The Combined Management Report pertains to both the Covestro Group and Covestro AG, which has its registered office in Leverkusen (Germany). The reporting period covers fiscal 2025, which is the same as the calendar year from January 1 to December 31, 2025. The presentation of the results of operations, financial position, and net assets as well as the expected development, including the principal opportunities and risks, relate to the Covestro Group, unless otherwise noted. The results of operations, financial position, and net assets of Covestro AG are presented in a separate chapter of the Report on Economic Position. The “Closing Statement on Relationships with Related Companies” section contains the Board of Management’s mandatory closing statement on the relationships with related companies in accordance with Section 312 3 of the German Stock Corporation Act (AktG). In addition, the Nonfinancial Group Statement is integrated into the Combined Management Report pursuant to Sections 315b and 315c HGB. Our Group Sustainability Statement was prepared in accordance with the requirements for a nonfinancial group statement of the Corporate Sustainability Reporting Directive (CSRD), Article 8 of Regulation (EU) 2020/852, and Sections 315b and 315c HGB. Pursuant to Section 289d HGB, the application of European frameworks is permissible. Given the importance of the European Sustainability Reporting Standards (ESRS) as a planned set of EU regulations, which has already been enacted accordingly in a large number of EU member states, we applied the ESRS as a framework in both the previous year and the reporting year. The ESRS contain formulations and terms that remain subject to considerable interpretation uncertainties. Therefore, regarding the metrics especially, the definitions and calculation methods may differ from those used by other companies, which may limit comparability.
The achievement of Covestro's sustainability targets contained in this report depends in part on factors beyond the direct control of our company. In particular, we cannot conclusively ensure that third parties fulfill their contractual obligations or continue to pursue or achieve their own sustainability targets. Regulatory changes are also beyond our control.
In its financial reporting, Covestro uses alternative performance measures (APMs) to assess the business performance of the Group. These are not defined in the International Financial Reporting Standards (IFRSs) adopted by the European Union (EU). The alternative performance measures of relevance to the Covestro Group include earnings before interest, taxes, depreciation, and amortization (EBITDA), return on capital employed (ROCE), free operating cash flow (FOCF), and net financial debt. The calculation methods for the APMs may vary from those of other companies, thus potentially limiting the extent of the overall comparability. These alternative performance measures should not be viewed in isolation or employed as an alternative to the financial indicators determined in accordance with IFRSs and presented in the Consolidated Financial Statements for purposes of assessing Covestro’s results of operations, financial position, and net assets.
Explanations of the definition and calculation of these alternative performance measures can be found in the “Management System” section.