rights, Sustainability and Environmental Policies, and
our Supplier Sustainability Declaration are the cornerstones that enable us to live up to the
standards set by the Global Compact. This is closely monitored and reported, as illustrated
throughout this report, which is also our annual Communication on Progress (COP)
submitted to the UN Global Compact Office.
We use this report to communicate on our progress towards the relevant Sustainable
Development Goals (SDGs), in particular SDG 3 (Ensure healthy lives and promote well-being
for all at all ages), SDG 12 (Ensure sustainable consumption and production patterns) and SDG
13 (Take urgent action to combat climate change and its impacts). Please refer to Advocacy
activities and expenses, starting on page 269 for more details.
231
12.1.3 Material topics and our focus

Every year, we identify the environmental, social, and governance topics which have the
greatest impact on our business and the greatest level of concern to stakeholders along our
value chain. Please refer to our Double Materiality Assessment, starting on page 13 for more
details on this process and the results for 2023. Below you will find an overview of the key
material topics, further references, KPIs and the boundaries of these topics.
Key material topics

Reference
Environmental Impacts, Risks and Opportunities KPI Boundaries Time horizon
- Climate change Message from the CEO , starting on page 5 Operational Carbon Footprint, Green/ Supply chain, operations, Short-, Medium-, and
Strategy and Businesses, starting on page 9 EcoDesigned Revenues use-phase Long-term
Environmental performance, starting on page 46
Environmental statements, starting on page 239
Strategic risks, starting on page 90 - ESG
Operational risks, starting on page 93 - GBP and regulations
- Circular Economy Green/EcoDesigned Innovation, starting on page 52 Circular Revenues, Waste to Landfill, Closing Supply chain, operations, Short-, Medium-, and
Environmental performance, starting on page 46 the Loop use-phase Long-term
Circular Economy, starting on page 245
Supplier sustainability, starting on page 263
- Energy efficiency Message from the CEO , starting on page 5 Operational Carbon Footprint, Green/ Supply chain, operations, Short-, Medium-, and
Environmental performance, starting on page 46 EcoDesigned Revenues use-phase Long-term
Green/EcoDesigned Innovation, starting on page 52
Sustainable Operations , starting on page 249
- Waste management Green/EcoDesigned Innovation, starting on page 52 Circular Revenues, Waste to Landfill, Closing Supply chain, operations, Short-, Medium-, and
Environmental performance, starting on page 46 the Loop use-phase Long-term
Circular Economy, starting on page 50
Operational risks, starting on page 93 - innovation excellence
232
Reference
Societal KPI Boundaries Time horizon
- Access to (quality & affordable) Message from the CEO , starting on page 5 Lives Improved, Lives improved in Use-phase Short-, Medium-, and
care Diagnosis & Treatment segment, starting on page 16 underserved health communities Long-term
Connected Care segment, starting on page 17
Social performance, starting on page 56
Strategic risks, starting on page 90 - Geopolitics and Macroeconomics, Health
informatics, ESG
- Public health risk Message from the CEO , starting on page 5 Lives Improved, Lives improved in Supply chain, operations, Short-, Medium-, and
Strategy and Businesses, starting on page 9 underserved communities use-phase Long-term
Health and Safety, starting on page 63
Factors impacting performance, starting on page 28
technology environment
Operational risks, starting on page 93 - Innovation excellence
- Employee rights Human rights, starting on page 63 Philips pays its employees at least a living Supply chain, operations, Short-, Medium-, and
Living wage, starting on page 62 wage use-phase Long-term
Equal opportunities and equal pay, starting on page 62
Philips General Business Principles (GBP), starting on page 68
Operational risks, starting on page 93 - People
- Employee well-being, Health & Message from the CEO , starting on page 5 Total Recordable Case rate, Suppliers Supply chain, operations Short-, Medium-, and
Safety Health and Safety, starting on page 63 participating in Supplier Development Long-term
Supplier sustainability, starting on page 263 program
- Human Rights Supply chain and procurement, starting on page 24 Human Rights impact assessments at our at- Supply chain, operations Short-, Medium-, and
Social performance, starting on page 56 risk sites, Suppliers participating in Supplier Long-term
ESG statements, starting on page 230 Development program
Operational risks, starting on page 93 - Supply chain, People
- Fair & Inclusive workplace Diversity, Inclusion and Well-Being, starting on page 59 Females in leadership positions Supply chain, operations Short-, Medium-, and
Equal opportunities and equal pay, starting on page 62 Long-term
- Talent & development Social performance, starting on page 56 Training hours Supply chain, operations Short-, Medium-, and
People development, starting on page 257 Long-term
Talent attraction, starting on page 258
- Responsible & resilient supply Supply chain and procurement, starting on page 24 Suppliers participating in Supplier Supply chain, operations Short-, Medium-, and
chains Human rights, starting on page 63 Development program Long-term
Health and Safety performance, starting on page 260
Operational risks, starting on page 93 - Supply chain and procurement, starting
on page 24 chain
- Social inclusion & engagement Social performance, starting on page 56 Females in leadership positions Supply chain, operations Short-, Medium-, and
Diversity, Inclusion and Well-Being, starting on page 59 Employee Engagement Score Long-term
Employee engagement, starting on page 60 Suppliers participating in Supplier
Supplier sustainability, starting on page 63 Development program
Operational risks, starting on page 93 - Supply chain, People
233
Reference
Governance KPI Boundaries Time horizon
- Business ethics & General Compliance risks, starting on page 99 Employees trained in GBP Supply chain, operations, Short-, Medium-, and
Business Principles Philips General Business Principles (GBP), starting on page 68 use-phase Long-term
Compliance risks, starting on page 99 - GBP and regulations
- Product responsibility & safety Message from the CEO , starting on page 5 Employees trained in Patient Safety and Supply chain, operations, Short-, Medium-, and
About segment Other, starting on page 21 Quality use-phase Long-term
Quality & Regulatory and patient safety, starting on page 69
Compliance risks, starting on page 99
ESG statements, starting on page 230
Operational risks, starting on page 93 - Patient Safety and Quality,
Cybersecurity
Compliance risks, starting on page 99 - Product regulations
- Competition & market access Our geographic structure, starting on page 22 Research and development expenses Supply chain, operations, Short-, Medium-, and
Social performance, starting on page 56 use-phase Long-term
technology environment
Operational risks, starting on page 93 - Supply chain
Financial risks, starting on page 97 - Global inflation
- Governance Governance, starting on page 67 Tax transparency Supply chain, operations Short-, Medium-, and
Operational risks, starting on page 93 - Business operating model simplification Long-term
Financial risks, starting on page 97 - Accounting and reporting
Compliance risks, starting on page 99 - GBP and regulations
- Big data, AI & Cybersecurity Strategy and Businesses, starting on page 9 Employees trained in Patient Safety and Supply chain, operations, Short-, Medium-, and
Cybersecurity, starting on page 72 Quality, and Security use-phase Long-term
Human rights, starting on page 63
Strategic risks, starting on page 90 - Health technology environment, Health
informatics
Operational risks, starting on page 93 - Cybersecurity
- Innovation & research Strategy and Businesses, starting on page 9 Green/EcoDesigned innovation Supply chain, operations, Short-, Medium-, and
Human rights, starting on page 63 use-phase, disposal Long-term
Green/EcoDesigned Innovation, starting on page 52
Strategic risks, starting on page 90 - Health technology environment, Health
informatics
- Sustainable value creation Message from the CEO , starting on page 5 Research and development expenses, Green/ Supply chain, operations, Short-, Medium-, and
Strategy and Businesses, starting on page 9 EcoDesigned innovation use-phase Long-term
Strategic risks, starting on page 90 - Acquisitions, ESG, Intellectual property
- Geopolitical events Message from the CEO , starting on page 5 N/A Supply chain, operations, Short-, Medium-, and
Strategy and Businesses, starting on page 9 use-phase Long-term
Strategic risks, starting on page 90 - Geopolitics and Macroeconomics
Operational risks, starting on page 93- Supply chain
Financial risks, starting on page 97 - Global inflation
- Investor relations and public Message from the CEO , starting on page 5 N/A Supply chain, operations, Short-, Medium-, and
affairs Strategy and Businesses, starting on page 9 use-phase Long-term
Working with stakeholders and advocacy, starting on page 65
Strategic risks, starting on page 90
Financial risks, starting on page 97
234
12.1.4 Programs and targets use-phase of our products) and reported for each topic on the relevant parts of the value
In 2020, as we ended the 5-year ‘Healthy people, Sustainable planet’ program, Philips' ESG chain. More details are provided in the relevant sections in the ESG statements.
commitments were introduced. An overview of these commitments has been provided in
Philips' ESG commitments, starting on page 44 and more detailed targets can be found in Philips has not used the option to omit a specific piece of information corresponding to
the respective sections. intellectual property, know-how or the results of innovation. Philips also did not use the
exemption from disclosure of subsidiaries provided for in articles 19a (3) and 29a (3) of
All of our programs are guided by the Philips General Business Principles, which provide the Directive 2013/34/EU.
framework for all of our business decisions and actions.
The consolidated selected financial information in this ESG statements section has been
Philips Group derived from the Group financial statements, which are based on IFRS.
ESG commitments
baseline year 2020 target 2025 2023 actual
Lives improved by the Philips Foundation have been consolidated.
Environmental
Green/EcoDesigned revenues 73.2% 70.5%
Circular revenues 14.6% 25% 20.0%
12.1.6 Comparability and completeness
Circular Materials Management 90% 95% 91%
We used expert opinions, estimates, and proxies for some parts of the Key Performance
Zero waste to landfill as a percentage 2.6% less than 0.5% 0.0% Indicator calculations. There is therefore an inherent uncertainty in our calculations, e.g.
of total regular waste Lives Improved, Environmental Profit & Loss account, Scope 3 carbon emissions, and Social
Net operational carbon footprint 0 KTonnes 0 KTonnes 0 KTonnes Impact calculations. The figures reported are Philips’ best estimate. As our insight increases,
% of suppliers committed to Science 50% 46% or higher-quality sources become available, we may enhance the methodology in the future.
Based Targets
Social We have excluded data from the former Domestic Appliances business from the ESG
Lives Improved 1.53 billion 2 billion 1.88 billion information wherever possible. In a limited number of cases, for example for road logistics
Lives improved in underserved 127 million 300 million 221 million emissions, we have used proxies for previous years. If Domestic Appliances information was
communities
not available for past years, and could therefore not be excluded, we have indicated this in
Females in leadership positions 27% 35% 31%
the respective section. The EEI and GBP results have not been restated.
Total Recordable Case (TRC) rate 0.24 0.24
Human Rights impact assessments at 60% 100% 100%
our at-risk sites In 2020, Philips made changes to the EP&L use-case scenario, the energy mix of the use-
Supplier Development Program 302,000 1,000,000 723,000 phase of its products, and added the full Sleep & Respiratory Care portfolio to the EP&L
employees employees employees scope. For more information, refer to Environmental performance, starting on page 46 and
impacted impacted impacted
our methodology document.
Governance
General Business Principles training 65,000 staff 60,000 staff
completion trained trained
In 2019, Philips re-aligned its Lives Improved target with the UN 2030 Sustainable
Development Agenda following the completion of its portfolio transformation. Philips
targets an ambitious, average annual Lives Improved growth rate of around 6% for the
12.1.5 Boundaries of ESG reporting 2019–2030 period.
Our ESG performance reporting encompasses the consolidated Philips Group activities in the
Environmental, Social and Governance sections, following the consolidation criteria detailed In order to report on our corporate Scope 2 emissions, Philips follows the Scope 2
in this section. Thus, the scope of the financial statements is the same as the scope of our Greenhouse Gas Reporting Guidance. This guidance requires that companies operating in
ESG statements, with the exception of value chain information in the ESG statements. As a liberalized electricity markets, where renewable energy certificates (also referred to as
result of impact assessments of our value chain, we have identified the material topics, “contractual instruments” and “energy attribute certificates) such as Guarantees of Origin
determined their relative impact in the value chain (supply chain, our own operations, and (GO), RECs, etc. are available, shall report two Scope 2 totals based on the following
methods: the location-based method and the market-based method. In short, the location-
235
based method total can only be reduced by decreasing the activity data (or electricity The specific methodology for how we determine an underserved health community can be
consumption) since the grid average emission factor is largely outside of corporate control found in the same document.
and more controlled by governments and utilities. By contrast, the market-based method is
designed to highlight supply choices, including low- or zero-carbon supply from renewable Health and safety
sources like wind or solar. In 2021, the emission factor set for our Scope 2 market-based and Health and safety data is reported by sites with over 50 FTEs (full-time equivalents);
location-based have been updated. For our market-based Scope 2 calculations in Europe reporting is voluntary for smaller locations. With this approach, the total FTE coverage of
and the US, we apply the Reliable Disclosure (RE-DISS) and AIB European Residual Mixes H&S reporting is above 90%. The remainder is not extrapolated. The data are reported and
2019 Version 1.1 (GWP Applied) and 2020 Green-e® Residual Mix Emissions Rates (2018 Data) validated each month via an online centralized IT tool. The Total Recordable Cases (TRC) rate
where residual mix factors are available; for all other countries, we apply the International is defined as a KPI for work-related cases where an employee is injured or becomes ill and is
Energy Agency (IEA) 2020 v1.1 (AR4 Applied) emission factors. For our location-based Scope unable to work in the same capacity for one or more days following a workplace incident or
2 calculations, we apply the US Environmental Protection Agency eGRID (Sub Region & US has medical treatment above first-aid treatment. We also provide the Lost Workday Cases
Average) - 2018 (Released Jan 2020) v1.1 and the International Energy Agency (IEA) 2020 v1.1 (LWC) rate, which measures work-related injuries and illnesses (predominantly occurring in
(AR4 Applied) emission factors. manufacturing operations and field service organizations) where the incident leads to at
least one lost workday. Fatalities are reported for staff, contractors and visitors. The TRC and
In order to report on our Scope 3 emissions, Philips follows the Scope 3 Greenhouse Gas LWC KPIs apply to all reported cases.
Reporting Guidance, in line with our Science Based Targets initiative (SBTi) submission. More
details can be found in Philips' Corporate Emission Accounting methodology documents. General Business Principles
Alleged GBP violations are registered in our web-based reporting and validation tool.
Data on emissions of substances are based on measurements and estimates at
manufacturing site level. The figures reported are Philips’ best estimate. The basis of Environmental data
preparation is data submitted by our environmental coordinators at our manufacturing All environmental data from manufacturing operations, except process chemicals, are
sites, which is validated and consolidated by Group Sustainability. reported on a monthly basis in our sustainability reporting and validation tool, according to
company guidelines that include definitions, procedures and calculation methods. Process
The integration of newly acquired activities is scheduled according to a defined integration chemicals are reported on a half-yearly basis.
timetable (in principle, the first full reporting year after the year of acquisition) and subject
to the integration agenda. Data for activities that are divested during the reporting year are Internal validation processes have been implemented and peer audits performed to ensure
not included in full-year reporting. Environmental data are reported for manufacturing sites consistent data quality and to assess the robustness of data reporting systems.
with more than 50 industrial employees.
These environmental data from manufacturing are tracked and reported to measure
Philips did not identify material misstatements in prior reporting periods. progress against our Sustainable Operations targets.
12.1.7 Scope of reporting A manufacturing site is classified as 'Zero Waste to Landfill' if less than or equal to 0.5% of
the total regular waste reported by the site is sent directly to landfill via an external
Lives improved contractor. This excludes waste that is landfilled due to a regulatory requirement and one-
The Key Performance Indicator on ‘lives improved’ and the scope are defined in the time waste. A site needs to meet these requirements for at least two consecutive reporting
methodology document that can be found in Methodology for calculating Lives Improved. periods.
We used opinions from Philips experts and estimates for some parts of the Lives Improved
calculations. Philips has made strong commitments to improve people's health and well- Reporting on ISO 14001 certification is based on manufacturing units reporting in the
being. To track our impact, Philips identifies countries where the need for access to sustainability reporting system.
healthcare is highest. This is determined by four selected health indicators, as provided by
United Nations Sustainable Development Goal 3, which focuses on health and well-being.
236
Environmental Profit & Loss account be considered grey electricity meaning of a nonrenewable source. We then multiply this
The Philips Environmental Profit & Loss (EP&L) account measures our environmental impact by a residual mix emission factor. For the location-based approach, we examine energy
on society at large. The EP&L account is based on Life Cycle Analysis methodology in which purchases and disregard any renewable energy certificates acquired. This amount is then
the environmental impacts are expressed in monetary terms using specific conversion multiplied by grid-average emission factors. The grid emission factors used for the
factors. For more information, we refer to our methodology report. market-based approach are dependent on the location. For sites in the US, we apply the
eGrid-specific Residual Mix emission factor (Green-e 2022 v1.3 (2020 Data)), and for sites
Total carbon footprint in Europe we use the AIB European Residual Mixes (2021 v1.1). For all other countries, we
Philips reports in line with the Greenhouse Gas Protocol (GHGP). The GHGP distinguishes apply the International Energy Agency (IEA) emission factors because residual mix
three scopes, as described below. The GHGP requires businesses to report on the first two emission factors are nonexistent for these regions (2022 v1.1 - GWP AR4). For the
scopes to comply with the GHGP reporting standards. As per the updated GHGP Scope 2 location-based approach we use eGrid and IEA grid average emission factors (Both v1.1 –
reporting guidance, from 2015 onward our Scope 2 emissions reporting includes both the GWP AR4). For all other energy purchases we use the emission factors from BEIS (v1.3
market-based method and the location-based method. The market-based method of 2022 – GWP AR5).
reporting will serve as our reference for calculating our total carbon footprint. As part of our • Scope 3, category 1 – Purchased goods and services – includes any emissions generated
carbon footprint, Philips also reports on four Scope 3 categories, namely emissions from by the consumption of raw materials, components, packaging, and services that are
purchased goods and services, business travel, transportation and distribution and use of acquired to create and distribute Philips products. This only includes production-related
sold products. goods (e.g., components and parts) and all services that fall under the GHG Protocol
described category. Goods related emissions are calculated using an average data
• Scope 1 greenhouse gas emissions are direct emissions caused by company owned and method and services using a spend based method. Components and material specific
-controlled entities. For example, the burning of fossil fuels and the use of refrigerants or emission factors are determined using EcoInvent (v3.9.1 – GWP AR6). These factors are
chemicals on-site generates scope 1-related CO2-e (carbon dioxide equivalent) emissions. regularly updated and consider the sourcing as well as raw material processing. The
Sites report their consumption of anthropogenic or biogenic-based fuels, and impact of purchased services is in contrast based on an input output model. To derive
refrigerants via our internal sustainability reporting system. Consumption per resource is emissions the Exiobase database (v3.8.2 – GWP AR5 and AR6) is leveraged, which factors
then aggregated across all sites and multiplied by resource-specific emission factors. This in all activities connected to the corresponding service.
approach is being used for all industrial sites and 80% of our non-industrial sites’ floor • Scope 3, category 6 – Business travel – covers any mode of transportation that is used by
area. For all other sites consumption is extrapolated. For scope 1 emissions we use two employees for business purposes and operated by a third party, excluding commuting. To
sets of emission factors. For fossil fuels and natural gases, we use the UK Department for calculate business travel emissions, we distinguish air travel and automobile travel. For
Business, Energy & Industrial Strategy (BEIS) database (v1.3 2022 – Global Warming automobile travel, we include leased vehicles and rented vehicles. All other modes of
Potentials (GWP) 5th Intergovernmental Panel on Climate Change (IPCC) Assessment transportation are not considered due to their minimal usage for business purposes and
Report (AR)). For all other relevant scope 1 refrigerants, we use the IPCC database (AR6, negligible total impact (e.g. trains in the Netherlands run on renewable electricity). The
v1.2). emissions factors from BEIS (v1.3 2022 – GWP AR5) are leveraged as these are updated
• Scope 2 emissions are indirect emissions caused by the purchase of electricity, heating, annually.
steam, and cooling. These emissions are not generated on our sites but are still directly • Scope 3, category 9 – Downstream transportation and distribution – includes all
impacted by our consumption level and contractual agreements. We can therefore emissions generated by transporting components, products, or raw materials from one
reduce these emissions by reducing consumption or by ensuring purchased energy location to another via a mode owned by a third party. This can include transport via air,
comes from low-emission sources. We report on both market-based and location-based road, or sea. Rail transport is rarely used by Philips and therefore has a negligible
emissions. For the market-based approach, we first subtract the amount of renewable influence on total emissions. Upstream and downstream transportation paid by Philips
energy acquired or self-generated in a specific region from the actual amount of are reported under the same category, because of our inability to distinguish between
electricity consumed. All renewable electricity claimed by Philips is sourced from the each trip. This has no influence on total emissions and merely simplifies the accounting
same energy market where the electricity-consuming operations are located, and is process. For air freight, road freight or less than a container load ocean freight the
tracked and redeemed, retired, or cancelled solely on behalf of Philips. To ensure emission factors from BEIS are leveraged (v1.3 2022 - GWP AR5). For full container load
additionality, all certificates were generated in 2023 – or maximum 6 months prior – in transports the emission factors from Clean Cargo are used (version 2021 – GWP AR6).
the country of consumption and are retired on behalf of Philips. The remainder can then
237
• Scope 3, category 11 – Use of sold products - constitutes the majority of Philips’ Philips publishes its integrated Annual Report with the highest (reasonable) assurance level
environmental impact. To determine emission we are interested in three key variables: from its independent auditor on its financial, environmental, social, and governance
the lifetime energy per device, number of products sold per country and country specific performance. With that overall reasonable assurance level, Philips is a frontrunner in its
emission factors. It should be noted that the energy consumption during the full lifetime industry.
of the products sold is included in the emission calculation of the year of sale. To
calculate emissions the country grid average emission factors from EcoInvent (v3.9.1 – 12.1.9 External assurance
GWP AR6) are used. EY has provided reasonable assurance on whether the information in Double Materiality
Assessment, starting on page 13, ESG statements, starting on page 230 and Environmental,
For more information on our calculation methodologies please refer to the ESG download Social and Governance, starting on page 42, except for the sections EU taxonomy framework
page. in EU Taxonomy disclosures, starting on page 252, Remuneration policy, starting on page 69
and Risk management approach, starting on page 67, presents fairly, in all material respects,
Employee Engagement Index (EEI) the sustainability performance in accordance with the reporting criteria. Please refer to
The Employee Engagement Index (EEI) is the single measure of the overall level of employee Independent auditor's assurance report on the ESG information and the EU Taxonomy
engagement at Philips. It is a combination of perceptions and attitudes related to employee information, starting on page 285
satisfaction, commitment and advocacy.
The reported figures are based on the Employee Survey. The total score for employee 12.2 Economic indicators
engagement is an average of the quarterly results of the survey. The results are calculated by This section provides summarized information on contributions made on an accruals basis to
taking the average of the answered questions of the surveys. the most important economic stakeholders as a basis for driving economic growth. For a full
understanding of each of these indicators, see the specific financial statements and notes in
ESRS definitions this report.
Our definitions of short-, medium-, and long-term are defined in preparation for ESRS 1
section 6.4. Philips Group
Distribution of direct economic benefits in millions of EUR
12.1.8 ESG governance 2021 2022 2023

Suppliers: goods and services (9,988) (10,633) (10,721)
ESG is strongly embedded in our core business processes, like innovation (EcoDesign),
Employees: salaries and wages (5,129) (5,698) (5,769)
sourcing (Supplier Sustainability Program), manufacturing (Sustainable Operations), logistics
Shareholders: distribution from retained earnings 773 741 749
(Green Logistics) and programs like our Circular Economy program. Government: corporate income tax 1) (249) (333) (152)
Capital providers: net interest (141) (210) (230)
In Royal Philips, the Board of Management is the highest governing ESG body. Subject to the
topics discussed, other Executive Committee members attend these meetings, together with
1)
The figures presented represent the income tax payments made, deviating from the prior year's practice of reporting the
income tax recorded in the profit and loss account.
functional executives. The Board of Management normally convenes four times per year on
ESG. The Board of Management also defines Philips’ ESG strategy, commitments, programs,
action plans and policies, monitors progress and takes corrective action where needed. On a Total purchased goods and services as included in cost of sales amounted to EUR 10.7 billion,
quarterly basis, ESG reporting is also discussed in the Audit Committee of the Supervisory representing 59.0% of total revenues of the Philips Group. Of this amount, approximately
Board. 53% was spent with global suppliers, the remainder with local suppliers.
Progress on ESG is communicated internally and externally (www.results.philips.com) on a In 2022, salaries and wages totaled EUR 5.8 billion, an increase of 1% compared to 2022. See
quarterly basis and at least annually in the Executive Committee and Supervisory Board. Income from operations, starting on page 159 for more information.
Philips’ shareholders were given EUR 816 million including costs in the form of a dividend.
238
The income tax paid in 2023 of EUR 152 million is mainly driven by prepayments based on Full value chain emissions
projected income. For more information, see Income taxes, starting on page 164. After delivering on our carbon neutrality commitments in 2020, we raised the bar and set
ambitious science-based emission reduction targets to ensure we help limit the impact of
Philips supports global initiatives of the OECD (Organization for Economic Cooperation and global warming, not only in our operations, but throughout our value chain – collaborating
Development) and UN (United Nations) to promote tax transparency and responsible tax with suppliers and customers to amplify our impact. The visual below shows the full value
management, taking into account the interests of various stakeholders, such as chain (Scope 1, 2 and 3) emissions of Philips in 2023.
governments, shareholders, customers and the communities in which Philips operates. For
more information, please refer to Our approach to taxes.
12.3 Environmental statements

In 2020, Philips further reinforced its commitments as a purpose-driven company with the
announcement of an enhanced and fully integrated approach to doing business responsibly
and sustainably. This section provides additional information on (some of) the
environmental performance parameters reported in Environmental performance, starting
on page 46.
12.3.1 Climate Action

Climate change has been a material topic for Philips for many years, and the Double
Materiality Assessment performed in 2023 confirmed this. At Philips, we have addressed
Climate Action for years, and in this section, we will explain our targets, plans, metrics, and
results to deliver on our commitments. Climate risks have also been addressed; for more
detailed information, refer to our TCFD report 2023.
Scope 1 and 2
In our sites, we reduced our Scope 1 (direct) CO2-e emissions by 12% and our Scope 2
(market-based approach) CO2-e emissions by 10% compared to 2022. Scope 1 emissions
cover the emissions from our direct fuel consumption and the use of refrigerants. In
contrast, Scope 2 (market-based) emissions cover the emissions of non-renewable electricity
and purchased (city/district) heating, cooling, and steam. For more information on the
Global Warming Potentials (GWP) applied, refer to the Greenhouse Gas emissions per gas
239
type section. For more information on how we calculate our Scope 1 and 2 emissions, refer to Even though we have already achieved our 2025 SBTi targets, we will continue to accelerate
the ESG downloads page. our Scope 1 and 2 decarbonization efforts by driving down overall energy consumption and
finding alternative renewable energy sources, making sure we remain well on track to
As emphasized in our environmental policy, we are implementing energy efficiency deliver on our long-term (2040) Science Based Targets.
measures, eliminating fossil fuels, and procuring renewable electricity to meet our Science
Based Targets for Scope 1 and 2 emissions (market-based). Our commitment is further Scope 3
underscored by the ongoing pursuit of ISO 50001 certification for our manufacturing sites, Scope 3 emissions are linked to indirect emissions that reside either upstream or
allowing us to adopt a systematic approach for continuous energy management downstream and are included in our approved Science Based Target of 42% reduction by
improvements. A significant milestone for our energy strategy in 2023 was achieved when 2030. At Philips, four Scope 3 categories are deemed material and together cover roughly
all Dutch sites, accounting for 29% of our energy consumption, were successfully re- 96% of our total Scope 3 emissions. These include Business Travel, Transportation &
certified. Distribution, Purchased Goods & Services, and Use of Sold Products. Therefore, in line with
the SBTi, the remaining 4% of estimated value chain emissions are deemed immaterial and
Our continued efforts to preserve energy have contributed to a reduction in our energy are not disclosed. For more information on the calculation methodologies, GWPs,
demand of 8%. This was achieved by introducing a global energy policy and temporarily proportion of emissions calculated using data from value chain partners and the underlying
closing certain buildings and floors to improve the utilization of available office space. As a assumptions, refer to the ESG download page. Please note that, for our business travel
strategic move in 2023 under our energy efficiency strategy, we also transitioned from emissions and logistics emissions, we used the reporting period December 2022 until
existing buildings to locations with better energy efficiency. Therefore, our average energy November 2023.
intensity has improved.
Business Travel
Regarding the transition to renewable energy, we are making good progress, increasing the Our Business Travel emissions, covering emissions from air travel, lease cars and rental cars,
share to 78% in 2023. We are therefore already overachieving our 2025 ambition of sourcing increased by 5% compared to 2022. This is mainly due to the restructuring at Philips that
75% of our energy from renewable sources. This is largely driven by multiple Power Purchase required increased travel to allow an optimal transition. The post-pandemic surge in travel
Agreements (PPAs) securing the supply of renewable electricity. Prior to 2023, these included was also driven by a need to align with customers which further contributed to the
the Los Mirasoles wind farm in the US and the Krammer and Bouwdokken wind farms in the increased emissions. Moving forward, we continue to electrify our lease fleet and promote
Dutch province of Zeeland. To further secure the long-term delivery and quality of online collaboration, as well as increase our efforts to move travelers to rail transport for
renewable electricity for all our operations in Europe, we increased our portfolio in 2023 shorter distances. With tightened travel budgets in 2024, we aim to curb the growth of
with a wind farm in Mutkalampi, Finland and a solar farm in Pontinia, Italy. In December travel emissions.
2023, we also closed our first direct renewable energy deal in China. For all remaining
electricity demand, we acquire unbundled Energy Attribute Certificates (EACs). Details Transportation and Distribution
regarding the attributes per country are available through RE100 in our CDP disclosure. In 2023, we recorded a 7% decrease in emissions from our Transportation and Distribution
compared to 2022. The scope of these emissions covers the CO2-e emitted by air freight,
EACs play a pivotal role in significantly reducing the reported Scope 2 market-based ocean freight, road freight and parcel shipments. As air freight accounts for most of our
emissions, aligning with the recommendations of the Greenhouse Gas Protocol (GHGP). operational carbon footprint, we have taken several measures to minimize our
These instruments serve as strategic tools in our commitment to sustainability and environmental impact. These include the Corridor Project, where we are shifting several
environmental responsibility. By investing in renewable energy projects through the lanes from air to ocean freight, and the Consolidation Project, where we group multiple
purchase of EACs, we not only contribute to the growth of the clean energy sector, but also shipments in one to reduce the total number of shipments. Overall, these efforts have
directly limit our carbon footprint associated with electricity consumption. contributed to the elimination of 6,228 air freight shipments, compared to 2022. It is also
important to note that Philips was the first healthcare company to sign the coZEV ambition
Our operational energy efficiency improved by 10%, from 27.9 MWh/million EUR sales in statement for Sustainable Maritime Freight Shipping. This will support our efforts in
2022 to 25.2 MWh/million EUR sales in 2023. accelerating maritime decarbonization.
240
Philips Group explained through the reduced sales of Sleep & Respiratory Care devices that are relatively
Logistic Freight emissions per mode of transportation in tonnes CO2-equivalent 1)
energy-intensive and by updated energy use cases for hair dryers in 2022.
2019 2020 2021 2022 2023
Air freight 278,794 261,504 252,104 213,562 168,153
To reduce the impact of our sold products we are implementing energy efficiency measures
Road freight 70,728 64,124 54,897 27,276 26,393
for our existing and future installed base. This is closely tied to our EcoDesign commitment
Sea freight 75,170 42,913 38,997 22,150 23,552
Parcel freight 45,259 46,090 70,963 63,811 86,988
of having all new product introductions EcoDesigned by 2025. EcoDesigned products must
Philips Group 469,950 414,631 416,961 326,798 305,086 optimize their energy consumption to the lowest possible state while meeting market and
technological requirements. Together with our businesses we are therefore exploring
solutions, for example introducing low energy-consuming eco-modes.
1)
Emissions in 2021 and before from ocean and road freight included combined shipments of our Domestic Appliances
business as well as Philips business. We were not able to exclude all the Domestic Appliances business part from our
datasets completely. From 2022 onwards, however, this has been fully resolved.
In 2023, we also started investigating novel partnerships with our customers to ensure
reduced energy consumption and increased renewable energy usage of our devices. As
Purchased Goods and Services proof of concept, we signed a strategic partnership agreement with Champalimaud
Our emissions from purchased goods and services were 1,511 kilotonnes CO2-e in 2023. This is Foundation in March 2023, to help them reduce their carbon emissions from Philips products
a reduction of 12% compared to the 2020 baseline. This includes any emissions generated by in scope by 50%. For more information, refer to the press release.
the consumption of raw materials, components, packaging, and services that are acquired to
create and distribute Philips products. This only includes production-related goods (e.g.,
components and parts) and all services that are in category 1 in line with the GHG protocol,
i.e. energy-related spend is not included in this as it is covered in other categories (Scope 1
and 2). Emissions associated with purchased goods are determined in line with the
Environmental Profit & Loss (EP&L) statement, reflecting a comprehensive Life Cycle Analysis
(LCA) perspective. To further reduce these emissions, we are driving action through our
Circular Economy and EcoDesign programs, applying the principles ’use less, use longer and
use again’. For more information on this and our Circular Economy program, please refer to
the Circular Economy, starting on page 50. For more information on any exclusions, refer to
the EP&L methodology document. Emissions associated with purchased services are, in
contrast, calculated using a spend-based approach.
Furthermore, to reduce emissions related to the sourcing of our materials, components and
parts, we announced at COP26 our plan to step up our acclaimed Supplier Sustainability
program with the goal of having at least 50% of our suppliers (based on spend) committing
to Science Based Targets for CO₂-e emissions reduction by 2025.
Use of sold products

In 2023, our emissions related to the use of sold products were 3,066 kilotonnes CO2-e, a
reduction of 41% compared to our baseline in 2020. These emissions are determined by
three key variables: the lifetime energy use per product, the number of products sold per
country, and the country-specific emission factor. It should be noted that the energy
consumption during the full lifetime of the products sold is included in the emission
calculation of the year of sale. Yearly emission levels therefore account for the forward-
looking locked-in energy demand of the products sold. This is done in accordance with the
Greenhouse Gas Protocol (GHGP). The reduction in use-phase emissions can mainly be
241
Philips Group In 2023, we updated our emission factors to the latest available version to reflect the most
Carbon footprint by scope and category in tonnes CO2-equivalent 1)
accurate results. For more information, refer to the methodologies on the ESG Downloads
Milestones and target
Retrospective years 2) page. Philips reports all its emissions in line with the GHGP.
Base
year 2022 2023 2025 2030 2040 Greenhouse Gas emissions per gas type
Scope 1 GHG emissions (base year = Scope 1&2 GHG emissions As part of our reporting obligations, we are also committed to disclosing emissions per
2015)
Greenhouse Gas type, where available. As most Scope 3 categories are out of our direct
Gross scope 1 GHG emissions 34,896 22,518 19,856
control, we do this for all of our Scope 1 and Scope 2 market-based emissions. We do not
% scope 1 emissions covered by 3% 3%
ETS 3) disclose this information for our location-based Scope 2 emissions, as this would ignore our
Scope 2 GHG emissions (base year = 33,543 13,417 conscious decision to procure renewable electricity for all our global operations.
2015)
Gross Location-based emissions 167,486 145,908 In accordance with international reporting requirements, emissions from each of the gases
Gross Market-based emissions 99,275 2,383 2,137 are weighted by their Global Warming Potential (GWP), so that total Greenhouse Gas
Significant scope 3 emissions (base Scope 3 GHG emissions emissions can be reported on a consistent basis. For all of our fuel-related scope 1 emissions,
year = 2020)
the GWPs are used from the IPCC Fifth Assessment Report. For emissions related to the use
Category 1- Purchased goods and 1,715,819 1,511,035
services 4) of refrigerants (fugitive emissions) the GWPs from the IPCC Sixth Assessment Report are
Category 6 - Business travel 70,158 86,399 90,776 leveraged. For our scope 2 market-based emissions the GWPs of the IPCC Fourth Assessment
Category 9 - Downstream 414,631 326,798 305,086 4,268,906 Report are used.
transportation & distribution
Category 11 - Use of sold 5,159,574 3,898,000 3,066,284 Philips Group
products 4) Greenhouse Gas emissions per gas type in tonnes CO2-equivalent
Total GHG emissions 2023
Total GHG emissions (Location- 5,138,945 Scope 1 Carbon dioxide (CO2) 18,267
based) Methane (CH4) 25
Total GHG emissions (Market- 4,995,174 Nitrous oxide (N20) 13
based)
Hydrofluorocarbons (HFC) 1,297
Total GHG emissions including 4,994,496
biofuels (Market-based) 5) Perfluorinated carbons (PFC) 0
Chlorofluorocarbons (CFC) 5
Sales to thirds in millions of EUR 18,169 Hydrochlorofluorocarbons (HCFC) 249

Scope 2 (Market based) Carbon dioxide (CO2) 2,118
GHG intensity Methane (CH4) 12
GHG intensity (Location-based 0.28 Nitrous oxide (N20) 7

approach) (kgCO2-e/EUR) Total amount of emissions 21,993
GHG intensity (Market-based 0.27
approach) (kgCO2-e/EUR)
1)
The emissions cover all activities over which Philips has operational control. This is done in preparation for the ESRS 1 - DR Carbon credits including offsets and insets
62 and 67. Although reduction is key to achieving carbon neutrality, unavoidable carbon emissions
2)
We do not have any location-based emission targets. We will therefore not disclose a baseline require compensation. This is achieved by the cancellation of acquired carbon credits. In
3)
For each of these trading schemes only emissions from CO2, CH4, N2O, HFCs, PFCs, SF6, and NF3 are regulated 2023, we offset a total of 417,900 tonnes CO2-e, equivalent to the annual uptake of
4)
Emissions are calculated using the same methodology and EcoInvent version 3.6 in 2020, 3.9.1 in 2023 approximately 12.6 million medium-sized oak trees. This covers our operational carbon
5)
Philips does not consume any biofuels in its direct operations that would contribute to scope 1 or 2 emissions footprint, which includes all CO2-e emissions from our sites, business travel, and
transportation and distribution. We thereby address climate change outside our own value
chain and contribute to the reduction of global CO2-e emissions that we cannot eliminate
242
along our own value chain. These activities complement our existing climate strategy and party. We ensure, through our providers, that the quality criteria of additionality,
are excluded from our Science Based Targets for emission reductions. Thus, ensuring that permanence and avoidance of double counting are met. In addition, Philips has conducted
these investments do not impede the achievement of our carbon reduction targets. site visits to some of the projects in our portfolio. None of our credits as of now are subject
to corresponding adjustment under Article 6 of the Paris Agreement. Philips will follow the
Philips not only offsets its operational carbon footprint by funding impactful social and developments of Article 6 closely to understand if, and when, any of the projects might
environmental projects but is also proactively exploring innovative approaches to directly become subject to corresponding adjustments. Please note that Philips is currently not
reduce carbon emissions in the value chain, particularly for unavoidable transport-related involved in any GHG removal and storage activities.
emissions. For instance, we employ biofuels in global transportation, enhancing
sustainability in modes such as ocean and air transport – a practice commonly known as All our carbon offsets drive social, economic and environmental progress in emerging
’insetting’. Despite the absence of widely accepted guidance from the GHGP, current markets. Our projects include:
auditing practices overlook insetting as an emission reduction solution. Philips remains
dedicated to fostering sustainability in its supply chain and seeks support from institutions, Providing access to safe drinking water while reducing wood consumption
companies, and organizations like the GHGP for guidelines on emerging carbon levers. This This carbon-emission reduction project is expected to provide millions of liters of safe
commitment aims to drive sector-wide decarbonization, anticipating future technological drinking water in Uganda and reduce the mortality risk from water-borne diseases.
innovations, and encouraging private-sector investments to enhance the overall Additionally, less wood will be required for boiling water, leading to less indoor air pollution
sustainability of the operational value chain. In 2023, we successfully inset 678 tonnes of and slowing down the deforestation rate. As such, this contributes to the protection of a
carbon dioxide equivalent (CO2-e) in the well-to-wheels (WTW) life cycle of air freight by biogenic sink. To ensure quality, all offsets are verified under the Gold Standard.
adopting biofuels from approved feedstock. We only accept biofuels from wastes, residues
and by-products as feedstocks with preference for REDII Annex IX feedstocks for advanced Replanting degraded land while providing education on health matters
biofuels. This strategic move not only resulted in a modest reduction of emissions, but also Planting trees is expected to improve livelihoods and address issues such as deforestation,
aligns with our commitment to nature-based solutions. biodiversity loss, and adaptation to climate change, as well as providing support and
education on, among others, HIV and malaria. This project therefore enhances a biogenic
Philips Group sink. To ensure quality, all offsets are verified under the VCS standard.
Carbon credits cancelled in tonnes CO2-equivalent
2023
Protecting forests through sustainable production
Total credits cancelled 417,900
Deforestation is expected to be reduced through promotion of sustainable businesses to
Share from removal projects (%) 2%
protect the forest. Unsustainable harvest of fuelwood is reduced, thereby contributing to
Share from reduction projects (%) 98%
the protection of a biogenic sink. The forest supports the supply of water to other parts of
Gold Standard GS (%) 17%
Ethiopia and neighboring countries. It is also the habitat of diverse and, in some cases, rare
Verra VCS (%) 83%
species. To ensure quality, all offsets are verified under the VCS standard.
Share from projects within the EU (%) -
Share of carbon credits that qualify as corresponding adjustments (%) -
Increasing employment through provision of sustainable energy
In India, the energy supply gap is reduced by providing access to clean energy and related
Carbon credits planned to be cancelled in the future is 420,000 tonnes CO2 in 2024 and the employment through wind generation. This is therefore considered a technological solution
same amount in 2025. This future cancellation is a high level estimate and subject to change. that also enables an improvement in livelihoods. To ensure quality, all offsets are verified
under the VCS standard.
We finance projects in emerging regions that have a strong link with UN Sustainable
Development Goals 3 (Ensure healthy lives and promote well-being for all at all ages) and 12 Improving respiratory health and reducing deforestation through provision of clean
(Ensure sustainable consumption and production patterns). To ensure these offsets meet our cookstoves
high-quality standard of additionality, permanence and avoidance of double counting, By supporting a range of cookstove technologies across Ghana and Kenya, the projects
Philips only procures carbon credits from carbon standards that are endorsed by ICROA, such improve respiratory health, reduce fuel costs and reduce deforestation. As such, this project
as VCS Standard and Gold Standard. Each program is also verified by an independent third contributes to the protection of a biogenic sink. This also gives people more time for paid
243
work, thus improving prospects. To ensure quality, all offsets are verified under the Gold No capital expenditures have been made related to coal, oil or gas-related economic
Standard. activities. There have also not been any site-related investments in 2023 with locked-in GHG
emissions that might impede our renewable energy and/or emission-related targets. On the
Energy consumption contrary, by signing new long-term Power Purchase Agreements, we have been able to
secure the delivery of renewable energy for the future.
Philips Group
Energy consumption in megawatt hours (MWh) unless otherwise stated
Carbon pricing
2019 2020 2021 2022 2023
At Philips, we apply an internal carbon shadow discount price for our IT, Real Estate,
Fuel consumed from coal and coal products
businesses and R&D investments. If an investment may support our climate targets by
Fuel consumed from crude oil and petroleum 7,400 7,400 4,300 5,000 5,120
products reducing CO2-e emissions, the relevant function and/or business is encouraged to apply EUR
Fuel consumed from natural gas 127,300 126,400 116,300 97,700 84,853 150 discount per saved tonne CO2-e. This enables all functions and businesses to incorporate
Fuel consumed from other non-renewable sources climate impacts in their business case development. Furthermore, by using a discount we
Consumption from nuclear products proactively incentivize the pursuit of sustainable projects, rather than imposing penalties on
Consumption of purchased electricity, heat, steam, 39,300 12,600 14,400 11,900 11,682 unsustainable investments. The scope spans all Philips operations and includes Scope 1 and 2
and cooling from non-renewable sources emissions, as well as all the four material Scope 3 categories. There are no geographic or
Total non-renewable energy consumption 174,000 146,400 135,000 114,600 101,656
business-specific boundaries.
Fuel consumption from renewable sources
(including biomass, biogas, non-fossil fuel waste,
etc.)
The price of EUR 150 per metric ton CO2-e is derived from the internationally recognized
In-contract renewable electricity 95,500 63,100 56,700 39,600 34,416 ReCiPe methodology, in combination with the environmental pricing provided by CE Delft.
Power Purchase Agreement (PPA) 160,900 186,200 168,700 187,400 198,454 This is also in alignment with our EP&L account. The key assumption is that the price of
Consumption of purchased electricity, heat, steam, 124,500 130,000 161,300 152,300 119,778 carbon will increase in the future. Therefore, to ensure price stability over the coming years,
and cooling from renewable sources an uplift was applied to the price of carbon, identified by CE Delft.
Total consumption of self-generated non-fuel 1,100 2,100 2,400 2,700 3,272
renewable energy Philips Group
Total renewable energy consumption 382,000 381,400 389,100 382,000 355,921 Carbon pricing in tonnes CO2-equivalent unless otherwise stated
Share of non-renewable energy consumption (%) 31% 28% 26% 23% 22% Volume at
Type of carbon stake Price applied
Share of renewable energy consumption (%) 69% 72% 74% 77% 78%
price (tCO2-e) (EUR/tCO2-e) Perimeter description
Share of renewable electricity consumption (%) 95% 100% 100% 100% 100%
Shadow 4,995,174 150 All Philips employees are encouraged to leverage the
Total energy consumption 556,000 527,800 524,100 496,600 457,576 discount price internal carbon price of 150 EUR to include
(CAPEX, R&D, environmental factors in the decision making process
Net revenue in millions of EUR EUR EUR
etc.)
17,827 18,169
Operational energy efficiency in MWh/million EUR 27.86 25.18

sales 1)
1)
Philips does not operate in a high climate impact sectors meaning the energy intensity is based on total net revenue
244
Taskforce on Climate-related Financial Disclosures (TCFD) In order to thoroughly evaluate the impact and resilience of climate-related risks, we provide
Philips recognizes the importance of identifying, assessing and mitigating climate-related a comprehensive overview of the climate-related risks and opportunities landscape and how
risks to ensure business continuity and resilience. We publish the annual Task Force on these can be assessed in the context of various Representative Concentration Pathways
Climate-related Financial Disclosures (TCFD) recommendations to provide the information (RCPs), Shared Socioeconomic Pathways (SSPs), and specific topic scenarios, such as the IEA
needed by investors, lenders, insurance underwriters and other stakeholders to Net Zero Emissions by 2050 Scenario (NZE Scenario). Physical risk factors were evaluated on a
appropriately assess and price climate-related risks and opportunities. Please see the visual site-specific level by exploring our 23 manufacturing sites in depth. Other non-
below for an indication of Philips' climate-related risks. manufacturing sites and critical suppliers were also screened for their risk exposure.
Transition risks, on the other hand, were assessed on a company level and by subject matter
experts. The reason for this differentiation is because physical risks vary on a regional level,
while transition forces generally apply on a global scale.
In our efforts to gain insight into physical risks, we have conducted hotspot analyses for each
manufacturing site, leveraging the external Munich RE NATHAN tool to identify physical
material risks. The tool assessed which of the following hazards are most threatening in the
short, medium, and long term, accounting for a 4 ºC global warming scenario (SSP5/RCP8.5):
drought, heat stress, wildfire, precipitation, river flood, storm, and cold stress. Furthermore,
we have conducted annual in-depth assessments at each site to broaden our internal
knowledge, obtaining insights from Environmental, Health and Safety Managers, Business
Continuity Managers, and Plant Site Managers. By doing so, we have gained a profound
understanding of Philips’ resilience towards climate change and the effectiveness of existing
adaptation measures. For more information on this please refer to our TCFD disclosures.
Transition risks have been assessed in line with low global warming scenarios limiting global
warming to 1.5 ºC, with limited overshoot (SSP1/RCP1.9 and SSP1/RCP2.6). The risks have
been evaluated across five key domains: technological, market, reputational, policy, and
legal. Collaboration with internal subject matter experts has ensured a holistic evaluation of
the risks and opportunities associated with the movement towards a low-carbon future.
Particularly, the inclusion of a quantitative assessment for carbon pricing transition risk in a
Net Zero Emissions by 2050 Scenario (NZE Scenario) marks a milestone in our assessment.
This provides stakeholders with a clearer understanding of potential financial implications
and necessary climate mitigation measures associated with our commitment to a low-
In 2023, our primary goal was to further enhance our understanding of both physical and carbon future.
transition climate risks in order to enable comprehensive quantification and disclosure of
climate risks in Philips’ Annual Report 2024. The management of climate-related risks is 12.3.2 Circular Economy
integrated into Philips’ regular risk management process. This ensures alignment with the The transition from a linear to a circular economy is essential to create a sustainable world
risk management team, increasing cross-business comparability and integration with already that functions within the constraints of our one planet. Globally, today more than 90% of
existing risk-screening procedures. The scope of the Physical hotspot analysis spans all Philips used materials go to waste each year, with electronic waste being one of the fastest
sites, as well as the most critical suppliers. The transition risk exploration involves Philips’ growing waste streams in the world. The healthcare industry is also a resource-intense
entire value chain, including our own operations as well as upstream and downstream industry which, according to the Circularity Gap Report 2020, consumes 10% of materials
activities. used globally, every year.
245
Circular Economy program Philips Group

th Philips 2025 targets linked to its circularity ambitions
The Circular Economy program at Philips ran for the 11 year in 2023. We apply Philips’
Increase Minimize Increase
circularity principles ‘use less, use longer and use again’ across five strategic areas: circular Increase circular primary raw renewable Ensure waste
design material use rate materials resources management
Our journey towards a circular economy is first and foremost focused on how we help our Circular revenues √ √ √ √
customers to do more with less materials. Across Philips’ portfolio, our businesses provide Zero waste to √ √
consumers and customers with products, services, and solutions based on circular practices landfill
Circular materials √ √
that also can reduce carbon emissions. We do this by reducing the use of virgin materials, for
management
example by using recycled content, innovative service-based models, digital solutions, Close the loop on √ √
optimizing the use of products, and recirculating materials through responsible end-of-use medical equipment
management. Philips also leverages partnerships to help scale the circular economy globally.
For example, we have worked closely with the Platform for Accelerating the Circular
Economy (PACE) and the World Business Council for Sustainable Development (WBSCD) to Philips looks at circularity in its broadest sense, namely how we can deliver maximum value
harmonize metrics; see Advocacy activities and expenses, starting on page 269. Building and with the minimum amount of materials. This means addressing not only the type and
nurturing communities within Philips is also an essential part of the transformation. In 2023, weight of the materials we use, but also, for example, the efficiency (e.g. though
we continued to provide our employees with access to Ellen MacArthur Foundation’s Basic digitalization), value-add (upgrades) and take-back of our innovations. We use Circular
Course for a Circular Economy and the Circular Economy Masterclass from University of revenues as an overarching metric that collates practices at Philips related to products,
Exeter Business School, training over 100 employees. In 2023, we also continued to upskill services and solutions that contribute to circularity. It measures the revenue contributions
dedicated target groups, including our R&D teams, on circular design, sales professionals on across 4 of our 5 strategic areas for circularity – from design to responsible end-of-use
th
circular propositions, and employees at our sites on circular materials management. management. For the 5 area, manufacturing and supply, we have separate targets on Zero
waste to landfill and Circular materials management that address waste management at our
Philips' circular journey is also closely connected with the developments around regulations, sites (see Sustainable Operations, starting on page 54 for more information). Propositions
metrics and reporting. Together with other companies, Philips is actively supporting global that qualify for circular revenues must comply with the requirements for at least one of the
and national governments in creating impactful and practical laws, regulations, and circular revenue categories. These include, among others, products with low weight or
guidelines. For instance, we have a leading role in the Dutch Circular Economy Agenda containing a minimum threshold of recycled or bio-based plastics, as-a-service models,
(NPCE). software running on cloud, telehealth, upgrades, lifetime extensions, and refurbished
equipment. Each contribution is underpinned and connected to sales via Philips
Philips' 2025 circularity targets management accounting data for sales or connected via inputs linked to other IT systems.
We have committed to achieving ambitious and voluntary circularity targets by 2025, and Circular revenues provide us with an integral overall view of how we progress, and the
our key actions are linked to delivering on these targets. These are also in line with our scientific impact is measured through our material flow metrics.
Environmental Policy, aiming to minimize the use of virgin materials. Our targets relate to
increasing the circularity of our resource inflows and outflows as depicted in the following Philips' material flows
table. The progress towards accomplishing these targets is internally monitored on at least a One important way to look at the impact of our circularity metrics is to look at material
quarterly basis, with quarterly progress externally reported via the Philips results hub. For an flows. Therefore, in addition to tracking progress towards our circularity ambitions, we are
overview of the 2023 results, see Circular Economy, starting on page 50. also improving transparency on Philips' material flows. In 2023, Philips put a total weight of
102 kilotonnes of products, parts and packaging on the market, plus 19 kilotonnes of waste
and less than 0.1 kilotonnes of chemicals via emissions. The reference products in the EP&L
are used as the basis for the products and parts (refer to Environmental performance,
starting on page 46 for more information). It should be noted that the Philips material flow
is outflow-based, with the assumption that the total material inflow into Philips equals the
total material outflow. The main materials that Philips used in 2023 for its products, parts
and packaging include paper and cardboard, plastics and metals.
246
As part of our continuous drive to further improve transparency, Philips has also started to Circular design of software and hardware
disclose information about recycled content, renewable materials, and critical and strategic Our EcoDesign program is a key enabler to lower our overall environmental footprint and is
raw materials. See the section Circular design of software and hardware. Furthermore, we thus a key driver for our Circular Economy program. By 2025, we will design all our new
also disclose data on secondary re-used materials and what is recycled after use, building on products introductions in line with our EcoDesign requirements. This also includes circular
weight data that has already been disclosed in previous Annual Reports. See the section design, which encompasses, for example, the application of recycled and bio-based
Circular end-of-use management. The data sources and processes we have in place for materials and designing for low weight, long life, disassembly, and recycling. A subset of
reporting ensure there is no double-counting. The re-used weights from our refurbished EcoDesigned products, which outperform on circular design, will be counted as contributing
equipment are calculated based on a 3-year average re-use % per equipment multiplied by to circular revenues. These include, for example, products that meet defined thresholds on
its original weight. For X-ray tubes, only the re-used material weight is considered. For the reduced weight compared to competitor products or their predecessors. These EcoDesigned
re-used and refurbished products from Personal Health, as well as re-used spare parts for our contributions were equivalent to 1.9% circular revenues in 2023. Examples include our CT
medical equipment, we have assumed that all product and part weight has been re-used. Incisive platform, which weighs up to 24% less compared to Ingenuity, avoiding 720 kg of
For recycled products, however, Philips reports on materials that are recycled into raw virgin materials.
materials through our certified recycling network or via national recycling schemes. The
latter is also distinct from recycled content in the materials of products and packaging that We are working towards increasing the percentage of recycled content in the materials we
we bring to market. use to reduce the use of virgin materials. In 2023, Philips used 23% of recycled content in our
material flows, mainly from packaging. Our Personal Health business units also have
multiple products with recycled materials – for example, our OneBlade has durable stainless-
steel blades made with an average of 88% recycled steel. Across our Diagnosis & Treatment
and Connected Care segments, recycled materials are mainly from metals used in our
products (40% building on global recycling data from UNEP). Where possible, we also use
renewable materials, which today mostly stem from our paper and cardboard packaging
(65% of total renewable materials), towards which our Personal Health business units are
increasingly shifting. We are increasingly applying renewable materials in our products. For
example, this year we launched our first brush-head with bio-based plastics in our Oral
Healthcare business unit. We understand that our value chain also has an impact on nature,
specifically related to virgin renewable raw materials. Therefore, Philips is taking steps to
confirm that the virgin renewable resources used are sustainably sourced, such as FSC-
certified cardboard. We are also working to improve transparency on our use of critical and
strategic raw materials as defined by the European Commission. Our current data shows we
put almost 0.24 kilotonnes of critical raw materials and 3 kilotonnes of strategic raw
materials to the market. We have low visibility on critical raw materials in, for example,
PCBAs and are working to improve this. Helium is an example of a strategic raw material:
innovations like Philips BlueSeal magnet technology help to reduce the use of this scarce
resource. With over 860 units installed globally, MRI scanners equipped with Philips BlueSeal
magnet technology have already saved more than 1.5 million liters of helium since 2018*).
Building on the further sharpening of circular design requirements in 2022, we continued

with deployment and trained our R&D staff to apply circular design through assessments,
guidelines, tools and training. To monitor the continued progress on, for example,
repairability and recyclability, we will continue to develop internal tools while also aligning
with emerging global standards. Examples of what we already do today to improve
247
recyclability include phasing-out chemicals like PVC and BFR to make our products easier to Circular service in use-phase
recycle. During the use-phase of our products, we help our customers to optimize the use of our
products to maximize their value. In 2023, this amounted to 9.2% circular revenues. In 2023,
Philips Group we upgraded almost 3,000 medical systems around the globe combined for MR, CT, Image
Circular design metrics in kilotonnes and %
Guided Therapy and Ultrasound**). For example, our MR SmartPath portfolio helps
Material flow metrics 2023
customers to re-use their existing magnets and convert these to the next-generation MR,
Recycled content in materials 28 kilotonnes / 23%
while our software upgrades like SmartSpeed can scan up to three times faster***) while
Renewable materials 35 kilotonnes / 29%
reducing power consumption on average by 32% per patient scan while still using the same
Critical raw materials 0.24 kilotonnes / 0.2%
Strategic raw materials 3 kilotonnes / 2%
equipment****) . In Personal Health, more than 1,300 consumer replaceable parts and spare
parts are available, allowing consumers to keep products longer by exchanging parts or
repairing their products via their local repair shop.
Circular manufacturing and supply
In line with our ambition for fully circular operations, Philips applies Lean methodologies to Circular end-of-use management
improve processes and continuously reduce the environmental footprint across our sites. Keeping materials in circulation is a vital element of the circular economy, and Philips strives
Circular materials management is our leading KPI and is not expressed in circular revenues. to recirculate products and parts that come back to our operations. This amounted to 3.3%
We retain as much as possible material value of our waste stream through responsible waste in 2023. In 2023, we brought 1,700 tonnes, or approximately 1.5% of secondary re-used
management and increasing circular practices at our sites. We team up with our supply materials, back to the market. The main pathways for material re-use were:
chain partners to find circular solutions for discarded materials, for example in the 'waste to
value' initiative. For inbound supplier packaging, we aim to replace single-use packaging • 1,655 tonnes from Diagnosis & Treatment and Connected Care, including our Circular
with more sustainable solutions like reusable boxes in order to contribute to our packaging Edition refurbished medical equipment and re-used materials in spare parts.
waste ambitions from recycling to re-use and reduce. For more information, please refer to • 4 tonnes from Personal Health, including refurbished products.
Sustainable Operations, starting on page 54.
Medical equipment
Circular delivery and financing models Philips’ commitment to close the loop, announced at Davos 2018, has helped us scale our
Circular delivery and financing models enable ecosystem partners, including customers and circular ambitions by building a strong case for the end-to-end value of our large medical
suppliers, to work closely together on products that incentivize material efficiency across the equipment. By the end of 2020, Philips ‘closed the loop’ on its large medical equipment by
value chain. This includes leasing, rentals, and service-based models. Amounting to 5.5% of structurally embedding a responsible take-back policy into its customer trade-in offers. This
circular revenues in 2023 and including for example Enterprise Monitoring as a Service means that for all equipment that a customer is willing to trade-in at end of use, Philips will,
(EMaaS) and mobile cardiac telemetry monitoring, where monitors and wearable sensors where feasible, take it back for refurbishment and/or parts recovery, or locally recycle it in a
are returned and processed to be used again. Within Diagnosis & Treatment, Agito Medical certified way to ensure it does not end up in landfill. The products and parts are then broken
has a rental solutions fleet that in 2023 amounted to almost 50 imaging solutions, including down into the main material fractions and provided to the market via our recycling partners.
MR, CT and Cath Lab systems from Philips, but also from other original equipment Following our policy implementation for our large medical equipment, Philips is now
manufacturers. For our consumer products, we offer, for example, rental programs for extending its ’closing the loop’ program to small medical equipment by adapting this policy
Lumea IPL and the Avent breastpump. When the rental period is over, we take the product to fit with the different value drivers, distribution channels and modalities of small
back and wherever possible, refurbish it so it can be used by another consumer. Circular equipment. By 2025, we aim to have a policy in place to responsibly take-back all
delivery models also include digital solutions that drive dematerialization, helping to further professional medical equipment sold directly to customers as part of a trade-in offer or as a
reduce use of virgin materials. Our businesses continue to shift their solutions towards the service at customer request. Like large medical equipment, small medical equipment will,
cloud, which uses significantly less resources compared to running these solutions on IT where feasible, be taken back for refurbishment and parts recovery, or for local recycling.
hardware on premises. With regard to our virtual care offerings, the eICU program at Emory
Healthcare led to a 4.9% increase in discharge to home healthcare and 2.1% decrease in We have more than 25 years of experience providing hospitals with refurbished systems. Our
60-day inpatient readmissions. refurbished portfolios (Circular Edition), offer ‘as good as new’ refurbished imaging systems
across MR, CT, Ultrasound and Image Guided Therapy, with the same high-quality standards,
248
warranty and services as you expect from new Philips systems. Our Circular Edition Philips Group
Circular end-of-use metrics in tonnes and %
refurbishment factories are fully compliant with ISO standard 13485. The re-use of materials
2023
in our Circular Edition portfolios reduces Scope 3 emissions for our customers by avoiding
Secondary re-used materials 1,700 tonnes / 1.5%
the use of virgin materials. For example, the carbon footprint of a refurbished MR system is
45% lower than of a new system, when used in France*****).
More information can be found on the Philips circular economy website.
Operationalizing our ’closing the loop’ commitment has reduced our environmental
footprint by improving the visibility of our installed base, enabling us to reclaim more and *)
The amount of liquid helium saved is a calculation compared to a conventional magnet with 1,500 liters of
triage for re-use at highest value. In 2023, Philips: helium
**)
Includes Compressed SENSE, SmartPath to Dstream, SmartSpeed, iPatientS and Technology Maximiser Pro and
Premium
• Reclaimed more than 11,500 systems or pieces of equipment, driven largely by the take-
***)
Compared to Philips SENSE
back program for patient monitors (more than 8,500 patient monitors).
****)
Applicable to MR 5300 and Ambition S. Philips SmartSpeed power consumption versus Philips SENSE based scanning.
• Increased our active refurbished systems (Circular Edition) installed base to over 10,000 Based on COCIR and in-house simulated environment. Results can vary based on site condition
systems. *****)
Based on LCA using ReCiPe 2008 and EcoInvent 3.8 database, for a refurbished MR Ingenia Omega HD compared to a
• Locally recycled 475 tonnes of medical equipment through our certified global recycling new MR Ingenia Omega HD, used in Paris, France and refurbished in Best, Netherlands. Results will vary per system
network******) . (type)/age, region/country due to, among other things, source of energy and logistics
******)
This number represents the systems we can account for. Recycled systems for which an insufficient Certificate of
Destruction was provided were not included
Consumer products
In 2023, we offered refurbished products in 12 countries, with the ambition to add more. Our
refurbished products include Lumea IPL, shavers, hair care products and baby monitors –
these products also come with a warranty. In Germany, we launched a ‘Better than New’ 12.3.3 Sustainable Operations
campaign focused on increasing consumer awareness and meeting rising demand for Our Sustainable Operations programs relate to improving the environmental performance
refurbished products. of our manufacturing facilities and focus on most of the contributors to climate change, but
also address water, recycling of waste and chemical substances.
While we proactively engage with our Business-to-Business customers, including retailers, to
responsibly take care of products at end-of-use, products do not always return to us, Philips Group
Sustainable Sites
especially our consumer products. These are discarded by consumers at the end of their
baseline year 2020 target 2025 2023 actual
useful life, and they are eventually processed by national collection and recycling schemes.
Total CO2 from manufacturing 0 Ktonnes 0 Ktonnes 0 Ktonnes
Europe has advanced schemes, and in accordance with the recycling rates published for
Water withdrawal* 710,108 m3 5% reduction 661,076 m3
packaging and the EU Waste Electrical and Electronic Equipment (WEEE) regulations, we
Zero waste to landfill 2.6% less than 0.5% 0.0%
estimate that approximately 11,800 tonnes of products (in WEEE category 5) and packaging Circular Materials Management 90% 95% 91%
from our Personal Health business units were recycled in the European Union in 2023. This is Hazardous substances emissions 2,465 kilos 25% reduction 1,300 kilos
an increase compared to the previous year (5,200 tonnes), which is mainly attributable to VOC emissions 79 tonnes 10% reduction 74 tonnes
updating our methodology to include packaging in our calculations, but also shifting to the
new WEEE categories. This applies to consumer products only and does not include our
medical equipment. Since medical equipment is now spread across multiple WEEE Energy use in manufacturing
categories, we were unable to provide reasonable recycling estimates for our Diagnosis & Total energy consumption in manufacturing amounted to 322,532 megawatt hours (MWh)
Treatment and Connected Care segments. We will continue improving our reporting on in 2023, which is a 5% reduction compared to the 338,140 MWh in 2022. Diagnosis &
recycled products, which will require global standards and harmonized data collection Treatment accounted for about 52% and Personal Health 36% of the consumption.
across the globe. Diagnosis & Treatment energy consumption decreased by 2%, mainly due to energy savings
plans in our large sites and better weather conditions. Connected Care reported a 5%
reduction due to changes in the operations. Energy consumption at Personal Health
249
decreased by 8%, mainly driven by the reduced production volumes and improved energy Hazardous substances emissions
efficiency. Compared to heavy industry, our sites have relatively few chemical emissions and we have
voluntary targets to reduce them. However, most of our manufacturing operations have
Philips Group processes that result in some emissions to air and water. Therefore, we carefully monitor all
Total energy consumption in manufacturing 1) in megawatt hours (MWh)
emissions and are working to limit hazardous chemical and VOC emissions. Many of these
2019 2020 2021 2022 2023
decisions happen at the product and process design stage.
Connected Care 78,056 63,611 44,722 41,509 39,523 Philips Group
Personal Health 134,722 114,445 130,834 126,738 116,548 Hazardous substances emissions
Philips Group 364,723 339,167 350,834 338,140 322,532 2019 2020 2021 2022 2023
1) Diagnosis & Treatment 104 92 181 175 158
This table reflects Philips energy consumption, excluding potential heat and transmission losses from electricity generation
and transport Connected Care 46 20 1,239 863 781
Personal Health 336 455 1,242 510 362
Philips Group 486 567 2,662 1,548 1,300
Carbon emissions in manufacturing
Greenhouse gas emissions from our manufacturing operations totaled 14,078 tonnes
CO2-equivalent in 2023, 2% lower than in 2022. Mainly driven by the energy saving projects, At Philips, we want to track the impact of chemical substances on a life-cycle basis and,
fossil fuel reduction and operational changes in different locations. CO2 emissions from based on a risk-level classification and precautionary principle, to ensure implementation in
electricity remained zero due to the use of 100% electricity from renewable sources. an active and practical way. The Classified Substances List (CSL) has been set up to manage,
Emissions from other greenhouse gases increased due to higher usage of refrigerants. restrict, control and/or monitor chemical substances according to regulation requirements
and/or known risks. In its CSL, Philips captures all substances with no current legislative
Philips Group restriction, but a foreseen, future indication as ‘Risk Level II’, requiring action to evaluate the
Total carbon emissions in manufacturing per segment in tonnes CO2-equivalent
measures to reduce exposure and emissions and, if possible, to evaluate and implement less
2019 2020 2021 2022 2023
harmful alternatives. For its chemicals reduction program ending in 2020, Philips used the
CSL from 2015. In 2021, with the start of the new 5-year program, we applied the latest CSL,
Connected Care 4,897 4,031 2,441 2,689 2,554
which includes many more chemicals. Therefore, the 2021 results are significantly higher
Personal Health 6,147 5,294 5,413 4,771 4,087
than the 2020 results. In 2023, we continued to phase out and replace hazardous substances
Philips Group 20,645 18,410 16,479 14,328 14,078
at our industrial sites. The hazardous substances emissions amounted to 1,300 kg in 2023,
which is a 16% reduction compared to the 1,548 kg in 2022. In the Diagnosis & Treatment
Diagnosis & Treatment CO2 emissions increased by 569 tonnes CO2-equivalent, 8% due to segment the emissions decreased by10%. The emissions in the Connected Care segment
increased emissions from refrigerants in India. Connected Care reported a slight decreased. amounted to 781 kg, which is a 10% reduction compared to the prior year caused by
At Personal Health, CO2 emissions increased due to higher refrigerants refills . replacing harmful chemicals and lower production volumes in a factory in Asia. In the
Personal Health segment the hazardous substances emissions were 362 kg in 2023, a
In 2023, all manufacturing sites received 100% of their electricity from renewable sources. significant 29% reduction due to more efficient processes.
Our operations in the US have been powered by wind energy since 2017 from the Los
Mirasoles windfarm. Additionally, our operations in the Netherlands have received electricity
from the Bouwdokken and Krammer wind farms since 2019, all helping to deliver on the
ambition to remain carbon-neutral in our operations.
250
VOC emissions No environmental incidents nor non-compliances were reported by Connected Care sites.
Philips Group In Personal Health, one site reported two environmental incidents. One was related to
VOC emissions in tonnes
handling chemical waste and hazardous materials. The other incident was due to a
2019 2020 2021 2022 2023
wastewater leakage, where immediate actions were taken. There was no groundwater
Diagnosis & Treatment 46 44 42 38 34
pollution, although minor contamination was detected on the upper soil. Furthermore, two
Connected Care 6 3 3 2 2
non-compliances were reported which were related to noise and water discharge
Personal Health 54 32 33 37 38
Philips Group 106 79 78 77 74
requirements. No fines were issued.
To find out about our sustainability results at global and regional and market level, go to the
Volatile Organic Compounds (VOC) can react with nitrogen oxides (NOx) and other harmful Philips results hub.
compounds to create highly toxic particulates (PM 2.5), often referred to as ground-level
Philips Group
harmful smog, which stimulate disease in plants, inhibit seed production, and hinder
CO2
fertilization. Philips is focused on reducing direct exposure impact and atmospheric
Total emitted Hazardous
photochemical reactions for the benefit of exposed employees, the general public and local Manufacturing recordable (Tonnes Waste CMM Water substances VOC
3
and global ecosystems. Market sites case rate 1) CO2) (Tonnes) (%) (m ) (kg) (Tonnes)
APAC 1 0.00 1998 3139 98% 110461 60 27824
VOC emissions decreased by 4% in 2023, 74 tonnes compared to 77 tonnes in 2022. The Benelux 2 0.18 3,478 6,100 87% 72,173 153 12,102
Diagnosis & Treatment businesses, which represent 46% of total VOC emissions, decreased Central 0 0.00
Eastern
by 11% due to process optimizations and changes in production. VOC emissions in the Europe
Connected Care businesses decreased due to lower production levels, and VOC emissions in DACH 3 0.49 2,583 2,296 93% 38,752 23 4,553
the Personal Health business units (representing 51% of total VOC emissions) increased France 0 0.11
slightly, mainly driven by the increased production volume in a factory in Asia. Greater 5 0.21 962 2,020 95% 153,110 928 4,580
China
ISO 14001 certification Iberia 0 0.34
The Philips manufacturing sites are certified individually. In 2023, 96% of reporting IIG 1 0.26 449 560 81% 11,958 0 198
Indian 1 0.03 746 194 100% 18,018 17 104
manufacturing sites were certified. The one site which is not certified yet, is planning to have
Subcontinent
the certificate in 2024. The integration of newly acquired companies is in progress; smaller
Japan 0 0.29
sites are required to maintain robust environmental management systems while external Latam 2 0.08 339 809 87% 72,634 1 14,251
certification is not mandatory. META 0 0.11
Nordics 0 1.35
Philips Group
North 8 0.47 3,523 4,257 91% 183,970 118 10,320
ISO 14001 certifications as a % of all reporting organizations
America
2019 2020 2021 2022 2023 Russia, 0 0.00
Philips Group 79% 81% 92% 96% 96% Central Asia
UK & Ireland 0 0.11
Environmental incidents 1)
Includes manufacturing and non-manufacturing sites
In 2023, three environmental incidents were reported by three Diagnosis & Treatment sites.
One incident was related to emissions to air due to leakage, one was related to water
discharge and one to a diesel spill. These incidents were followed by investigations and
remedial actions. Furthermore, one site reported a non-compliance which was related to
wastewater discharge. No fines were issued.
251
12.3.4 EU Taxonomy disclosures Reportable taxonomy-eligible capital expenditures in 2023 amounted to EUR 636 million, or
The aim of the European Taxonomy Regulation (EU 2020/852), including the delegated acts 64.6% of total capital expenditure (non-eligible capital expenditures 35.4%). Some other
adopted thereunder, is to provide companies, investors and policymakers with appropriate (enabling) Philips activities are included in the delegated act ((EU) 2021/2139) and are
criteria for determining which economic activities can be considered environmentally eligible for capital expenditures for the objective of climate change mitigation and climate
sustainable, and it requires companies to report on how and to what extent their activities change adaptation to be reported over 2023. We therefore screened (EU) 2021/2139,
are associated with such ‘taxonomy-eligible activities’. The Taxonomy Regulation is relatively assessed our capital expenditure, and identified relevant activities mainly related to our real
new and still under development (e.g. changes to the first Delegated Act, changes in estate portfolio. For these activities, capital expenditures are determined based on the 2023
presentation format), leaving still significant uncertainties around its phased additions to property, plant and equipment, intangible assets, and additions to right-of-use
implementation. It is expected, however, that the EU Taxonomy will develop into a assets, excluding any re-assessments (refer to Property, plant and equipment, starting on
comprehensive and detailed framework over the coming years. page 170 and Intangible assets excluding goodwill, starting on page 176).
The Taxonomy Regulation provides certain conditions for taxonomy alignment. Among Reportable taxonomy-aligned capital expenditures in 2023 amounted to EUR 4 million, or
others, the relevant activity must substantially contribute to one or more of the following six 0.4% of total capital expenditure (non-aligned capital expenditures 99.6%), and mainly
environmental objectives (while not significantly harming any of the others): related to energy efficiency improvement measures in our buildings (installation,
maintenance, and repair of energy efficiency equipment), such as energy-efficient heating,
1. Climate change mitigation ventilation, and air conditioning (HVAC) in various locations around the world. Next, we
2. Climate change adaptation invested in onsite renewable electricity generation (installation, maintenance and repair of
3. The sustainable use and protection of water and marine resources renewable energy technologies) by installing PV (solar) panels in one of our factories in Asia.
4. The transition to a circular economy
5. Pollution prevention and control We assessed compliance with the criteria set out in Article 3 of Regulation (EU) 2020/852
6. The protection and restoration of biodiversity and ecosystems and the associated technical screening criteria on a project basis.
The delegated acts adopted under the Taxonomy Regulation provide technical screening Similar to capital expenditures, we screened (EU) 2021/2139 for relevant operational
criteria which must also be met to constitute taxonomy alignment. In 2023, the second expenditure activities. Total operational expenditures are determined based on the 2023
Delegated Act was published concerning activities significantly contributing to non-capitalized costs that relate to research and development, building renovation, short-
environmental objectives 3-6 above. term lease, maintenance and repair, and any other direct expenditures relating to day-to-
day servicing of property, plant and equipment. Reportable taxonomy-eligible operational
The taxonomy framework provisions effective on the date of this Annual Report require expenditures in 2023 amounted to EUR 2,008 million, or 84.8% of total operational
Philips to disclose the proportion of its taxonomy-eligible activities (described in any expenditures expenditure (non-eligible operational expenditures 15.2%), In 2023, we did not
delegated act adopted to date) and non-eligible economic activities in its total turnover, record reportable taxonomy-aligned operational expenditures (0%), as for example, the
capital and operational expenditure, as well as certain qualitative information for sourcing of renewable energy is not included in the Taxonomy. Non-aligned operational
environmental objectives 1-6. We used the Regulation (EU) 2020/852 as supplemented with expenditures were 100%.
Commission Delegated Regulation (EU) 2021/2139, Commission Delegated Regulation (EU)
2021/2178, Commission Delegated Regulation (EU) 2023/2485 and Commission Delegated We followed the same accounting principles as in our financial statements.
Regulation (EU) 2023/2486) to identify activities that are eligible. Consequently, 98.7% of
Philips’ revenues were eligible under these delegated acts during 2023. All remaining We will continue to monitor legislative developments and adapt our disclosures where
revenues were non-eligible (1.3%). We used delegated act (EU) 2021/2178, 2023/2485 and needed.
2023/2486 for the definition and calculation of the taxonomy-eligible percentages. Revenue
is calculated based on ’Sales’ as per Consolidated statements of income, starting on page
141.
252
Philips Group
Proportion of turnover from products or services associated with Taxonomy-aligned economic activities – 2023
in millions of EUR unless otherwise stated
Financial year Year Substantial Contribution Criteria DNSH criteria ('Does Not Significantly Harm')(h)
Circular Economy (15)
Category transitional
(A.1.) or eligible (A.2.)
turnover, 2022 (18)
Category enabling
Taxonomy aligned
Climate Change
Climate Change
Climate Change
Climate Change
Biodiversity (10)
Biodiversity (16)
Adaptation (12)
Safeguards (17)
Adaptation (6)
Turnover, 2023
Mitigation (11)
Mitigation (5)
Proportion of
Proportion of
Pollution (14)
Pollution (8)
Turnover (3)
activity (20)
Code (a) (2)
activity (19)
Water (13)
Minimum
Water (7)
Economic Activities (1)
EUR % Y; N; N/ Y; N; N/ Y; N; Y; N; Y; N; Y; N; Y/N Y/N Y/N Y/N Y/N Y/N Y/N % E T
EL (b) (c) EL (b) (c) N/EL N/EL N/EL N/EL
(b) (c) (b) (c) (b) (c) (b) (c)
A. TAXONOMY-ELIGIBLE ACTIVITIES
A.1. Environmentally sustainable activities (Taxonomy-aligned)
Turnover of environmentally 0 0% 0%
sustainable activities (Taxonomy-
aligned) (A.1)
Of which Enabling 0 0% 0% E
Of which Transitional 0 0% 0% T
A.2 Taxonomy-Eligible but not environmentally sustainable activities (not Taxonomy-aligned activities) (g)
EL; N/EL EL; N/EL EL; N/ EL; N/ EL; N/ EL; N/
(f) (f) EL (f) EL (f) EL (f) EL (f)
Manufacture of CE1.2 13,366.54 73.6% N/EL N/EL N/EL N/EL EL N/EL N/A
electrical and electronic
equipment
Provision of IT/OT data- CE4.1 929.18 5.1% N/EL N/EL N/EL N/EL EL N/EL N/A
driven solutions
Repair, refurbishment CE5.1 40.15 0.2% N/EL N/EL N/EL N/EL EL N/EL N/A
and remanufacturing
Sale of spare parts CE5.2 42.88 0.2% N/EL N/EL N/EL N/EL EL N/EL N/A
Product-as-a-service and CE5.5 3,552.18 19.6% N/EL N/EL N/EL N/EL EL N/EL N/A
other circular use- and
result-oriented service
models
Turnover of Taxonomy- 17,930.94 98.7%
eligible but not
environmentally
sustainable activities
(not Taxonomy-aligned
activities) (A.2)
A. Turnover of 17,930.94 98.7%
Taxonomy eligible
activities (A.1+A.2)
B. TAXONOMY-NON-ELIGIBLE ACTIVITIES
Turnover of Taxonomy- 238.17 1.3% N/A
non-eligible activities
TOTAL 18,169.11 100% N/A
253
Philips Group
Proportion of CapEx from products or services associated with Taxonomy-aligned economic activities – 2023
Proportion of CapEx,
Category enabling
Taxonomy aligned
CapEx, 2022 (18)

Climate Change
Climate Change
Climate Change
Climate Change
Biodiversity (10)
Biodiversity (16)
Adaptation (12)
Safeguards (17)
Adaptation (6)
Mitigation (11)
Mitigation (5)
Proportion of
Pollution (14)
Pollution (8)
activity (20)
Code (a) (2)
activity (19)
Water (13)
Minimum
Water (7)
CapEx (3)
2023 (4)
(b) (c) (b) (c) (b) (c) (b) (c)
Electricity generation CCM4.1 0.39 0% Y N N/EL N/EL N/EL N/EL Y Y Y Y Y Y 0% E
using solar photovoltaic
technology
Renovation of existing CCM7.2 0.04 0% Y N N/EL N/EL N/EL N/EL Y Y Y Y Y Y 0% T
buildings
Installation, CCM7.3 3.55 0.4% Y N N/EL N/EL N/EL N/EL Y Y Y Y Y Y 1% E
maintenance and repair
of energy efficient
equipment
Installation, CCM7.4 0.03 0% Y N N/EL N/EL N/EL N/EL Y Y Y Y Y Y 0% E
of charging stations for
electric vehicles
CapEx of environmentally 4.01 0.4% 100% 0% 0% 0% 0% 0% Y Y Y Y Y Y 1%
aligned) (A.1)
Of which Enabling 3.97 0.4% 100% 0% 0% 0% 0% 0% Y Y Y Y Y Y % E
Of which Transitional 0.04 0% 0% Y Y Y Y Y Y % T
Electricity generation CCM4.1 0.01 0% Y N N/EL N/EL N/EL N/EL 0%
using solar photovoltaic
technology
Construction of new CCM7.1 0.46 0% Y N N/EL N/EL N/EL N/EL 0%
buildings
Renovation of existing CCM7.2 30.62 3.1% Y N N/EL N/EL N/EL N/EL 0%
buildings
Installation, CCM7.3 3.69 0.4% Y N N/EL N/EL N/EL N/EL 0%
of energy efficient
equipment
Installation, CCM7.4 0.03 0% Y N N/EL N/EL N/EL N/EL 0%
254
Proportion of CapEx,
Category enabling
Taxonomy aligned
CapEx, 2022 (18)

Climate Change
Climate Change
Climate Change
Climate Change
Biodiversity (10)
Biodiversity (16)
Adaptation (12)
Safeguards (17)
Adaptation (6)
Mitigation (11)
Mitigation (5)
Proportion of
Pollution (14)
Pollution (8)
activity (20)
Code (a) (2)
activity (19)
Water (13)
Minimum
Water (7)
CapEx (3)
2023 (4)
of charging stations for
electric vehicles
Manufacture of CE1.2 526.65 53.5% N/EL N/EL N/EL N/EL EL N/EL N/A
equipment
driven solutions
Repair, refurbishment CE5.1 9.00 0.9% N/EL N/EL N/EL N/EL EL N/EL N/A
and remanufacturing
Sale of spare parts CE5.2 0 0% N/EL N/EL N/EL N/EL EL N/EL N/A
Product-as-a-service CE5.5 19.66 2.0% N/EL N/EL N/EL N/EL EL N/EL N/A
and other circular use-
and result-oriented
service models
CapEx of Taxonomy- 632.32 64.2%
eligible but not
environmentally
activities) (A.2)
A. CapEx of Taxonomy eligible 636.33 64.6% 1
activities (A.1+A.2)
CapEx of Taxonomy- 349.09 35.4%
non-eligible activities
TOTAL 985.42 100%
255
Philips Group
Proportion of OpEx from products or services associated with Taxonomy-aligned economic activities – 2023
Proportion of OpEx,
Category enabling
Taxonomy aligned
Climate Change
Climate Change
Climate Change
Climate Change
Biodiversity (10)
Biodiversity (16)
Adaptation (12)
OpEx, 2022 (18)

Safeguards (17)
Adaptation (6)
Mitigation (11)
Mitigation (5)
Proportion of
Pollution (14)
Pollution (8)
activity (20)
Code (a) (2)
activity (19)
Water (13)
Minimum
Water (7)
OpEx (3)
2023 (4)
(b) (c) (b) (c) (b) (c) (b) (c)
OpEx of environmentally 0 0% 0%
aligned) (A.1)
Of which Enabling 0 0% 0% E
Of which Transitional 0 0% 0% T
Manufacture of CE1.2 1,606.98 67.9% N/EL N/EL N/EL N/EL EL N/EL N/A
equipment
driven solutions
Repair, refurbishment CE5.1 0.34 0% N/EL N/EL N/EL N/EL EL N/EL N/A
and remanufacturing
Sale of spare parts CE5.2 1.50 0% N/EL N/EL N/EL N/EL EL N/EL N/A
Product-as-a-service CE5.5 102.97 4.4% N/EL N/EL N/EL N/EL EL N/EL N/A
and other circular use-
and result-oriented
service models
OpEx of Taxonomy- 2,007.68 84.8%
eligible but not
environmentally
activities) (A.2)
A. OpEx of Taxonomy 2,007.68 84.8%
eligible activities
(A.1+A.2)
OpEx of Taxonomy-non- 358.98 15.2%
eligible activities
TOTAL 2,366.66 100%
256
12.4 Social statements 12.4.2 People development

announcement of an enhanced and fully integrated approach to doing business responsibly Onboarding
and sustainably. This section provides additional information on (some of) the Social At Philips, we welcome thousands of new employees every year. We understand the
performance parameters reported in Social performance, starting on page 56 significance of ensuring that our colleagues feel a profound sense of belonging and clarity
about their roles right from the start. To achieve this, we have crafted a digitally enhanced
12.4.1 Measuring health impacts onboarding approach, tailored for both new hires and internal movers.
In 2023, we continued the research to measure our social impact to assess the positive
contributions to health effects offered by publicly traded companies related to medical Our people leaders and their teams play an invaluable role in the onboarding experience.
devices. We further piloted the methodology and evaluated another use case of the Our new employees consistently highlight this as the most valuable aspect of their
potential measurable impact of IGT devices. onboarding journey. To bolster this approach, we offer support to our people leaders
through comprehensive capability-building programs and toolkits. We firmly believe that
This study estimated the potential benefits of using IGT medical devices to detect and onboarding is not just a process, but a key leadership accountability.
support treating health problems for patients in several countries and regions of the world.
This study is expected to help us assess the broader use of the methodology to diverse In 2023, we reinforced the mandatory quality and clinical education that every new hire
devices with an aim to support and illustrate how to guide investments toward publicly receives, underscoring our unwavering commitment to patient safety and quality. Of those
traded companies that bring products and services into the market with quantifiable who joined Philips in 2023, 91% reported a positive onboarding experience, and 95% felt
impacts linked to a common framework that fulfils the UN Sustainable Development Goals. genuinely welcomed here.
Our onboarding practices reflect our dedication to nurturing a dynamic and inclusive
Case study*): IGT medical devices workplace, ensuring that our new team members hit the ground running and can thrive in
An analysis of 204 countries estimated the impact of IGT medical devices on reducing their roles.
cancer (tracheal, bronchus, lung, and kidney) and cardiovascular mortality in different
world areas, aligning with UN SDG targets 3.2 and 3.4: Career development
We see our talent as our most differentiating enterprise asset. Our goal is to enable
• A global assessment of IGT diagnosis indicates that a procedure may prevent everyone to thrive at Philips, and we recognize that it is important to invest in strategic
between 0.02 and 1.91 deaths per medical device per year, with a global geometric capabilities, and for both leaders and employees to share accountability for career
mean of 0.18 and 90% CI [0.08, 0.37]. development. We expect our leaders to scout for talent, develop people and upgrade
• Cardiovascular mortality prevention benefits of using IGT medical devices are the capabilities, so that we can continue to build a diverse, future-oriented workforce where
highest in Central and Eastern European countries. inclusion is key, and transparent, ongoing feedback enables all our people to grow.
We support our people in navigating their own career and stimulate our managers to have
meaningful career dialogues with their people. To this end, we continued our Continuous
*) Feedback and Continuous Talent Dialog approach in 2023. We also implemented a digital
Sanchez-Pina (2023), Assessment of Positive Contributions to Health of Publicly Traded Companies related to Medical
Devices, Department of Environmental Health Harvard T.H. Chan School of Public Health talent marketplace within Philips, giving employees the opportunity to build their skills in
new areas outside of their core jobs.
Enablers such as Mentoring, Development Centers and Onboarding have also been
leveraged by the organization based on the needs of particular talent segments. We
recently launched LinkedIn Learning to provide access to technology-enabled self-paced
learning and best-in-class learning content.
257
We invested in development of our leaders, especially to lead during the current changes. Through improved data analytics and simplified ways of working, we continuously align our
We launched development offerings in areas of leading with care, engagement & learning product portfolio to support organizational capability development. Philips
motivation, and managing change. University is committed to deliver learning and development experiences that impact our
people and Philips as a whole.
Our People Performance Management focuses on both ‘what’ we achieve (goals and key
areas of responsibilities) and ‘how’ we achieve these goals. This more balanced view of By the end of 2023, 670,712 courses had been taken through Philips University, with 631,364
performance drives holistic conversations between employee and manager throughout the training completions (internal platform only) and a total of 660,145 training hours. Courses
year, with regular check-ins for feedback and development built in along the way. In 2023, completed by the largest number of employees include Living integrity/General Business
89% of our employees were involved in regular performance and career development Principles and Legal Compliance 2023, and Security Fundamentals 2023.
reviews.
By the end of 2023, 3,000,251 courses had been taken through Quality Management
We continue to stimulate cross-moves (across Businesses, between Zones or Functions) to Learning (internal platform only), with 2,946,835 training completions and a total 2,327,115
promote collaboration and give people challenging learning experiences. During the recent training hours. These training completions relate to our emphasis, via training deployments,
reorganization, we largely staffed senior leadership positions with internal talent, with a on Patient Safety and Quality-related topics, and represent training for all our employees
specific focus on cross-functional talent pipelining. who work on our Philips products or related services. Courses completed by the largest
number of employees in the Quality Management Learning domain include Customer
Philips also gave meaningful work experience to 1,802 interns, offering 321 of them Feedback Awareness, Quality Policy Awareness, Management system and Quality
permanent employment after their internship. Management system portal navigation and Manage Customer Feedback.
Leadership For Philips in total, therefore, 3,670,963 courses have been taken, with 3,578,199 training
To continuously improve our leadership capability, we provide company-wide development completions and 2,987,260 training hours, resulting in an average number of training hours
solutions such as Leadership Programs, Coaching & Mentoring, Development Centers and of 43 per employee.
Assessments. Senior Leadership Programs (Corporate Grade 90 and above) are facilitated
multi-day immersive experiences, in which a selected senior management group focuses on 12.4.3 Talent attraction
core business challenges as well as the behavioral shifts needed to accelerate results. Through 2023, we filled over 11,000 positions across the organization, of which 43% were
internal appointments, up from 33% in 2022. Our two strategic external hiring channels are
In 2023, all leadership interventions continued to focus on accelerating patient safety and Direct-Sourcing and Referrals, which together delivered 42% of our external hires in 2023.
quality, and also supported the development of capabilities to deliver on our strategy to
create value with sustainable impact. Through collaboration with the Tent Partnership for Refugees, we continue to offer
opportunities to refugees across our operations. In 2023, we hired 51 refugees across the
In 2023, we launched a change leadership capability program for senior leaders (Corporate globe, and we kicked off this refugee program roll-out in the US. In May we joined Tent’s
Grade 90 and above), and for people leaders we developed and launched short modules to Mentorship Program for Refugee Women in the US and announced a new commitment to
build deeper capability in change, care, and engagement. mentor 50 refugee women over the course of the next three years. In August, we also
committed to mentor 50 Hispanic refugees over the next three years.
Learning
Philips advocates experience-based career development, providing our people with the In 2023, we strengthened our focus on strategic Employer Branding and Recruitment
opportunity to identify and gain the experiences necessary to help deliver our strategy and Marketing initiatives. We optimized our approach to media activity with targeted attraction
strengthen their employability. In 2023, we continued to innovate the way learning and campaigns focused on the most critical talent segments and strategic capabilities. This led to
development experiences are created and offered, embarking on a program to transform a 55% increase in leads in our talent pool, a 57% increase in unique visitors to our Careers
Philips University into a Capability Development Platform. Continuing our strategy to website per job posted, and a 9% increase in applications per job requisition compared to
provide a ‘digital first’ employee experience, we expanded our investments in digital 2022.
solutions that support personal, team and organizational growth.
258
We continued our always-on employer branding content program across a variety of % Employees
Have Collective covered under
channels, strengthening our positioning as a people-centric, purpose-driven health Bargaining Collective Labor
technology company focused on patient safety, quality and sustainability, and as an Country Total EEA Country? Agreement? Agreements
employer of choice for inclusion, diversity and well-being. Our marketing metrics indicating Hong Kong 214 No No
interest and favorability to our employer brand increased double-digit compared to 2022. Switzerland 189 No No
Saudi Arabia 167 No No
12.4.4 Workforce details Taiwan 163 No No
United Arab Emirates 156 No No
New reporting requirements require listed European companies like Philips to disclose more
Denmark 144 Yes Yes 31%
details on their workforce, if 'Own workers' are considered 'material' as per the Double
South Africa 144 No No
Materiality Assessment, starting on page 13, which is the case at Philips. In preparation for
Thailand 137 No No
these reporting requirements in 2024, we decided to already publish a number of these in
Argentina 133 No No
the Annual Report 2023.
Egypt 113 No No
Romania 107 Yes No
Philips Group
Key data on number of employees (including contingent workers) per country Colombia 107 No No
% Employees Czechia 105 Yes No

Have Collective covered under Chile 101 No Yes 100%
Bargaining Collective Labor Malaysia 97 No No
Country Total EEA Country? Agreement? Agreements Philippines 87 No No
United States 17,598 No Yes 0.3% Portugal 81 Yes Yes 100%
Netherlands 9,242 Yes Yes 89% Finland 79 Yes Yes 97%
India 8,667 No Yes 0.6% Vietnam 70 No No
China 7,151 No No Hungary 61 Yes No
Germany 3,632 Yes Yes 46% Other countries (with less than 436
Indonesia 3,573 No No 50 employees)
Costa Rica 2,901 No No Total 70,245
Poland 2,094 Yes No
Japan 2,013 No No Employees covered under 22%
Brazil 1,841 No Yes 100% Collective Labor Agreements
Israel 1,189 No No
United Kingdom 969 No Yes 8% The table above displays all countries where Philips has more than 50 employees. As shown
France 916 Yes Yes 100% above, the percentage of total employees covered by collective bargaining agreements is
Panama 771 No No
22%. The number of employees in the European Economic Area (EEA) at year-end 2023 was
Italy 679 Yes Yes 100%
18,512, and the percentage of employees in the EEA covered by Collective Labor Agreements
Canada 553 No No
is 70%.
Australia 543 No No
Spain 516 Yes Yes 94% Philips Group
Singapore 406 No Yes 12% Employees (excluding contingent workers) by working type in head count at year -end
Russian Federation 363 No No Female I choose not to self-identify Male Total
Korea, Republic of 336 No Yes 80% Permanent employees 23,905 47 40,196 64,148
Austria 328 Yes Yes 100% Temporary employees 2,903 1 969 3,873
Mexico 316 No No Other employees 7 0 11 18
Belgium 287 Yes Yes 50% Philips Group 26,815 48 41,176 68,039
Sweden 241 Yes Yes 100%
Turkey 229 No No
259
Employees with disabilities – based on voluntary self-identification to become a self-sustaining forest by 2026.
Philips is committed to broadening our outreach of talent and leveraging the diversity of our • India: Philips employees engaged in various CSR activities, including fulfilling over 1,000
employees and is dedicated to fostering an environment that encourages self-identification children's wishes through 'The Philips Wish Tree', donating blood, supporting heart
in order to: surgeries for children, conducting a Telemedicine Drive, and partnering for pediatric
heart surgeries.
• Increase hiring and retention of qualified individuals with disabilities to capitalize on • Japan: Philips Japan participated in the Yamathon Charity Event, walking the 30 stations
their unique skillset, talents, experiences and perspectives of the JR Yamanote Line within 12 hours, raising significant funds for a children's hospice.
• Ensure we are creating and sustaining a diverse and inclusive workplace Additionally, our employees made efforts towards sustainability, reducing office amenity
• Comply with US federal regulations requiring affirmative action in disability hiring, such use and fuel consumption.
as Section 503 of the Rehabilitation Act
12.4.6 Building employability
US federal regulations under Section 503 of the Rehabilitation Act require covered federal At Philips, our goal to offer the best place to work for people who share our passion is not
contractors with 50 or more employees (US companies that conduct business with the limited to employees on our payroll. In the Netherlands, for example, we run a special
federal government, such as Philips) to obtain voluntary self-identification information employment program, WGP (Werkgelegenheidsplan, or Philips Employment Scheme), to
through an agency-prescribed Voluntary Self-Identification of Disability Form (Form CC-305) offer vulnerable groups of external jobseekers a work experience placement, usually
which is embedded within Philips' system of record, at three stages: pre-offer (application combined with training. Since the scheme’s launch in 1983, 13,415 people have participated,
process), post-offer (after job offer, but before the new hire or rehire starts job duties), and and around 80% found a regular job after taking part. In 2023, we had an inflow of 50
during employment (invite employees to voluntarily inform Philips whether the employee is candidates, bringing the total number of participants in 2023 to 114. The WGP program is
an individual with a disability) by way of a resurvey that must occur at five-year intervals. US also accessible to refugees, and in 2023 we had 11 refugees participating.
employees can update their disability status within the disability self-ID module within
Philips' system of record at any time during their employment with Philips. These regulations 12.4.7 Health and Safety performance
came into effect in 2014, making 2024 the second five-year window since rule inception for Policy, Procedures and Management Systems: Philips continued to build a comprehensive
federal contractors to conduct a resurvey. global Health & Safety Management System with the deployment of 12 updated Philips
Corporate Safety Standards (PCSS) in 2023. A simplification exercise on the Health & Safety
Choosing to identify a disability status is strictly voluntary. The records would remain (H&S) framework took place, leading to a new total of 66 PCSS deployed by the end of 2023.
confidential, i.e. will not be shared with supervisors/managers or included in employee The PCSSs are supported with training materials in Philips University and Guidance Notes. An
personnel files (information is stored in a separate file within Philips' system of record) or updated Occupational Health & Safety Policy was published in March 2023. Management
have any effect on their employment (which is emphasized in all Philips communications). System Certifications ISO 45001 are in place for 24 manufacturing locations. A total of 16 ISO
45001 certificates for non-manufacturing organizations have been obtained, with further
At year-end 2023, 4% of our US employees have voluntarily disclosed that they have, or have certifications planned for 2024. 51% of the total Philips workforce, including 3rd party
had, a disability. Philips did not deploy a disability self-identification in other parts of the workers, is covered by ISO 45001 certification.
world.
Compliance and audit: In 2023, Philips continued the deployment of the ENHESA
12.4.5 Employee volunteering Compliance tracking tool at all locations where Philips has a significant presence. A review of
Employees at Philips are entitled to 8 hours or one full day of paid time off to volunteer, applicable regulations and compliance status was in scope. 13 H&S audits were performed in
once a year. This can be with a local community project or an established non-governmental manufacturing and research & development, office and field service organizations.
organization whose work can impact access to healthcare. Some Regions also encourage
employees to support corporate social responsibility projects which are typically outlined in Risk assessments: The high-level risk assessment process continued to be developed for all
local volunteering policies. Examples in 2023 include: entities of health & safety scope, to provide a strategic overview of the risk profile, using the
Philips Corporate Risk Assessment protocol. This approach has identified exceptional risks at
• Germany: In Hamburg, 70 Philips employees and 60 other volunteers planted 3,150 specific locations as well as systemic risks across Philips. Systemic risks were addressed
native trees and shrub seedlings, covering 1,050 square meters. This initiative is expected through company-wide H&S campaigns to drive performance improvements. Risk
260
assessments were also reviewed during the Assurance letter process, and Philips entities The Occupational Health team also collaborated with Personnel Security to enhance
have a clearer understanding of the risks they face, and the controls needed to address communications around safe and healthy travel and support for employees requiring
them. medical support during travel.
Management reviews: The Philips Health and Safety Assurance letter was completed. This Together with Group Sustainability and the HazCom team at Philips Engineering Solutions
process requires a full Health and Safety review at every level of the organization that (part of Health and Safety as of September 1, 2023), considerable effort was put into
verifies that the Philips H&S policy is understood, a verified H&S Management System is in improving cross-functional alignment and management of chemicals. This resulted in a
place, compliance requirements are met, risk assessments have been completed with plans significantly improved Philips Excellence Process Framework process towards Q4 of 2023.
in place to control/reduce significant risks, and sufficient resources (including adequate
staff) are in place. The process is initiated at the lowest organizational level and raised Metrics
progressively to more senior leadership and finally to Executive level, with review and sign- Proactive metrics: Increased emphasis was placed on proactive metrics while retaining the
off at each stage. existing reportable accident rate. The metrics are aggregated into a scorecard, to provide
one consolidated proactive performance metric, which is presented at business level. Specific
Training and Communication: A library of Underwriters Ltd. (UL) safety e-learning courses proactive safety metrics include:
(517 H&S courses in 11 languages) was made available in Philips University. Four new H&S
campaigns were launched – Health (Awareness) Fair, Chemical Safety, Working at Heights, • Gemba walks completed: 42,272 (target: 11,888)
Warehouse Safety – and six health awareness topics were circulated throughout our • Ride-alongs completed: 2,658 (target 1,470)
community (physical activity, safe and healthy travel, skin health, heart health, respiratory • Safety problem-solving events (Kaizens) implemented: 15,584 (target: 4,755)
virus, lung health (smoking/vaping). • Training: 135,913 trainings completed (target 56,659)
Occupational Health: Focus on COVID-19 management continued to reduce. During Q2 Reactive metrics
2022, it was communicated that outbreak management would shift from the central crisis
management organization to local Market/Country management teams. Health and Safety • Total Recordable Case (TRC) Rate: 172 TRCs were recorded in 2023 (172 in 2022), i.e. cases
remained primarily responsible for maintaining all infection prevention guidance, periodic where the injured employee is unable to work for one or more days, received medical
reporting, and organizational support. Periodic reporting to the Executive Committee was treatment or sustained an industrial illness.
discontinued in June 2023, due to the reduced risk. This decision was based on the This data includes 165 of work-related accidents, 1.14 cases per one million hours worked
conclusion of the World Health Organization that COVID-19 is an established and ongoing in our own workforce (155 cases with 1.11 accident rate for employees; 10 cases with 1.57
health issue which no longer constitutes a public health emergency of international concern accident rate for non-employees). A rate based on 1 000 000 hours worked, indicates the
(PHEIC). The global intranet page provides information about COVID-19 to all employees, number of work-related injuries per 500 full time people in the workforce over a 1-year
and it was fully reviewed and updated in 2023. timeframe. We recorded 7 recordable work-related ill health in our own workforce, (6 for
employees, 1 for non-employees). The TRC rate increased from 0.23 per hundred FTEs in
Continued focus was placed on two critical programs: Ergonomics and Mental Health & 2022 to 0.24 in 2023, (0.23 for employees, 0.35 for non-employees).
Well-being. Due to socio-economic and political issues and the personnel reductions
announced in 2022, Mental Health & Well-being remained a topic of high attention. Mental No fatalities occurred with our own workforce or other workers, working on our sites in
Health Champions were trained across the globe, and the program was further matured 2023.
with structural support and training (close to 250 Champions by the end of 2023). Within the
Ergonomics program there were some 171 trained Champions by the end of 2023. These
Champions can support job analysis and incident investigations and help drive ergonomic
improvements.
261
Philips Group Personal Health

Total recordable cases per 100 FTE
In the Personal Health segment, the number of Health and Safety incidents comparable to
2019 2020 2021 2022 2023
2022, with 7 registered LWICs. The LWIC rate remained at the same level as 0.09 in 2022.
Diagnosis & Treatment 0.61 0.45 0.53 0.41 0.43
There were 17 recordable cases in the Personal Health segment in 2023 (21 in 2022). This
Connected Care 0.34 0.31 0.31 0.19 0.27
decrease was mainly driven by less recorded incidents in North America.
Personal Health 0.18 0.3 0.24 0.27 0.21
Other 0.24 0.16 0.21 0.17 0.18
Philips Group 0.32 0.24 0.29 0.23 0.24
12.4.8 Philips Foundation
Philips Foundation is a registered non-profit organization established in 2014 – then
founded to be the centralized corporate social responsibility platform of Philips. Meanwhile,
• Lost Workday Case (LWC) Rate: 90 LWCs were recorded in 2023 (81 in 2022), i.e. cases its mission and focus are to provide access to quality healthcare for underserved
where the injured employee is unable to work (either his/her normal work or restricted communities worldwide, reducing healthcare inequality. In 2023, Royal Philips supported
work as determined by an occupational physician on any day after the day on which the Philips Foundation with a contribution of EUR 6.7 million and provided the Foundation’s
injury occurred). The LWIC rate increased from 0.11 per 100 FTEs in 2022 to 0.12 in 2023, operational staff. Expert volunteers from Royal Philips assisted in the execution of Philips
(0.12 for employees, 0.22 for non-employees) Foundation’s programs. In addition, Royal Philips matched funds raised by employees for
• The number of days lost to work-related injuries and fatalities from work-related victims supported by Philips Foundation during the crises in Ukraine, the Middle East and
accidents decreased by 1,471 days to 2,549 days in 2023. (2,333 days lost for employees Northern Africa.
and 216 days lost for non-employees).
Philips Foundation fulfills its mission by deploying Philips’ expertise in innovative healthcare
Philips Group technology and solutions, exploring viable and sustainable healthcare delivery models to
Lost workday injuries per 100 FTEs
serve the people who lack access to affordable healthcare, and collaborating with key
2019 2020 2021 2022 2023 societal organizations and partners worldwide. Philips Foundation, through its Impact
Diagnosis & Treatment 0.33 0.27 0.28 0.21 0.28
Investments entity, is also investing in enterprises with innovations in the healthcare space,
Connected Care 0.09 0.11 0.09 0.09 0.13
enabling underserved communities to get medical examinations for early detection of
Personal Health 0.14 0.22 0.16 0.09 0.09
conditions and timely referral to the right medical services. Philips Foundation fosters
Other 0.09 0.06 0.12 0.08 0.09
innovations that are fit for purpose, address local needs, are accessible and affordable, are
Philips Group 0.14 0.12 0.16 0.11 0.12
set up for scaling, and are financially sustainable to help ensure lasting healthcare provision.
Diagnosis & Treatment Since the launch of Philips Foundation, hundreds of grant-based initiatives have been
In the Diagnosis & Treatment segment, the number of Health and Safety incidents increased completed or are in progress throughout the world – engaging employees, providing
in 2023 to 36 LWICs compared to 31 in 2022. The LWIC rate increased to 0.28 compared to healthcare technologies and solutions, and overcoming healthcare challenges in close
0.21 in 2022. The total number of recordable cases for the Diagnosis & Treatment segment connection with organizations operating locally. Philips Foundation Impact Investments B.V.,
decreased to 56 (59 in 2022), mainly due to less recorded incidents in our factory in Costa a subsidiary set up in 2021, expanded its portfolio to 10 ventures in 2023. Philips Foundation
Rica. aims to accelerate the development of potentially high-impact opportunities to enhance
access to care and reduce healthcare inequality by nurturing early-stage social enterprises
Connected Care through investments and non-financial support. In 2023, Philips Foundation’s initiatives
In the Connected Care segment, the number of Health and Safety incidents increased in improved the lives of almost 1.4 million people and provided access to healthcare to well
2023 to 8 LWICs (6 in 2022). Correspondingly, the LWIC rate increased to 0.13 compared to over 28 million people in some of the most underserved regions across the globe. Philips
0.09 in 2022. The total number of recordable cases for the Connected Care segment Foundation retains the ambition to provide access to quality healthcare for around 100
increased to 16 in 2023 (13 in 2022), mainly driven by our factories in North America and million underserved people annually by 2030.
Germany.
262
In 2023, Philips Foundation continued its program of new and ongoing projects, mainly ESG indicators are evaluated. In addition to minimum requirements set out in our Code of
oriented towards the deployment of technology-based solutions, exploring and supporting Conduct, suppliers with a better ESG performance are considered favorably.
scalable ways to strengthen community and primary care. With projects covering many
phases of people’s health journeys, Philips Foundation focused on early detection of Supplier sustainability compliance
cardiovascular and respiratory diseases and cancers, improving maternal and child health, Two core policy documents form the basis of our supplier sustainability compliance
and strengthening acute and emergency care. Philips Foundation aims to relieve healthcare approach: the Supplier Sustainability Declaration and the Regulated Substances List.
facilities and local health workers in underserved areas by leveraging Philips’ expertise in
telehealth technologies for qualitative and informed triage, timely treatment or rapid Supplier Sustainability Declaration (SSD)
(virtual) referral to the right doctor or specialist. The SSD sets out the standards and behaviors Philips requires from its suppliers. The SSD is
based on the Responsible Business Alliance (RBA) Code of Conduct, in combination with
In 2023, Philips Foundation further built upon the expertise of Philips employees, social several additional Philips-specific expected behaviors. The Code is in alignment with the UN
entrepreneurs, academics, medical experts, and others to explore innovative paths to Guiding Principles on Business and Human Rights and key international human rights
strengthen healthcare access. With Rology providing radiology services at distance, over standards, including the ILO Declaration on Fundamental Principles and Rights at Work and
250,000 patients analyses were made, based on images taken in hospitals without a the UN Universal Declaration of Human Rights. It covers topics such as Labor, Health &
radiologist, for proper reporting on the patients’ condition. The multi-year partnership with Safety, Environment, Ethics, and Management Systems. The RBA is the world’s largest
RAD-AID began to take effect in 2023, to ultimately promote access to diagnostic ultrasound industry coalition dedicated to responsible business conduct in global supply chains. As a
services in 10 countries across continents, that support remote healthcare delivery for Regular member of the RBA, Philips is required to commit publicly to the RBA Code of
communities thousands of kilometers away. Conduct and actively pursue conformance to the Code and its standards, which must be
regarded as a total supply chain initiative.
For more information about Philips Foundation, its purpose and scope, as well as its latest
annual report, visit the website. Regulated Substances List (RSL)
The RSL specifies the chemical substances regulated by legislation. Suppliers are required to
12.4.9 Supplier sustainability follow all the requirements stated in the RSL. Substances are marked as restricted or
Philips’ purpose to improve people’s health and well-being extends throughout our value declarable.
chain. At Philips, we have a direct business relationship with approximately 4,900 product
and component suppliers and 16,100 service providers. Our supply chain sustainability All suppliers are required to commit to the SSD and RSL. Through integration of a
strategy is evaluated annually through a structured process, combined with multi- Sustainability Agreement in our purchasing agreements, suppliers declare compliance to
stakeholder dialogues. From this, we have developed multiple ESG programs aimed at both the SSD and RSL. Upon request, they provide additional information and evidence.
driving sustainable improvement. These programs cover compliance with our policies,
improvement of our suppliers’ sustainability performance, our approach towards Supplier Sustainability Performance (SSP) – 'Beyond Auditing'
responsible sourcing of minerals, and reducing the environmental impact of our supply base. In 2016, Philips first piloted its 'Beyond Auditing' approach to engage suppliers on ESG
Supplier engagement in these programs is driven by screening ESG opportunities and risks, matters, with a focus on:
evaluating materiality and impact along the lines of material, industry, and geographical
characteristics. • a systematic approach to improve the sustainability of our supply chain
through continuous improvement against a set of recognized and global references
Procurement and supplier information sessions are scheduled on an ongoing basis. During • collaboration, increased transparency, clear commitments, and ensuring suppliers meet
these sessions, our supplier ESG expectations are shared and clarified. Training courses are the agreed targets
organized to support suppliers in meeting those expectations. In addition, suppliers are • encouraging our suppliers, industry peers and cross-industry peers to adopt our
supported in improving their ESG performance via individual training. Where data is approach
available, suppliers are informed on their performance compared to industry peers, and best
practices are shared, and their adoption encouraged. During the sourcing process, supplier
263
This systematic approach is shown in the figure below and is a high-level representation of There are four different engagement approaches: BiC (Best in Class), SSIP (Supplier
the SSP program. Sustainability Improvement Plan), DIY (Do It Yourself) and PZT (Potential Zero Tolerance).
The PZT status is a temporary status and requires immediate attention and action.
Depending on the categorization, suppliers are engaged in different ways to improve their
sustainability performance through agreed improvement plans.
If a (Potential) Zero Tolerance is identified, immediate action is taken. If the requested

additional information and evidence lead to the conclusion that there is no structural Zero
Tolerance, the supplier’s status will be changed and the supplier will go back to the original
track in the program. If the conclusion gives rise to a structural Zero Tolerance, the supplier is
required to:
• propose a corrective action plan to mitigate and/or resolve the identified Zero
Tolerance(s)
• commit to structurally resolving the Zero Tolerance
• provide regular updates and evidence
First, a set of references, international standards, and Philips requirements are used to • avoid quick-fixing
develop the Frame of Reference, which covers management systems, environment, health &
safety, business ethics, and human rights. For each, the maturity level of suppliers is Philips defines six Zero Tolerances:
identified in the Program Execution Wheel, which assesses suppliers against the
Plan–Do–Check–Act (PDCA) cycle. Suppliers are then categorized through the Supplier • Fake or falsified records
Classification model, which differentiates on the basis of supplier maturity, resulting in • Child and/or forced labor
supplier-specific proposals for improvement. The SSP process is monitored and adjusted • Immediate threats to the environment
through continuous feedback loops. The outcome of the SSP assessment is a supplier • Immediate threats to worker health and safety
sustainability score ranging from 0 to 100. This score is based on supplier performance in • Failure to comply with regulatory and/or Philips requirements
environmental management, health & safety, business ethics, and human rights. • Workers’ monthly income (covering salary for regular hours and overtime, tax
deductions, social insurance) failing to meet regulatory requirements
Supplier classification
Supplier selection for the program is based on significance. Significance of suppliers is For more details on the SSP process, refer to the SSP brochure.
determined through an assessment of the supplier’s associated ESG risks and opportunities,
including material, industry, and geographical characteristics, as well as annual spend. In Our 2023 results
2023, 152 of our suppliers were considered significant. After this initial assessment, the In 2023, five zero tolerances were found across the following categories: health and safety,
engagement strategy is tailored based on the suppliers’ current performance in terms of labor, and environmental impact. All five cases were successfully closed in 2023 after
sustainability. confirmation of completion of the corrective action plan. One zero tolerance, found in the
last quarter of 2022, has also been closed during 2023.
Philips Group
Significant suppliers - tier 1
Philips measures the impact of SSP engagements through the number of lives improved in
2023
the supply chain. This is derived from the improvements that suppliers make in their
Number of suppliers 152
performance. To determine improvements, we calculate the pro rata change in performance
Spend as percentage of total 20%
from one year to the next.
264
Philips Group
Lives improved in the supply chain in thousands of Lives
2021 2022 2023
Lives improved in the supply chain 430 459 723
In 2023, the overall year-on-year improvement in performance was 37% for suppliers that
received their first re-assessment in 2023. The number of employees impacted (first and
second tier) suppliers participating in the SSP program was approximately 723,000. This
figure includes suppliers assessed in the last three years, for which the supplier has
communicated their number of employees via the self-assessment questionnaire, which was
validated during the on-site assessment. For those workers, labor conditions improved, the
risk of serious injury reduced, and the negative environmental impact of suppliers was
brought down. This includes the workers at suppliers of the Domestic Appliances business,
for which Philips continued the sustainability engagement. For a detailed break-down of
percentage improvements realized by active suppliers in the past year, by comparing the
assessment in 2023 to their previous assessment, refer to the following table.
Philips Group
SSP 2023 performance: pro-rata improvements in %
Topics Policy Procedures Implementation Management responsibility Communication Risk control Target-setting & tracking Corrective action approach Supplier management
Environment 2% 7% -2% 10% 2% 23% 15% 10% -8%
Health and Safety 11% 11% 16% 0% 6% 10% 11% 21% 4%
Business Ethics 11% 20% 9% -4% 26% 21% 33% 26% 1%
Human Capital 13% 13% 19% 11% 7% 4% 10% 12% -2%
Categories which showed the biggest improvement are: In 2023, 158 suppliers were added to the SSP program (compared to 47 added in 2022). Of
the population of suppliers that entered the program in the years before 2023 and have
• Risk control and Target setting and tracking of Environmental topics: improving the audit been assessed at least once in the past three years, 392 suppliers were still active in 2023
process to periodically assess conformance, including compliance with applicable laws (compared to 249 in 2022). The combined group represents 77% of our significant suppliers
and regulations pertaining to environmental topics, as well as the target setting and who are in the program.
tracking on topics such as Greenhouse Gas Emissions.
• Implementation and Corrective action approach of Health & Safety topics: improving As part of our commitment to improve the lives of 1 million workers in the supply chain by
working conditions of workers in the value chain, including corrective action approaches 2025, we increased our engagement with second-tier suppliers. By teaming up with Tier 1
where applicable. suppliers in conducting the assessment, Philips has supported in building ESG supplier
• Business Ethics, especially in the domains of communication, target setting and corrective management skills. In 2023, 110 second-tier suppliers entered the program, resulting in a
actions. total number of 138 second-tier suppliers engaged with in the last three years.
• Implementation for Human Capital: improving the approach to implement policies and
procedures into formal records for the supplier's human capital system. Additional progress made in 2023
Philips is actively applying the latest insights in data science and machine learning methods
to make the SSP program more efficient. Through the use of reference data collected over
1,600 assessments in the past years, Philips is working towards integrating maturity and
265
improvement predictions in the program. This is expected to support us in determining the smelters of high concern. In addition, we strive to reduce the number of non-identified
sustainability maturity of suppliers, while also increasing the effectiveness of our supplier smelters. As a result, the percentage of CMRTs that satisfied minimum acceptance criteria
improvement approach. has decreased by 13 percentage points.
On an annual basis, Philips experts organize quality trainings in the sustainability area for Philips Group
Conflict Minerals Due Diligence results
suppliers in the scope of the SSP program.
Key performance indicator 2021 2022 2023
Response rate of suppliers (%) 99% 95% 95%
Responsible sourcing of minerals
CMRTs that reached minimum acceptance criteria (%) 84% 78% 65%
The supply chains for minerals are long and complex. Philips does not source minerals
Non-listed smelters in our supply chain (#) 0 0 0
directly from mines as there are typically 7+ tiers between end-user companies like Philips
and the mines where the minerals are extracted. The extraction of minerals can take place in
conflict-affected and high-risk regions, where mining is often informal and unregulated, and
carried out at artisanal small-scale mines (ASM). These ASMs are vulnerable to exploitation
by armed groups and local traders. Within this context, there is an increased risk of severe
human rights violations (forced labor, child labor or widespread sexual violence), unsafe
working conditions or environmental concerns.
Philips addresses the complexities of minerals supply chains through a continuous due
diligence process, combined with active participation in multi-stakeholder initiatives to
promote the responsible sourcing of minerals.
Conflict minerals due diligence

Each year, Philips investigates its supply chain to identify smelters of tin, tantalum, tungsten
and gold in its supply chain and we have committed to not purchasing raw materials, sub-
assemblies, or supplies found to contain conflict minerals.
Philips applies collective cross-industry leverage through active engagement via the
Responsible Minerals Initiative (RMI). RMI identifies smelters that can demonstrate, through
an independent third-party audit, that the minerals they procure are conflict-free. In 2023,
Philips continued to actively direct its supply chain towards these smelters.
The Philips Conflict Minerals Due Diligence framework, measures and outcomes are
described in the Conflict Minerals Report that we file annually to the US Securities and
Exchange Commission (SEC). The conflict minerals report is also publicly available on Philips’
website. Philips fully supports and complies with the OECD Due Diligence Guidance for Cobalt
Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas (OECD Philips has performed due diligence on cobalt since 2019. We use cobalt predominantly in
Guidance). lithium-ion batteries. As part of this initiative, we engaged suppliers that provide materials
containing cobalt. In 2023, we again reached a 100% response rate (2022: 100%).
Each year, we work with our suppliers on the quality of their due diligence reporting by
setting minimum criteria for the Conflict Minerals Reporting Templates (CMRT). For the 2023 Multi-stakeholder initiatives for responsible sourcing of minerals
Conflict Minerals Report, Philips significantly strengthened the acceptance criteria for CMRTs We believe that multi-stakeholder collaboration in the responsible sourcing of minerals is
as it intensified the required due diligence performed by suppliers towards the use of the most viable approach for addressing the complexities of minerals value chains.
266
European Partnership for Responsible Minerals (EPRM) CDP engagement: Since 2011 we have been partnering with CDP Supply Chain, through
Philips is a founding partner of EPRM and has been a strategic member since its inception in which we invite suppliers to disclose their environmental performance and carbon intensity.
May 2016. EPRM is a multi-stakeholder partnership between governments, companies, and In 2023, there was a response rate of 93% (2022: 85%). With 500 of our biggest suppliers
civil society actors working toward more sustainable minerals supply chains. The goal of included in the CDP engagement program in 2023, CDP confirmed Philips is in the top tier in
EPRM is to create better social and economic conditions for mine workers and local mining terms of its supplier engagement coverage.
communities by increasing the number of mines that adopt responsible mining practices in
Conflict-Affected and High-Risk Areas (CAHRAs). Of the group that responded, 60% engaged in emission-reduction initiatives (2022: 59%).
In addition, 48% committed to carbon emission targets (2022: 47%). In the 2023 survey, our
EPRM is an accompanying measure to the EU Conflict Minerals Regulation dedicated to suppliers reported 14 million metric tonnes CO2 savings from improvement projects
making real change ‘on the ground’. Through EPRM, Philips supports activities to improve undertaken in 2023.
responsible mining practices in mining areas in CAHRAs and shares our knowledge and
practice in conducting due diligence. Since 2018, Philips has actively participated in several Philips Group
Supplier response rate to CDP questionnaire
working groups focused on strengthening the responsible production of minerals, as well as
2021 2022 2023
improving responsible sourcing practices.
Supplier response rate to CDP questionnaire 87% 85% 93%
Supplier decarbonization program

Since 2003, Philips has looked at ways to improve the environmental performance of its Data-driven insights: Through accurate data insights, Philips’ buyers are enabled to
suppliers. When it comes to climate change, we have adopted a multi-pronged approach: consider climate action in their supplier selection. In 2023, 46% of our purchases (in spend)
reducing the environmental impact of our products, committing to carbon neutrality in our were made at suppliers that have committed to science-based CO2 reduction targets.
own operations, and engaging with our supply chain to reduce their carbon footprint.
Through initiatives such as the CDP supply chain program, Philips motivates its suppliers to Capability building: We support suppliers in advancing their company approach to climate
disclose emissions, embed board responsibility on climate change, and actively work on action, offering guidance that is tailored to their climate action maturity. In 2023, we further
reduction activities. grew the offering of tailored feedback and guidance for 80% of our suppliers to support
their growth in capabilities and help improve their approach.
In October 2021, during COP26, Philips announced its target to have at least 50% of its
suppliers (based on spend) committed to science-based targets for carbon reduction by Opportunities for decarbonization: Through on-site assessments we identify energy
2025. efficiency opportunities that enable our suppliers to make cost-effective carbon reductions.
Our team calculates for the supplier what the cost impact would be, and also the return. In
Philips Group 2023, 19 on-site assessments took place, which resulted in tailored plans for improvement.
% of suppliers committed to science-based targets
2021 2022 2023
% of suppliers committed to Science Based Targets 28% 41% 46%
12.5 Governance statements
We consider suppliers to have committed to science-based targets when this is announcement of an enhanced and fully integrated approach to doing business responsibly
communicated via the Science Based Targets initiative (SBTi), the suppliers' CDP disclosures, and sustainably. This section provides additional information on (some of) the Governance
or public websites and announcements (on a 'Science Based Target', 'Net Zero Target', or parameters reported in Governance, starting on page 67
equivalent). Multiple activities have been deployed to help us achieve this climate target. We
consider spend to be relevant if it relates to product and component suppliers and relevant 12.5.1 Philips SpeakUp (Ethics Line)
service providers, like logistics and information technology suppliers. In line with Philips SpeakUp Policy, potential violations of our General Business Principles or
any other concern that may constitute a direct threat to Philips’ corporate integrity, are
reported through the Philips SpeakUp program. The Philips SpeakUp Policy sets out
267
safeguards for reporters and participants in an investigation, which includes the prohibition Most common types of concerns reported
of (attempted) retaliation.
Treatment of employees
In 2023, a total of 764 concerns were reported via Philips SpeakUp (Ethics Line) and through As in previous years, the type of concern most commonly reported related to the category
our network of GBP Compliance Officers, an increase of 8% year-on-year (2022: 706 ‘Treatment of employees’. In 2023, there were 459 reports in this category, compared to 430
concerns). This is a continuation of the year-on-year upward trend. We believe the upward in 2022. This represents 60% of the total number of concerns, slightly lower than in 2022
trend in reporting remains in line with our multi-year efforts to encourage our employees to (61%).
express their concerns, whilst realizing that the extraordinary business conditions of the past
few years make it imprudent to draw any specific conclusions from these numbers. The majority of the concerns reported in the ‘Treatment of employees’ category relate to
‘Respectful treatment’. The ‘Respectful treatment’ sub-category generally relates to concerns
In percentage terms, North America remains the region with the highest case inflow (2023: about verbal abuse, (sexual) harassment, and hostile work environments. In the ‘Treatment
47%; 2022: 49%). The percentage increase in reports is visible in Latin America, which is now of employees’ category, 51% of cases originated from North America, a decrease compared
responsible for 15% of all reported concerns (2022: 9%). The APAC region showed a small to 2022 (54%). In 2023, no material fines, penalties or damages were paid for incidents of
decline (2023: 20%; 2022: 21%). EMEA, responsible for 18% of reported concerns in 2023 discrimination, harassment and severe human rights incidents (e.g., forced labor, human
showed a decline (2022: 21%). trafficking or child labor).
Philips Group Business integrity

Breakdown of reported GBP concerns in number of reports
The second most-reported type of concern relates to ‘Business Integrity’, which accounted
2019 2020 2021 2022 2023
for 18% of total cases reported in 2023, up from 16% in 2022. These concerns originated
Health & Safety 9 26 19 19 13
primarily from the APAC region (33%), followed by North America (31%), Latin America
Treatment of employees 320 342 365 430 459
(20%) and EMEA (16%).
- Equal and fair treatment 55 52 31 53 53
- Employee development 9 5 20 29 41
- Employee privacy 10 8 11 6 6 The majority of concerns reported in the category ‘Business Integrity’ relate to potential
- Employee relations 18 13 6 11 2 fraudulent behavior. The category ‘Business Integrity’ also includes concerns related to
- Respectful treatment 163 160 226 255 240 alleged violations of anti-corruption and anti-bribery laws. In 2023, Philips was not convicted
- Remuneration 9 28 7 17 12 or fined for any violation of such laws but has entered into a number of settlement
- Forced labor 1 agreements to resolve matters relating to compliance with the internal controls and
- Conflict of interest 1 6 7 9 3 recordkeeping provisions of the U.S. Foreign Corrupt Practices Act (FCPA), the U.S. Anti-
- Working hours 14 27 10 15 14 kickback statute and Federal False Claims Act.
- HR other 41 42 47 35 88
Legal 33 28 30 48 61
Quality 11 11 18 30 30
Business Integrity 138 127 112 114 137
Procurement 7 12 4 3
IT 3 5 8 9 10
Other 24 20 54 53 54
Total 545 571 610 706 764
268
Substantiated/unsubstantiated concerns
Philips Group
Classification of concerns investigated in numbers of reports
2021 2022 2023
Category substantiated unsubstantiated substantiated unsubstantiated substantiated unsubstantiated
Health & Safety 3 18 6 16 2 14
Treatment of employees 87 271 121 312 89 370
Legal 8 17 11 24 9 40
Quality 4 14 6 14 7 29
Business Integrity 60 90 52 54 71 77
Procurement 1 6 1 2
IT 5 4 2 4 4 5
Other 8 41 14 33 14 43
Total 176 461 213 459 196 578
In 2023, a total of 774 reports were closed. Of these 774 reports, 196 were substantiated (i.e. United States:
were found to constitute a breach of our General Business Principles), which represents 25% • The use of Artificial Intelligence (AI) and cybersecurity in healthcare.
of the cases closed in 2023 (32% in 2022). 19% of ‘Treatment of employees’ cases were • The shape of the future of digital health as a connected and highly accessible network.
substantiated, compared to 28% in 2022 (2021: 24%). In addition, 48% of the ‘Business • Global harmonization of standards, in line with industry best practices and complying
integrity’ reports were closed as substantiated, compared to 49% in 2022 (2021: 40%). with legal and privacy requirements.
• Decarbonization of healthcare.
Follow-up action
Depending on the outcome of the investigation, appropriate follow-up action is taken. China
Follow-up action can be remedial and/or disciplinary in nature. Remedial action can vary • Strong clinical partnerships, particularly relevant to China’s healthcare challenges,
from strengthening the business processes and procedures, enhanced monitoring, training supplying national top hospitals with tailor-made solutions for their clinical and research
and coaching, and increasing awareness of the expected standard of business conduct. needs.
Disciplinary measures may include written warnings and termination of employment. In • Value-based and AI-enabled solutions for diagnosis and treatment in a range of areas in
2023, disciplinary action was taken in 126 cases, and remedial action in 193. radiology, cardiology, and oncology.
• Decarbonization of healthcare.
12.5.2 Advocacy activities and expenses
Philips prioritizes its advocacy in three key regions where building strong relationships and For more information on Philips’ guiding principles regarding stakeholder advocacy &
collaborations is instrumental for us: the European Union, the United States and China: engagement, please refer to Philips’ Stakeholder Advocacy & Engagement Policy.
European Union: Stakeholder Advocacy & Engagement on Health Systems Sustainability

• The impact of the semiconductor shortage on the medical technology sector and and Resilience
consequently on patients. In the social dimension, Philips collaborates with numerous international partners to deliver
• The impact of early detection of lung and prostate cancer on patients and health sustainable value and drive global change. These efforts align with the UN’s Sustainable
systems. Development Goal 3 (Ensure healthy lives and promote well-being for all at all ages) and Goal
• The recovery from COVID-19, pandemic preparedness and resilience of healthcare 17 (Strengthen the means of implementation and revitalize the global partnership for
systems in general. sustainable development). Our aim is to reduce our shared environmental footprint and
• Decarbonization of healthcare. increase our social impact as part of the commitment to improve 2 billion lives by 2025.
269
Partnerships for Health Systems Sustainability and Resilience (PHSSR) financial hardship. This will not only improve health and health equity but also help reduce
Philips collaborates closely with a diverse international network of stakeholders to establish poverty, create jobs, drive inclusive economic growth, promote gender equality, and protect
strategic partnerships and conduct industry research. In 2020, Philips joined forces with populations from epidemics. As member of the UHC2030 Private-Sector Constituency, Philips
esteemed organizations including the World Economic Forum, AstraZeneca, KPMG, the actively supports this mission. We joined the advocacy work of the UHC2030 partnership in
London School of Economics, the WHO Foundation, and the Center for Asia Pacific the run up and during the UN High Level Meeting on UHC in September 2023.
Resilience and Innovation (CAPRI) to form the Partnership for Health System Sustainability
and Resilience (PHSSR). This non-profit, multi-sector, global collaboration is united in its goal Access to care in underserved communities
to build more sustainable and resilient health systems. Over the past year, Philips has continued its journey to improve access to care in underserved
communities. Through shared-value partnerships and dedicated teams across the company’s
To support this goal, the PHSSR is active in over 30 countries, and has published 24 reports to businesses and markets, Philips is developing innovative digital solutions and deploying new
date on its commissioned independent research, providing evidence-based business and financing models that are both sustainable and scalable, to strengthen health
recommendations on health system strengthening. This work, which includes country- systems while lowering costs and bringing care closer to those most in need.
specific findings as well as combined overarching global insights, is conducted by national
experts with first-hand knowledge and experience of the domestic health systems studied. Ultrasound, for example, is still not sufficiently available in many rural and remote areas. So,
Post-pandemic, many health systems remain in a perilous state as accumulating pressures by leveraging its expertise in mobile ultrasound services, and in close collaboration with the
and increasing demands have reached crisis point. The PHSSR seeks to facilitate cross-border Bill & Melinda Gates Foundation, Philips is researching and developing AI-based applications
and cross-sectoral collaboration to accelerate the strengthening of health systems by that can assist frontline health workers to effectively capture and interpret ultrasound
enabling international knowledge exchange and collaboration with health system images.
stakeholders.
Philips is a Commissioner at the High-Level Commission (HLC) on the Nairobi Summit on
Engaging with healthcare professionals and key opinion leaders: Future Health Index ICPD25 Follow-up. The mission of the HLC is, among other things, to support acceleration of
The Future Health Index is a research-based platform designed to help determine the the implementation of the ICPD Program of Action by providing global guidance and
readiness of countries to address global health challenges and build sustainable, fit-for- advocacy to advance the 12 global Nairobi commitments, which highlight the ‘three zeros’
purpose national health systems. By examining the role of technology in the health system, (zero unmet need for family planning, zero preventable maternal mortality, and zero sexual
the aim of the Future Health Index is to provide actionable insights to healthcare and gender-based violence including harmful practices). Philips is a member of the Coalition
professionals, governments and patients that will also improve their experience with for Reproductive Justice in Business, which is established by UNFPA and its partners to
healthcare. advance and mainstream the women and girls’ reproductive health agenda within the
private sector to provide adequate maternal health support, access to family planning
The Future Health Index 2023 report analyzes the priorities and perspectives of healthcare information and response to gender-based violence in the workplace.
leaders and younger healthcare professionals in 14 countries. Now in its eighth year, this
year’s report focuses on their perception of new care delivery models, which integrate The Partnership for Maternal and Newborn Child Health (PMNCH) continues to be an
physical and virtual care within and beyond hospital walls. The report reveals that healthcare important platform for Philips in advocating for health and well-being. As the world’s
leaders and younger healthcare professionals share the same vision for the future of care largest alliance for women’s, children’s and adolescents’ health and well-being, the
delivery: one in which healthcare, enabled by digital technology, is delivered in more Partnership works across 10 constituency groups and is hosted by the World Health
connected, convenient, and sustainable ways across care settings. Organization.
Universal Health Coverage (UHC) by 2030 In 2023, Philips continued to be a Steering Committee member of the Health Finance
We can only achieve health for all, the commitment made by United Nations member states, Coalition. This coalition consists of leading health donors, investors and technical partners
if the public, private and non-profit sectors work together. Universal Health Coverage (UHC) seeking to scale blended finance solutions to achieve SDG3 and Universal Health Coverage
means that all people have access to the full range of quality health services they need, in Africa. As part of this coalition, Philips invested USD 10 million in the Transform Health
when and where they need them, without financial hardship. The UHC2030 agenda is about Fund, that will invest in supply chain transformation and innovative care delivery models
ensuring that by 2030 all people can obtain the health services they need without suffering
270
serving low-income patients. Thanks to the catalytic role Philips played, the Fund was able to going to take commitment and collaboration across the industry. The project is with the
achieve its first close at USD 50 million in June 2023. radiology department, where efforts will focus on measuring and addressing energy
consumption of VUMC’s diagnostic imaging devices including MR, CT, Ultrasound and X-ray.
Philips also partners with Philips Foundation to improve access to care in some of the most The two organizations plan to publish their findings with the aim of promoting knowledge
underserved communities globally. Refer to Philips Foundation, starting on page 262 to exchange and enabling others in the industry to enhance their environmental strategies.
learn more about the Philips Foundation.
In 2023, to further advance on our journey towards a circular company, Philips and
Stakeholder Advocacy & Engagement on Climate Action and Circularity Champalimaud Foundation signed a strategic partnership aimed at halving the carbon
Regarding its environmental responsibility, Philips focuses on making a material impact, footprint resulting from Champalimaud’s use of diagnostic and interventional imaging
which means prioritizing initiatives that deliver tangible value. Our strategy is in line with equipment by 2028. After conducting a baseline assessment of Champalimaud Foundation’s
the UN’s Sustainable Development Goals 12 (Ensure sustainable consumption and production current CO₂ emissions, Philips will work with the organization to update and renew its
patterns) and 13 (Take urgent action to combat climate change and its impacts). diagnostic imaging technology capabilities, keeping it up-to-date with Philips’ latest
innovations in diagnostic imaging such as CT and MR systems, while also reducing resource
COP28: Teaming up for sustainable and accessible healthcare with partners across the demand, increasing the use of recycled materials, and extending equipment lifespans. As a
value chain result, Champalimaud Foundation’s patients and staff will be able to enjoy the outcome
COP28 marked a historic milestone by hosting its first-ever dedicated Health Day, addressing benefits of advanced diagnostic imaging coupled with improved patient and staff
the pressing global concern about the impact of climate change on people’s health. In experiences and more sustainable healthcare delivery. Philips will also take back the
collaboration with members of the Alliance for Transformative Action on Climate Change currently installed Philips equipment and ensure responsible end-of-use management, to
and Health (ATACH), the World Health Organization (WHO) led efforts to promote avoid waste going to landfill.
commitments in building climate-resilient and sustainable low-carbon health systems.
Partnerships for Climate Action
Philips played an active role in advocating for transformative changes within the healthcare As a member of the WEF Alliance of CEO Climate Leaders, Philips has continued to promote
sector, as exemplified during our participation in COP28. Our key requests underscored the supply chain decarbonization in 2023 by helping co-develop a framework for tackling
urgency for the healthcare industry to achieve net-zero emissions within health systems by upstream Scope 3 emissions by engaging suppliers and supporting them to decarbonize. By
2050. Additionally, we called for the establishment of national targets aligned with the Paris signing up to this framework, Alliance members will use the plan as guidance to scale their
Agreement to reduce carbon emissions across the entire healthcare value chain (scope 1, 2, action on Scope 3 upstream emissions.
3) by 2030. Recognizing the importance of climate resilience, we urged the development
and release of comprehensive climate resilience plans for continuous operations by 2027. We already source 100% of our electricity from renewable sources, and finance projects in
developing regions to compensate unavoidable emissions. Thanks to our focused approach
We are pleased to report a significant outcome from COP28—the adoption of the Dubai to drive down emissions, we have been carbon-neutral in our operations since 2020. We
Declaration on Climate and Health by 143 countries. This landmark agreement paves the have been developing more and more products that are EcoDesigned, which includes
way for a consequential World Health Assembly (WHA) resolution on the intersection of optimizing the design of our products to make them more energy efficient and circular. To
climate and health, scheduled for May 2024. Philips remains steadfast in our commitment to really mitigate climate change we need to speed up our efforts and drive scale beyond our
driving positive global change, and the outcomes of COP28 underscore our shared own operations. For the 11th year in a row, Philips received the prestigious ‘A List’ award
dedication to building a more sustainable and resilient future for the healthcare sector and from global environmental impact non-profit CDP, for our efforts to cut emissions, mitigate
beyond. climate risks and develop the low-carbon economy.
Partnerships with customers to decarbonize healthcare In 2023, Philips, HEINEKEN, Nobian, and Signify celebrated the opening of Finland’s largest
Philips and Vanderbilt University Medical Center (VUMC), home to the top-ranked adult and active wind farm that will provide a renewable electricity guarantee for the consortium of
pediatric hospitals in the Southeastern U.S., announced a collaboration that aims to reduce companies. The 10-year agreement with Neoen will deliver 330 GWh per year to the
the health system’s carbon footprint while determining a blueprint to guide industry efforts. consortium – the equivalent electricity needed to power 40,000 households. This renewable
Philips and VUMC share a common vision – that systemically addressing climate change is electricity will help to avoid over 230,000 tons of CO2 emissions per year. In the first pan-
271
European agreement of its kind, the consortium committed to contracting renewable Stakeholder Advocacy & Engagement on World Economic Forum (WEF)
electricity from the wind farm for the first 10 years through the Virtual Power Purchase Philips is proud of its continued engagement as a Strategic Partner of the WEF, the
Agreement signed in 2020. The electricity is physically delivered to the Finnish grid while the international organization for public-private cooperation committed to improving the state
four consortium partners benefit from the Guarantees of Origin. This provides income of the world. The Forum engages political, business and other leaders to help shape global,
stability for the renewable project, while guaranteeing clean energy for the consortium regional and industry agendas.
members.
The year kicked off with the WEF Annual Meeting in Davos, Switzerland, attended by over
Philips promotes the green and sustainable development in the healthcare sector and 2,000 global leaders. Philips joined a number of high-level panels and held bilateral
supports the efforts from the Dutch government to address the link between climate meetings with key business leaders, civil society representatives and public figures. In
change and health, via participation in the Dutch Global Health Hub. Furthermore, Philips particular, Philips led discussions around building resilience in health systems, the digital
supports the exchange and cooperation between China and the Netherlands in the field of transformation of healthcare, and supply chain decarbonization.
green hospital development.
Throughout 2023, Philips continued to work closely with the WEF International Business
Partnerships for Circularity Council (IBC) to integrate the Stakeholder Capitalism Metrics framework published in 2020
At Philips, we engage with multiple stakeholders to drive circular practices worldwide. In into ESG and sustainability reporting. This framework is a set of common metrics for
2023, Philips continued its strategic partnership with the Ellen MacArthur Foundation (EMF). companies to align their mainstream reporting on performance against ESG indicators and
Together with a group of engaged design leaders in EMF’s ‘Circular Design Leaders’ group, track their contributions towards sustainable value creation and the SDGs on a consistent
we helped shape a framework – Adaptive Strategy for Circular Design – identifying 6 focus basis. Philips has advocated for adoption across various platforms like the WEF ESG
areas to create an organization environment for circular transformation. We have been a practitioners’ group and the European Round Table for Industry (ERT) Sustainable Finance
partner with PACE (Platform for Accelerating the Circular Economy) since its creation by the group and has included the framework for the third time in this 2023 Annual Report.
World Economic Forum in 2018. PACE is a public-private collaboration platform with the
mission to catalyze global leadership from businesses, government and civil society to Stakeholder Advocacy & Engagement on Artificial Intelligence (AI)
accelerate the transition to a circular economy Focus is among others on strengthening the In July 2023, WEF published an insight report on the transformative potential of artificial
connection between climate and circularity and scaling mineral circularity for global intelligence (AI) in healthcare and the importance of public-private collaboration in driving
resilience. Together with PACE, Circle Economy in the Circular Economy Indicators Coalition its global adoption. Philips was featured in the report alongside Apollo Hospitals, Johnson &
(CEIC) and Accenture, we jointly published ‘Corporate circular target-setting guidance’, Johnson, and AstraZeneca, which highlighted high-priority use cases where AI can make a
building on the earlier publication in 2022 on ‘Corporate target-setting for the circular difference, including disease detection, outbreak management and medical breakthroughs.
economy’. The guidance seeks to provide businesses with an actionable blueprint for
selecting and reporting against impactful circular targets. Furthermore, this year Philips’ CEO Roy Jakobs was appointed co-chair of the US National
Academy of Medicine’s Steering Committee to develop an AI Code of Conduct (AICC). To
Together with other parties, Philips contributed to the Circularity Gap report issued by ensure equitable, ethical, safe and responsible use of AI in healthcare. In 2023, the National
Circularity Gap Reporting Initiative, providing clarity on the gaps to close on a global scale, Academy of Medicine invited a group of leading individuals from healthcare, technology,
and on the necessary contribution and scaling of circularity to systematically address climate research and bioethics to launch a three-year project to develop a framework to advance
change. governance in support of the responsible advancement of AI.
Philips participates in the World Business Council for Sustainable Development (WBCSD), Listing of Advocacy Expenses in 2023
actively contributing to the development of the Circular Transition Indicators (CTI). On a The expenses included in this section are classified into four categories based on
national level, Philips is an active leader in the Dutch National Circular Economy Program, contribution level and reported for global partnerships, annual events and general
supporting with policy advice, execution of the national roadmaps, and measuring progress contributions, trade associations, and political contributions. We are reporting only on
towards goals. expenses equal to or greater than EUR 40,000 and have grouped these, based on
contribution level, into three bandwidths: EUR 250,000 - EUR 750,000, EUR 100,000 - EUR
250,000, EUR 40,000 - EUR 100,000.
272
Global Partnerships Philips Group

Trade Associations
Our global partnerships represent long-term collaborations with organizations that share
EUR 250,000 - EUR 750,000
our values and vision. These engagements involve substantial contributions to support
Advanced Medical Technology Association (AdvaMed)
initiatives, research, and programs aimed at addressing healthcare challenges and fostering
Medical Imaging & Technology Alliance (MITA)
innovation. Please note that many of the earlier-mentioned partnerships do not require
EUR 100,000 - EUR 250,000
expenses; hence, they have not been included in the listing.
Electrical and Electronic Manufacturers' Association (ZVEI)
Council for Quality Respiratory Care (CQRC)
Philips Group
Global Partnerships Consumer Technology Association (CTA)
Dutch Employers' Federation (VNO-NCW)
EUR 250,000 - EUR 750,000
European Coordination Committee of the Radiological, Electromedical and Healthcare IT Industry
International Consortium for Health Outcomes Measurement (ICHOM)
(COCIR)
Ellen MacArthur Foundation (EMF)
European trade association representing the medical technology industries (MedTech Europe)
EUR 100,000 - EUR 250,000
EUR 40,000 - EUR 100,000
Platform for Accelerating the Circular Economy (PACE)
APACMed
Partnership for Health System Sustainability and Resilience (PHSSR)
Japan Electronics and Information Technology Industries Association (Jeita)
EUR 40,000 - EUR 100,000
European Round Table for Industry (ERT)
Gaia-X
Appliance Industry in Europe (APPLiA)
World Stroke Organization (WSO)
Political contributions
Annual Events and General Contributions The Philips General Business Principles set the standard for acting with integrity at Philips.
Philips actively engages with annual events and makes general contributions to knowledge They govern all our decisions and actions throughout the world and apply equally to our
exchange, networking, and industry growth. These events provide us with opportunities to group actions and to our conduct as individuals. Article 2.5 of the General Business Principles
engage with key stakeholders, showcase our expertise, contribute to the transformation of states: “We comply with public procurement rules that apply to government projects or
healthcare, and advance the decarbonization process in the healthcare industry. contracts. We do not make any contribution, in money or in kind, to political parties or
organizations, or to individuals engaged in politics.”
Philips Group
Annual Events and General Contributions
In the United States, in compliance with U.S. federal law, Philips does not make corporate
EUR 250,000 - EUR 750,000
contributions to federal candidates and federal political committees. Additionally, Philips
World Economic Forum (WEF)
does not make corporate political contributions to any U.S. state and local campaign
EUR 100,000 - EUR 250,000
committees, state and local political committees, state and local political parties, and other
World Business Council for Sustainable Development (WBCSD)
state and local 527 political organizations. The company supports the Philips North America
EUR 40,000 - EUR 100,000
LLC Employee Political Action Committee (Philips PAC) that makes contributions to federal,
Center for Asia-Pacific Research and Innovation (CAPRI)
state and local candidates, political committees, political parties, and other 527 political
organizations. Philips PAC is funded exclusively by voluntary contributions from U.S.
Trade Associations employees who are eligible, in accordance with federal law, to contribute to the Philips PAC.
Our memberships in trade associations are essential for staying informed about industry U.S. federal law prohibits reimbursing employees, directly or indirectly, for contributions to
developments and standards. We contribute significantly to these associations to support Philips PAC.
advocacy efforts, research, and collective industry initiatives that benefit Philips and the
healthcare sector. Please refer to the U.S. Federal Election Commission website for more information
pertaining to Philips PAC financial activity.
273
13 Further information
13.1 References to the content of this Annual Report Environmental, Social and Governance
The information included in this Annual Report extends beyond our financial results and
Financial statements statements as it also includes information on our Environmental and Social performance,
Chapter 10 ‘Group financial statements’ and Chapter 11 ’Company financial statements’ integrating our various resources to create value with sustainable impact for our
together contain the statutory financial statements of Koninklijke Philips N.V., the parent stakeholders. Please refer specifically to How we create value with sustainable impact,
company of the Philips group. These statements are subject to adoption by the company’s starting on page 12, Double Materiality Assessment, starting on page 13, Environmental,
shareholders at the 2024 Annual General Meeting of Shareholders. Social and Governance, starting on page 42 and ESG statements, starting on page 230.
Management report
The following sections and chapters form the management report within the meaning of 13.2 Management’s statements and report
article 2:391 of the Dutch Civil Code: The statements and report below are provided by Roy Jakobs, Abhijit Bhattacharya and
Marnix van Ginneken, together constituting the entire Board of Management of Koninklijke
• Message from the CEO , starting on page 5 Philips N.V., on the date of this Annual Report.
• Board of Management and Executive Committee, starting on page 7
• Strategy and Businesses, starting on page 9 Management’s statement pursuant to section 5:25c paragraph 2 sub s of
• Financial performance, starting on page 26 the Dutch Financial Supervision Act (Wet op het financieel toezicht)
• Environment, Social and Governance, starting on page 42 The Board of Management of Koninklijke Philips N.V. hereby declares that, to the best of its
• Risk management, starting on page 85 knowledge, the Group financial statements and Company financial statements give a true
• Sub-section ‘Diversity’ in Report of the Corporate Governance and Nomination & and fair view of the assets, liabilities, financial position and profit or loss of the company and
Selection Committee, starting on page 110 the undertakings included in the consolidation taken as a whole and that the management
• Corporate governance, starting on page 130 report referred to in Introduction gives a true and fair view concerning the position as per
• Forward-looking statements and other information, starting on page 300 the balance sheet date, the development and performance of the business during the
• ESG statements, starting on page 230 but excluding 13.3.3 Assurance report of the financial year of the company and the undertakings included in the consolidation taken as a
independent auditor whole, together with a description of the principal risks that they face.
The sections Strategy and Businesses, Financial performance and Environment, Social and Management’s annual report on internal control over financial reporting
Governance provide an extensive analysis of the developments during the financial year pursuant to section 404 of the US Sarbanes-Oxley Act
2023 and the results. These sections also provide information on the business outlook, The Board of Management of Koninklijke Philips N.V. (Royal Philips) is responsible for
investments, financing, personnel and research and development. establishing and maintaining an adequate system of internal control over financial
reporting (as such term is defined in Rule 13a-15 (f) under the US Securities Exchange Act).
For ‘Additional information’ within the meaning of article 2:392 of the Dutch Civil Code, Internal control over financial reporting is a process to provide reasonable assurance
please refer to Independent auditor's report on financial statements, starting on page 276 regarding the reliability of our financial reporting for external purposes in accordance with
and the Appropriation of profits, starting on page 289. IFRS as issued by the IASB.
Please refer to Forward-looking statements and other information, starting on page 300 for Internal control over financial reporting includes maintaining records that, in reasonable
more information about forward-looking statements, third-party market share data, fair detail, accurately and fairly reflect our transactions; providing reasonable assurance that
value information, and revisions and reclassifications. transactions are recorded as necessary for preparation of our financial statements; providing
reasonable assurance that receipts and expenditures of company assets are made in
274
accordance with management authorization; and providing reasonable assurance that Second, our independent auditor has issued a report on the 2023 consolidated financial
unauthorized acquisition, use or disposition of company assets that could have a material statements and the company financial statements, in accordance with Dutch law, including
effect on our financial statements would be prevented or detected on a timely basis. the Dutch standards on Auditing, of Koninklijke Philips N.V., which is set out in Independent
Because of its inherent limitations, internal control over financial reporting is not intended auditor's report on financial statements, starting on page 276.
to provide absolute assurance that a misstatement of our financial statements would be
prevented or detected. Also, projections of any evaluation of the effectiveness of internal Our independent auditor has also issued a report on the consolidated financial statements
control over financial reporting to future periods are subject to the risk that the controls may 2023 and 2022 in accordance with the standards of the Public Company Accounting
become inadequate because of changes in conditions, or that the degree of compliance Oversight Board in the US, which will be included in the Annual Report on Form 20-F
with the policies or procedures may deteriorate. expected to be filed with the US Securities and Exchange Commission on February 20, 2024.
The Board of Management conducted an assessment of Royal Philips' internal control over Third, our independent auditor has issued an assurance report following its audit of certain
financial reporting based on the “Internal Control Integrated Framework (2013)” established selected ESG related information in this Annual Report, which is set out in Independent
by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). auditor's assurance report on the ESG information and the EU Taxonomy information,
Based on the Board of Management’s assessment of the effectiveness of Royal Philips'
internal control over financial reporting as of December 31, 2023, it has concluded that, as of 13.3.1 Independent auditor’s report on internal control over financial
December 31, 2023, Royal Philips' internal control over Group financial reporting is reporting
considered effective.
Report of Independent Registered Public Accounting Firm
The effectiveness of the Royal Philips' internal control over financial reporting as of To: The Supervisory Board and Shareholders of Koninklijke Philips N.V.
December 31, 2023, as included in the section Group financial statements, starting on page
140, has been audited by Ernst & Young Accountants LLP, an independent registered public Opinion on Internal Control over Financial Reporting
accounting firm, as stated in their report which follows hereafter. We have audited Koninklijke Philips N.V.’s internal control over financial reporting as of
December 31, 2023, based on criteria established in Internal Control — Integrated
Changes in internal control over financial reporting Framework issued by the Committee of Sponsoring Organizations of the Treadway
There were no changes in our internal control over financial reporting during 2023 that have Commission (2013 framework) (the COSO criteria). In our opinion, Koninklijke Philips N.V.
materially affected, or are reasonably likely to materially affect, our internal control over (the Company) maintained, in all material respects, effective internal control over financial
financial reporting. reporting as of December 31, 2023, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting
13.3 Independent auditor's reports Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company
as of December 31, 2023 and 2022, the related consolidated statements of income,
Introduction comprehensive income, cash flows and changes in equity for each of the three years in the
Our independent auditor, Ernst & Young Accountants LLP, has issued several reports which period ended December 31, 2023, and the related notes and our report dated February 20,
have been included in this section Independent auditor's reports, starting on page 275. 2024 expressed an unqualified opinion thereon.
First, the report set out in section Independent auditor’s report on internal control over Basis for Opinion
financial reporting, starting on page 275, is provided in compliance with standards of the The Company’s management is responsible for maintaining effective internal control over
Public Company Accounting Oversight Board in the US and includes an opinion on the financial reporting, and for its assessment of the effectiveness of internal control over
effectiveness of internal control over financial reporting as of December 31, 2023, based on financial reporting included in the accompanying section ‘Management’s report on internal
COSO criteria. Management’s report on internal control over financial reporting is set out in control’, of this Annual Report. Our responsibility is to express an opinion on the Company’s
Management’s statements and report, starting on page 274. internal control over financial reporting based on our audit. We are a public accounting firm
275
registered with the PCAOB and are required to be independent with respect to the 13.3.2 Independent auditor's report on financial statements
Company in accordance with the U.S. federal securities laws and the applicable rules and To: the Supervisory Board and Shareholders of Koninklijke Philips N.V.
regulations of the Securities and Exchange Commission and the PCAOB.
Report on the audit of the financial statements 2023 included in the
We conducted our audit in accordance with the standards of the PCAOB. Those standards annual report
require that we plan and perform the audit to obtain reasonable assurance about whether
effective internal control over financial reporting was maintained in all material respects. Our opinion
We have audited the financial statements 2023 of Koninklijke Philips N.V. (Philips, or the
Our audit included obtaining an understanding of internal control over financial reporting, Company), based in Eindhoven, the Netherlands. The financial statements comprise the
assessing the risk that a material weakness exists, testing and evaluating the design and group and company financial statements.
operating effectiveness of internal control based on the assessed risk, and performing such
other procedures as we considered necessary in the circumstances. We believe that our audit In our opinion:
provides a reasonable basis for our opinion.
• the accompanying group financial statements give a true and fair view of the financial
Definition and Limitations of Internal Control over Financial Reporting position of Koninklijke Philips N.V. as of December 31, 2023 and of its result and its cash
A company’s internal control over financial reporting is a process designed to provide flows for 2023 in accordance with International Financial Reporting Standards as
reasonable assurance regarding the reliability of financial reporting and the preparation of adopted in the European Union (IFRSs-EU) and with Part 9 of Book 2 of the Dutch Civil
financial statements for external purposes in accordance with generally accepted Code
accounting principles. A company’s internal control over financial reporting includes those • the accompanying company financial statements give a true and fair view of the
policies and procedures that (1) pertain to the maintenance of records that, in reasonable financial position of Koninklijke Philips N.V. as of December 31, 2023 and of its result for
detail, accurately and fairly reflect the transactions and dispositions of the assets of the 2023 in accordance with Part 9 of Book 2 of the Dutch Civil Code
company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted The group financial statements comprise:
accounting principles, and that receipts and expenditures of the company are being made
only in accordance with authorizations of management and directors of the company; and • the consolidated balance sheet as of December 31, 2023;
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized • the following statements for 2023: the consolidated statements of income,
acquisition, use, or disposition of the company’s assets that could have a material effect on comprehensive income, cash flows and changes in equity;
the financial statements. • the notes comprising material accounting policies and other explanatory information.
Because of its inherent limitations, internal control over financial reporting may not prevent The company financial statements comprise:
or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in • the company balance sheet as of December 31, 2023;
conditions, or that the degree of compliance with the policies or procedures may • the company statement of income for 2023;
deteriorate. • the notes comprising a summary of the accounting policies and other explanatory
information.
Ernst & Young Accountants LLP
Basis for our opinion
Amsterdam, the Netherlands We conducted our audit in accordance with Dutch law, including the Dutch Standards on
February 20, 2024 Auditing. Our responsibilities under those standards are further described in the Our
responsibilities for the audit of the financial statements section of our report.
276
We are independent of Koninklijke Philips N.V. in accordance with the EU Regulation on We agreed with the Supervisory Board that misstatements in excess of EUR 3.75 million,
specific requirements regarding statutory audit of public-interest entities, the “Wet toezicht which are identified during the audit, would be reported to them, as well as smaller
accountantsorganisaties” (Wta, Audit firms supervision act), the “Verordening inzake de misstatements that in our view must be reported on qualitative grounds.
onafhankelijkheid van accountants bij assurance-opdrachten” (ViO, Code of Ethics for
Professional Accountants, a regulation with respect to independence) and other relevant Scope of the group audit
independence regulations in the Netherlands. Furthermore we have complied with the Koninklijke Philips N.V. is at the head of a group of entities. The financial information of this
“Verordening gedrags- en beroepsregels accountants” (VGBA, Dutch Code of Ethics). group is included in the group financial statements.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a Because we are ultimately responsible for the opinion, we are also responsible for directing,
basis for our opinion. supervising and performing the group audit. In this respect we have determined the nature
and extent of the audit procedures to be carried out for components. Decisive were the size
Information in support of our opinion and/or the risk profile of the components. On this basis, we selected components for which
We designed our audit procedures in the context of our audit of the financial statements as an audit had to be carried out on the complete set of financial information or specific items.
a whole and in forming our opinion thereon. The following information in support of our
opinion and any findings were addressed in this context, and we do not provide a separate Our group audit primarily focused on significant group entities. Following our assessment of
opinion or conclusion on these matters. the risk of material misstatement to Koninklijke Philips N.V.’s group financial statements, we
have selected 6 components which required an audit of the complete financial information.
Our understanding of the business Furthermore, we selected 32 components requiring audit procedures on specific account
Koninklijke Philips N.V. is a health technology company delivering personal health solutions balances or specified audit procedures on significant accounts that we considered had the
and professional health solutions for healthcare providers and their patients. The group is potential for the greatest impact on the group financial statements. We selected 1
structured in operating reporting units (hereinafter: components) and we tailored our component requiring review procedures of the complete financial information. We
group audit approach accordingly. We paid specific attention in our audit to a number of performed certain audit procedures centrally, related to financial statement account
areas driven by the operations of the group, as set out in our Key Audit Matters, as well as in balances such as capitalized development costs, restructuring costs, Health Systems sales and
our risk assessment. Personal Health sales running on the primary systems, Respironics field action provision and
other product warranty provisions, payroll, acquisitions and goodwill. Furthermore, we were
We determined materiality and identified and assessed the risks of material misstatement of involved in certain component team audit procedures related to tax, legal claims, litigation
the financial statements, whether due to fraud or error, in order to design audit procedures and contingencies. For the remaining components, we performed selected other
responsive to those risks and to obtain audit evidence that is sufficient and appropriate to procedures, including analytical review and test of details to respond to potential risks of
provide a basis for our opinion. material misstatements to the financial statements that we identified.
Materiality As a result of our scoping of the complete financial information, specific account balances
and the performance of audit procedures at different levels in the organization, our actual
Materiality EUR 75 million (2022: EUR 55 million) coverage varies per financial statement account balance and the depth of our audit
Benchmark 0.4% of sales (2022: 0.3% of sales). procedures per account balance varies depending on our risk assessment.
applied
Explanation We determined materiality based on our understanding of the Company’s business and
We have full audit coverage for selected account balances included in the key audit matters
our perception of the financial information needs of users of the financial statements.
We consider sales an important metric for the activities of the Company. The benchmark stated below.
applied is in line with our 2022 audit.
Involvement with component teams
We have also taken into account misstatements and/or possible misstatements that in our Component performance materiality was determined using judgment, based on the relative
opinion are material for the users of the financial statements for qualitative reasons. size of the component and our risk assessment.
277
We hosted audit meetings with component auditors to discuss the group audit, risks, audit As part of our audit of the financial statements, we evaluated the extent to which climate-
approach and instructions. In addition, we sent instructions to component auditors, related risks and the Company’s commitments and (constructive) obligations are taken into
covering the significant areas to be audited and the information required to be reported to account in estimates and significant assumptions applied by Koninklijke Philips N.V.
us. Based on our risk assessment, we attended in-person site visits at component locations in Furthermore, we read the management report and considered whether there is any material
the U.S.A., China, and India. These site visits encompassed some, or all, of the following inconsistency between the non-financial information in Chapter 5 Environmental, Social and
activities: co-developing the significant risk area audit approach, reviewing key local Governance, starting on page 42 and Chapter 12 ESG statements, starting on page 230 and
working papers and conclusions, meeting with local and regional management teams and the financial statements.
obtaining an understanding of key processes including centralized entity level controls
processes. In general, we interacted regularly with the component teams during various Based on the audit procedures performed, we do not deem climate-related risks to have a
stages of the audit through the use of video or teleconferencing facilities. Where deemed material impact on the financial reporting judgments, estimates or significant assumptions
appropriate, we attended certain component closing meetings with management, also as of December 31, 2023 and as such we have not identified a key audit matter.
using video or teleconferencing facilities. We reviewed key working papers of component
auditors using the EY electronic audit file platform, screen sharing or by the provision of Our focus on fraud and non-compliance with laws and regulations
copies of work papers direct to the group audit team.
Our responsibility
By performing the procedures mentioned above at components, together with additional Although we are not responsible for preventing fraud or non-compliance and we cannot be
procedures at the central level, we have been able to obtain sufficient and appropriate audit expected to detect non-compliance with all laws and regulations, it is our responsibility to
evidence about the group’s financial information to provide an opinion on the group obtain reasonable assurance that the financial statements, taken as a whole, are free from
financial statements. material misstatement, whether caused by fraud or error. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as
Teaming, use of specialists and internal audit fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the
We ensured that the audit teams both at group and at component levels included the override of internal control.
appropriate skills and competencies which are needed for the audit of a listed client in the
health technology industry. We included specialists in the areas of IT audit, forensics, Our audit response related to fraud risks
treasury, and income tax and have made use of our own valuation, share based payments We identified and assessed the risks of material misstatements of the financial statements
and actuarial experts. due to fraud. During our audit we obtained an understanding of Philips and its environment
and the components of the system of internal control, including the risk assessment process
We performed our audit in cooperation with internal audit of Koninklijke Philips N.V., and the Board of Management’s process for responding to the risks of fraud and monitoring
leveraging their in-depth knowledge of Koninklijke Philips N.V. and work performed. We the system of internal control including how the Supervisory Board exercises oversight, as
agreed on the joint coordination of the audit planning, the nature and scope of the work to well as the outcomes.
be performed, reporting and documentation. We evaluated and tested the relevant work
performed by Internal Audit to satisfy ourselves that the work was adequate for our We refer to Chapter 6 Risk management, starting on page 85 of the management report for
purposes and established what work had to be performed by our own professionals. the Board of Management’s fraud risk assessment and section 8.3 of the Supervisory Board
report, starting on page 103 in which the Audit Committee reflects on this fraud risk
Our focus on climate-related risks assessment.
Climate-related risks can impact financial reporting. The Board of Management has
summarized Philips’ commitments and obligations in relation to climate, and reported in We evaluated the design and relevant aspects of the system of internal control and in
Chapter 5 Environmental, Social and Governance, starting on page 42 and Chapter 12 ESG particular the fraud risk assessment, as well as the code of conduct, whistle blower
statements, starting on page 230 on the Environmental, Social and Governance (ESG) how procedures and incident registration. We evaluated the design and the implementation and,
the Company is addressing climate-related and environmental risks. where considered appropriate, tested the operating effectiveness of internal controls
designed to mitigate fraud risks.
278
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect Given the Company is a global organization, operating in multiple jurisdictions, in our
to financial reporting fraud, misappropriation of assets and bribery and corruption, in close assessment of the risk of non-compliance with laws and regulations, we also considered the
co-operation with our forensic and legal specialists. We evaluated whether these factors potential risk from Philips’ interactions with third-party distributors and governmental
indicate that a risk of material misstatement due to fraud is present. agencies. We refer to section 6.6 Compliance risks, starting on page 99 in the management
report. Our audit approach included the following steps: 1) obtain an understanding of the
We incorporated elements of unpredictability in our audit. We also considered the outcome environment and the Company to enable the detection of non-compliance with laws and
of our other audit procedures and evaluated whether any findings were indicative of fraud regulations related to bribery and corruption, 2) obtain an understanding of the internal
or non-compliance. control environment and the measures for mitigating those risks (by the Company) in the
light of applicable anti-corruption laws and regulations and 3) execute controls-based and
We addressed the risks related to management override of controls, as this risk is present in substantive audit procedures in order to obtain sufficient evidence for the mitigation of the
all companies. For these risks, we have performed procedures, among others to, evaluate key risk of non-compliance with laws and regulations related to bribery and corruption.
accounting estimates for management bias that may represent a risk of material
misstatement due to fraud, in particular relating to important judgment areas and We also inspected lawyers’ letters and correspondence with regulatory authorities and
significant accounting estimates as disclosed in Note 1 General information to the remained alert to any indication of (suspected) non-compliance throughout the audit.
Consolidated financial statements, starting on page 147 to the group financial statements. Finally, we obtained written representations that all known or alleged instances of non-
We have also used data analysis to identify and address high-risk journal entries and compliance with laws and regulations have been disclosed to us.
evaluated the business rationale (or lack thereof) of significant extraordinary transactions,
including those with related parties. When identifying and assessing fraud risks, we We refer to our Key Audit Matter related to the Measurement of provisions and disclosures
presumed that there are risks of fraud in sales recognition. We refer to our Key Audit Matter for legal claims, litigations and contingent liabilities for further information as to our
related to Revenue recognition – sales-related accruals and installable sales orders for procedures in this regard.
further information.
Our audit response related to going concern
We considered available information and made inquiries of relevant executives, directors, As disclosed in section ‘Basis of preparation’ in Note 1 General information to the
internal audit, legal, compliance, human resources, regional directors and the Supervisory Consolidated financial statements, starting on page 147 to the group financial statements,
Board. the financial statements have been prepared on a going concern basis. When preparing the
financial statements the Board of Management made a specific assessment of the
The fraud risks we identified, inquiries and other available information did not lead to Company’s ability to continue as a going concern and to continue its operations for the
specific indications for fraud or suspected fraud potentially materially impacting the view of foreseeable future.
the financial statements.
We discussed and evaluated the specific assessment with the Board of Management,
Our audit response related to risks of non-compliance with laws and regulations exercising professional judgment and maintaining professional skepticism.
We performed appropriate audit procedures regarding compliance with the provisions of
those laws and regulations that have a direct effect on the determination of material We considered whether the Board of Management’s going concern assessment, based on
amounts and disclosures in the financial statements. Furthermore, we assessed factors our knowledge and understanding obtained through our audit of the financial statements
related to the risks of non-compliance with laws and regulations that could reasonably be or otherwise, contains all events or conditions that may cast significant doubt on the
expected to have a material effect on the financial statements from our general industry Company’s ability to continue as a going concern. If we conclude that a material uncertainty
experience, through discussions with the Board of Management, reading minutes, exists, we are required to draw attention in our auditor’s report to the related disclosures in
inspection of internal audit and compliance reports and performing test of controls, the financial statements or, if such disclosures are inadequate, to modify our opinion.
substantive tests of details on classes of transactions, account balances or disclosures.
279
Based on our procedures performed, we did not identify material uncertainties about going
concern. Our conclusions are based on the audit evidence obtained up to the date of our
auditor’s report. However, future events or conditions may cause a company to cease to
continue as a going concern.
Our key audit matters

Key audit matters are those matters that, in our professional judgment, were of most
significance in our audit of the financial statements. We have communicated the key audit
matters to the Supervisory Board. The key audit matters are not a comprehensive reflection
of all matters discussed. In comparison with previous year, we defined one new key audit
matter: Recognition of deferred tax assets in the United States.
Revenue recognition – Sales-related accruals and installable sales orders

Risk In the Personal Health businesses, the Company has sales promotion-related agreements with distributors and retailers whereby discounts and rebates are provided based on the quantity of goods
sold and promotional and marketing activities performed by distributors and retailers. Estimating these sales-related accruals involves management assumptions based on a combination of
historical patterns and future expectations regarding which promotional targets are expected to be met by distributors and retailers. We identified a fraud risk related to the estimation of certain
sales-related accruals, specifically rebates that are non-contractual in nature, through inappropriate estimations. Refer to Note 6, Income from operations, starting on page 159, section Sales
composition and disaggregation.
Auditing the Company’s measurement of sales-related accruals was complex because the calculation involves subjective management assumptions around the extent to which promotional or
marketing targets will be met by distributors and retailers and the related non-contractual rebates that will be owed.
In addition, the sales in the Diagnosis & Treatment (D&T) and Connected Care (CC) businesses of the Company include the sale of equipment which requires installation and formal acceptance by the
customer before control over the goods and services are transferred to the customer and these installable sales orders can be recognized as revenue. There is a risk of management accelerating
revenue recognition through override of customer acceptance controls for installable sales orders.
Our audit approach Our audit procedures included, amongst others, evaluating the appropriateness of the Company’s revenue recognition policies for sales promotion-related agreements in accordance with IFRS 15
‘Revenue from Contracts with Customers’ and whether the policies have been applied consistently or whether changes, if any, are appropriate in the circumstances.
As part of our audit procedures, we obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls that address the risks of material
misstatement relating to measurement for these sales-related accruals and the occurrence of revenue recognized for installable sales orders. This included testing controls relating to management’s
review of key assumptions related to non-contractual sales-related accruals. Specifically for sales in the D&T and CC businesses, we tested the Company’s controls over customers’ acceptance of
installed equipment.
With respect to the sales-related accruals, we evaluated management’s assumptions by performing, among other procedures, a retrospective review of actual settlements of prior period sales-
related accruals. Additionally, we made inquiries of sales personnel regarding the extent to which promotional or marketing targets will be met by distributors and retailers. We also requested
external confirmation from end customers in order to verify the terms and conditions.
Furthermore, with respect to the installable sales orders we have tested, among other procedures, sales orders recognized before and after period-end for installable sales orders by obtaining formal
customer acceptance documentation to evidence occurrence of sales in the appropriate period. We have integrated unpredictability into the nature, timing and extent of these procedures by also
testing random sales transactions for installable sales orders that do not meet quantitative or qualitative criteria.
We also evaluated the adequacy of the sales-related accruals and installable sales orders disclosures as included in the group financial statements.
Key observations We consider management’s assumptions related to the sales-related accruals as well as installable sales orders to be reasonable.
In addition, we evaluated that the sales-related accruals and installable sales orders disclosures are adequate.
280
Valuation of Goodwill for Cash Generating Unit Sleep & Respiratory Care
Risk As more fully described in Note 11, Goodwill, starting on page 173, goodwill is allocated to groups of cash-generating units (CGUs) and tested for impairment at the business level (one level below
segment level), which represents the lowest level at which the goodwill is monitored internally for management purposes. Management applied certain considerations for the CGU Sleep &
Respiratory Care (S&RC) during 2023. Specifically, in performing the impairment tests for the CGU S&RC, it was necessary for management to make assumptions regarding the estimated impact of
the proposed Respironics consent decree. As of December 31, 2023, the total carrying value of goodwill allocated to CGU S&RC amounted to EUR 687 million.
Auditing the calculation of the recoverable amount for CGU S&RC was complex, given the significant judgment and estimation uncertainty related to assumptions in the model used to determine
whether the recoverable amount (value-in-use) of the CGU S&RC was appropriate. The most significant assumptions used within the model to support the recoverable amount of the CGU S&RC were
sales growth rates, pre-tax discount rate, EBITA in the terminal value, and the estimated impact of the proposed Respironics consent decree.
Our audit approach Our audit procedures included, amongst others, evaluating the appropriateness of the impairment methodology applied by the Company related to the valuation of goodwill in accordance with IAS
36 ‘Impairment of Assets’ and whether the methodology has been applied consistently or whether changes, if any, are appropriate in the circumstances. We focused specifically on the CGU S&RC
considering the potential impact of the proposed Respironics consent decree on S&RC operations.
We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over management’s goodwill impairment review process related to the CGU S&RC. For
example, we tested controls over management’s review and determination of sales growth, pre-tax discount rate, EBITA in the terminal value, and the estimated impact of the proposed Respironics
consent decree.
As part of these procedures, we assessed and tested the assumptions used by management in its valuation model for the CGU S&RC by comparing the assumptions to external data such as industrial
sales growth rates and discount rates, and we performed sensitivity analyses over these assumptions. We were assisted in our evaluation of the discount rate by valuation specialists. Further, we
corroborated the assumptions of the consent decree , including the estimated impact of the proposed Respironics consent decree to the underlying legal documentation. Additionally, to test the
data used by management, we compared the cash flow projections used in the valuation model to the information approved by the Board of Management and have evaluated the historical
accuracy of management's estimates, such as business plans and expected growth rates.
We also evaluated the adequacy of management’s disclosure around goodwill as included in the group financial statements.
Key observations We consider management’s assumptions and estimates made to calculate the recoverable amount to be reasonable.
We evaluated that the disclosures related to this matter in the group financial statements are adequate.
Measurement and disclosure of the Respironics field action provision related to Sleep & Respiratory Care products
Risk The Company recognized a provision based on management's best estimate of the costs to replace, repair or refund devices subject to the Respironics field action, initiated in 2021. As more fully
described in Note 19, Provisions, starting on page 188, the Respironics field action provision amounted to EUR 334 million as of December 31, 2023.
Auditing the Respironics field action provision was complex as it required significant judgment applied by management. Significant assumptions used to determine the provision related to quantity
of devices remaining in the recall and the estimated mix of replacement, repair or refund remediation approaches.
Our audit approach Our audit procedures included, amongst others, evaluating the appropriateness of the Company’s accounting policies related to the Respironics field action in accordance with IAS 37 ‘Provisions,
contingent liabilities and contingent assets’, and whether the accounting policies have been applied consistently or whether changes, if any, are appropriate in the circumstances.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls relating to the Respironics field action recall provision calculation and
utilization. For example, we tested the management review controls over the completeness, the utilization and mathematical accuracy of the provision.
Our audit procedures included, among others, the assessment of the significant assumptions and data used by management in its calculation model for the Respironics field action provision. For
example, we tested the quantities through obtaining third-party confirmations for quantities registered for remediation as of December 31, 2023. We assessed the reasonableness of management’s
remediation mix through inspection of communication with customers, which indicated their preferred remediation method. We also performed sensitivity analyses over the estimated mix
incorporated into the provision. In addition, we obtained information used by management in estimating refund amounts and compared these to historical sales prices. We also inspected the
communication with regulatory authorities regarding the expected terms of the consent decree and held discussions with management on the recall process as well as the ongoing cooperation with
the Department of Justice, representing the United States Food and Drug Administration. In addition, we performed procedures to test the utilization of the field action provision during the year
through a combination of analytical procedures and agreeing transactions to source documentation.
We further evaluated the adequacy of the disclosures as included in the group financial statements.
Key observations We consider the Respironics field action provision as of December 31, 2023 to be within a reasonable range.
We evaluated that the disclosures related to the Respironics field action provision in the group financial statements are adequate.
281
Measurement of provisions and disclosures for legal claims, litigations and contingent liabilities
Risk The Company and certain of its group companies and former group companies are involved as a party in legal proceedings, including regulatory and other governmental proceedings, as well as
being investigated by governmental authorities for alleged non-compliance with laws and regulations. As more fully described in Note 19, Provisions, starting on page 188 and Note 24,
Contingencies, starting on page 198, this includes legal claims and litigation related to the Respironics field action, and discussions with and information provided to the Securities and Exchange
Commission (SEC) and Department of Justice (DoJ) regarding ongoing investigations.
In Note 24, the Company has disclosed present obligations with a probable outflow of economic resources where the amount cannot be reliably estimated, as well as certain possible obligations
arising from past events.
The Company recognizes provisions for legal claims and litigation when it has a present obligation, it is probable that an outflow of economic benefits will be required to settle the obligation and
the amount can be estimated reliably. At December 31, 2023, the provision balance recorded for these obligations is EUR 487 million. A significant portion of this balance is derived from a settlement
in relation to the economic loss class action complaint in the United States (US) for which the Company recorded a provision of EUR 575 million in 2023.
Auditing the provisions for legal claims and litigation, and the disclosure for provisions and contingent liabilities, was complex and judgmental due to the subjectivity applied by management in
predicting the outcome of the matters and estimating the potential impact if the outcomes are unfavorable and the amounts involved are, or can be, material to the group financial statements as a
whole. Specifically as it relates to the economic loss class action in the US, the final cost of the settlement may vary based on, among other things, how many patients and other settlement class
members participate in the settlement.
Our audit approach Our audit procedures included, amongst others, evaluating the appropriateness of the Company’s accounting policies related to provisions and disclosures for legal claims, litigations, and
contingent liabilities in accordance with IAS 37 ‘Provisions, contingent liabilities, and contingent assets’, and whether the accounting policies have been applied consistently or whether changes, if
any, are appropriate in the circumstances.
We obtained an understanding, evaluated the design and tested the operating effectiveness of the Company’s controls around the identification and evaluation of legal claims, litigation and
investigations, and the recording and continuous re-assessment of the related provisions, contingent liabilities, and disclosures. For example, as it relates to the economic loss class action settlement,
we tested management’s review over key assumptions in the provision calculation, such as the number of patients and other settlement class members expected to participate in the settlement.
To evaluate the potential impact of allegations and test the Company’s estimate of provisions for legal claims and litigation and the disclosure for provisions and contingent liabilities, we discussed
the allegations with both internal and external legal counsel and requested confirmation letters from in-house legal counsel and external legal counsel involved in these matters. We also discussed
the allegations with the Company’s finance department, inspected relevant correspondence with authorities, and inspected the minutes of the meetings of the Audit Committee, Supervisory Board,
Board of Management and Executive Committee. For claims settled during the year, we read the related settlement agreements and agreed the cash payments, as appropriate.
Specifically related to ongoing investigations into alleged non-compliance with laws and regulations, we were supported by forensic specialists and legal specialists to assist us in assessing certain
technical aspects of the alleged non-compliance matters, legal claims, and litigation. To assess the completeness of the provisions and contingent liabilities, we reviewed publicly available
information, such as press releases, notifications issued by regulatory bodies, media reports and publications. Related to the economic loss class action settlement, we tested the accuracy of input
data such as quantities registered, for which a significant portion is derived from the Respironics recall program. We also obtained the settlement agreement and agreed the terms and conditions to
the key inputs used to record the provision.
We evaluated the adequacy of the Company’s disclosure for provisions for legal claims and litigation, and contingent liabilities, as included in the group financial statements.
Key observations We consider the Board of Management’s assessment and conclusion on the expected outcome of the above matters reasonable, and the accounting of legal claims and litigation adequate.
We evaluated that the disclosures in the group financial statements related to provisions, contingent liabilities, and contingent assets are adequate.
282
Recognition of deferred tax assets in the United States

Risk As more fully described in Note 8, Income taxes, starting on page 164, at December 31, 2023, the Company had net deferred tax assets of EUR 1,676 million which were recognized in respect of
entities in countries where there have been tax losses in the current or preceding period, primarily the United States (US).
Deferred tax assets (‘DTA’) are recognized to the extent that it is probable that there will be future taxable profits against which these can be utilized. Determining whether such taxable profits are
probable involves significant judgment, which includes but is not limited to, the availability and timing of reversal of offsetting deferred tax liabilities, the projection of available future tax profits
and the expected period of recovery.
Auditing the recognition of deferred tax assets in the US was complex because it involved significant judgment and management assumptions related to projections used to determine future
taxable income, which was derived from the Company’s strategic plan, and estimation uncertainty in determining the expected period of recovery.
Our audit approach Our audit procedures included, amongst others, evaluating the appropriateness of the tax accounting in accordance with IAS 12 ‘Income Taxes’ and whether the accounting policies have been
applied consistently or whether changes, if any, are appropriate in the circumstances.
We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the recognition of deferred tax assets in the US. This included controls over
management’s process related to the assessment of the model used to project future taxable income, the assumptions used in the income projections, and controls over the mathematical accuracy
of the calculation.
We performed procedures to test the projections of future taxable income, based on the Company’s strategic plan, including assessment of the historical accuracy of management’s forecasting
assumptions and sensitivity analyses. With the assistance of our tax professionals we assessed the reasonableness of the expected period of recovery by analysing the timing and right of offset of
certain deferred tax assets with deferred tax liabilities.
We also evaluated the adequacy of management’s disclosures around deferred tax assets as included in the group financial statements.
Key observations We consider management’s assumptions and estimates made in determining the recoverability of the deferred tax assets in the US to be reasonable.
We evaluated that the disclosures related to the deferred tax assets in the US in the group financial statements are adequate.
Report on other information included in the annual report The Board of Management is responsible for the preparation of the other information,
The annual report contains other information in addition to the financial statements and including the management report in accordance with Part 9 of Book 2 of the Dutch Civil
our auditor’s report thereon. Code and other information required by Part 9 of Book 2 of the Dutch Civil Code. The Board
of Management and the Supervisory Board are responsible for ensuring that the
Based on the following procedures performed, we conclude that the other information: remuneration report is drawn up and published in accordance with sections 2:135b and
2:145 sub-section 2 of the Dutch Civil Code. In accordance with the Dutch Corporate
• Is consistent with the financial statements and does not contain material misstatements. Governance Code, the Supervisory Board renders account of the implementation of the
• Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code for the remuneration policy in 2023 in the remuneration report, as prepared by the Remuneration
management report and the other information as required by Part 9 of Book 2 of the Committee.
Dutch Civil Code and as required by Sections 2:135b and 2:145 sub‑section 2 of the Dutch
Civil Code for the remuneration report. Report on other legal and regulatory requirements and ESEF
We have read the other information. Based on our knowledge and understanding obtained Engagement
through our audit of the financial statements or otherwise, we have considered whether the Following the appointment by the General Meeting on May 7, 2015, we were engaged by
other information contains material misstatements. By performing these procedures, we the Supervisory Board as auditor of Koninklijke Philips N.V. on October 22, 2015, as of the
comply with the requirements of Part 9 of Book 2 and Section 2:135b sub-Section 7 of the audit for the year 2016 and have operated as statutory auditor ever since that date.
Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is
substantially less than the scope of those performed in our audit of the financial statements. No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU
Regulation on specific requirements regarding statutory audit of public-interest entities.
283
European Single Electronic Reporting Format (ESEF) Description of responsibilities regarding the financial statements
Koninklijke Philips N.V. has prepared the annual report in ESEF. The requirements for this are
set out in the Delegated Regulation (EU) 2019/815 with regard to regulatory technical
standards on the specification of a single electronic reporting format (hereinafter: the RTS Responsibilities of the Board of Management and the Supervisory Board for the
on ESEF). financial statements
The Board of Management is responsible for the preparation and fair presentation of the
In our opinion, the annual report, prepared in the XHTML format, including the (partially) financial statements in accordance with IFRS-EU and Part 9 of Book 2 of the Dutch Civil Code.
marked-up group financial statements, as included in the reporting package by Koninklijke Furthermore, the Board of Management is responsible for such internal control as the Board
Philips N.V., complies in all material respects with the RTS on ESEF. of Management determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
The Board of Management is responsible for preparing the annual report, including the
financial statements, in accordance with the RTS on ESEF, whereby the Board of As part of the preparation of the financial statements, the Board of Management is
Management combines the various components into a single reporting package. responsible for assessing the Company’s ability to continue as a going concern. Based on the
financial reporting frameworks mentioned, the Board of Management should prepare the
Our responsibility is to obtain reasonable assurance for our opinion whether the annual financial statements using the going concern basis of accounting unless the Board of
report in this reporting package complies with the RTS on ESEF. Management either intends to liquidate the Company or to cease operations or has no
realistic alternative but to do so. The Board of Management should disclose events and
We performed our examination in accordance with Dutch law, including Dutch Standard circumstances that may cast significant doubt on the Company’s ability to continue as a
3950N ’Assurance-opdrachten inzake het voldoen aan de criteria voor het opstellen van een going concern in the financial statements.
digitaal verantwoordingsdocument’ (assurance engagements relating to compliance with
criteria for digital reporting). Our examination included amongst others: The Supervisory Board is responsible for overseeing the Company’s financial reporting
process.
• obtaining an understanding of the Company’s financial reporting process, including the
preparation of the reporting package Our responsibilities for the audit of the financial statements
• identifying and assessing the risks that the annual report does not comply in all material Our objective is to plan and perform the audit engagement in a manner that allows us to
respects with the RTS on ESEF and designing and performing further assurance obtain sufficient and appropriate audit evidence for our opinion.
procedures responsive to those risks to provide a basis for our opinion, including:
• obtaining the reporting package and performing validations to determine whether Our audit has been performed with a high, but not absolute, level of assurance, which
the reporting package containing the Inline XBRL instance document and the XBRL means we may not detect all material errors and fraud during our audit.
extension taxonomy files has been prepared in accordance with the technical
specifications as included in the RTS on ESEF Misstatements can arise from fraud or error and are considered material if, individually or in
• examining the information related to the group financial statements in the reporting the aggregate, they could reasonably be expected to influence the economic decisions of
package to determine whether all required mark-ups have been applied and whether users taken on the basis of these financial statements. The materiality affects the nature,
these are in accordance with the RTS on ESEF. timing and extent of our audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
We have exercised professional judgment and have maintained professional skepticism

throughout the audit, in accordance with Dutch Standards on Auditing, ethical
requirements and independence requirements. The ‘Information in support of our opinion’
section above includes an informative summary of our responsibilities and the work
performed as the basis for our opinion.
284
Our audit further included among others: 13.3.3 Independent auditor's assurance report on the ESG information
and the EU Taxonomy information
• Performing audit procedures responsive to the risks identified, and obtaining audit To: the Supervisory Board and Shareholders of Koninklijke Philips N.V.
evidence that is sufficient and appropriate to provide a basis for our opinion
• Obtaining an understanding of internal control relevant to the audit in order to design Our opinion and conclusion
audit procedures that are appropriate in the circumstances, but not for the purpose of We have performed a reasonable assurance engagement on the ESG information for 2023
expressing an opinion on the effectiveness of the Company’s internal control of Koninklijke Philips N.V. at Eindhoven. The ESG information is included in section 3.3
• Evaluating the appropriateness of accounting policies used and the reasonableness of “Double Materiality Assessment, starting on page 13”, Chapter 5 “Environmental, Social and
accounting estimates and related disclosures made by the Board of Management Governance, starting on page 42” (excluding sections 5.4.3 “Risk management and internal
• Evaluating the overall presentation, structure and content of the financial statements, control framework , starting on page 67” and 5.4.5 “Remuneration policy, starting on page
including the disclosures 69”) and Chapter 12 “ESG statements, starting on page 230” (excluding section 12.3.4 “EU
• Evaluating whether the financial statements represent the underlying transactions and Taxonomy disclosures, starting on page 252”) (hereafter together: the ESG information) of
events in a manner that achieves fair presentation the accompanying annual report.
Communication In our opinion, the ESG information presents fairly, in all material respects:
We communicate with the Supervisory Board regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant • The policy with regard to ESG matters
findings in internal control that we identify during our audit. In this respect, we also submit • The business operations, events and achievements in that area in 2023
an additional report to the audit committee of the Supervisory Board in accordance with
Article 11 of the EU Regulation on specific requirements regarding statutory audit of public- in accordance with the applicable criteria as included in the section ‘Criteria’.
interest entities. The information included in this additional report is consistent with our
audit opinion in this auditor’s report. Furthermore we have performed a limited assurance engagement on the section 12.3.4 “EU
Taxonomy disclosures, starting on page 252” in the annual report (hereafter: the EU
We provide the Supervisory Board with a statement that we have complied with relevant Taxonomy information).
ethical requirements regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought to bear on our Based on our procedures performed and the assurance information obtained, nothing has
independence, and where applicable, related safeguards. come to our attention that causes us to believe that the EU Taxonomy information is not
prepared, in all material respects, in accordance with the applicable criteria as included in
From the matters communicated with the Supervisory Board, we determine the key audit the section ‘Criteria’.
matters: those matters that were of most significance in the audit of the financial
statements. We describe these matters in our auditor’s report unless law or regulation Basis for our opinion and conclusion
precludes public disclosure about the matter or when, in extremely rare circumstances, not We have performed our reasonable assurance engagement on the ESG information and our
communicating the matter is in the public interest. limited assurance engagement on the EU Taxonomy information in accordance with Dutch
law, including Dutch standard 3810N, “Assurance-opdrachten inzake
Amsterdam, the Netherlands, February 20, 2024 duurzaamheidsverslaggeving” (Assurance engagements relating to sustainability reporting),
which is a specified Dutch Standard that is based on the International Standard on
Ernst & Young Accountants LLP Assurance Engagements (ISAE) 3000, “Assurance engagements other than audits or reviews
of historical financial information”. Our responsibilities in this regard are further described in
Signed by F.J. Blenderman the section ‘Our responsibilities’ of our report.
285
We are independent of Koninklijke Philips N.V. in accordance with the Verordening inzake report and further elaborated in the “Methodology for calculating Lives improved”, version
de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for 2023 (Lives improved methodology), the “Methodology for calculating the Environmental
Professional Accountants, a regulation with respect to independence). This includes that we Profit & Loss Account”, version 2023 (EPL methodology) and the “Methodology for
do not perform any activities that could result in a conflict of interest with our independent calculating scope 3 emissions”, version 2023 (Scope 3 Accounting methodology), as available
assurance engagement. Furthermore we have complied with the Verordening gedrags- en on the website of Koninklijke Philips N.V. We have determined that these assumptions and
beroepsregels accountants (VGBA, Dutch Code of Ethics for Professional Accountants). external sources are appropriate, but we have not performed procedures on the content of
these assumptions and external sources.
We believe that the assurance evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion and conclusion. The references to external sources or websites in the ESG information are not part of the
ESG information as included in the scope of our assurance engagement. We therefore do
Criteria not provide assurance on this information.
The criteria applied for the preparation of the ESG information are the GRI Sustainability
Reporting Standards (GRI Standards) and the criteria supplementally applied as disclosed in Our opinion and conclusion are not modified in respect to these matters.
section 12.1 “Approach to ESG reporting, starting on page 230” of the annual report.
Responsibilities of the Board of Management and the Supervisory Board for the
The ESG information is prepared with reference to the GRI Standards. The GRI Standards ESG information and the EU Taxonomy information
used are listed in the GRI Content Index as published on website of Koninklijke Philips N.V. The Board of Management is responsible for the preparation and fair presentation of the
ESG information and the EU Taxonomy information in accordance with the criteria as
The criteria used for the EU Taxonomy information are the Regulation (EU) 2020/852 as included in the section ‘Criteria’, including the identification of stakeholders and the
supplemented with Commission Delegated Regulation (EU) 2021/2139, Commission definition of material matters.
Delegated Regulation (EU) 2021/2178, Commission Delegated Regulation (EU) 2023/2485
and Commission Delegated Regulation (EU) 2023/2486. The Board of Management is also responsible for selecting and applying the criteria and for
determining that these criteria are suitable for the legitimate information needs of
The comparability of ESG information and EU Taxonomy information between entities and stakeholders, considering applicable law and regulations related to reporting. The choices
over time may be affected by the absence of an uniform practice on which to draw, to made by the Board of Management regarding the scope of the ESG information, the EU
evaluate and measure this information. This allows for the application of different, but Taxonomy information and the reporting policy are summarized in the section 12.1
acceptable, measurement techniques. “Approach to ESG reporting, starting on page 230” of the annual report.
Consequently, the ESG information and EU Taxonomy information need to be read and Furthermore, the Board of Management is responsible for such internal control as it
understood together with the criteria applied. determines is necessary to enable the preparation of the ESG information and the EU
Taxonomy information that is free from material misstatement, whether due to fraud or
Limitations to the scope of our assurance engagement error.
The ESG information includes prospective information such as ambitions, strategy, plans,
expectations, estimates and risk assessments. Prospective information relates to events and The Supervisory Board is responsible for overseeing the ESG information and the EU
actions that have not yet occurred and may never occur. We do not provide assurance on the Taxonomy reporting process of Koninklijke Philips N.V.
assumptions and achievability of this prospective information.
Our responsibilities
In the ESG information, the calculations to determine the KPIs Lives Improved, Our responsibility is to plan and perform the assurance engagement in a manner that allows
Environmental Profit & Loss and scope 3 emissions (Category 1 - Purchased goods and us to obtain sufficient and appropriate assurance evidence for our opinion and conclusion.
services and Category 11- Use of sold products) (hereinafter: the impact data) are mostly
based on assumptions and sources from third parties. The assumptions and sources used are
disclosed in section 12.1 “Approach to ESG reporting, starting on page 230” of the annual
286
Our assurance engagement of the ESG information has been performed with a high, but not
absolute, level of assurance, which means we may not have detected all material fraud and
errors during our assurance engagement.
Our assurance engagement of the EU Taxonomy information is aimed to obtain a limited

level of assurance to determine the plausibility of information. The procedures vary in nature
and timing from, and are less in extent, than for a reasonable assurance engagement. The
level of assurance obtained in a limited assurance engagement is therefore substantially less
than the assurance that is obtained when a reasonable assurance engagement is performed.
We apply the Nadere voorschriften kwaliteitssystemen (NVKS, regulations for quality

management systems) and accordingly maintain a comprehensive system of quality
management including documented policies and procedures regarding compliance with
ethical requirements, professional standards and other relevant legal and regulatory
requirements.
For a more detailed description of our responsibilities, we refer to the appendix of this
assurance report.
Eindhoven, February 20, 2024
Ernst & Young Accountants LLP
Signed by A.B.E. Laan
287
Appendix to the assurance report of the independent auditor on the ESG information and the EU Taxonomy information
Our assurance engagement included amongst others:
• Performing an analysis of the external environment and obtaining an understanding of relevant ESG themes and issues and the characteristics of the company
• Evaluating the appropriateness of the criteria applied used, their consistent application and related disclosures in the ESG information and the EU Taxonomy information. This includes the evaluation
of the company’s materiality assessment and the reasonableness of estimates made by the Board of Management
• Reconciling the relevant financial information with the financial statements
• Reading the information in the annual report which is not included in the scope of our assurance engagement to identify material inconsistencies, if any, with the ESG information and the EU
Taxonomy information
Our reasonable assurance engagement of the ESG information included amongst others: Our limited assurance engagement of the EU Taxonomy information included amongst others:
• Obtaining an understanding of the systems and processes for collecting, reporting, and • Obtaining through inquiries a general understanding of the internal control environment,
consolidating the ESG information, including obtaining an understanding of the internal the reporting processes, the information systems and the entity’s risk assessment process
control environment relevant to our assurance engagement, but not for the purpose of relevant to the preparation of the EU Taxonomy information, without obtaining assurance
expressing an opinion on the effectiveness of the company’s internal control information about the implementation or testing the operating effectiveness of controls
• Identifying and assessing the risks that the ESG information is misleading or unbalanced, or • Identifying areas of the EU Taxonomy information where misleading or unbalanced
contains material misstatements, whether due to fraud or error. Designing and performing information or a material misstatement, whether due to fraud or error, is likely to arise.
further assurance procedures responsive to those risks, and obtaining assurance evidence Designing and performing further assurance procedures aimed at determining the
that is sufficient and appropriate to provide a basis for our opinion. These procedures plausibility of the EU Taxonomy information responsive to this risk analysis. These
consisted amongst others of: procedures consisted amongst others of:
• Making inquiries of management and relevant staff at corporate level responsible for the • Making inquiries of management and relevant staff at corporate level responsible for
ESG strategy, policy and results the EU Taxonomy strategy, policy and results
• Reading minutes of the meetings of Board of Management, of the Supervisory Board and • Interviewing relevant staff responsible for providing the information for, carrying out
other meetings that are important for the content of the ESG reporting internal control procedures on, and consolidating the data in the EU Taxonomy
• Interviewing relevant staff responsible for providing the information for, carrying out information
internal control procedures on, and consolidating the data in the ESG information • Obtaining assurance evidence that the EU Taxonomy information reconciles with
• Determining the nature and extent of the procedures to be performed for the group underlying records of Koninklijke Philips N.V.
components and locations. For this, the nature, extent and/or risk profile of these • Reviewing, on a limited sample basis, relevant internal and external documentation
components are decisive. Based thereon we selected the components and locations to • Considering the data and trends in the information submitted for consolidation at
visit. The visits to Batam in Indonesia and Hamburg in Germany are aimed at, on a local corporate level
level, obtaining understanding of the design and implementation of controls • Considering whether the EU Taxonomy information is presented and disclosed free
• Evaluating the suitability of assumptions and sources from third parties used for the from material misstatement in accordance with the criteria applied
calculation underlying the impact data as included in section 12.1 “Approach to ESG
reporting, starting on page 230” of the annual report and further explained in the “Lives
improved methodology”, the “EPL methodology” and the “Scope 3 Accounting
methodology”
• Obtaining assurance evidence that the ESG information reconciles with underlying
records of Koninklijke Philips N.V.
• Evaluating relevant internal and external documentation, on a sample basis, to determine
the reliability of the information in the ESG information
• Evaluating the data and trends in the information submitted for consolidation at
corporate level
• Evaluating the overall presentation and balanced content of the ESG information
• Evaluating whether the ESG information as a whole, including the ESG matters and
disclosures, is clearly and adequately disclosed in accordance with the criteria applied
Communication
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the assurance engagement and significant findings, including any significant
findings in internal control that we identify during our assurance engagement.
288
13.4 Appropriation of profits This chapter contains the definitions of the non-IFRS measures used in this Annual Report as
Pursuant to article 34 of the articles of association of the Company, a dividend will first be well as reconciliations from the most directly comparable IFRS measures. The non-IFRS
declared on preference shares out of net income. The remainder of the net income, after any measures discussed in this Annual Report are cross referenced to this chapter. These non-
retention by way of reserve with the approval of the Supervisory Board, shall be available for IFRS measures should not be viewed in isolation or as alternatives to equivalent IFRS
distribution to holders of common shares subject to shareholder approval after year-end. As measures and should be used in conjunction with the most directly comparable IFRS
of December 31, 2023, the issued share capital consists only of common shares. No measures.
preference shares have been issued. Article 33 of the articles of association of the company
gives the Board of Management the power to determine what portion of the net income The non-IFRS financial measures presented are not measures of financial performance or
shall be retained by way of reserve, subject to the approval of the Supervisory Board. liquidity under IFRS, but measures used by management to monitor the underlying
performance of Philips’ business and operations and, accordingly, they have not been
audited or reviewed by Philips’ external auditors.
13.5 Reconciliation of non-IFRS information
In this Annual Report Philips presents certain financial measures when discussing Philips’ Additionally, Philips provides forward-looking targets for comparable sales growth, adjusted
performance that are not measures of financial performance or liquidity under IFRS (‘non- EBITA margin improvement, free cash flow and organic ROIC, which are non-IFRS financial
IFRS’). These non-IFRS measures (also known as non-GAAP or alternative performance measures. Philips has not provided a quantitative reconciliation of these targets to the most
measures) are presented because management considers them important supplemental directly comparable IFRS measures because certain information needed to reconcile these
measures of Philips’ performance and believes that they are widely used in the industry in non-IFRS financial measures to the most comparable IFRS financial measures are dependent
which Philips operates as a means of evaluating a company’s operating performance and on specific items or impacts which are not yet determined, are subject to uncertainty and
liquidity. Philips believes that an understanding of its sales performance, profitability, variability in timing and amount due to their nature, are outside of Philips’ control, or
financial strength and funding requirements is enhanced by reporting the following non- cannot be predicted, including items and impacts such as currency exchange rates,
IFRS measures: acquisitions and disposals, legal and tax gains and losses and pension settlements, charges
and costs such as impairments, restructuring and acquisition-related charges, amortization
• Comparable sales growth; of intangible assets and net capital expenditures. Accordingly, reconciliations of these non-
• EBITA; IFRS forward looking financial measures to the most directly comparable IFRS financial
• Adjusted EBITA; measures are not available without unreasonable effort. Such unavailable reconciling items
• Adjusted EBITDA; could significantly impact the results of operations and financial condition.
• Adjusted income from continuing operations attributable to shareholders;
• Adjusted income from continuing operations attributable to shareholders per common Comparable sales growth
share (in EUR) - diluted (Adjusted EPS); Comparable sales growth represents the period-on-period growth in sales excluding the
• Free cash flow; effects of currency movements and changes in consolidation. As indicated in General
• Net debt : group equity ratio; and information to the Consolidated financial statements, starting on page 147, foreign currency
• Organic Return on Invested Capital (ROIC) sales and costs are translated into Philips’ presentation currency, the euro, at the exchange
rates prevailing at the respective transaction dates. As a result of significant foreign currency
Non-IFRS measures do not have standardized meanings under IFRS and not all companies sales and currency movements during the periods presented, the effects of translating
calculate non-IFRS measures in the same manner or on a consistent basis. As a result, these foreign currency sales amounts into euros could have a material impact on the comparability
measures may not be comparable to measures used by other companies that have the same of sales between periods. Therefore, these impacts are excluded when presenting
or similar names. Accordingly, undue reliance should not be placed on the non-IFRS comparable sales in euros by translating the foreign currency sales of the previous period
measures contained in this Annual Report and they should not be considered as substitutes and the current period into euros at the same average exchange rates. In addition, the years
for sales, net income, net cash provided by operating activities or other financial measures presented were affected by a number of acquisitions and divestments, as a result of which
computed in accordance with IFRS. various activities were consolidated or deconsolidated. The effect of consolidation changes
has also been excluded in arriving at the comparable sales. For the purpose of calculating
comparable sales, when a previously consolidated entity is sold or control is lost, relevant
289
sales of that entity for the corresponding prior year period are excluded. Similarly, when an Philips Group
Sales growth composition by geographic area in %
entity is acquired and consolidated, relevant sales of that entity for the current year period
nominal consolidation currency comparable
are excluded. growth changes effects growth
2023 versus 2022
Comparable sales growth is presented for the Philips Group, operating segments and Western Europe 6.0 0.3 0.3 6.6
geographic area. Philips’ believes that the presentation of comparable sales growth is North America (0.3) 0.2 2.7 2.5
meaningful for investors to evaluate the performance of Philips’ business activities over Other mature (1.0) 0.1 8.2 7.3
time. Comparable sales growth may be subject to limitations as an analytical tool for geographies
investors, because comparable sales growth figures are not adjusted for other effects, such Mature geographies 1.4 0.2 2.7 4.2
as increases or decreases in prices or quantity/volume. In addition, interaction effects Growth geographies 3.4 0.2 6.9 10.5
Philips Group 1.9 0.2 3.9 6.0
between currency movements and changes in consolidation are not taken into account.
2022 versus 2021
Philips Group
Sales growth composition by segment in % Western Europe (1.2) (1.3) (0.4) (2.8)
nominal consolidation currency comparable North America 11.9 0.2 (12.4) (0.3)
growth changes effects growth Other mature (3.0) 0.0 2.5 (0.5)
2023 versus 2022 geographies
Diagnosis & 6.4 0.2 4.5 11.1 Mature geographies 5.9 (0.3) (6.7) (1.1)
Treatment Growth geographies (0.8) (0.1) (5.9) (6.9)
Connected Care (2.5) 0.3 3.3 1.1 Philips Group 3.9 (0.3) (6.4) (2.8)
Personal Health (0.7) 0.0 3.9 3.2
Philips Group 1.9 0.2 3.9 6.0 2021 versus 2020
Western Europe (1.5) (1.3) (0.4) (3.2)
2022 versus 2021 North America (1.5) (5.5) 3.6 (3.4)
Diagnosis & Treatment 5.9 0.0 (6.7) (0.8) Other mature (3.2) (0.1) 3.6 0.3
Connected Care (1.9) 0.0 (7.2) (9.1) geographies
Personal Health 5.7 0.0 (5.7) 0.1 Mature geographies (1.8) (3.5) 2.4 (2.8)
Philips Group 3.9 (0.3) (6.4) (2.8) Growth geographies 1.2 (0.3) 2.1 3.0
Philips Group (0.9) (2.5) 2.3 (1.2)
2021 versus 2020
Diagnosis & Treatment 5.9 (0.1) 2.5 8.3 EBITA and Adjusted EBITA
Connected Care (14.9) (6.3) 2.2 (19.0) The term Adjusted EBITA is used to evaluate the performance of Philips and its segments.
Personal Health 7.2 0.0 1.6 8.8 EBITA represents Income from operations excluding amortization and impairment of
Philips Group (0.9) (2.5) 2.3 (1.2) acquired intangible assets and impairment of goodwill. Adjusted EBITA represents EBITA
excluding gains or losses from restructuring costs, acquisition-related charges and other
items.
Restructuring costs are defined as the estimated costs of initiated reorganizations, the most
significant of which have been approved by the Executive Committee, and which generally
involve the realignment of certain parts of the industrial and commercial organization.
Acquisition-related charges are defined as costs that are directly triggered by the acquisition
of a company, such as transaction costs, purchase accounting related costs and integration-
related expenses.
290
Other items are defined as any individual item with an income statement impact (loss or Adjusted EBITDA
gain) that is deemed by management to be both significant and incidental to normal Adjusted EBITDA is defined as Income from operations excluding amortization and
business activity. This includes the following: litigation costs and settlements in favor of (or impairment of intangible assets, impairment of goodwill, depreciation and impairment of
against) the company, gains (or losses) on sale of businesses or assets, remediation costs, property, plant and equipment, restructuring costs, acquisition-related charges and other
impairment of assets, portfolio realignment charges, environmental charges and other items items.
which are individually above an amount of EUR 20 million in a quarter, or an individual item
which is above EUR 40 million across multiple quarters. Refer to Net income, Income from Philips understands that Adjusted EBITDA is broadly used by analysts, rating agencies and
operations (EBIT) and Adjusted EBITA within the Results of operations, starting on page 28 investors in their evaluation of different companies because it excludes certain items that
section of Financial performance, starting on page 26. can vary widely across different industries or among companies within the same industry.
Philips considers Adjusted EBITDA useful when comparing its performance to other
Philips considers the use of Adjusted EBITA appropriate as Philips uses it as a measure of companies in the HealthTech industry. However, Adjusted EBITDA may be subject to
segment performance and as one of its strategic drivers to increase profitability through re- limitations as an analytical tool because of the range of items excluded and their
allocation of its resources towards opportunities offering more consistent and higher significance in a given reporting period. Furthermore, comparisons with other companies
returns. This is done with the aim of making the underlying performance of the businesses may be complicated due to the absence of a standardized meaning and calculation
more transparent. framework. Philips management compensates for the limitations of using Adjusted EBITDA
by using this measure to supplement IFRS results to provide a more complete understanding
EBITA excludes amortization and impairment of acquired intangible assets and impairment of the factors and trends affecting the business rather than IFRS results alone. In addition to
of goodwill, which primarily relates to brand names, customer relationships and technology, the limitations noted above, Adjusted EBITDA excludes items that may be recurring in
as Philips believes that such amounts are inconsistent in amount and frequency, are nature and should not be disregarded in the evaluation of performance. However, we
significantly impacted by the timing and/or size of acquisitions and do not factor into its believe it is useful to exclude such items to provide a supplemental analysis of current results
decisions on allocation of its resources across segments. Although we exclude amortization and trends compared to other periods. This is because certain excluded items can vary
and impairment of acquired intangible assets from the Adjusted EBITA measure, Philips significantly depending on specific underlying transactions or events. Also, the variability of
believes that it is important for investors to understand that these acquired intangible assets such items may not relate specifically to ongoing operating results or trends and certain
contribute to revenue generation. excluded items, while potentially recurring in future periods and may not be indicative of
future results. Net income, for the years indicated is included in the following table. Net
Philips believes Adjusted EBITA is useful to evaluate financial performance on a comparable income is not allocated to segments as certain income and expense line items are monitored
basis over time by factoring out restructuring costs, acquisition-related charges and other on a centralized basis, resulting in them being shown on a Philips Group level only.
incidental items which are not directly related to the operational performance of Philips
Group or its segments.
Adjusted EBITA may be subject to limitations as an analytical tool for investors, as it excludes
restructuring costs, acquisition-related charges and other incidental items and therefore
does not reflect the expense associated with such items, which may be significant and have
a significant effect on Philips’ net income.
Adjusted EBITA margin refers to Adjusted EBITA divided by sales expressed as a percentage.
Adjusted EBITA is not a recognized measure of financial performance under IFRS. The
reconciliation of Adjusted EBITA to the most directly comparable IFRS measure, Net income,
for the years indicated is presented in the following table. Net income is not allocated to
segments as certain income and expense line items are monitored on a centralized basis,
resulting in them being shown on a Philips Group level only.
291
Philips Group
Reconciliation of Net income to Adjusted EBITA and Adjusted EBITDA in millions of EUR
Diagnosis &
2023
Net Income (463)
Discontinued operations, net of income taxes 10
Income taxes (73)
Income from operations (115) 720 (1,199) 552 (188)
Impairment of goodwill 8 8 -
EBITA 183 816 (1,020) 567 (179)
Other items: 1,358 92 1,275 22 (32)
Respironics litigation provision 575 575
Provision for a legal matter 31 31
Investment re-measurement loss 23 23
Gain on divestment of business (35) (35)
Remaining items 2 11 (12) (1) 3
Adjusted EBITA 1,921 1,026 369 597 (71)
Depreciation, amortization and impairment of fixed assets and other intangible assets 971 217 267 101 385
Adding back impairment of fixed assets included in Restructuring and acquisition-related charges and Other (47) (4) (14) (30)
items
Adjusted EBITDA 2,845 1,239 623 698 284
292
Philips Group
Diagnosis &
2022
Net Income (1,605)
Discontinued operations, net of income taxes (13)
Income taxes (113)
Income from operations (1,529) 538 (2,347) 515 (235)
Impairment of goodwill 1,357 1,357
EBITA 192 652 (764) 531 (227)
Other items: 925 133 750 (4) 46
R&D project impairments 134 73 59 3
Portfolio realignment charges 109 109
Impairments of assets in S&RC 39 39
Provision for public investigations tender irregularities 60 60
Remaining items 63 - 24 (6) 46
Adjusted EBITA 1,318 788 111 538 (119)
Depreciation, amortization and impairment of fixed assets and other intangible assets 1,239 302 420 117 400
Adding back impairment of fixed assets included in Restructuring and acquisition-related charges and Other (252) (83) (136) (3) (30)
items
Adjusted EBITDA 2,305 1,008 394 652 250
293
Philips Group
Diagnosis &
2021
Net Income 3,323
Discontinued operations, net of income taxes (2,711)
Income taxes (103)
Income from operations 553 948 (716) 576 (255)
Impairment of goodwill 15 2 13
EBITA 890 1,092 (545) 591 (248)
Restructuring and acquisition-related charges 95 (30) 130 (1) (5)
Other items: 1,069 (35) 968 - 136
Loss on divestment of business 76 76
Remaining items 87 (35) 61 - 61
Adjusted EBITA 2,054 1,028 553 590 (117)
Depreciation, amortization and impairment of fixed assets and other intangible assets 1,001 221 314 116 351
Adding back impairment of fixed assets included in Restructuring and acquisition-related charges and Other (70) (4) (68) - 2
items
Adjusted EBITDA 2,985 1,245 799 706 235
Adjusted income from continuing operations attributable to Net finance expenses are defined as either the financial income or expense component of
shareholders an individual item already identified to be excluded as part of the Adjusted income from
The term Adjusted income from continuing operations attributable to shareholders continuing operations, fair value movements of equity investments in limited life funds
represents income from continuing operations less continuing operations non-controlling recognized at fair value through profit or loss or a financial income or expense component
interests, amortization and impairment of acquired intangible assets, impairment of with an income statement impact (gain or loss) that is deemed by management to be both
goodwill, excluding gains or losses from restructuring costs and acquisition-related charges, significant and incidental to normal business activity.
other items, adjustments to net finance expenses, adjustments to investments in associates
and adjustments to tax expense. Shareholders refers to shareholders of Koninklijke Philips The adjustments to tax expense include the tax impact of the adjustments to income from
N.V. continuing operations as well as tax only adjusting items, and uses the Weighted Average
Statutory Tax Rate plus any recurring tax costs or benefits.
Restructuring costs, acquisition-related charges and other items are all defined in the EBITA
and Adjusted EBITA section above. Philips considers the use of Adjusted income from continuing operations attributable to
shareholders appropriate as Philips uses it as the basis for the Adjusted income from
continuing operations attributable to shareholders per common share (in EUR) - diluted, a
non-IFRS measure.
294
Adjusted income from continuing operations attributable to shareholders may be subject to Philips Group
Adjusted income from continuing operations attributable to shareholders 1) in millions of EUR unless
limitations as an analytical tool for investors, as it excludes certain items and therefore does otherwise stated
not reflect the expense associated with such items, which may be significant and have a 2021 2022 2023
significant effect on Philips’ net income. Net income, for the years indicated is included in Net income 3,323 (1,605) (463)
the following table. Net income is not allocated to segments as certain income and expense Discontinued operations, net of income taxes (2,711) (13) 10
line items are monitored on a centralized basis, resulting in them being shown on a Philips Income from continuing operations 612 (1,618) (454)
Group level only. Income from continuing operations attributable to non-controlling interests (4) (3) (2)
Income from continuing operations attributable to shareholders 1) 608 (1,622) (456)
Adjusted income from continuing operations attributable to shareholders is not a Adjustments for:
recognized measure of financial performance under IFRS. The reconciliation of Adjusted Amortization and impairment of acquired intangible assets 322 363 290
income from continuing operations attributable to shareholders to the most directly Impairment of goodwill 15 1,357 8
comparable IFRS measure, Net income, for the years indicated is included in the following Restructuring costs and acquisition-related charges 95 202 381
table. Other items: 1,069 925 1,358
Respironics litigation provision 575
Adjusted income from continuing operations attributable to Respironics field-action connected to the proposed consent decree 719 250 363
shareholders per common share (in EUR) - diluted (Adjusted EPS) Respironics field-action running remediation costs 94 210 224
Adjusted income from continuing operations attributable to shareholders per common
R&D project impairments 134
share (in EUR) - diluted is calculated by dividing the Adjusted income from continuing
Portfolio realignment charges 109
operations attributable to shareholders by the diluted weighted average number of shares
Impairment of assets in S&RC 39
(after deduction of treasury shares) outstanding during the period, as defined in General Provision for public investigations tender irregularities 60
information to the Consolidated financial statements, starting on page 147, earnings per Provision for a legal matter 31
share section. Investment re-measurement loss 23
Loss (gain) on divestment of business 76 (35)
Philips considers the use of Adjusted income from continuing operations attributable to Remaining items 87 63 2
shareholders per common share (in EUR) - diluted appropriate as it is a measure that is Net finance income/expenses (84) (4) 18
useful when comparing its performance to other companies in the HealthTech industry. Tax impact of adjusted items and tax only adjusting items (527) (376) (450)
However, it may be subject to limitations as an analytical tool for investors, as it uses Adjusted Income from continuing operations attributable to shareholders 1) 1,497 845 1,148
Adjusted income from continuing operations attributable to shareholders which has certain Earnings per common share:
items excluded. Income from continuing operations attributable to shareholders 1) per common 0.64 (1.76) (0.50)
share (in EUR) - diluted
Adjusted income from continuing operations attributable to shareholders 1) per 1.58 0.92 1.25
Adjusted income from continuing operations attributable to shareholders per common common share (in EUR) - diluted
share (in EUR) - diluted is not a recognized measure of financial performance under IFRS. The
1)
most directly comparable IFRS measure, income from continuing operations attributable to Shareholders refers to shareholders of Koninklijke Philips N.V.
shareholders per common share (in EUR) - diluted for the years indicated, is included in the
following table. Free cash flow
Free cash flow is defined as net cash flows from operating activities minus net capital
expenditures. Net capital expenditures are comprised of the purchase of intangible assets,
expenditures on development assets, capital expenditures on property, plant and
equipment and proceeds from sales of property, plant and equipment.
295
Philips discloses free cash flow as a supplemental non-IFRS financial measure, as Philips Philips Group
Composition of net debt to group equity in millions of EUR unless otherwise stated
believes it is a meaningful measure to evaluate the performance of its business activities
2021 2022 2023
over time. Philips understands that free cash flow is broadly used by analysts, rating agencies
Long-term debt 6,473 7,270 7,035
and investors in assessing its performance. Philips also believes that the presentation of free
Short-term debt 506 931 654
cash flow provides useful information to investors regarding the cash generated by the
Total debt 6,980 8,201 7,689
Philips operations after deducting cash outflows for purchases of intangible assets, Cash and cash equivalents 2,303 1,172 1,869
capitalization of product development, expenditures on development assets, capital Net debt 4,676 7,028 5,820
expenditures on property, plant and equipment and proceeds from disposal of property, Shareholders' equity 14,438 13,249 12,028
plant and equipment. Therefore, the measure gives an indication of the long-term cash Non-controlling interests 36 34 33
generating ability of the business. In addition, because free cash flow is not impacted by Group equity 14,475 13,283 12,061
purchases or sales of businesses and investments, it is generally less volatile than the total of Net debt : group equity ratio 24:76 35:65 33:67
net cash provided by (used for) operating activities and net cash provided by (used for)
investing activities.
Organic Return on Invested Capital
Free cash flow may be subject to limitations as an analytical tool for investors, as free cash Organic Return on Invested Capital (ROIC) is defined as organic return which includes
flow is not a measure of cash generated by operations available exclusively for discretionary income from operations for the year excluding the impact of: Income or Loss from
expenditures and Philips requires funds in addition to those required for capital operations of businesses acquired in the five year period prior to the measurement date;
expenditures for a wide variety of non-discretionary expenditures, such as payments on certain tax gains and losses determined by management to be material in nature and
outstanding debt, dividend payments or other investing and financing activities. In addition, require separate disclosure and; certain other items; and tax effects of the other adjustments
free cash flow does not reflect cash payments that may be required in future for costs (calculated at group effective tax rate) divided by average of the Net operating capital at the
already incurred, such as restructuring costs. end of each of the five quarters ending on the relevant measurement date excluding the
average net operating capital at the end of each of the five quarters ending on the relevant
Philips Group measurement date of the businesses acquired in the five year period prior to the
Composition of free cash flow in millions of EUR
measurement date, expressed as a percentage.
2021 2022 2023
Net cash flows provided by operating activities 1,629 (173) 2,136
Net operating capital is defined as tangible fixed assets, intangible fixed assets, including
Net capital expenditures: (729) (788) (554)
goodwill, inventories and receivable balances, minus payable balances and provisions, all as
Purchase of intangible assets (107) (105) (96)
further defined below. Net operating capital is adjusted to exclude assets and liabilities of
Expenditures on development assets (259) (257) (203)
businesses acquired in the five year period prior to the relevant measurement date, and
Capital expenditures on property, plant and equipment (397) (444) (345)
Proceeds from disposals of property, plant and equipment 33 18 90 adjustments determined by management to be necessary for comparability.
Free cash flow 900 (961) 1,582
Other items are defined as material in nature and require separate disclosure and have the
same nature as the items excluded from Adjusted EBITA. In the years 2020-2022 these other
Net debt : group equity ratio items included legal provisions, pension settlements, results of divestments, remediation
Net debt : group equity ratio is presented to express the financial strength of Philips. Net costs, impairment of assets and portfolio realignment charges. Refer to Net income, Income
debt is defined as the sum of long- and short-term debt minus cash and cash equivalents. from operations (EBIT) and Adjusted EBITA within the Results of operations, starting on
Group equity is defined as the sum of shareholders’ equity and non-controlling interests. page 28 section of Financial performance, starting on page 26. Organic ROIC is calculated
This measure is used by Philips Treasury management and investment analysts to evaluate after taxes.
financial strength and funding requirements. This measure may be subject to limitations
because cash and cash equivalents are used for various purposes, not only debt repayment. The term Organic Return on Invested Capital (ROIC) is used by management to evaluate
The net debt calculation deducts all cash and cash equivalents whereas these items are not Philips’ efficiency at allocating the capital under its control to profitable investments and
necessarily available exclusively for debt repayment at any given time. how well the company uses capital to generate returns. Philips believes that Organic ROIC
296
provides useful information to investors because it excludes the impact of recently acquired The reconciliation of Average Net operating capital and the reconciliation of Net income to
businesses, giving a more accurate representation of how the Philips Business System is Organic ROIC for the years ended December 31, 2020, 2021 and 2022 are included in the
leveraged to drive operational excellence and removes irregularity caused by various following tables.
operating models of recently acquired businesses. Philips also believes that excluding certain
items determined by management to be material in nature and requiring separate Philips Group
Reconciliation of Average Net operating capital 1) in millions of EUR
disclosure enhances comparability across several periods. Organic ROIC may be subject to
2021 2022 2023
limitations as an analytical tool for investors, as it excludes Income or Loss from operations
Tangible fixed assets 2,716 2,715 2,553
of acquired businesses and tax gains and losses and certain other items, which may have a
Intangible assets (including goodwill) 13,454 14,684 13,475
significant effect on ROIC. Organic ROIC is not a recognized measure of financial
Inventories 3,248 3,999 3,984
performance under IFRS.
Receivable balances 2) 4,648 5,043 4,981
Payable balances 3) (6,627) (7,129) (6,810)
The most comparable IFRS measure to Organic ROIC is Return on total assets, calculated as Provisions 4) (2,178) (2,313) (2,420)
Income from operations for the year divided by total assets as of the end of the year. Return Group Average Net operating capital 15,261 16,999 15,763
on total assets as of the balance sheet date for the years ended December 31, 2020, 2021 and Net operating capital of businesses acquired (5,511) (5,739) (4,081)
2022 is included in the following table. Average Net operating capital 9,750 11,260 11,681
Philips Group
1)
All line items represent the average of each of the five quarters ending before the relevant measurement date.
Return on total assets in millions of EUR unless otherwise stated 2)
Receivable balances consists of (Non-)Current receivables, Other (non-)current assets, (Non-)Current derivative financial
assets and Income tax receivable.
2021 2022 2023
3)
Income from operations 553 (1,529) (115) Payable balances consist of Accounts payable, Accrued liabilities, (Non-)Current contract liabilities, Other (Non-)current
liabilities, (Non-) current derivative financial liabilities and (Non-)Current tax liabilities.
Total assets 30,961 30,688 29,406 4)
Provisions consist of Long-term and Short-term provisions.
Return on total assets (%) 1.8% (5.0)% (0.4)%
297
Philips Group 13.6 Other Key Performance Indicators

Reconciliation of Net Income to Organic ROIC in millions of EUR unless otherwise stated
In addition to monitoring the IFRS and non-IFRS financial measures discussed under
2021 2022 2023
Financial performance, starting on page 26, Philips’ management also uses the following
Net Income 3,323 (1,605) (463)
other key performance indicators to monitor the performance of the business and to
Discontinued operations, net of income taxes (2,711) (13) 10
manage the business. Comparative results have been restated to reflect the treatment of the
Income taxes (103) (113) (73)
Domestic Appliances business as a discontinued operation (for more information, please
Investments in associates, net of income taxes 4 2 98
refer to Discontinued operations and assets classified as held for sale, starting on page 154).
Financial expenses 188 258 350
Financial income (149) (58) (36)
Philips Group
Income from operations 553 (1,529) (115) Other Key Performance Indicators
Loss from operations of businesses acquired 124 178 253
2021 2022 2023
Tax gains and losses (197) (169) (140)
Lives improved, in billions 1.67 1.81 1.88
Goodwill impairment 15 1,357 8
Operational carbon footprint, in kilotonnes CO2-equivalent 519 438 418
Other items: 872 802 1,181
Circular revenue 16.0% 18.1% 20.0%
Respironics litigation provision 575
Waste to landfill 0.1% 0.0% 0.0%
Respironics field-action connected to the proposed consent decree 719 250 363
Closing the Loop 34.0% 35.3% 20.5%
Respironics field-action running remediation costs 94 210 224
Comparable order intake 4% (3)% (5)%
R&D project impairments 134
Portfolio realignment charges 109
Impairment of assets in S&RC 39 Lives Improved
Provision for specified legal matters (17) 60 31
The purpose of Philips is to improve people’s health and well-being through meaningful
Investment re-measurement loss 23
innovation and we aim to improve the lives of 2 billion people a year by 2025, including 300
Loss (gain) on divestment of business 76 (35)
million in underserved communities, rising to 2.5 billion and 400 million respectively by 2030.
Income taxes 103 113 73
We use Lives Improved as a measurement of our societal impact. In the course of 2021 we
Tax effects of other adjustments (33) (45) (56)
changed the definition of ‘lives improved’ (effective January 2021) to align more closely with
Organic return 1,437 707 1,204
Average Net operating capital 9,750 11,260 11,681
our purpose. The new definition includes only products or solutions that contribute to
Organic ROIC (%) 14.7% 6.3% 10.3% people’s health and well-being, and no longer includes the contribution from our Green
Products and Solutions that support a healthy ecosystem. Additionally, as we discontinued
our Domestic Appliances business, we have removed the impact of this business from the
Lives Improved results. The combined impact of these changes resulted in an overall drop of
223 million lives improved in 2021. We calculate Lives Improved as the number of individual
interactions for each product sold (based on market intelligence and statistical data) and
multiply by the number of those products delivered in a year (eliminating double counting
for multiple different product touches per individual). See Improving people’s lives, starting
on page 56 for more information on Lives Improved.
Operational Carbon Footprint

We aim to minimize our environmental impact and we use the Operational Carbon
Footprint as one of the measurements of our impact. We define Operational Carbon
Footprint as the total greenhouse gas emissions caused by an organization, event, product
or person; expressed in kilotonnes CO2-equivalent. We calculate our Operational Carbon
Footprint on a monthly basis and include industrial sites (manufacturing and assembly sites),
non-industrial sites (offices, warehouses, IT centers and R&D facilities), business travel (lease
298
and rental cars and airplane travel) and logistics (air, sea and road transport) See Sustainable 2023, starting on page 115 for more information on the Philips’ Long-Term Incentive (LTI)
Operations, starting on page 54 for more information on our Operational Carbon Footprint. Plan.
Circular Revenues Philips currently intends to propose a 2024 Remuneration Policy for the Board of
Circular Revenues are revenues from Philips products, services and solutions that contribute Management which would, among other things, provide for the vesting of performance
to circular practices. Propositions that qualify for circular revenues must comply with the shares subject to performance over a period of 3 years and based on certain criteria,
requirements for at least one of the circular revenue categories. These include, among including a 20% weighting for Sustainability Objectives, which would be defined under that
others, products with low weight or containing a minimum threshold of recycled or bio- plan as: Lives Improved, Carbon Footprint, Circular Revenues and Employee Engagement
based plastics, as-a-service models, software running in the cloud, telehealth, upgrades, Score. The 2024 Remuneration Policy is subject to the approval of Philips shareholders at the
lifetime extensions, and refurbished equipment or components. 2024 AGM. See Remuneration of the Board of Management in 2023, starting on page 115 for
more information on the Philips’ Long-Term Incentive (LTI) Plans under the 2020
Waste to Landfill Remuneration Policy and the currently proposed 2024 Remuneration Policy.
At Philips, as a responsible company, we strive to reduce our environmental impact. We
define Waste to Landfill as total waste that is delivered for landfill and exclude one-time- Comparable order intake
only waste and waste delivered to landfill due to regulatory requirements. We calculate Comparable order intake represents the period-on-period growth, expressed as a
Waste to Landfill in kilotonnes per year. See Sustainable Operations, starting on page 54 for percentage, in order intake excluding the effects of currency movements and changes in
more information on Waste to Landfill. consolidation. Comparable order intake is reported for equipment and software in the
Diagnoses & Treatment and Connected Care segments, and is defined as the total
Closing the Loop contractually committed value of equipment and software to be delivered within a specified
Closing the loop means we are embedding a policy to responsibly take back all professional timeframe, and is an approximation of expected future revenue growth in the respective
medical equipment sold directly to customers as part of a trade-in offer or as a service at businesses. Comparable order intake does not derive from the financial statements and a
customer request. As part of the policy, we will ensure that equipment coming back to us is, quantitative reconciliation is thus not provided. In 2023, comparable order book was tracked
where feasible, made available for refurbishment and/or parts recovery, or locally recycled in for businesses that represented approximately 40% of 2023 sales.
a certified way to ensure it does not end up in landfill. We monitor the impact of our policies
by measuring the amount of equipment that we collect from our customers. We report on Philips has simplified its order intake policy by aligning horizons for all modalities to 18
this as ‘reclaimed equipment’. months to revenue. Order intake for software contracts corresponds to the same 18 months
to revenue horizon, meaning that only the next 18 months conversion to revenue under the
Philips believes that the five other key performance indicators described above (Lives contract is recognized. Philips believes this policy eliminates major variances in order intake
Improved, Operational Carbon Footprint, Circular Revenues, Waste to Landfill and Closing growth and better reflects expected revenue in the short term from order intake booked in
the Loop) provide important information to investors and are important to understanding the reporting period.
the long-term performance and prospects of the business. In addition, these other key
performance indicators are also used for management compensation purposes. Members of Philips uses comparable order intake as an indicator of business activity and performance.
the Board of Management are eligible for grants of performance shares under the Long- Comparable order intake is not an alternative to revenue and may be subject to limitations
Term Incentive (LTI) Plan, and the vesting of the performance shares is subject to as an analytical tool due to differences in amount and timing between booking orders and
performance over a period of 3 years and based on certain criteria, including a 10% revenue recognition. Due to divergence in practice, other companies may calculate this or a
weighting for Sustainability Objectives, which Philips defines as the five other key similar measure (such as order backlog) differently and therefore comparisons between
performance indicators described above: Lives Improved, Carbon Footprint, Circular companies may be complicated.
Revenues, Waste to Landfill and Closing the Loop. Philips believes that including these other
key performance indicators in our remuneration policy encourages management to act
responsibly and sustainably, supporting the company’s overall performance and enhancing
the long-term value of the company. See Remuneration of the Board of Management in
299
13.7 Forward-looking statements and other information may also be based on estimates and projections prepared by management and/or based on
outside sources of information. Management's estimates of rankings are based on order
Forward-looking statements intake or sales, depending on the business.
This document contains certain forward-looking statements with respect to the financial
condition, results of operations and business of Philips and certain of the plans and Use of non-IFRS information
objectives of Philips with respect to these items. Examples of forward-looking statements In presenting and discussing the Philips Group’s financial position, operating results and
include statements made about our strategy, estimates of sales growth, future Adjusted cash flows, management uses certain non-IFRS financial measures. These non-IFRS financial
EBITA*), future restructuring and acquisition-related charges and other costs, future measures should not be viewed in isolation as alternatives to the equivalent IFRS measure
developments in Philips’ organic business and the completion of acquisitions and and should be used in conjunction with the most directly comparable IFRS measures. Non-
divestments. Forward-looking statements can be identified generally as those containing IFRS financial measures do not have standardized meaning under IFRS and therefore may
words such as “anticipates”, “assumes”, “believes”, “estimates”, “expects”, “should”, “will”, “will not be comparable to similar measures presented by other issuers. A reconciliation of these
likely result”, “forecast”, “outlook”, “projects”, “may” or similar expressions. By their nature, non-IFRS measures to the most directly comparable IFRS measures is contained in
these statements involve risk and uncertainty because they relate to future events and Reconciliation of non-IFRS information, starting on page 289.
circumstances and there are many factors that could cause actual results and developments
to differ materially from those expressed or implied by these statements. Statutory financial statements and management report
The chapters Group financial statements and Company financial statements contain the
These factors include but are not limited to: Philips’ ability to gain leadership in health statutory financial statements of the company. The introduction to the chapter Group
informatics in response to developments in the health technology industry; Philips’ ability to financial statements sets out which parts of this Annual Report form the management
keep pace with the changing health technology environment; macroeconomic and report within the meaning of Section 2:391 of the Dutch Civil Code.
geopolitical changes; integration of acquisitions and their delivery on business plans and
value creation expectations; securing and maintaining Philips’ intellectual property rights, *)
and unauthorized use of third-party intellectual property rights; ability to meet expectations Reconciliation of non-IFRS information, starting on page 289.
with respect to ESG-related matters; failure of products and services to meet quality or
security standards, adversely affecting patient safety and customer operations; breach of
cybersecurity; challenges in simplifying our organization and our ways of working; the
resilience of our supply chain; attracting and retaining personnel; challenges in driving
operational excellence and speed in bringing innovations to market; compliance with
regulations and standards including quality, product safety and (cyber) security; compliance
with business conduct rules and regulations including privacy and upcoming ESG disclosure
and due diligence requirements; treasury and financing risks; tax risks; reliability of internal
controls, financial reporting and management process; global inflation.
As a result, Philips’ actual future results may differ materially from the plans, goals and
expectations set forth in such forward-looking statements. For a discussion of factors that
could cause future results to differ from such forward-looking statements, see also Risk
management, starting on page 85.
Third-party market share data

Statements regarding market share, contained in this document, including those regarding
Philips’ competitive position, are based on outside sources such as specialized research
institutes, industry and dealer panels in combination with management estimates. Where
full year information regarding 2023 is not yet available to Philips, market share statements
300
13.8 Investor information Philips Group

Shareholders by style at year-end 1)
2023
13.8.1 Share information Value 49%

Index 14%
Philips Group Growth 11%
Share information at year-end 2023 GARP 11%
Share listings Euronext Amsterdam, New York Stock Exchange Retail 9%
Ticker code PHIA, PHG Other 6%
No. of shares issued 914 million Hedge Fund 1%
No. of shares issued and outstanding 906 million 1)
Approximate split based on shareholders identified.
Market capitalization EUR 19 billion
Industry classification
MSCI: Health Care Equipment 35101010
13.8.2 Financial calendar
ICB: Medical Equipment 4535
Financial calendar
Members of indices AEX, NYSE,
STOXX Europe 600 Healthcare, Annual General Meeting of Shareholders
MSCI Europe Health Care Record date 2024 AGM April 9, 2024
2024 AGM May 7, 2024
Quarterly reports 1)
The following information is based on a shareholder base analysis carried out for investor
First quarter results 2024 April 29, 2024
relations purposes by an independent provider in December 2023.
Second quarter results 2024 July 29, 2024
Philips Group Third quarter results 2024 October 28, 2024
Shareholders by region at year-end 1) Fourth quarter results 2024 February 3, 2025
2023 1)
Subject to updates of the financial calendar as published on the company's website
United States 40%
Netherlands 16%
United Kingdom 14%
2024 Annual General Meeting of Shareholders
Switzerland 4%
The Agenda and the explanatory notes to the Agenda for the Annual General Meeting of
Rest of Europe 9%
Retail and Other 2) 16% Shareholders on May 7, 2024, will be published on the company’s website.
For the 2024 Annual General Meeting of Shareholders, a record date of April 9, 2024 will
1)
Approximate split based on shareholders identified.
apply. Those persons who, on that date, hold shares in the company, and are registered as
2)
No geography identified for Retail and Other.
such in one of the registers designated by the Board of Management for the Annual General
Meeting of Shareholders, will be entitled to participate in, and vote at, the meeting.
301
13.8.3 Investor contact International direct investment program

Royal Philips offers a Dividend Reinvestment and Direct Stock Purchase Plan designed for the
Shareholder services US market. This program provides existing shareholders and interested investors with an
Shareholders and other interested parties can make inquiries about the Annual Report 2023 economical and convenient way to purchase and sell Philips New York Registry shares (listed
to: at the New York Stock Exchange) and to reinvest cash dividends. Deutsche Bank (the
registrar of Philips NY Registry shares) has been authorized to implement and administer
Royal Philips both plans for registered shareholders of and new investors in Philips NY Registry shares.
Annual Report Office Philips does not administer or sponsor the Program and assumes no obligation or liability for
Philips Center the operation of the plan. For further information on this program and for enrollment
P.O. Box 77900 forms, contact:
1070 MX Amsterdam, The Netherlands
E-mail: annual.report@philips.com Deutsche Bank Trust Company Americas
C/O Equiniti Trust Company LLC
The Annual Report on Form 20-F is filed electronically with the US Securities and Exchange PO Box 10027, Newark NJ 07101
Commission. Telephone (toll free US): +1-866-706-8374
Telephone (outside of US): +1-718-921-8137
Holders of shares listed on Euronext Amsterdam Website: www.equiniti.com
Communications concerning share transfers, share certificates, dividends and change of E-mail: adr@equiniti.com
address should be directed to:
Analysts’ coverage
ABN AMRO Bank N.V. Royal Philips is covered by approximately 20 analysts. For a list of our current analysts, please
Department Equity Capital Markets/Corporate Broking and Issuer Services HQ7212 refer to: www.philips.com/a-w/about/investor/stock-info/analyst-coverage.html
Gustav Mahlerlaan 10,
1082 PP Amsterdam, The Netherlands How to reach us
Telephone: +31-20-628-6070
Investor Relations contact
E-mail: corporate.broking@nl.abnamro.com Royal Philips
Philips Center
Holders of New York Registry shares P.O. Box 77900
Communications concerning share transfers, share certificates, dividends and change of 1070 MX Amsterdam, The Netherlands
address should be directed to: Telephone: +31-20-59 77222
Website: www.philips.com/investor
Deutsche Bank Trust Company Americas E-mail: investor.relations@philips.com
C/O Equiniti Trust Company LLC
Peck Slip Station, PO Box 2050, New York NY 10272-2050 Leandro Mazzoni
Telephone (toll-free US): +1-866-706-8374 Head of Investor Relations
Telephone (outside of US): +1-718-921-8137 Telephone: +31-20-59 77222
Website: www.equiniti.com
E-mail: adr@equiniti.com Dorin Danu
Investor Relations Director
Telephone: +31-20-59 77055
302
Sustainability contact
Royal Philips
st
High Tech Campus 51, 1 floor
5656 AG Eindhoven, The Netherlands
Telephone: +31-40-27 83651
Website: www.philips.com/sustainability
E-mail: philips.sustainability@philips.com
Press Office contact

Royal Philips
Philips Center
Amstelplein 2
1096 BC Amsterdam, The Netherlands
E-mail: group.communications@philips.com
For media contacts please refer to:
https://www.philips.com/a-w/about/news/contacts.html
Registered address
High Tech Campus 52, 5656 AG Eindhoven, The Netherlands
303
13.9 Definitions and abbreviations Circular economy

A circular economy aims to decouple economic growth from the consumption of natural
Actionable resources by optimizing their use, eliminating waste and pollution, and circulating products
In the context of the Respironics recall, actionable registrations are those that contain the and materials for as long as possible, while giving natural systems the opportunity to
necessary information needed to complete the remediation and are not awaiting further regenerate themselves.
information, including from patient registrants.
Circular Materials Management
Artificial Intelligence (AI) Circular Materials Management is a KPI for promoting an increase in the proportion of
Philips embraces the following formal definition of AI (source: European Commission High- waste treated using waste management hierarchy levels that are circular: prevention, re-use,
Level Expert Group definition AI): Artificial intelligence (AI) systems are software (and and recycling. Circular Materials Management % is the proportion of materials managed
possibly also hardware) systems designed by humans that, given a complex goal, act in the circularly in comparison to the total used materials baseline. The total used materials
physical or digital dimension by perceiving their environment through data acquisition, baseline is the total of both circular and linear waste, excluding linear disposal of waste that
interpreting the collected structured or unstructured data, reasoning on the knowledge, or is required by law. Circular Materials Management includes recycling, re-use, prevention and
processing the information, derived from this data and deciding the best action(s) to take to other recovery (e.g. repurposing). It excludes all linear disposal, which is classified as waste to
achieve the given goal. energy, incineration and landfill.
AI systems can either use symbolic rules or learn a numeric model, and they can also adapt Circular Revenues
their behavior by analyzing how the environment is affected by their previous actions. Circular Revenues are revenues from Philips products, services and solutions that contribute
to circular practices. Propositions that qualify for circular revenues must comply with the
As a scientific discipline, AI includes several approaches and techniques, such as machine requirements for at least one of the circular revenue categories. These include, among
learning (of which deep learning and reinforcement learning are specific examples), others, products with low weight or containing a minimum threshold of recycled or bio-
machine reasoning (which includes planning, scheduling, knowledge representation and based plastics, as-a-service models, software running in the cloud, telehealth, upgrades,
reasoning, search, and optimization), and robotics (which includes control, perception, lifetime extensions, and refurbished equipment.
sensors and actuators, as well as the integration of all other techniques into cyber-physical
systems). Closing the Loop / reclaimed equipment
Closing the loop means we are embedding a policy to responsibly take back all professional
See also Philips AI Principles. medical equipment sold directly to customers as part of a trade-in offer or as a service at
customer request. As part of the policy, we will ensure that equipment coming back to us is,
Brominated flame retardants (BFR) where feasible, made available for refurbishment and/or parts recovery, or locally recycled in
Brominated flame retardants are a group of chemicals that have an inhibitory effect on the a certified way to ensure it does not end up in landfill. We monitor the impact of our policies
ignition of combustible organic materials. Of the commercialized chemical flame retardants, by measuring the amount of equipment that we collect from our customers. We report on
the brominated variety are most widely used. this as ‘reclaimed equipment’.
Business/Business unit Dividend yield

In the Philips Operating Model, our three operating segments are made up of six businesses, The dividend yield is the annual dividend payment divided by Philips’ market capitalization.
which are in turn comprised of 18 business units. See also the entry under Segment. All references to dividend yield are as of December 31 of the previous year.
CO2-equivalent EcoHeroes
CO2-equivalent or carbon dioxide equivalent is a quantity that describes, for a given mixture Philips’ ‘EcoHeroes’ concept aims to drive innovation beyond our EcoDesign requirements,
and amount of greenhouse gas, the amount of CO2 that would have the same global delivering solutions that are demonstrably setting the pace in terms of environmental
warming potential (GWP), when measured over a specified timescale (generally 100 years). impact. An EcoHero product meets all EcoDesign requirements applicable to new product
304
introductions and outperforms in at least one of the focal areas of EcoDesign (Energy, Green/EcoDesigned Revenues
Packaging, Substances and Circularity). Green/EcoDesigned Revenues are generated through products that meet the
Green/EcoDesigned Products definition.
Employee Engagement Index (EEI)
The Employee Engagement Index (EEI) is the single measure of the overall level of employee Growth geographies
engagement at Philips. It is a combination of perceptions and attitudes related to employee Growth geographies consists of the grouping 'Growth', which comprises the developing
satisfaction, commitment and advocacy. geographies Asia Pacific (excluding Japan, South Korea, Australia and New Zealand), Latin
America, Central & Eastern Europe, Middle East & Turkey (excluding Israel) and Africa.
Energy-using Products (EuP)
An energy-using product is a product that uses, generates, transfers or measures energy Hazardous substances
(electricity, gas, fossil fuel). Examples include boilers, computers, televisions, transformers, Hazardous substances are generally defined as substances posing imminent and substantial
industrial fans and industrial furnaces. danger to public health and welfare or the environment.
Functions Income from operations (EBIT)

In the Philips Operating Model, Philips' businesses are supported by lean Functions. The Income from operations as reported on the IFRS consolidated statement of income. The
Functions deliver cost-effective services, ensure legal & regulatory requirements are term EBIT (earnings before interest and tax) has the same meaning as Income from
deployed, and propose Enterprise policies, standards, guidance and infrastructure, as well as operations.
providing functional capabilities and expertise (e.g. via Centers of Excellence).
Income from continuing operations
Full-time equivalent employee (FTE) Income from continuing operations as reported on the IFRS consolidated statement of
Full-time equivalent is a way to measure a worker’s involvement in a project. An FTE of 1.0 income, which is net income from continuing operations, or net income excluding
means that the person is equivalent to a full-time worker, while an FTE of 0.5 signals that the discontinued operations.
worker works half-time.
Lean
Global Reporting Initiative (GRI) The basic insight of Lean thinking is that if every person is trained to identify wasted time
The Global Reporting Initiative (GRI) is a network-based organization that pioneered the and effort in their own job and to better work together to improve processes by eliminating
world’s most widely used sustainability reporting framework. GRI is committed to the such waste, the resulting enterprise will deliver more value at less expense.
framework’s continuous improvement and application worldwide. GRI’s core goals include
the mainstreaming of disclosure on environmental, social and governance performance. Lives improved by Philips
To calculate how many lives we are improving, market intelligence and statistical data on the
Green/EcoDesigned Innovation number of people touched by the products contributing to the social or ecological
Green/EcoDesigned Innovation comprises all R&D activities directly contributing to the dimension over the lifetime of a product are multiplied by the number of those products
intended development of Green/EcoDesigned Products. delivered in a year. After elimination of double counts – multiple different product touches
per individual are only counted once – the number of lives improved by our innovative
Green/EcoDesigned Products solutions is calculated.
A Green/EcoDesigned Product must comply with all applicable legal requirements, Philips
policies, and all stated EcoDesigned Product requirements in our four focal areas: Energy, Long-term strategic partnership
Substances, Circularity and Packaging. The aim is to improve the energy efficiency of our Multi-year contractual agreement that represents a partnership to enable long-term
products, use less resources and more recycled content, avoid the use of hazardous collaboration.
substances, design for circularity, and make our packaging easier to recycle and re-use.
305
Mature geographies Quadruple Aim

Mature geographies are the highly developed markets constituting three geographic areas: At Philips, we make value-based care principles actionable by addressing the Quadruple Aim
Western Europe, North America, and Other mature (including Japan, South Korea, Israel, – better health outcomes, improved patient experience, improved staff experience, and
Australia and New Zealand). lower cost of care.
Net Promoter Score REACH

Net Promoter Score®, or NPS®, measures customer experience and predicts business growth. Registration, Evaluation, Authorization and Restriction of Chemicals (REACH;Regulation (EC)
NPS is calculated by taking the answer to a key question on a 0-10 scale: How likely is it that No 1907/2006) is a European Union regulation that addresses the production and use (e.g. in
you would recommend [brand] to a friend or colleague? products) of chemical substances, and their potential impact on both human health and the
Respondents are grouped as follows: environment. This regulation is covered in the Philips Regulated Substances List.
• Promoters (score 9-10) are loyal enthusiasts who will keep buying and refer others, Regulated Substance List
fueling growth. Philips Regulated Substances List (RSL) combines legal, industry, and voluntary Philips
• Passives (score 7-8) are satisfied but unenthusiastic customers who are vulnerable to requirements regarding chemical substances used in Philips products and their packaging,
competitive offerings. either on a homogenous material level or present in the product as such. The RSL contains
• Detractors (score 0-6) are unhappy customers who can damage the brand and impede restricted and declarable substances.
growth through negative word-of-mouth.
Respironics recall
Subtracting the percentage of Detractors from the percentage of Promoters yields the Net The voluntary recall notification in the United States and field safety notice outside the
Promoter Score, which can range from a low of -100 (if every customer is a Detractor) to a United States for certain sleep and respiratory care products initiated by Philips Respironics
high of 100 (if every customer is a Promoter). in 2021.
Operational carbon footprint Responsible Business Alliance (RBA)

A carbon footprint is the total set of greenhouse gas emissions caused by an organization, The Responsible Business Alliance (formerly known as The Electronic Industry Citizenship
event, product or person; usually expressed in kilotonnes CO2-equivalent. Philips' Coalition (EICC)) was established in 2004 to promote a common code of conduct for the
operational carbon footprint is calculated on a monthly basis and includes industrial sites electronics and information and communications technology (ICT) industry. EICC now
(manufacturing and assembly sites), non-industrial sites (offices, warehouses, IT centers and includes more than 100 global companies and their suppliers.
R&D facilities), business travel (lease and rental cars and airplane travel) and logistics (air, sea
and road transport). Restriction on Hazardous Substances (RoHS)
The RoHS Directive prohibits all new electrical and electronic equipment placed on the
Philips Lighting/Signify market in the European Economic Area from containing lead, mercury, cadmium, hexavalent
References to 'Signify' in this Annual Report relate to Philips' former Lighting segment (prior chromium, poly-brominated biphenyls (PBB) or polybrominated diphenyl ethers (PBDE)and
to deconsolidation as from the end of November 2017 and when reported as discontinued four phthalates (DEHP, DBP, BBP and DiHP), except in certain specific applications, in
operations), Philips Lighting N.V. (before or after such deconsolidation) or Signify N.V. (after concentrations greater than the values decided by the European Commission. These values
its renaming in May 2018), as the context requires. have been established as 0.01% by weight per homogeneous material for cadmium and
0.1% for the other nine substances. This regulation is covered in the Philips Regulated
Polyvinyl chloride (PVC) Substances List.
Polyvinyl chloride, better known as PVC or vinyl, is an inexpensive plastic so versatile it has
become completely pervasive in modern society.
306
Segment Weighted Average Statutory Tax Rate (WASTR)

The Philips Operating Model identifies three operating segments – Diagnosis & Treatment, The reconciliation of the effective tax rate is based on the applicable statutory tax rate,
Connected Care and Personal Care – comprised of six businesses and 18 business units, as which is a weighted average of all applicable jurisdictions. This weighted average statutory
well as segment Other. Other includes Innovation & Strategy, IP Royalties, Central Costs, and tax rate (WASTR) is the aggregation of the result before tax multiplied by the applicable
other small items. See also the entry under Business/Business unit. statutory tax rate without adjustment for losses, divided by the group result before tax.
Solution
A combination of Philips (and 3rd-party) systems, devices, software, consumables and
services, configured and delivered in a way to solve customer (segment)-specific needs and
challenges.
Sustainable Development Goals

The Sustainable Development Goals (SDGs) are a collection of 17 global goals set by the
United Nations. The broad goals are interrelated though each has its own targets. The SDGs
cover a broad range of social and economic development issues. These include poverty,
hunger, health, education, climate change, water, sanitation, energy, environment and social
justice.
Sustainable Innovation
Sustainable Innovation is the Research & Development spend related to the development of
new generations of products and solutions that address the United Nations Sustainable
Development Goals 3 (Ensure healthy lives and promote well-being for all at all ages) or 12
(Ensure sustainable consumption and production patterns). This includes all Diagnosis &
Treatment and Connected Care innovation spend. In addition, innovation spend that
contributes to Green Products and healthy living at Personal Health is included. Finally,
innovation spend at Other that addresses the SDGs 3 and 12 is included.
VOC
Volatile organic compounds (VOCs) are organic chemicals that have a high vapor pressure at
ordinary room temperature. Their high vapor pressure results from a low boiling point,
which causes large numbers of molecules to evaporate or sublimate from the liquid or solid
form of the compound and enter the surrounding air, a trait known as volatility.
Voluntary turnover
Voluntary turnover covers all employees who resigned of their own volition.
Waste Electrical and Electronic Equipment (WEEE)

The Waste Electrical and Electronic Equipment Directive (WEEE Directive) is the European
Community directive on waste electrical and electronic equipment setting collection,
recycling and recovery targets for all types of electrical goods. The directive imposes the
responsibility for the disposal of waste electrical and electronic equipment on the
manufacturers of such equipment.
307
www.philips.com/annualreport2023
© 2024 Koninklijke Philips N.V. All rights reserved

PhilipsFullAnnualReport2023 English

Uploaded by

Copyright:

Available Formats

PhilipsFullAnnualReport2023 English

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

PhilipsFullAnnualReport2023 English

Uploaded by

Copyright:

Available Formats

PDF/printed version

This document is the PDF/printed version of the 2023 Annual Report

IFRS basis of presentation

Dutch Financial Markets Supervision Act

Statutory financial statements and management report

Due to rounding, amounts may not add up precisely to the totals

Social impact Innovation People & culture

1 Message from the CEO

2 Board of Management and Executive Committee

Members of the Board of Management

Roy Jakobs Abhijit Bhattacharya Marnix van Ginneken

Other members of the Executive Committee

Willem Appelo Edwin Paalvast Steve C de Baca

Andy Ho Shez Partovi Julia Strandberg

Deeptha Khanna Jeff DiLullo

Bert van Meurs Heidi Sichien

At a glance Significant opportunities to drive impact – helping

Patient safety and quality at the heart of innovation

Strong customer interest in AI-enabled health

Personal health innovations supported by online

Respironics recall: remediation of sleep devices almost

3 Strategy and Businesses

3.2 How we create value with sustainable impact

Resource inputs Value outcomes Societal impact

At year-end 2023, Personal Health employed 9,085 people worldwide.

International Marie-Lannelongue (Hauts-de-Seine) to improve personalized cancer care by integrating

3.7 Real Estate

At a glance Group sales increased 6% on a comparable basis to

performance Income from operations was a loss of EUR 115 million,

Operating cash flow improved to EUR 2,136 million,

4.1 Performance review Philips Group

The year 2023 2021 2022 2023

4.4 Restructuring and acquisition-related charges

Philips Group Net cash flows from financing activities

Net cash flows from discontinued operations 4.8 Debt position

Proposed distribution Philips Group

At a glance 1.88 billion lives improved by our products and solutions,

Strengthening patient safety and quality Philips' highest

Shift to new, simplified operating model, including

Preparing for upcoming ESG reporting legislation

5 Environmental, Social and Governance

5.1 Philips' ESG commitments

Our key ESG commitments

Environmental Social Governance

Additionally, the environmental impact categories associated with biodiversity and

5.2.1 Climate Action

Carbon footprint and energy efficiency

Operational carbon footprint

Philips Group Philips Group

environment a human right.

5.2.6 Sustainable Operations Philips Group

Waste Philips Group

5.3.1 Improving people’s lives

In 2023, we gained momentum towards our strategy of becoming a more people-centric

Diversity Policy and Fair Employment Policy. 50 52 52 66 65 65 71 69 68 75 76 75 60 61 61 Male

Global Diversity Council External awards

Employee Resource Groups External partnerships

• Social Plan or respective severance policy Employee turnover

Philips Group Philips Group