Basis of Preparation

Our Group Sustainability Statement presents Covestro’s material sustainability matters, broken down into environmental, social, and governance matters. These disclosures are supplemented with the general information on our reporting provided in this section. We report on entity-specific matters in the respective categories.

The strategic partnership between Covestro and XRG does not have any material impact on the Group Sustainability Statement since Covestro will retain its independence as a business, the corporate governance standards, and the continuation of the Sustainable Future strategy.

For further information, please refer to “Significant Events.”

The Group Sustainability Statement was prepared on a consolidated basis. The scope of consolidation largely corresponds to that used in financial reporting. Due to their lack of materiality, the companies acquired as part of the takeover of Pontacol AG, Schmitten FR (Switzerland), are included on a differentiated basis. The data relating to these companies is generally not included in the calculation of the metrics as their impact on the reporting year is immaterial. The non-inclusion of these metrics is made transparent in the respective disclosures by adding footnotes. Individual structure-related pieces of information, especially numbers of employees, are included in full only in the social matters category. Qualitative aspects of the acquired companies have been assessed individually and are explained in the relevant sections.

For further information, please refer to note 5.1 “Scope of Consolidation and Investments” in the Notes to the Consolidated Financial Statements.

In addition to our own business activities, our sustainability reporting also covers upstream and downstream value chains, if material impacts, risks, and opportunities in this regard were identified during the double materiality assessment.

For further information, please refer to “Impact, Risk and Opportunity Management.”

There were no structural factors in the reporting year that limit the comparability of the metrics presented. Where specific circumstances influence the comparability of individual metrics, this is explained separately in the section concerned.

Disclosures based on other regulations or generally recognized pronouncements on sustainability reporting are presented in a corresponding table.

For further information, please refer to “Data Points that Derive from Other EU Legislation.”

As a general rule, the company reports in compliance with the time horizons defined in ESRS 1.77. Any deviations from this are described in the respective section.

The material impacts, risks, and opportunities determined in the double materiality assessment are listed at the beginning of the respective sections on environmental, social, and governance matters, alongside any associated policies, actions, and targets. In the section texts, the policies, actions, and targets are highlighted in color to make them easier to find.

Covestro has not made use of the option to omit certain information relating to intellectual property, know-how, or the results of innovations.

At Covestro, we attach great importance to reporting metrics determined according to standardized and – where available – established methods. This guarantees a high standard of quality and enables comparability with other companies. The structure and complexity of the metrics presented in the Group Sustainability Statement in some cases requires the use of estimates and assumptions, which may change over time and impact the metrics presented. The specific methodology for determining our metrics is explained in detail in the sections concerned. Our aim is continually to improve the accuracy of the metrics reported as far as the underlying conditions allow.

As regards our Scope⁠ ⁠3 emissions, it is in particular the method of calculating the “End-of-life treatment of sold products” category that is subject to greater uncertainty than that of other metrics in relation to the possible end-of-life treatment methods to be considered for our products. The breakdown of end-of-life treatment methods for each region is based on data from external studies, which represent the best estimate at the present time.

For further information, please refer to “ESRS E1: Climate Change – GHG Emissions.”

In this Group Sustainability Statement, the terms “climate neutrality” and “climate neutral” are used almost exclusively in the context of our Group’s Sustainable Future strategy. In this context, we understand climate neutrality as meeting our climate targets defined in accordance with the definition of net-zero targets under ESRS (Annex II to Commission Delegated Regulation (EU) 2023/2772). This will require the almost complete reduction of GHG emissions along the entire value chain (around 90⁠–⁠95%) along 1.5 °C pathways as well as the permanent neutralization of avoidable residual emissions by CO₂ removal.

We meet the ESRS disclosure requirements by using references in some cases. These references, which have been inserted in the respective sections of the Group Sustainability Statement, lead to further information in the general part of the Combined Management Report.

For further information, please refer to “ESRS References.”

None of the metrics included in the Group Sustainability Statement have been validated by an external auditor who has not audited the entire Sustainability Statement.

Nonfinancial Group Statement

We publish the nonfinancial Group statement pursuant to Sections⁠ ⁠315b and 315c in conjunction with Sections⁠ ⁠289c through 289e HGB as an integrated part of the Group Management Report. The respective sections of the Group Sustainability Statement include the strategies we pursue in addressing environmental, employee, and social issues as well as protecting human rights and fighting corruption and bribery, including the due diligence processes followed and measures implemented, as well as the outcomes of these strategies. Covestro has not made use of the simplified procedure pursuant to Section 289e HGB.

Our business model is described in “Company Profile.”

For further information, please refer to “Company Profile.”

We applied the European Sustainability Reporting Standards (ESRS) as a framework for preparing the nonfinancial Group statement.

Key topics relevant to the nonfinancial Group statement were identified with the help of the double materiality assessment, taking the (sub- and sub-sub-)topics specified in ESRS 1.AR⁠ ⁠16 into account. Topics were included in the nonfinancial Group statement if their impact on people and the environment and their financial effects, i.e., risks or opportunities, had been assessed as material. Materiality was determined on the basis of a rating of more than 3.5 on a scale from 1 to 5. Nonfinancial performance indicators are reported only when these are important to the Covestro Group.

A⁠ ⁠nonfinancial statement or nonfinancial report in accordance with Sections 289c through 289e of the HGB does not have to be provided for Covestro⁠ ⁠AG at present.

The following table provides an overview of the key sustainability topics with an eye to the relevant aspects and contains references to the specific sections in the Group Management Report.