Covestro

The role of the administrative, management and supervisory bodies

Reference: page 112. Disclosures under ESRS 2.21-23 (board composition, diversity, competences) are incorporated by reference to the "Declaration on Corporate Governance" (page 112).

The Board of Management runs Covestro on its own responsibility, deciding on portfolio, resource allocation, and financial/nonfinancial steering; it approves transactions of strategic importance and "deals on an ad hoc basis with specific impacts, risks, and opportunities" (page 112). The Supervisory Board, "in particular its Sustainability Committee," is regularly briefed by the Board of Management on sustainability developments (page 112).

Day-to-day sustainability governance runs through the Sustainability & Innovation Governance Body (SI GoB), chaired by the CEO and organized by the Chief Sustainability Officer (head of the corporate GIS function), which meets four times a year and develops recommended actions for sustainability transformation and manages the innovation portfolio (page 112). Group Innovation & Sustainability (GIS) drives cross-functional sustainability projects and supports business entities in implementation.

Information provided to and sustainability matters addressed by administrative, management and supervisory bodies

Reference: page 112.

"At Covestro, the relevant expert functions are responsible for the operational monitoring and control of material impacts, risks, and opportunities. They continually report on current developments within their organizational structure to the responsible member of the Board of Management." The SI GoB (chaired by the CEO, organized by the CSO) meets four times a year to develop sustainability recommendations and manage the innovation portfolio (page 112).

In fiscal 2025, "critical adjustments were made to the Group's Sustainable Future strategy," with the Board of Management weighing impacts, risks and opportunities tied to the circularity/net-zero vision and reaffirming innovation as a key enabler alongside corporate culture and workforce (page 112). Group-wide risk management is interlinked with material sustainability topics and associated financial risks/opportunities (page 112).

Integration of sustainability-related performance in incentive schemes

Reference: pages 112-114.

Short-term incentive (STI): the sustainability component is "determined by the direct and indirect Scope 1 and Scope 2 GHG emissions (CO2 equivalents) of all environmentally relevant sites," sitting within the 50%-weighted medium-term component at 25%, for an overall STI share of 12.5% (page 113). For fiscal 2025, "no share can be calculated... as the required minimum thresholds for the relevant metrics were not reached and therefore no short-term variable compensation is paid" (page 113).

Long-term incentive (Prisma): the sustainability component has applied since 2021, based on the Scope 1/2 GHG reduction target; from the 2024-2027 tranche it was expanded to 30% with two added social criteria (employee-survey participation rate, recordable incident rate), each weighted 10% alongside the emissions criterion (pages 113-114). The Prisma 2022-2025 payout represented 28% of total payout on the climate-related component. Individual Board of Management members' share of compensation linked to climate-related considerations ranged from 0.0% to 18.4% in the reporting year (page 114).

Statement on due diligence

Reference: pages 115-116 (Statement on due diligence table).

Covestro maps the five core elements of due diligence under ESRS 2.30-33 to sections of the Group Sustainability Statement:

Corporate commitments underpinning due diligence are approved by the responsible Board of Management member and made available to employees, business partners and other relevant parties for download (page 115).

Risk management and internal controls over sustainability reporting

Reference: pages 75-78 (ESRS 2.36-tagged content, incorporated by reference from "Group-wide Opportunity and Risk Management"); cross-referenced at page 114.

Internal control system (ICS): based on the COSO 2013 framework and COBIT for IT controls, scoped by a risk-based control approach; risks are classified into financial/nonfinancial reporting, operating, and fraud/corruption categories, with "risks of nonfinancial reporting... especially seen in sustainability reporting, where there are, for example, controls on metrics relating to energy consumption, greenhouse gas emissions, and production waste" (page 75). A network of local/regional ICS specialists and process owners is centrally managed; self-assessments are conducted at multiple levels up to the Board of Management, reported to the CEO, CFO and Audit Committee at least once yearly (page 76).

Risk management system: aligned with COSO II Enterprise Risk Management (2004) and the German Stock Corporation Act's early-warning requirement (Section 91(2) AktG); the Corporate Risk Committee met three times in fiscal 2025, with material sustainability risks integrated into Group-wide risk management "with the same care as financial types of risk" (pages 77-78).

Strategy, business model and value chain

Reference: page 117; incorporated by reference to "Business Model," "Organization," "Group Strategy" and "Procurement" sections (ESRS 2.40, 2.42, 2.45).

The sustainability matters of circular economy, climate mitigation, and energy, as well as sustainable solutions, are described as "an integral part of our Group's Sustainable Future strategy" (page 117). Covestro reports "modest sales in connection with fossil gas in accordance with Article 2(62) of Commission Delegated Regulation (EU) 2018/1999" (page 117).

Sustainability targets have been set "as early as in fiscal 2016 and continually adapt these targets in line with our strategy and vision" (page 117). Datapoints on involvement in fossil fuel, chemical production, controversial weapons and tobacco activities (SBM-1 40(d)) are separately tracked in the "List of datapoints that derive from other EU legislation" table (page 132). Covestro's value chain spans upstream raw-material and mineral extraction, its own chemical-manufacturing operations, and downstream customer processing and end-of-life treatment of products.

Interests and views of stakeholders

Reference: pages 117-118 (Interactions with stakeholder groups table).

Stakeholders identified include: own employees; customers and their employees; suppliers and their employees; nature (a "silent stakeholder" represented by NGOs, local communities and legislators); nongovernmental organizations; general public and local communities; regulators and authorities; vulnerable groups; associations; capital market representatives; and science (pages 117-118).

Engagement mechanisms include employee events with Board of Management participation and continuous works-council dialogue; customer surveys, audits, trade fairs and digital showrooms; the Together for Sustainability initiative and supplier audits/workshops; ad hoc dialogue with local communities via Chempark neighborhood offices (Germany) and Community Advisory Panels (United States); and active membership of associations such as VCI, Plastics Europe, ACC and CPCIF (page 118). Internal representatives of relevant stakeholder groups were involved in identifying and assessing impacts, risks and opportunities during the double materiality assessment (page 117).

Material impacts, risks and opportunities and their interaction with strategy and business model

Reference: page 119; per-topic IRO tables at the head of each ESRS chapter (pages 136, 152, 160, 163, 168, 174, 182, 199, 208).

"Our sustainability reporting covers eight of the matters specified in ESRS 1 AR16 as well as the entity-specific topic of 'Sustainable Solutions'" (page 119): ESRS E1, E2, E3, E4, E5, S1, S2 and G1.

Changes versus the prior year (page 119): "we identified a material positive impact that in addition to those of the previous year in the area of corporate culture and integrated this into the reporting in 'ESRS G1: Business Conduct.' Furthermore, there was a change in the classification of a material impact in 'S1: Own Workforce,' from potentially negative to actually negative. Other than those, there were no changes in the material impacts, risks, and opportunities in the reporting year compared to the previous year." As part of the Pontacol acquisition, all relevant topics and IROs were reassessed; "the acquisition did not lead to any changes in the results of the double materiality assessment" (page 120).

Description of the processes to identify and assess material impacts, risks and opportunities

Reference: pages 119-123.

Covestro performs comprehensive materiality assessments every three to five years plus annual reviews; the last comprehensive assessment ran in fiscal 2024, with fiscal 2025 an "annual review... focused on updating and validating" (page 120). The value chain examined runs from raw-material extraction (upstream) through Covestro's own manufacturing to end-of-life treatment (downstream) (page 120).

Thresholds: impacts/risks/opportunities were rated material above 3.5 on a 1-5 scale; actual financial effects are material "irrespective of size" (page 121), assessed gross, prior to mitigation.

Climate (pages 120-122): physical risk assessed via a 2024 analysis of 47 sites to 2030/2040/2050 using the high-emission IPCC SSP5-8.5 scenario, covering all 28 ESRS E1 physical risks; transition risks assessed qualitatively using the IEA Net Zero Emissions by 2050 scenario.

Pollution/water/biodiversity/resource use (pages 122-123): materiality plausibility-checked at the largest production sites per region (Dormagen, Leverkusen, Krefeld-Uerdingen in EMLA; Baytown in NA; Shanghai in APAC). Biodiversity impacts were assessed with the ENCORE database/TNFD LEAP approach, finding toxic soil/water pollutants the only significant impact.

Disclosure requirements in ESRS covered by the undertaking's sustainability statement

Reference: pages 123-125 (Decision-Making Process and Associated Internal Control Process); pages 126-135 (ESRS Appendix / ESRS Index).

The ESRS Index (pages 126-130) maps every material disclosure requirement to its Group Sustainability Statement section, covering ESRS 2 (BP-1, BP-2, GOV-1 to GOV-5, SBM-1 to SBM-3, IRO-1, IRO-2) and the topical standards E1, E2, E3, E4, E5, S1, S2 and G1, plus the entity-specific "Sustainable Solutions" MDR-P/A/M/T disclosures. ESRS S3 (Affected communities) and S4 (Consumers and end-users) do not appear in the Index, consistent with the materiality summary table (page 111), which lists only E1-E5, S1, S2 and G1 as material topics.

Pages 132-135 list datapoints deriving from other EU legislation (SFDR, Pillar 3, Benchmark Regulation, EU Climate Law), each marked with its Group Sustainability Statement location or "Non-material datapoint" where the underlying topic (e.g. E3-4 water consumption, several E4-2 datapoints, G1-1 UN Convention against Corruption, G1-4 anti-corruption fines/standards, all S3/S4 datapoints) was not identified as material. "Covestro has not made use of the option to omit certain information relating to intellectual property, know-how, or the results of innovations" (page 108).

Transition plan for climate change mitigation

Reference: page 138; pages 137-145.

Covestro understands climate neutrality as "society's collective goal of attaining net zero GHG emissions by the year 2050," aligned to the 1.5°C Paris Agreement pathway (page 137). To reach net-zero Scope 1 and 2 by 2035 at all environmentally relevant sites, three levers are defined: optimizing production processes, increasing renewable electricity, and using more climate-neutral steam (page 138). Four Scope 3 levers address upstream/downstream emissions: supplier Scope 1/2 reduction, sale of alternative-raw-material products, MAKE recycling/bio-based investment projects, and further actions (logistics, recycling rates) (page 138).

Investment: €250-600 million CapEx anticipated by 2035 for Scope 1/2 processes, with €50-100 million annual OpEx savings from efficiency and a low three-digit-million-euro annual OpEx increase for renewable energy procurement; €580 million planned for MAKE/recycling technologies by 2035 (page 139). Targets and actions "were approved by the Board of Management and presented to the Supervisory Board" (page 140). "We see no risks to target achievement from locked-in emissions because Covestro can use existing facilities to make products with sustainable properties" (page 139).

Identification of climate-related risks and scenario analysis

Back-filled from ESRS 2 IRO-1 (pages 120-122) and the E1 "Resilience Analysis" section (page 140), where this content is disclosed in the FY2025 report. This disclosure requirement did not exist under the 2023 ESRS the report was prepared against.

Physical risk: an analysis covering 47 sites used the IPCC SSP5-8.5 scenario, described as "the worst-case scenario" giving "the greatest weight to the physical risks" (page 121), across all 28 physical risks defined by ESRS E1 (page 122). Time horizons were 2030, 2040 and 2050. Eleven risks were identified as potentially material: heat stress, water stress, sea level rise, heatwave, tornado, tropical cyclone, storm, drought, flood, heavy precipitation and subsidence (page 140). First performed in 2024, the analysis "was updated in the year 2025 and a new site was added" (page 140).

Transition risk: assessed qualitatively using the IEA Net Zero Emissions by 2050 scenario, per the ESRS 1.77 time horizons (page 122). No material transition risks/opportunities were found for climate adaptation, mitigation or energy; a material opportunity was instead found for resource use and circular economy (page 122). Physical climate risk is also assessed under E1-1 and E1-3 (2025 numbering).

Resilience in relation to climate change

Back-filled from ESRS 2 SBM-3 (page 119) and the E1 "Resilience Analysis" section (pages 139-140), where this content is disclosed in the FY2025 report. This disclosure requirement did not exist under the 2023 ESRS the report was prepared against.

"Based on what we know today, we have not identified any negative impacts on Covestro's business model" from physical climate risk (page 140). A resilience questionnaire assesses site-level adaptation measures against identified hazards, refined in fiscal 2025 following the 2024 physical risk analysis (page 139-140).

Areas of uncertainty: "uncertainty remains as to the specific magnitude of each of the hazards per site... continuous monitoring of the physical risks and of the appropriateness of the associated adaptation measures ensures that additional measures can be implemented if new information comes to light" (page 140).

Capacity to adapt: at three production sites in Asia, "the construction measures identified are not sufficient to mitigate large parts of the risks of a sea level rise and flood forecast under the worst-case scenario"; further measures were identified, prioritized, and the CTO informed (page 140). At all other sites, existing measures were assessed as suitable for chronic and acute risks.

Policies related to climate change mitigation and adaptation

Reference: page 140.

Material climate impacts are addressed "globally under our corporate Health, Safety, Environment and Energy, and Quality (HSEQ) policy" (page 140). For climate change mitigation and energy, the global policy "is operationalized by our CO2 roadmap and our integrated HSEQ management system," which prioritizes GHG-reduction actions "based on GHG avoidance costs, both for our own investments and for the procurement of renewable or climate-neutral energy and alternative raw materials" (page 141).

Actions are identified jointly by sites, corporate functions (Group Innovation & Sustainability, Group Procurement, Logistics) and the business entities, covering process technologies, energy efficiency and procurement, and "internal and external positioning" on levers such as carbon capture and storage (CCS), carbon capture and usage (CCU), mass balancing and carbon compensation. Selected measures pass through central prioritization and the annual resource and allocation planning approved by the Board of Management (page 141). Details on the HSEQ management system are cross-referenced to ESRS E2: Pollution.

Actions and resources in relation to climate change policies

Reference: pages 141-144.

Scope 1/2 actions: more sustainable production processes (e.g. the modernized TDI plant in Dormagen consuming "up to 70% less energy than a conventional process"; €17 million invested in CO2-roadmap actions in fiscal 2025, 1.7% of PP&E CapEx); electricity from renewable sources (new supply agreements for North Rhine-Westphalia and Shanghai); and climate-neutral steam, including the first Rondo Heat Battery investment at Brunsbüttel, expected online end-2026 and to save "up to 13,000 metric tons of CO2 emissions per year" (pages 141-142).

Scope 3 actions: reduction of suppliers' Scope 1/2 emissions (e.g. replacing imported ammonia with a lower-footprint local partner in Shanghai, an accumulated ~0.5 million tonnes CO2e reduction in the reporting year); sale of products based on alternative raw materials (the CQ label, ≥25% alternative raw materials, life-cycle assessment/PCF technology certified by TÜV Rheinland); MAKE projects (€3 million invested in the reporting year, including Evocycle CQ mattress recycling); and further actions (recycling rates, logistics, primary energy) (pages 142-143). No significant fiscal 2025 OpEx was allocated to any of these actions.

Targets related to climate change mitigation and adaptation

Reference: pages 143-145.

Scope 1 and 2 (2020 base year): net-zero by 2035 at all environmentally relevant sites; interim reduction of 60% by 2030 (versus SBTi's 42% requirement), from a 5.6 million tonnes CO2e baseline to 2.2 million tonnes CO2e; residual emissions of 0.3-0.5 million tonnes CO2e assumed to remain in 2035.

Scope 3 (2021 base year, 80% of total emissions): interim target of a 10 million tonnes CO2e (30%) reduction by 2035 across purchased goods and services, fuel- and energy-related activities, upstream transportation and distribution, and end-of-life treatment of sold products; net-zero by 2050, with 5-10% residual emissions assumed to remain.

Targets "were developed using the methodology of the Science Based Targets initiative (SBTi) and exceed its requirements," but have "not been certified by the Science Based Targets initiative at this stage," and "a final assessment of conformity with the current [SBTi sector-specific chemical industry] targets... is not yet possible at the time of reporting" given SBTi's December 2025 sector guidance, effective June 2026 (page 145).

Energy consumption and mix

Reference: page 150 (Energy consumption and energy mix table).

Renewable share rose from 7% to 9%, driven by the proportion of "all contractual instruments with 'green' attributes" reaching 9% of total energy usage (previous year 7%) (page 146). Covestro belongs to the high climate impact sectors under Annex I of Regulation (EC) No 1893/2006, requiring detailed fossil-consumption disclosure (page 150). Own-generated nonrenewable electricity/steam totaled 5,651,000 MWh; own-generated renewable electricity/steam totaled around 400 MWh (page 150).

Gross Scopes 1, 2, 3 and Total GHG emissions

Reference: pages 148-149 (GHG emissions table); accounting policies pages 146-147.

Scope 1 fell 23% "mainly as a result of the successful implementation of the NAUCI... projects at our Baytown (United States) and Shanghai (China) sites." Scope 2 fell 7% on lower Dormagen capacity utilization and the Maasvlakte joint-venture closure (page 147). The 2025 mix was roughly 80% Scope 3 (unchanged from the 2021 base year). Nine of 15 GHG Protocol Scope 3 categories are relevant; 43% of total Scope 3 emissions are determined directly with primary supplier data (previous year 34%) (page 147).

GHG removals and GHG mitigation projects financed through carbon credits

Reference: page 146; page 149 (footnote 8).

"In fiscal 2025, the Covestro Group did not implement any projects to reduce and/or store greenhouse gases within its own operating activities. Moreover, it did not contribute to any such projects in the upstream and downstream value chain, and no climate change mitigation projects outside the company's own value chain were financed by the purchase of carbon credits" (page 146).

Covestro is instead a seller of emission-reduction credits generated by its own Scope 1 abatement projects: "We currently sell carbon certificates to third parties and, in accordance with the GHG Protocol, do not use these volumes as offsets" (page 146). Certification of the NAUCI-project reductions from July to December 2025 was not yet complete at the reporting date; the expected reduction volumes (0.688 million tCO2e "sold compensation actions") are presented in the GHG table pending certification, with "the plan... to sell the emission reductions made in the fiscal year as emission credits once they have been certified" (page 149). Biogenic Scope 3 emissions (87,561 tCO2e) are reported separately outside of scopes, not as removals (page 149).

Internal carbon pricing

Reference: page 151.

Covestro applies an internal CO2 shadow price of €100 per tonne CO2 equivalent in ROCE-based investment appraisal, and a €200 per tonne shadow price in standard sensitivity analysis for worldwide investments exceeding €5 million; both prices "derived from the forecast by enervis energy advisors GmbH, taking account of existing and anticipated EU legislation, e.g., on emissions trading and on the Carbon Border Adjustment Mechanism (CBAM) until the year 2045" (page 151). No adjustment was made to the price in the reporting year.

In the reporting year, 255 kt CO2e of Scope 1 emissions (32.7% of total Scope 1, up from 10.4%) and 48 kt CO2e of Scope 2 emissions (1.3% of total, up from 0.8%) were measured at the shadow price; no Scope 3 emissions were measured this way. The shadow prices "are used exclusively in the context of managing investment projects" and are not applied in the consolidated financial statements for useful lives, carrying amounts, impairment or business-combination fair values (page 151).

Policies related to pollution

Reference: page 155.

Pollution impacts "are an integral part of our integrated Health, Safety, Environment, Energy and Quality (HSEQ) management system," a holistic set of Group policies without pollutant-specific lists, responsibility for which "has been assigned to the corporate Group Health, Safety, Environment and Reliability (HSER) function" (page 155). The HSEQ policy "commits us to working continuously on reducing environmental impacts resulting from our activities, products, and services" (page 155).

Minimum environmental standards apply worldwide, based on internationally recognized standards such as ISO 14001 (page 155). All plants operate under permits defining minimum local-legislation requirements; sites are responsible for compliance with approved thresholds. Globally applicable processes cover incident/emergency prevention, accident investigation, health care, occupational safety and emergency management per standards including ISO 45001 and ISO 14001 (page 155).

Actions and resources related to pollution

Reference: page 155.

Environmental effects are analyzed and evaluated annually across air, water and soil, with measures derived to reduce and minimize impacts, implemented through global process/workflow descriptions and reviewed via internal audits, annual self-assessments and external certifications, feeding into the annual management review (page 155). Individual local actions vary by site: at Brunsbüttel (Germany), "new ultra-low NOx burners were installed for underfiring hydrogen, which have reduced nitrogen oxide emissions significantly as from this year," with an added GHG co-benefit (page 155).

Microplastics: Covestro has run Operation Clean Sweep® (OCS) since 2015 as "the key action for preventing the emission of microplastics," with sites that produce/process microplastics taking locally appropriate, regularly reviewed measures (page 155). Customers receive training on the safe handling of products both in and outside Covestro's facilities, and third-party compliance databases are increasingly used to track legal requirements (page 155).

Targets related to pollution

Reference: page 156.

"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 ourselves global targets" (page 156).

For microplastics specifically: "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" (page 156). Covestro also states it "does not set itself any specific targets for the procurement, use, manufacture, and placing on the market of SoCs and SVHCs," and has no dedicated substitution/phase-out policy for these substances beyond individual optimization initiatives (page 156).

Pollution of air, water and soil

Reference: page 157 (Emissions into the air and water table).

Consolidated emissions exceeding Annex II E-PRTR thresholds, metric tons/year:

Measurement varies by local legislation, sometimes continuous and sometimes limited to selected years, with facility-run-time extrapolation to a full-year figure (page 157). "As in the previous year, there were no emissions into the soil above the thresholds in the 2025 reporting year" (page 157). Reported figures also include emissions from environmental incidents involving unplanned discharges. Data covers all consolidated companies and environmentally relevant sites; the acquired Pontacol companies were excluded from 2025 figures due to immateriality (page 157).

Substances of concern and substances of very high concern

Reference: pages 157-159 (SoC/SVHC tables); accounting policies page 158.

Emissions into the air/water/soil for SoC/SVHC purposes are recorded via a system-based approach using process-order data and inventory reduction, following the ESRS Annex 2 definitions; SVHCs are additionally subject to the EU's Ecodesign for Sustainable Products Regulation, for which no delegated acts specific to substances of concern had been published by the reporting date, limiting further identification (page 158). The microplastics quantity leaving Covestro as product totaled 1.5 million metric tons (previous year 1.6 million) (page 157-158). A detailed hazard-class breakdown (carcinogenicity, germ cell mutagenicity, reproductive toxicity, sensitization, aquatic toxicity, etc.) is provided for both generated/used/procured and outflow quantities (page 159).

Policies related to water and marine resources

Reference: page 161; Corporate Commitment on Water.

Water areas of stress are determined using the Aqueduct Water Risk Atlas of the World Resources Institute (WRI) and the Water Risk Filter of the WWF, alongside regulatory risk factors such as drinking-water directives (page 161). Water is treated holistically: "the availability of and access to clean water is vital for our production sites. That is why water withdrawal is our main focus," alongside wastewater quality, which "is subject to stringent monitoring and analysis in accordance with the applicable local legal requirements before it is discharged" (page 161).

The Covestro Water Program, rolled out since 2023 and continuing to 2030, is a risk-based program targeting sites currently or prospectively in water-stressed areas, assessing water scarcity, pollution and flooding challenges. Responsibility lies with the corporate Group Health, Safety, Environment and Reliability (HSER) function, reporting to the CTO; sites implement locally defined goals and measures (page 161). Water is also covered by the integrated HSEQ management system (page 161).

Actions and resources related to water and marine resources

Reference: page 161.

A water dashboard covering physical water risks was created in the prior year and shared with production sites, enabling early risk identification and improvement planning; a platform for exchanging information and sharing best practice was also established (page 161). The context-based Covestro Water Program, begun in 2023, "concentrates specifically on sites that are currently located in areas with water stress or could be located in such areas in the future," developing customized medium- and long-term action plans that may include local water-related targets (page 161).

In the reporting year, a criticality assessment was conducted "to mitigate risk relating to water in order to determine a clear prioritization approach in the development and implementation of actions," with resources provided at both Group and site level (page 161). The program is scheduled to complete its roll-out by 2030.

Targets related to water and marine resources

Reference: page 162.

"We have currently not set any targets in accordance with ESRS for this target. As the Water Program progresses, we will get more insights into the matter and examine on an ongoing basis whether it makes sense to set Group-wide targets" (page 162). As a general principle, Covestro states it "strive[s] to minimize the use of water and to use it several times and recycle it wherever possible" (page 162).

The absence of a quantified Group-wide water target is explained by the phased, risk-based roll-out of the Covestro Water Program (running to 2030), which is intended to generate the site-level insight needed before target-setting is considered (page 161-162).

Transition plan on biodiversity and ecosystems

Reference: pages 164-165.

Covestro states plainly that it has no dedicated biodiversity transition plan: "the policies and actions are embedded in the corresponding subject matters (ESRS E1 and E2) and there are no specific policies and actions for biodiversity and ecosystems" (page 165), because the material E4 impacts and dependencies identified all trace back to climate change (E1) and pollution (E2): an analysis near production sites "revealed emissions of toxic soil and water pollutants as the only potentially significant impact," addressed through the integrated HSEQ management system rather than a standalone biodiversity program (page 165).

Correspondingly, "our sustainability targets for reaching net-zero GHG emissions for Scope 1 and Scope 2 emissions by the year 2035 and for Scope 3 emissions by the year 2050 are contributing to limiting the negative impacts of climate change on biodiversity and ecosystems" (page 165) - i.e. Covestro's climate transition plan (E1-1) functions as its biodiversity mitigation pathway. On this basis, "Covestro will continue to examine the resilience of its strategy and economic activities in relation to biodiversity and ecosystems" (page 165).

Policies related to biodiversity and ecosystems

Reference: pages 164-165.

"For further details about the respective policies and actions, please refer to sections 'ESRS E1: Climate Change' and 'ESRS E2: Pollution.' The impacts identified as material in relation to biodiversity and ecosystems refer to the matter of climate change (ESRS E1) and pollution (ESRS E2). That is why the policies and actions are embedded in the corresponding subject matters (ESRS E1 and E2) and there are no specific policies and actions for biodiversity and ecosystems" (page 165).

Biodiversity impacts near production sites are managed through the integrated HSEQ management system - the same Group policies covering climate and pollution - "which means that the impacts described above are addressed there," including annual environmental performance evaluation, internal audits, self-assessments and external certifications (page 165).

Actions and resources related to biodiversity and ecosystems

Reference: page 165.

Because the material E4 impacts trace to climate change and pollution rather than a distinct biodiversity pathway, biodiversity-related actions are the same climate and pollution actions described under ESRS E1 and ESRS E2 - "the environmental impacts associated with our business activities are an integral part of our integrated Health, Safety, Environment, Energy and Quality (HSEQ) management system" (page 165).

The proximity analysis of Covestro sites to biodiversity-sensitive areas (BSAs) - Natura 2000 areas, UNESCO World Heritage Sites, and Key Biodiversity Areas - was conducted by an external service provider using geo-coordinates and geographic information systems, differentiating land (<1 km), sea (<5 km) and river (<10 km) impact ranges (page 165). No site is within 10 km of a natural or mixed World Heritage Site.

Targets related to biodiversity and ecosystems

Reference: page 165.

"We have currently not set ourselves any specific targets for biodiversity and ecosystems in accordance with the target definition of the ESRS, because the materiality arises due to the impacts of climate change and pollution. The relevant matters are addressed in the sections below" (page 165).

Instead, Covestro states that its climate targets serve this function: "our sustainability targets for reaching net-zero GHG emissions for Scope 1 and Scope 2 emissions by the year 2035 and for Scope 3 emissions by the year 2050 are contributing to limiting the negative impacts of climate change on biodiversity and ecosystems" (page 165), cross-referring to ESRS E1 and E2 for the operative target detail.

Impact metrics related to biodiversity and ecosystems change

Reference: pages 165-167 (proximity to Natura 2000 areas and Key Biodiversity Areas tables; ecological condition tables).

Nine production sites are close to Key Biodiversity Areas (KBAs); nine are close to Natura 2000 areas; 15 sites in total are close to Natura 2000 areas and/or KBAs, occupying 796 hectares. All are proximity cases except Qingdao (China), which is located within a KBA (pages 166).

Ecological condition was measured using the abundance-based and richness-based Biodiversity Intactness Index (BII), last determined in 2019, on a 0-100% scale. Under the richness-based BII, most sites (Antwerp, Barcelona, Brunsbüttel, Dormagen, Fos-Sur-Mer, Meppen, Parets del Valles, St. Margarida i els Monjos, Tarragona, Tsuchiura, Waalwijk) fall in the 40.1-60.0% band; Qingdao and Hoek van Holland rate higher (60.1-100%); Changhua and Leverkusen rate lower (20.1-40.0%) (page 166-167).

Policies related to resource use and circular economy

Reference: pages 169-170.

"Our intention is to return products and materials to the value cycle at the end of their life cycle - as a whole, in the form of polymers, or in molecular or other chemical forms" (page 170), underpinning the "We will be fully circular" vision. Alternative raw materials are described as "an essential pillar of our Sustainable Future strategy" (page 169-170).

A dedicated circular-economy policy is still being developed: "Covestro's long-term focus on the circular economy... is to be underpinned by specific policies. These are in the process of development and consolidation in order to achieve a specific transition away from the use of primary raw materials and transition to sustainable procurement. Material aspects of this approach are already being addressed indirectly via the ESRS E1 policies, especially via action 'Reduction of Suppliers' Scope 1 and Scope 2 Emissions'" (page 170). Handling of unavoidable waste is governed by Covestro's integrated management system (page 171).

Actions and resources related to resource use and circular economy

Reference: pages 170-171.

Increasing recyclability: Covestro is "currently researching recycling processes for its own products and materials in 20 projects," prioritizing chemical/enzymatic depolymerization; uses ISCC PLUS-certified raw materials via the mass balance approach; and piloted an automated, SAP-native mass-balance accounting system in fiscal 2025 (pages 170-171). €580 million is planned in own recycling/bio-based technologies (MAKE) by 2035.

Market design for circular products: the Circular Intelligence (CQ) label, used in selected MDI, TDI and polycarbonate products, contains at least 25% alternative/recycled raw materials (page 171). Efficient and safe handling of waste: the internal Waste to Value initiative, launched in 2025, aims for greater waste-stream transparency; several ideas were implemented in the reporting year, improving internal reuse and recycling, with further projects planned (page 171).

Targets related to resource use and circular economy

Reference: page 171.

"Efforts toward building a circular economy in the company can be measured by verifying the degree to which we can replace fossil sources of carbon for production with alternative raw materials and produce renewable inorganic compounds to run each of them in loops... We are therefore working to develop suitable targets for Covestro that will increase performance in all areas that are key to the circular economy and will in the long term lead to an absolute reduction in the use of primary raw materials" (page 171).

No quantified Group-wide circular-economy target is yet set; Covestro instead frames progress through its recyclability and alternative-raw-material metrics (E5-4/E5-5) and states the intent to develop formal targets going forward.

Resource inflows

Reference: page 171 (Resource inflows table).

Resource inflows are captured from the global ERP system and analyzed via a product-life-cycle-related system on a mass basis; "technical goods and services are not material and not included" (page 171). The two tracked categories are biological materials and secondary reused/recycled materials; both rose slightly as a share of total inflows year over year. For fiscal 2025 the acquired Pontacol companies' data was excluded from the metric due to immateriality (page 171).

Resource outflows

Reference: pages 171-172.

"Covestro analyzed its products with regard to recyclability in the reporting year. We follow a conservative approach by focusing on mechanical recyclability" (page 172). The recyclable product portfolio accounted for 15.0% of total resource outflows (previous year 15.0%); considering only the core business, mechanically recyclable products reached 28.1% (previous year 28.4%) (page 172).

"Climate change mitigation targets contribute indirectly to the circular economy, e.g., by opting to procure alternative raw materials in order also to reduce Scope 3 emissions" (page 172). Waste figures cover all consolidated companies and environmentally relevant sites; changes to the site portfolio (one closure, one sale, one new production site) are explained where they affect year-on-year comparability, and the acquired Pontacol data was excluded from 2025 figures due to immateriality (page 172).

Waste

Reference: pages 172-173 (Waste by means of disposal table).

Hazardous waste volume was 138 kt (previous year 177 kt); non-recycled waste was 73 kt (previous year 74 kt), a 33% non-recycled share (previous year 29%) (page 172). Waste is generated mainly in production (e.g. TDI or BPA residue), plus demolition/construction and wastewater treatment operations. Roughly 40% of total waste volume is attributable to EU sites, of which 53% is classified as hazardous under EU legislation; the hazardous share for non-EU sites was estimated at 67% using local-legislation comparisons (page 172).

Policies related to own workforce

Reference: pages 185-187.

Health and safety: the integrated HSEQ management system, combined with the "Occupational Health and Safety" policy, commits Covestro to "ensure safe and healthy workplaces," "proactively prevent workplace accidents, injuries, and illnesses," and "take psychosocial risks into account" via a Plan-Do-Check-Act cycle; responsibility lies with the CTO (page 185).

Adequate wages / equal pay: Covestro's Group policies define six guiding principles including a value- and performance-based culture; the company states it offers "transparent, fair, and competitive pay" and determines salaries "regardless of gender and with the aim of equal pay for equal work" (page 186).

Inclusion and belonging: the "Fairness and Respect at Work" policy, applicable to all employees, prohibits discrimination on stated grounds (race, sex, age, disability, sexual orientation, etc.), with mandatory web-based training for the entire workforce since 2024, responsibility resting with the Head of corporate Human Resources (pages 185-186).

Child and forced labor: the corporate commitment to respect human rights (Human Rights Policy Statement), approved by the entire Board of Management with a "zero-tolerance policy on child labor, forced labor, modern slavery, and human trafficking" (page 187).

Processes for engaging with own workforce and workers' representatives about impacts

Reference: pages 186-188.

Local engagement runs through statutory codetermination bodies where required, e.g. in Germany the Economic Committee and Joint Committee (meeting at least ten times a year), overseen by the Labor Director; in the United States, the Site Director and internal trade-union specialists; in China, the General Manager together with the Site Director and Head of HR (pages 187-188). Germany, the US and China together represent approximately 70% of Covestro's employees (page 187).

Global-level instruments include the annual "We Are 1" town hall with the Board of Management; the ENGAGE employee survey, run three times a year with results shared globally by the CEO; and structured people-development dialogues (page 188). There is no global framework agreement with employee representatives on child and forced labor, "since there are local corporate commitments at company level" (page 188).

Processes to remediate negative impacts and channels for own workforce to raise concerns

Reference: pages 189-190.

Employees can raise concerns through the ENGAGE survey and the global compliance SpeakUp! Line, and via local resources such as first-aiders and company medical personnel for health incidents (page 190). Effectiveness is checked using a specific ENGAGE survey question - "If I were to experience serious misconduct at work, I am confident that suitable actions would be taken" - with responses reported to remain "at a high level and above cross-industry benchmarks" (page 190).

Incidents are reported through the integrated information management system (IIMS), electronically recorded, classified by impact and processed via root-cause analysis, with monthly Group-wide communication of results "so that any recurrence, even at different sites, can be prevented as far as possible" (page 190). Grievance-mechanism process detail is cross-referenced to ESRS G1: Business Conduct.

Taking action on material impacts on own workforce

Reference: pages 189-192.

Health and safety: continuous monitoring of accident rates, cause-effect analyses, Safety Days, awareness campaigns and a health-and-safety procedure (effective fiscal 2024) covering own workers, contractors and visitors (pages 190-191).

Adequate wages / equal pay: regular salary comparison analyses, an annual feasibility review of pay increases for non-payscale employees, and collective bargaining processes for payscale employees (page 191).

Inclusion and belonging: mandatory web-based fairness-and-respect training worldwide, and continued support for employee resource groups and inclusion committees (page 191).

Child and forced labor: preventive age/eligibility verification in global recruitment, and a whistleblower system for reporting potential breaches under the zero-tolerance policy (page 191-192). "Covestro has not identified any material opportunities and therefore no need to develop actions relating to opportunities arises" (page 190).

Targets related to own workforce

Reference: pages 192-194.

Inclusion and belonging (only quantified S1 target): since 2022, targets for the percentage of women in the first two management levels below the Board of Management, set under Germany's FüPoG II. 2027 targets, Covestro AG: first level 25% (currently 25%, 1 of 4), second level 31.6% (currently 31.6%, 6 of 19). Covestro Group first-level position stood at 31.0% (9 of 29) and second-level at 30.2% (54 of 179) as of December 31, 2025 (page 193).

For adequate wages, gender equal pay, health and safety, child labor and forced labor, Covestro states plainly: "There are currently no targets... We perform the legally required calculation of the unadjusted gender pay gap... we have do not have any time-bound and measurable targets... in accordance with ESRS" for these matters, though effectiveness of policies/actions is still tracked, e.g. via the "zero incidents" occupational health vision (pages 193-194).

Characteristics of the undertaking's employees

Reference: pages 195-196 (employee tables).

Covestro had 18,119 employees worldwide at December 31, 2025 (previous year 18,021; 17,598 FTE, previous year 17,503). By gender: 4,306 women, 13,803 men, 10 not provided (page 195). By contract type: 17,806 permanent, 313 temporary (page 195). By country, over 10% of the workforce each in Germany (7,701), China (2,819) and the USA (2,456) (page 195).

Employee turnover was 5.6% (1,009 leavers; previous year 6.2%, 1,127 leavers) (page 195). Age distribution: 2,000 employees under 30, 10,416 aged 30-50, 5,703 over 50 (page 196). Board of Management members, vocational trainees and interns are excluded from these metrics due to their special employment relationship (page 195).

Diversity metrics

Reference: pages 195-196 (gender-by-management-level table).

Comparative 2024 figures: level 1 - 7 women (25%), 21 men (75%), 28 total; level 2 - 40 women (23%), 131 men (77%), 171 total (page 196). "No employees who identify with other gender options were represented at the management levels disclosed" (page 196). Age-band distribution across the full workforce (2,000 under-30, 10,416 aged 30-50, 5,703 over-50) is disclosed alongside these figures under S1-6 (page 196).

Adequate wages

Reference: page 196.

"Adequate wages are therefore paid to all employees of Covestro. When paying our employees, we exceed the minimum wage level legally applicable in the respective countries and pay at least a living wage, which is reviewed and set worldwide by the non-profit organization Wage Indicator Foundation on a yearly basis" (page 196).

No percentage-of-workforce-below-benchmark figure is given; instead Covestro asserts full compliance and describes the external benchmark used. Effectiveness is tracked "mainly... through regular salary comparison analyses," supplemented by the externally sourced Wage Indicator Foundation data "to ascertain the global adequacy of our employees' compensation" (page 192).

Health and safety metrics

Reference: pages 196-197 (Work-related accidents table).

"The number of workplace accidents involving our employees went up by 4 to 56 (previous year: 52), raising our employees' recordable incident rate (RIR) according to ESRSs by 0.15 points" (page 197). Work-related ill health with identifiable, currently-influenceable causes is included in RIR; long-latency occupational diseases are excluded (page 197).

Compensation metrics (pay gap and total compensation)

Reference: page 198.

Unadjusted gender pay gap: 7.7% at Covestro Group level (previous year 6.0%), "defined exclusively as the difference in average earnings between our female and male employees and expressed as a percentage of the average earnings of male employees" (page 198), collected via standardized queries of payroll compensation data across employment types and countries, unadjusted as required by ESRS S1-16 (page 198).

CEO pay ratio: the ratio of the highest-paid individual's total annual compensation to the median of all employees' total annual compensation was 53.1 (previous year 58.9) (page 198). For the year 2025, the acquired Pontacol companies' data was excluded from these metrics due to immateriality (page 198).

Incidents, complaints and severe human rights impacts

Reference: page 198.

"We received zero complaints relating to child and forced labor through the internal grievance mechanisms. No grievances were received by National Contact Points for the OECD Guidelines for Multinational Enterprises. The fines, penalties, and compensation payments for these incidents and complaints relating to child and forced labor amounted to zero in total, as in the previous year" (page 198).

"As in the previous year, there were no concrete indications of human rights abuses within the Covestro organization in the reporting year" (page 198). Suspected cases across all categories, including discrimination, are logged in a central database and evaluated for the reporting year (page 198); incidents of discrimination are reported separately under S1-9 metrics context (6 incidents in 2025, up from 0 in 2024, see S1-9/materiality table).

Policies related to value chain workers

Reference: page 201.

The Supplier Code of Conduct, published the prior year and approved by the Chief Procurement Officer, "remains binding on existing and new suppliers" and "is based on the principles of the United Nations Global Compact as well as our continuous corporate commitment to respect human rights," explicitly addressing "human trafficking, child and forced labor, and health and safety" (page 201). It is available online in 13 languages; new/renewed supply agreements contain clauses requiring compliance and granting Covestro verification rights.

The corporate commitment to respect human rights, described under ESRS S1: Own Workforce, "extend[s] to all workers in the value chain" (page 201). The Group "Occupational Health and Safety" and "Transport & Logistics Safety" policies also cover health and safety impacts on upstream and downstream value chain workers (page 199).

Processes for engaging with value chain workers about impacts

Reference: pages 202-203 (Supplier Screening, Supplier Risk Analysis, Opportunities for Training and Dialogue).

Covestro is a member of Together for Sustainability (TfS), using standardized online assessments (conducted by EcoVadis) and on-site audits by TfS/Cefic-accredited third-party auditors; Cefic's SQAS logistics-provider audits are recognized as TfS-equivalent (page 202). Suppliers are prioritized for evaluation using combined country and commodity/industry risk from external sources (page 202).

Dialogue channels include the TfS Academy knowledge-sharing platform, company-wide sustainability training plus region/country-specific evaluation training for procurement staff, and function-wide human rights training held in the reporting year (page 203). "Based on our analysis, we have not identified any indication of child or forced labor in our value chain" (page 202).

Processes to remediate negative impacts and channels for value chain workers to raise concerns

Reference: page 206.

"All workers in the value chain have access to the different confidential and anonymous ways of reporting illegal and unethical conduct on which we report in 'ESRS G1: Business Conduct'" - i.e. the global compliance SpeakUp! Line (page 206). Covestro "explicitly encourages reporting of suspected human rights abuses in the Group, as well as at our direct and indirect suppliers," investigating grounded suspicions "carefully and consistently" and expecting business-partner cooperation within a reasonable timeframe (page 206).

"There were no indications of human rights abuses within Covestro's supply chain in the reporting year" (page 206). Beyond the reporting channels and supplier-assessment processes described, "there is no direct cooperation with workers in the value chain or their legitimate representatives" (page 205).

Taking action on material impacts on value chain workers

Reference: pages 202-205.

Preventive/remedial measures: two Group Procurement staff support the cross-functional Human Rights Office; the CPO owns procurement-related Group-wide risk items; procurement managers received deeper supplier-risk-analysis training in the reporting year, with follow-up questionnaires to at-risk suppliers (page 202).

Transport & Logistics Safety: a dedicated Group policy governs safe transport/logistics, with logistics-provider selection based on safety/quality checks and transport-risk assessment (page 203).

Customer Sites / Product Stewardship: the Group "Product Stewardship" policy sets minimum requirements for legally compliant, safe product use, with multi-step product evaluation, safety data sheets and labeling "in up to 40 different languages" (pages 203-204). "For fiscal 2025, we know of no material incidents of noncompliance with regulations or voluntary codes... there were no product recalls in this context in the reporting period" (page 205).

Targets related to managing material negative impacts, advancing positive impacts, and managing material risks and opportunities

Reference: page 206-207.

Since 2019, Covestro has targeted 100% of target-relevant suppliers (those with purchasing volumes over €1 million, individually or by corporate group) meeting its sustainability requirements by 2025, defined as achieving a minimum evaluation result of 45% (page 206). Supplier evaluations covered 75% of total purchasing value in the reporting year (previous year 82%).

Progress: 92% of target-relevant suppliers met the sustainability requirements (previous year 79%), based on 518 target-relevant assessments out of 1,581 total supplier assessments (47 on-site); 72% of repeat-assessed target-relevant suppliers improved on their prior result (page 207). "None of the supplier assessments conducted revealed any indication of child or forced labor," and no supplier relationship was terminated solely for a sustainability deficit (page 207).

Business conduct policies and corporate culture

Reference: pages 208-210.

Covestro's Code of Conduct "mandates fundamental principles and rules for all own workers," covering competition law, business integrity, product stewardship, data protection, export/insider-trading law, and "fair, respectful working conditions, free from discrimination," and embeds whistleblower protection guidance (page 209). A local Compliance Officer is appointed for every country where Covestro has employees.

The compliance culture is described as built on "ethical principles and a sense of responsibility," reinforced when "managers serve as excellent role models (setting the tone from the top) and maintaining zero tolerance toward compliance breaches" (page 208). The Compliance Management System (CMS) follows the COSO framework, and its design, appropriateness, implementation and effectiveness "were confirmed without qualifications in the reporting year in accordance with Auditing Standard 980... for the sub-areas of antitrust law, anti-corruption, and export control" (page 209). The global compliance SpeakUp! Line (hotline and online form) provides confidential, anonymous reporting channels, reviewed annually for effectiveness by the Global Compliance Office (pages 209-210).

Targets related to business conduct

This 2025/2026 ESRS disclosure requirement did not exist as a numbered code under the 2023 ESRS the report was prepared against; the topic was formerly covered by MDR-T wherever a G1 sub-topic was material. Reference: pages 209-210.

Covestro's material G1 sub-topics - corporate culture and protection of whistleblowers - carry no quantified numerical target. Instead, effectiveness is tracked in the absence of one, the other limb of MDR-T: "the effectiveness of the hotline is reviewed annually by the Global Compliance Office" (page 210), and the Compliance Management System's "design, appropriateness, and implementation as well as the effectiveness... were confirmed without qualifications in the reporting year in accordance with Auditing Standard 980 of the Institute of Public Auditors in Germany (IDW) for the sub-areas of antitrust law, anti-corruption, and export control" (page 209).

Compliance incidents are also "regularly reported by the Chief Compliance Officer to the Supervisory Board, the Board of Management, and the business entities' management teams," with a monthly Compliance Telegram published internally (page 210), providing an additional recurring effectiveness-tracking mechanism for the whistleblower-protection and corporate-culture impacts.