Impact, risk and opportunity management

[ESRS E1 ESRS 2 IRO-1]

The methodological approach and basic assumptions of the TCFD assessment procedure are described in detail in the “Climate-related risk assessment according to TCFD” section in the “ESRS 2 General disclosures” chapter. For the general approach of the double materiality analysis, please see the “Double materiality analysis” section in the “ESRS 2 General disclosures” chapter.

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.

Sustainability Policy

In Lenzing’s 2019 Sustainability Policy, the Executive Committee promoted the aim of continuously improving sustainability performance, resource efficiency as well as decarbonization along the entire value chain. Lenzing is committed to the conservation of natural resources, energy, and biodiversity. The company consistently identifies, evaluates, and manages environmental risks, opportunities, and impacts, while regularly monitoring, reviewing, and reporting on its progress.

The Sustainability Policy covers the following impacts, risks and opportunities: Risk to Lenzing’s operations and supply chain due to the increasingly chronic physical climate hazards as indicated by climate risk assessment; Risk of wood scarcity from non-resilient forests and effects of increasing global average temperature; Positive impact of sustainable wood sourcing on the maintenance of healthy and resilient forests as natural carbon sinks; Positive impact on downstream value chain partners by supporting the achievement of their climate related goals by providing low-carbon fibers; Risk of increasing costs of GHG emissions from emerging regulations on carbon pricing in low-emission scenarios; Risk of not achieving energy transformation in line with the Lenzing Group’s science-based targets; Risk of increasing wood prices due to climate changes and biomass competition; Opportunity to de-risk Lenzing’s operations and gain market share by reducing GHG emissions; Positive impact on driving the energy transition through a circular business model and innovation; Positive impact on GHG emission along Lenzing’s value chain by assessing and engaging suppliers to reduce emissions; Potential financial risk to Lenzing’s operations and increased costs due to unforeseen energy shortages and loss of power supply.

For more information on the ESRS 2 MDR-P of the Sustainability Policy, please see the section “Sustainability Strategy” of the “ESRS 2 General disclosures” chapter.

Policy for Safety, Health and Environment (SHE)

In its SHE Policy, Lenzing commits to protecting the environment it operates in by minimizing emissions and waste and reiterates the need for improved resource efficiency.

The SHE Policy covers the following impacts, risks and opportunity: Positive impact of sustainable wood sourcing on the maintenance of healthy and resilient forests as natural carbon sinks; Positive impact on downstream value chain partners by supporting the achievement of their climate related goals by providing low-carbon fibers; Risk of increasing costs of GHG emissions from emerging regulations on carbon pricing in low-emission scenarios; Risk of not achieving energy transformation in line with the Lenzing Group’s science-based Targets; Risk of increasing wood prices due to climate changes and biomass competition; Opportunity to de-risk Lenzing’s operations and gain market share by reducing GHG emissions

For more information on the ESRS 2 MDR-P of the SHE Policy, please see the “Policies” section of the “E2 Pollution” chapter.

Group Environmental Policy and Standard

The Group Environmental Policy and Standard supports Lenzing’s sustainability strategy and SHE Policy. It sets out a detailed group approach to each key environmental material issue that has been identified through environmental aspects and impacts assessment as well as the group materiality analysis. It also supports Lenzing’s climate change target by improving energy efficiency and reducing energy consumption at all Lenzing’s sites.

The Group Environmental Policy and Standard addresses the following impacts, risk and opportunities: Risk to Lenzing’s operations and supply chain due to the increasingly chronic physical climate hazards as indicated by climate risk assessment; Opportunity through increased demand for low-emission products and product innovation; Positive impact of sustainable wood sourcing on the maintenance of healthy and resilient forests as natural carbon sinks; Positive impact on downstream value chain partners by supporting the achievement of their climate related goals by providing low-carbon fibers; Risk of increasing costs of GHG emissions from emerging regulations on carbon pricing in low-emission scenarios; Risk of not achieving energy transformation in line with the Lenzing Group’s science-based targets; Risk of increasing wood prices due to climate changes and biomass competition; Opportunity to de-risk Lenzing’s operations and gain market share by reducing GHG emissions; Negative impact on global climate change by generating GHG emissions with the use of non-renewable energy sources; Risk of reputational damage if sustainability requirements in regard to energy sources are not met and carbon footprint is not reduced; Potential financial risk to Lenzing’s operations and increased costs due to unforeseen energy shortages and loss of power supply.

For more information on the ESRS 2 MDR-P of the Group Environment Policy and Standard, please see the “Policies” section in the “E2 Pollution” chapter.

The policies are implemented through Lenzing’s climate action plan. 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. For more information, please see the “Actions” section of this chapter.

Bioenergy Policy

In 2023, the Bioenergy Policy was approved by the Chief Pulp Officer (CPO) and the Chief Sustainability Officer (CSO) while the site directors are responsible for its roll-out and implementation at site level. It provides guidance on biomass sourcing for Lenzing’s energy production as well as on biomass sourcing for third parties delivering bioenergy to the production facilities 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. 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), particularly, residues from palm oil production. If such products are considered for supply, compliance with this policy has to be assured. 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) help to ensure the policy compliance and the 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, engagement with suppliers is undertaken to encourage practices aligned with the Bioenergy Policy. If the response is unsatisfactory, the supplier is eliminated from Lenzing’s supply chain with a reasonable lead time.

The Bioenergy Policy covers the following risks and opportunity: Risk of reputational damage if sustainability requirements in regard to energy sources are not met and carbon footprint is not reduced; Risk of increasing commodity costs (e.g. wood, pulp, chemicals) due to energy prices; Risk of biomass being reclassified as non-renewable in the Renewable Energy Directive (RED II/III); Opportunity of decreasing energy costs by implementing concepts based on renewable energy in the long term.

Wood and Pulp Policy

The Wood and Pulp Policy covers the “Positive impact of sustainable wood sourcing on the maintenance of healthy and resilient forests as natural carbon sinks”. For more information on the ESRS 2 MDR-P of the Wood and Pulp Policy, please see the “Policies” section of the “E4 Biodiversity and ecosystems” chapter.

Global Supplier Code of Conduct

All suppliers must comply with Lenzing’s Global Supplier Code of Conduct and are expected to use natural resources (e.g. water, sources of energy and raw materials) in an economical and responsible way. Negative impacts on the environment and climate should be minimized or eliminated at their source or through practices such as the modification of production, maintenance and facility processes, material substitution, conservation, recycling and material reutilization. Suppliers should engage in the development of climate-friendly products and processes to reduce power consumption and greenhouse gas emissions.

The Global Supplier Code of Conduct addresses the following impacts and opportunity: Opportunity through increased demand for low-emission products and product innovation; Positive impact on downstream value chain partners by supporting the achievement of their climate related goals by providing low-carbon fibers; Positive impact on GHG emission along Lenzing’s value chain by assessing and engaging suppliers to reduce emissions

For more information on the ESRS 2 MDR-P of the Global Supplier Code of Conduct, please see the “Policies” section in the “G1 Business Conduct” chapter.