[ESRS E1 ESRS 2 SBM-3; GRI 3-3ab, 201-1, 201-2]
Relevant risks and opportunities for Lenzing were qualitatively evaluated by using scenario analyses for short-term (1-2 years), mid-term (2-5 years) and long-term (5-30 years) consequences in order to estimate their potential financial impact and probability of occurrence. Lenzing then derived a KPI scorecard with indicators and targets on the key climate-related risks and opportunities based on the TCFD recommendation for metrics and targets.
The following table describes key climate risks and opportunities and provides details of Lenzing’s response and mitigation measures. A TCFD index in the Annex of this report shows the link between the TCFD recommendations, the contents of this report and other external publications such as the CDP Climate Change.
Characterization |
Risk/opportunity description |
Lenzing’s response |
|---|---|---|
Transition risks |
Emerging regulations on carbon pricing |
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Increasing regulation, especially on green taxation and carbon pricing, constitutes a relevant risk for Lenzing. In the countries where Lenzing has carbon intensive processes, regulations on greenhouse gas (GHG) emissions have already been implemented (energy efficiency improvements, regulated emission allowances) and stricter regulations that could increase the costs of GHG emissions are under development. |
Lenzing is implementing stringent energy efficiency measures in order to reduce its potential exposure to green taxation. In 2023, Lenzing updated its science-based targets to 1.5°C aligned to reduce its total GHG emissions in Scope 1 and 2 by 42 percent and in Scope 3 by 25 percent by 2030 (compared to a 2021 baseline). Lenzing is therefore mitigating the risks from emerging carbon pricing regulations. Lenzing also set a SBTi validated 2050 long-term net-zero target with 90 percent absolute reduction of Scope 1, 2 and 3 emissions until 2050 (baseline 2021). |
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Increased biomass costs |
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Wood is the Group’s most important natural resource for manufacturing regenerated cellulosic fibers. Despite its sustainable sourcing policy and backward-integrated production, wood prices are at risk of increasing due to climate change, growing global biomass demand and alternative land use. Growing competition for land use and natural resources is affecting long-term structural biomass prices. |
In order to mitigate the risk of increasing biomass costs and improve supply chain security, Lenzing started-up a modern dissolving wood pulp plant in 2022 with integrated plantation and forest operations in Brazil. The new pulp mill improves Lenzing’s cost position, as it secures the Group’s own supply of dissolving wood pulp and represents a milestone in Lenzing’s strategy to achieve carbon neutrality. |
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Reputational risk in the textile sector |
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The textile industry, where Lenzing’s products are commonly used, is being scrutinized for its sometimes unsustainable and resource-intensive raw material consumption and production processes. This could lead to negative media coverage and further stigmatize the sector, which could, in turn, influence the Group’s revenue. |
Lenzing responds to potential negative media coverage of the fashion and textile industry by proactively disclosing information on its business practices and environmental footprint. Through its communication channels, Lenzing underlines its contributions to a low-carbon economy and the net benefits created by its speciality products compared to generic products in the market. |
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Physical risks |
Chronic physical climate risks |
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Climate models indicate that rising global mean temperatures will lead to an increase in chronic physical climate hazards. The Lenzing Group’s operations and supply chain could be increasingly affected by extreme weather events, water scarcity and other physical hazards of varying severity. For example, climate change related impacts such as heavy rainfall or forest fires could affect Lenzing’s key pulp supplies from South Africa and the new pulp plant in Brazil, resulting in a shortage of high-quality pulp and bottlenecks in fiber production. In addition, climate change-induced disruptions such as heat stress could lead to more frequent pest outbreaks, droughts and rising winter temperatures, which could disrupt wood suppliers’ planned harvest schedules and thus pose a risk to Lenzing’s wood supply, especially in the European pulp mills. Water scarcity could also mean, for example, that less water can be drawn from the Ager river at the Lenzing site during longer dry periods, especially in the summer months, which in turn would lead to a reduced production. |
All identified risks arising from a disruption in the supply chain for the various raw materials, chemicals and energy required for pulp and fiber production are managed by Lenzing through comprehensive supplier diversification and holistic inventory and resource management. In addition, Lenzing has initiated the “Safe Supply” project, comprising around 300 initiatives for alternative suppliers and supply routes for important raw materials and chemicals. The effects of climate change-related heavy rainfalls and the associated potential flooding at affected locations are mitigated by appropriate flood protection and evacuation plans based on flood risk assessments. Possible water shortages due to prolonged dry periods at affected production sites are counteracted by targeted measures in the areas of water efficiency, water reuse, water recycling and water conservation. |
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Transition opportunities |
Increased demand for low-emission products and product innovation |
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As consumer needs and preferences shift toward low-emission products, the development and expansion of low-emission goods and services is expected to have substantial growth potential. Lenzing applies life-cycle thinking, sustainable sourcing, efficient use of biomass and partnerships with stakeholders along the value chain in order to contribute to more sustainable consumption and production patterns. All these factors mean that Lenzing’s products offer net benefits. |
Lenzing has embarked on an ambitious growth strategy to benefit from expected higher demand for responsibly resourced and low-emission products. Lenzing invested more than EUR 1 billion in a new lyocell fiber production facility in Prachinburi (Thailand) and a new wood pulp facilitiy in Indianópolis (Brazil) that started operating in 2022. Major achievements in 2023 were the implementation of the technical concept and the production startup of LENZING™ ECOVERO™ branded viscose fibers at Lenzing’s site in Purwakarta (Indonesia) and switching one line from viscose to modal fiber production at the Nanjing (China) site. These investments significantly contribute to reducing Lenzing’s GHG emissions and strengthen the security of the Group’s raw material supply. |
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Decarbonization strategy de-risks operations |
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The Lenzing Group considers rapid decarbonization to be a major business opportunity to de-risk its operations, build resilience, launch products with less climate impact and harvest energy efficiency gains. Lenzing will substantially reduce its GHG emissions in the coming years through a number of corresponding measures (decarbonization strategy) and science-based targets. Furthermore, Lenzing aims to reach net-zero greenhouse gas emissions by 2050. |
Lenzing’s science-based targets are approved by the Science Based Target initiative, making Lenzing the first regenerated cellulosic fiber producer to have approved science-based targets. Lenzing’s decarbonization strategy is based on reducing its emissions, not offsetting them. To reach the targets, Lenzing set up a cross-functional steering committee to make necessary decisions under the leadership of the managing board. Lenzing’s GHG abatement activities will involve a series of measures to reduce carbon emissions both within its operational boundaries and along its supply chain. |
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[ESRS E1 ESRS 2 IRO-1]
The group-wide TCFD assessment process implemented in 2020 was further developed with the goal of identifying, prioritizing, quantifying and mitigating climate change risks and seizing opportunities in Lenzing’s operations and in its supply chain.
Policies
[ESRS E1-2; GRI 3-3c]
Lenzing’s policies address climate change mitigation and adaptation. They act as a set or framework of general objectives and management principles that are used for decision-making. In Lenzing’s 2019 Sustainability Policy, the Executive Committee promoted the line to continuously improve the sustainability performance and resource efficiency and decarbonisation along the entire value chain. In the Policy for Safety, Health and Environment (SHE, see “Pollution” chapter), Lenzing commits to protecting the environment it operates in by minimizing emissions and waste and reiterates the need for improved resource efficiency. The policies are implemented through Lenzing’s transition plan for climate change mitigation and the actions detailed below.
Switching to renewable energy is a crucial step for Lenzing and the Group already relies on a mix of renewables including hydro, solar and wind energy. In the reporting year, bioenergy was an additional focus of policymaking because of the recent start-up of Lenzing’s biorefinery in Brazil and investments in biomass utilization (see “Actions” below).
Bioenergy Policy
In 2023, the Bioenergy Policy was approved by the Chief Pulp Officer and the Chief Sustainability Officer (CSO). It gives guidance for sourcing biomass for Lenzing’s energy production as well as for biomass sourcing of third parties delivering bioenergy to the members of the Lenzing Group. Lenzing strives to source biomass for energy exclusively from non-controversial sources as laid out in the Wood and Pulp Policy (see “Resource use and circular economy” chapter). For woody by-products and agricultural residues Lenzing requires transparency about the sourcing region and demands that the biomass is at least legally harvested and connected to a low risk of deforestation. Lenzing generally avoids biomass from agricultural commodities with a high risk of deforestation (defined by Annex 1 of the EU Deforestation Regulation), in particular, residues from palm oil production. If such products are considered for a supply, the compliance with Lenzing`s policy has to be assured by credible third-party certification, regular risk-assessments specific for the sourcing regions, audits and on-site visits as well as independent third-party certification of the biomass for energy programs (like the ones endorsed by the EU Renewable Energy Directive RED II). These help to ensure compliance to this policy and Lenzing’s commitment to no deforestation. Lenzing’s production sites are responsible for the assessment of the biomass being used. If it is discovered that Lenzing sources biomass from controversial sources, suppliers are engaged to encourage consistent practices with our policy. If the response is unsatisfactory, the supplier is eliminated from Lenzing’s supply chain with a reasonable lead time.
Actions
[ESRS E1-3; GRI 3-3d]
A summary of the “Actions taken” can be found in the management approach at the beginning of this chapter.
Lenzing is committed to reducing emissions in its own operation and along the entire value chain. Table “How forests and wood products work for climate change mitigation” gives an overview of how Lenzing’s forests and wood products are contributing to climate change mitigation.
The most important actions Lenzing took during the reporting year are linked to the beforementioned levers and detailed below.
Energy reduction
Lenzing’s Innovation Platform is frequently used by employees from various departments to propose energy reduction measures or other innovative ideas. In the reporting year such proposals included a range of topics, from reminding colleagues to put computing hardware to sleep during longer breaks to installing a larger heat exchanger in a refining process at one of the production sites.
Significant projects to increase energy efficiency were recently completed in viscose/modal production at the Lenzing site. With their ideas and expertise, production employees played a key role in this. The projects improve the ventilation systems of the fiber production lines, the waste gas treatment and the regulation of steam for high-vacuum systems. The ingenuity of employees and the professional handling of the three projects helped to make viscose/modal production at the Lenzing site even more efficient. Overall, this will result in total energy savings of around 26,500 GJ per year. This is equivalent to the annual energy consumption of roughly 1,470 single-family homes.
Energy mix
In the reporting year Lenzing took a range of actions to further improve its energy mix and to facilitate the switch to renewables.
A 43 megawatt biomass power plant in Heiligenkreuz (Austria) was purchased. After obtaining the official approvals and fulfilling the other closing conditions, the biomass power plant was taken over by the Heiligenkreuz site in Q2/2023. This strategic investment significantly reduces the dependence on fossil fuels at the site. Around 50 percent of the natural gas previously used can be replaced by the bioenergy.
Two additional production sites in the Lenzing Group (Purwakarta, Indonesia and Nanjing, China) use 100 percent renewable electricity from the grid, upping the number of sites relying solely on renewable electricity to six.
Since November 2023, the green energy producers Enery and Energie Steiermark supply the fiber and pulp plant at the Lenzing site with photovoltaic energy from a power station with a peak output of 5,500 kW located in Styria (Austria).
The Lenzing site will be supplied with green energy from the Engelhartstetten wind farm in Marchfeld (Lower Austria) from Q1/2025. The Engelhartstetten wind farm is a joint project involving several partners including WindLandKraft which acts as the operator and supplier of the wind power. The Lenzing Group has signed a long-term supply contract with a term of 15 years.
Integration
Pulp mills can generate bioenergy which can be used for fiber production. This is the advantage of facilities that integrate pulp and fiber production at the same site over stand-alone fiber production units. In some cases, a pulp producer in close proximity to a fiber producer can also provide bioenergy. In both cases, procurement of wood or biomass from sustainable sources is a pre-requisite.
New technology development
In 2023, Linde Green air gases were integrated in production processes to reduce GHG emissions in relation to conventional production processes. By sourcing renewable industrial gases from Linde, which are produced from 100 percent renewable energy, Lenzing contributes to significantly reduced emissions by saving more than 1,700 tons of GHG emissions annually.
Topic relevant to climate change |
Details |
Lenzing Group contribution |
|---|---|---|
CO2 sequestration in sustainably managed forests |
Sustainably managed semi-natural forests and forest plantations absorb more carbon in trees and harvested wood products, therefore acting as a net sink over the long term. Forest areas and carbon stocks are increasing in Europe |
Wood sourcing from sustainably managed forests, managing own forest plantations, active engagement with pulp suppliers for improvements and other stakeholder activities (e.g. research at WOOD K plus) |
Substitution of raw materials that have large climate impacts |
Fibers with lower carbon footprints in their manufacturing process and life cycle |
Offering choices for fibers with lower carbon footprints |
Adaptation of forests to climate change |
Share of beech in Europe is increasing, but its uses are limited. Active forest management achieves faster increases in species diversity (and therefore climate resilience) compared to the natural development of forests |
Economic valorization of beech wood for dissolving wood pulp production at Lenzing (higher value added than fuel wood use) thereby providing forest owners with the income they need for climate adaptation actions. |
CO2 emissions from deforestation of forests |
Ensure that no deforestation occurs in the supply chain |
Lenzing’s wood and pulp policy, forest certificates (FSC®, PEFC), transparency through CDP Forests and implementing the Canopy pathway are ranked top with dark green shirt in the CanopyStyle initiative |