ESRS E2: Pollution

Impacts, Risks, and Opportunities

¹ Time horizon broken down into short-term (S), medium-term (M), and long-term (L).

² Location within the value chain divided into upstream value chain (1), own operations (2), and downstream value chain (3).

³ Covestro uses raw materials and manufactures intermediates and products for internal use that are considered microplastics based on the following definition in accordance with ESRS E2: polymer-containing material that is used as a feedstock in extrusion or injection-molding processes in the manufacture of plastics and has a particle size greater than or equal to 0.1 μm (0.0001 mm) and smaller than or equal to 5 mm (height x width x depth).
For further information, please refer to “Impact, Risk and Opportunity Management.”
For further information, please refer to “Strategy – Interests and Views of Stakeholders.”

Policies and Actions

Pollution of Air, Water and Soil

The environmental impacts associated with our business activities are an integral part of our integrated Health, Safety, Environment, Energy and Quality (HSEQ) management system, which consists of various Group policies that form a holistic, integrated approach to cover all material environmental aspects. Due to the holistic approach, the Group policies do not contain specific lists of pollutants or other substances covered.
Responsibility for the integrated management system has been assigned to the corporate Group Health, Safety, Environment and Reliability (HSER) function.

Our corporate Health, Safety, Environment and Energy, and Quality (HSEQ) policy commits us to working continuously on reducing environmental impacts resulting from our activities, products, and services. This ensures that resource-conserving processes help to protect the environment and cut costs. Additionally, all of our plants are subject to permits that define minimum requirements for the operation of the plants in line with local legislation. Nevertheless, unintended releases of emissions into the air, water, or soil may impact human health and the environment. The sites are responsible for compliance with the approved thresholds and must take measures to ensure that impacts on the environment and society remain within permissible limits.

The basic principles contained in the corporate HSEQ policy are published in the Policy Booklet on our website.

For further information, please refer to: www.covestro.com/en/sustainability/documents-and-downloads/policies-and-commitments

To avoid any types of incident and emergency situation or to minimize their impacts in the worst-case scenario, globally applicable processes and workflows include detailed rules governing the safety of production facilities and manufacturing processes, the investigation of accidents, as well as environmental and transportation incidents, health care and occupational safety, and emergency management at Covestro. The rules stipulated by international standards (e.g., ISO 45001 or ISO 14001) comprise the minimum requirements applicable worldwide and are supplemented with additional regulations if needed. They are intended to prevent work-related health impacts, accidents and incidents at the workplace or on transportation routes that could have adverse consequences for people or the environment. In addition, we offer support to our customers, for example by providing training on the safe handling of our products in and outside of our facilities. We increasingly rely on the support of third-party databases to help us identify, review, and update our compliance with mandatory legal and other requirements.

Moreover, minimum environmental standards applicable worldwide were specified to ensure that our high standards for resource conservation and emissions reduction are met. These requirements are based on internationally recognized standards and rules such as ISO 14001 (environmental management systems).

Each year we analyze and evaluate the effects of our activities on the environment, including emissions into the air, water, and soil. From our environmental performance assessment, we derive measures to reduce and minimize environmental impacts. Global process and workflow descriptions help us implement these measures throughout the Group.

Adherence to processes and workflows is continuously reviewed through regularly conducted internal audits, annual self-assessments, and external certifications. The insights we gain from these measures are incorporated into our annual management review. Every process is thus subject to continuous monitoring and is updated as required.

In the context of local and national legislation, it is also the responsibility of each site to take individual local actions to mitigate the influence and impacts on people and the environment. For this reason, the measures described above for the impacts on each site may vary considerably. An example of an improvement measure in the reporting year is the commissioning of new waste gas reduction technology at our sites in Shanghai (China) and Baytown, Texas (United States). In addition to making a positive contribution to CO₂ reduction, this will enable us to cut our nitrogen oxide emissions significantly.

Microplastics

In our HSEQ management system, we record emission events and the associated data to help us avoid future events. Since the year 2015, Operation Clean Sweep® (OCS) has been the key action for preventing the emission of microplastics at Covestro. This initiative aims to prevent plastic particles from entering waterways and oceans. In recent years, the sites and facilities that produce and process microplastics have taken locally appropriate measures to prevent such emissions. The measures are regularly reviewed and optimized when necessary.

Substances of Concern and Substances of Very High Concern

Covestro uses chemical substances to manufacture products as starting materials for further processing in the value chain. Our products are used and transformed industrially in downstream processes. Their safe use and the provision of information to our customers are governed by law.

The reactivity and suitability of the substances are essential to achieving the desired product properties. The chemical substances used may result in properties which, in the context of sustainability reporting in accordance with ESRS, lead to classification as substances of concern (SoC) or substances of very high concern (SVHC). These properties also result in a potential negative impact in the downstream supply chain on people and the environment if employees are exposed to hazardous substances or if air, water, and soil are contaminated. Our actions to counter this potential negative impact are described in “ESRS S2: Workers in the Value Chain” under “Product Stewardship.” The actions and policies described there comprehensively consider product-related hazards. This covers both the potential impacts of the substances of concern and substances of very high concern mentioned here and other potential hazards.

For further information, please refer to “ESRS S2: Workers in the Value Chain – Product Stewardship.”

Apart from the above, Covestro does not have any dedicated policies to substitute and minimize the use of substances of concern and to phase out substances of very high concern, not even for essential societal purposes and in consumer products. This does not affect individual actions and optimization initiatives.

We identified a material risk for per- and polyfluoroalkyl substances (PFAS).

PFAS are in the focus of public debate on account of their potential negative impacts on people and the environment. Covestro may be affected through the procurement of plant components and raw materials. We monitor the regulatory debate on PFAS and support proportionate, implementable, and enforceable regulations based on robust scientific results and a reliable risk assessment. To this end, we get involved in appropriate association activities and have established an internal interdisciplinary working group on this matter.

We include in our safety data sheets in the EU any PFAS that are classified as SVHC in accordance with REACH and are contained in our products at a concentration of more than 0.1% by weight.

Targets

We currently have no Group-wide targets for emissions into the air, water, and soil that go beyond the climate targets described in the “ESRS E1: Climate Change” section. In light of local regulatory requirements, which are also specified as minimum requirements in our operating licenses, we do not consider it necessary to set global targets.

We have not set ourselves a Group-wide target for microplastics either within the meaning of the ESRS at this stage. We very carefully consider the emissions of microplastics that arise within the production steps for which Covestro is responsible. As described earlier, we have already taken actions to avoid incidents in recent years.

In the future, we aim to produce and market more sustainable products. In this connection, it is essential to use SoCs or SVHCs on the basis of legal requirements. As described in “ESRS S2: Workers in the Value Chain” and in this section, we work continuously to provide information on the safe handling and use of our products in the value chain. Covestro does not set itself any specific targets for the procurement, use, manufacture, and placing on the market of SoCs and SVHCs in our production and products.

For further information, please refer to “Sustainable Solutions.”

For further information, please refer to “ESRS S2: Workers in the Value Chain.”

Metrics

We record our emissions into the air, water, and soil for all consolidated companies. All nonconsolidated companies in the scope of consolidation were examined to determine whether Covestro has operational control as defined by ESRS and acts in accordance with the rights and obligations of the Covestro Group. Since these metrics are calculated only at the end of the year, they include the group of companies consolidated as it stands at year-end. In this process, we incorporate data from all environmentally relevant Covestro sites, i.e., all production sites and relevant administrative sites. In order to meet the disclosure deadlines, the sites estimate the environmental data for the last weeks of the current fiscal year using established extrapolation methods (e.g., on the basis of operations planning, averages, or data from the prior-year months) to ensure that data reporting is as precise as possible and close to the actual values for the year. If, however, in the course of the following year, we become aware of material deviations based on internally defined thresholds, the figures in question are corrected retroactively. As the emissions data has been recorded for the first time in accordance with the new provisions of the ESRS, it is not possible to draw a comparison with the previous year.

Depending on local legislation and the operating licenses, emissions into the air, water, and soil are subject to very different measuring specifications. Therefore, substances may be measured continuously in some facilities but only in selected years in other facilities. The measured data is then calculated for the facility’s annual run time to obtain a meaningful value for the reporting year. Measurements are carried out by Covestro and third parties engaged for the purpose. The emissions reported here also include emissions caused by environmental incidents with unplanned discharges of substances.

The quantities reported are also used in reporting to the local authorities.

¹ This table contains only consolidated values for emissions into the air and water that exceed the threshold values defined in Annex II of Regulation (EC) No. 166/2006. In the 2024 reporting year, there were no emissions into the soil above the thresholds.

The quantity of microplastics leaving Covestro as product is recorded in a system-based approach using sales data. Given the lack of standardized measurement methods for emissions of microplastics, the quantity of microplastics emitted into the environment can only be estimated. For this purpose, Covestro uses the information on emission events, which must be reported by the sites in a central database. Generally only those emissions that arise within the production steps for which Covestro is responsible are considered. Covestro’s sphere of influence and thus its responsibility end as soon as products are transferred to logistics companies. The quantity of microplastics that left our company as product amounted to 1.6 million metric tons in the fiscal year. No emission volumes were determined that have an influence on the metric presented in million metric tons.

Covestro uses raw materials and manufactures intermediates and products that contain components that must be considered SoCs and SVHCs in accordance with the definition in Annex 2 of ESRS.

Part of the definition of “substances of concern” refers to the EU’s Ecodesign for Sustainable Products Regulation (ESPR), which was adopted in the year 2024. By the end of the reporting period, no delegated acts relating to this Regulation had been published that specifically mention substances of concern, which means that no further substances of concern can currently be identified in this context. This means that it is not possible at this stage to make a final assessment of the double materiality assessment in accordance with the ESPR Regulation.

The quantities shown below were recorded in a system-based approach. External procurement and sales volumes and the exact composition – including the hazard classification of the individual components at the reporting date – of our products and raw materials are documented in our IT systems. For the raw materials supplied externally, our internal information contains all the details on their composition available to us. The metrics reported here have been collated according to the best of our knowledge. To determine the quantities generated and used, we rely on the data from process orders or determine the reduction in inventories of the relevant materials compared to the previous reporting date. The metrics reflect SoCs/SVHCs carried in our inventory. This may lead to SoCs/SVHCs produced in situ not being recorded if they have been used up completely in the same production process and are not carried in our inventory. Due to the complex system and process landscape in the Group, specific micro quantities are not captured by the system-based calculation methods. They relate exclusively to quantities that have no influence on the figures presented in kilotons below. The volumes of emissions are likewise negligible and are therefore not included in the volumes reported.

The information contained in the table headed “Total quantity of substances of concern (SoCs) and substances of very high concern (SVHCs) in the reporting period” refer to the aggregate quantity of all quantities generated or used or procured by Covestro in the reporting period and to the quantities that left our facilities in the form of products, or parts of products.

“Allocation of substances of concern to the main hazard classes” includes exactly those substances in each hazard class which can be allocated to one of the hazard classes in accordance with the definition of SoC. As there are substances with more than one classification, i.e., they can be assigned to several hazard classes, some substances may be included more than once. As a result, the sum of the individual quantities may be larger than the total quantity.

Anticipated Financial Effects

ESRS E2 Pollution in principle also provides for qualitative and quantitative disclosures on anticipated financial effects of material risks and opportunities in connection with pollution. In accordance with ESRS 1 Appendix C, Covestro applies the phased-in disclosure requirements in the first year of preparing the Group Sustainability Statement. According to this expedient, the disclosures specified may be omitted in the first year