Strategy
[ESRS E1-1; GRI 3-3e]
Climate action plan
In line with the Paris Agreement (1.5 °C target) and the UN SDG 13, the Lenzing Group has set ambitious SBTs for reducing absolute GHG emissions by 42 percent in scope 1 and 2 and by 25 percent in scope 3 by 2030 (baseline 2021), and aims to achieve net-zero GHG emissions by 2050.
Climate Action Plan
Lenzing is committed to its science-based targets (SBTs) for 2030 and 2050 and has been implementing the following roadmap, which is periodically updated to incorporate evolving technological options and changing market conditions.
For more information on the key actions described by the decarbonization levers, see the “Actions” section below in this chapter.
Lenzing’s climate action plan for climate change mitigation is a component of Lenzing’s long-term business strategy. It was approved by the Managing Board. Currently, Lenzing is working to strengthen the plan and to meet the formal requirements of a transition plan under the European Sustainability Reporting Standards (ESRS), as well as the European Corporate Sustainability Due Diligence Directive (CSDDD) by 2026.
Since 2021, Lenzing’s investments have included around EUR 20 mn in the viscose site in Nanjing (China)) for the transition from coal to natural gas, the purchase of a 43 MW biomass power plant for the lyocell site in Heiligenkreuz (Austria) for around EUR 20 mn, and the installation of a new sulfur recovery system in Purwakarta (Indonesia), which reduces Lenzing’s scope 3 chemicals contribution (and has led to the whole Group obtaining the EU ecolabel). Lenzing has implemented numerous other initiatives, such as buying grid-based renewable energy in six facilities globally, and the purchase of more than 80 percent biomass energy for the lyocell site in Prachinburi (Thailand). All these initiatives have led to higher operational expenditures (OpEx) for the Group. Lenzing is able to offer premium products with a low carbon footprint due to these measures.
Lenzing has been working with suppliers to produce and supply low-carbon raw materials involving long-term contracts.
The teams are looking into more GHG reduction options to further decarbonize Lenzing sites and the supply chain in different countries (please see the roadmap for key levers).
Currently, there are several barriers to executing the action plan. Barriers include the availability and accessibility of grid-based renewable electricity, unequal costs of renewable fuels (green hydrogen, ammonia) compared to fossil-based electricity and fuels, the lack of a level playing field for low-carbon products, and the willingness of business partners to share the costs and risks of investments.
Lenzing has been working with its partners and policy makers to find solutions to these barriers, create incentives to implement climate action plans and to support the transformation of the industry.
A cross-functional project team has been set up under the leadership of the Chief Pulp & Technology Officer (CPO). The project management team includes a steering committee to enable alignment across all decision-makers and functions, expedite decisions and ensure the involvement of different owners of capital projects, sites and functions. A dedicated global project manager is operationally responsible for facilitating the roadmap preparation and bringing best practice examples to implement climate targets at the facility and group levels. Additionally, the manager supports the functions in integrating climate in business decisions.
To ensure engagement and empowerment, production sites and functions are responsible for developing and implementing roadmaps, so that they can effectively manage their portfolios and specific agendas in the medium- and long-term. This process is facilitated by the project manager.
The Lenzing Group is not excluded from the EU Paris-aligned benchmarks.
Locked-in GHG emissions: Lenzing’s coal boilers at the site in Purwakarta (Indonesia) are significant sources of future locked-in GHG emissions throughout their operational lifetimes. These emissions could jeopardize the achievement of the SBTs and net-zero targets by 2050 if the current infrastructure is not changed. Replacing the coal boilers with new alternative fuel-compatible boilers could substantially mitigate these risks and support the GHG emission reduction targets. This is envisaged in Lenzing’s climate action plan. However, there are many barriers and challenges that need to be overcome with the support of business partners and initiatives.
Strategy, targets and roadmaps
Lenzing’s corporate strategy, “Better Growth”, includes climate change targets to ensure that climate change is incorporated into the business strategy and decision-making.
To effectively achieve the SBTs, the global project manager has developed a high-level SBT roadmap for the Lenzing Group with potential site-level targets. These scenarios and site targets have been aligned with the CPO, steering committee and other decision-makers of key functions and regions. This has provided guidance and direction and facilitated the development of roadmaps by each production site and function.
Integration in functions and projects
Operations: Each of Lenzing’s nine production sites is engaged in developing its targets and roadmaps.
Business management and sales: Lenzing places great importance on communicating the climate impacts of its products to customers and business partners. During sales processes the results of product LCAs support conveying the benefits of Lenzing’s low-carbon fiber portfolio related to climate change (see “Sustainable innovations” chapter).
Procurement and supplier engagement: Lenzing engages and partners with key chemicals and pulp suppliers to reduce its scope 3 emissions. The intention is to produce and supply raw materials with lower GHG emissions and lower other negative impacts. Lenzing focuses on maintaining long-term relationships, helping suppliers to achieve improvements and being part of their transition journey by using their green products.
Strategy, mergers and acquisitions: Capital projects, whether brownfield or greenfield, have to align with the climate change strategy and targets. In this regard, some projects have been assessed for their benefits and contribution to climate change impact as part of the Managing Board’s decision-making process. Internal carbon pricing for key projects is used to support this process.
Finance and controlling: In the yearly medium-term plan (MTP) budgeting process, projects were assessed for their relevance to the climate action plan as well as their GHG impacts. The results were implemented as additional decision criteria.
Levers to meet SBTs
Based on technical feasibility, Lenzing deploys different levers to reduce scope 1, scope 2 and scope 3 emissions, as seen in figure “Levers to meet science-based targets”.
Levers to meet science-based targets
For more information on the key actions described by the decarbonization levers, see the “Actions” section below in this chapter.
Risk and opportunity assessment
ESRS E1 ESRS 2 SBM-3; GRI 3-3ab, 201-2]
The TCFD assessment procedure was implemented in Lenzing for the first time in 2020 and further developed in the reporting year aiming to quantify climate change-related risks in Lenzing’s operations and its value chain. The analysis covered effects on short-, medium- and long-term time scales and different emission scenarios capturing drivers of physical and transitional risks. The table below summarizes the scenarios’ narrative and assumptions.
Climate scenario |
No Policy |
Stated Policy |
Paris Ambition |
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|---|---|---|---|---|---|
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(SSP5-8.5) |
(SSP2-4.5) |
(SSP1-1.9) |
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Global temperature rise (by 2100) |
>4 °C |
2.5 °C |
<1.5 °C |
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Policy narrative |
Assumes that climate policies are repealed, resulting in high warming and extreme physical risks |
Includes all pledged policies even if not yet backed up by implemented effective policies. |
Limits global warming to 1.5 °C through stringent climate policies and innovation, reaching global net zero GHG emissions around 2050. |
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Policy reaction |
Policy reversal – repeal of current policies |
Aligned with Nationally Determined Contributions (NDCs) |
Immediate and smooth |
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Technology change |
Slow change |
Slow change |
Fast change |
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Carbon dioxide removal |
Not used |
Low-medium use |
Medium-high use |
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Regional variation |
Low variation |
Medium variation |
Medium variation |
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Global carbon price (2030, 2050) |
0, 0 |
43, 140 |
131, 446 |
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Demand for low carbon products |
Low |
Medium |
High |
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Global sustainable purchasing trend – % share of population purchasing sustainably (2030, 2050) |
23%, 22% |
36%, 50% |
53%, 60% |
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Outcomes of the quantified risks are summarized in the table below and presented qualitatively in low-, medium-, and high-risk categories in line with the internal ERM and double materiality approach.
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0‑5 |
6‑10 |
11‑20 |
0‑5 |
6‑10 |
11‑20 |
0‑5 |
6‑10 |
11‑20 |
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No Policy |
Stated Policy |
Paris Ambition |
Description of risk category |
Result description |
Key assumptions |
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Transitional risks |
Policy |
○ |
○ |
○ |
● |
● |
● |
● |
● |
● |
Legislation enacted by governments to price and penalize GHG emissions. |
In a Paris Ambition scenario, the transition to a lower carbon economy means there will be increased carbon regulations globally reflected in carbon prices to keep temperatures under 1.5 °C, therefore greater Policy risk for Lenzing. |
The policy model contains carbon pricing data per country and sector which is then applied to each country and scope of emissions. Upstream impacts relate to costs of carbon pricing, while downstream impacts affect revenue (as reflected in higher product price). |
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Technology |
○ |
○ |
○ |
○ |
○ |
○ |
● |
○ |
○ |
Disruptive lower-carbon technology changes in key economic sectors and risks to carbon-intensive assets and operations. |
In a Paris Ambition scenario, the transition to green assets needs to happen faster across the globe to keep temperatures under 1.5 °C, therefore causing greater potential Technology Impairment risk for Lenzing in the short term. |
Technology risk is based on machinery assets held by Lenzing and its’ dependencies on fossil fuel and depreciation rates. |
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Consumer sentiment |
○ |
● |
● |
○ |
○ |
○ |
● |
● |
● |
Consumer preferences shift towards sustainable alternative products and services, transforming market demand. |
In a Paris Ambition scenario, the transition to a lower carbon economy means some sectors that Lenzing sells into will shrink and therefore Lenzing’s customer base, and hence demand, will reduce. |
The Consumer Demand model covers not only consumer demand for products, but also the macro demand of business sectors for Lenzing’s products. A generalised sector split to the demand model still needs improvement to better reflect B2B relations of Lenzing. |
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Liability |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
Litigation brought by plaintiffs against companies for their liabilities in causing harm from climate change. |
Liability risk for Lenzing is minimal due to their sector and location being less likely to receive litigation cases, and Lenzing’s emissions intensity being close to the sector average. |
Liability risk is based on Lenzing’s sector, location, market share and emissions intensity compared to sector average. |
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Investor sentiment |
○ |
● |
● |
○ |
● |
● |
○ |
○ |
○ |
Investors prioritize returns from lower-carbon companies, driving cost of capital and valuation changes. |
Investor risk for Lenzing is minimal due to Lenzing’s emissions intensity being close to the sector average. |
Investor risk is based on Lenzing’s cost of capital and the emissions intensity of Lenzing compared to the sector average. |
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Reputation |
● |
● |
● |
○ |
● |
● |
● |
● |
● |
Customer activism influenced by company’s actions to address climate change risk. |
In a No Policy scenario, global action on climate change has slowed and therefore high emitting industries will be targeted in consumer activism. On the other hand, the transition to a lower carbon economy in a Paris Ambition scenario means that individual companies that are not taking action to combat climate change in line with their peers will be more at risk of consumer activism. |
The reputation model shows impacts in terms of reduced demand for products, as activism and boycotts increase. |
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Physical risks |
Facility disruption |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
Climate change causes a variety of weather events that will impact the ability to operate at facilities and cause damage to assets. |
The increasing severity and frequency of heatwave events is potentially the largest driver of revenue loss at Lenzing facilities. |
The facility disruption model applies vulnerability curves, showing operational days lost and time to recover, of different climatic events to each facility based on their facility type. A value per day of disruption is then generated for each facility to calculate the overall revenue loss and assets damage costs. |
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Supply risk |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
○ |
Climate changes in temperature and precipitation impact the yield of raw materials at the growing locations. |
Raw materials risk results for Lenzing from the applied model appears as minimal due to current coverage of only European Spruce in the analysis. |
Supply risk is based on Lenzing’s raw material volume for European spruce and pine, the sourcing footprints and the dependency of Lenzing products on the availability of this raw material. In the latest iteration, only data for climate change-related effects on European spruce was available. However, as other tree species used in Lenzing are similarly prominent, such as beech and eucalyptus, a comprehensive analysis of supply risk of raw materials was not yet possible. |
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The following table outlines key climate-related risks and opportunities identified in the Lenzing ERM system 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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Emerging regulations, especially on green taxation and carbon pricing, constitute relevant risks to 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. A qualitative impact assessment including a detailed description of this risk is included in the results of the climate risk analysis under the “Policy” category in table “Projected Climate Risk Potential”. |
Lenzing’s risk response strategy aims at reducing the exposure to potential green taxations by implementing stringent measures to reduce GHG emissions and by proactively steering the technology portfolio. In 2023, Lenzing updated its SBTs 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 until 2030 (compared to a 2021 baseline). Lenzing is therefore mitigating the risks from emerging carbon pricing regulations. Lenzing also has a validated SBT for a 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 cellulose fibers. Despite Lenzing’s 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. The risk of increased biomass costs is not fully reflected in the results of the climate risk analysis, as the risk model used was limited to a few wood species relevant to Lenzing, such as spruce and pine. |
Lenzing has already taken various measures to mitigate this risk, with supplier diversification being the most important risk mitigation measure. By procuring wood from a broader range of countries or less risk exposed wood species (e.g. pine), Lenzing minimizes the risk of supply chain disruption that may occur in a single sourcing region. Moreover, in 2022 Lenzing started the production of dissolving wood pulp in its new pulp mill in Brazil. The mill is supplied by an own FSC® certified plantation located next to the mill. Hence, Lenzing’s pulp mills are not exclusively dependent on European wood supply. Secondly, to reduce long-term residual risk, Lenzing endorses sustainable forest management to improve the resilience of forests to the negative impacts of climate change and also invests in a few conservation projects to improve resilience of forests. |
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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. A qualitative impact analysis for Lenzing resulting from the reputational risk in the textile sector is reflected in the results of the climate risk analysis in the “Reputation” section and to a lesser extent in the “Consumer sentiment” category in table “Projected Climate Risk Potential”. |
Lenzing has various targets to address important sustainability impacts and thus continuously improves its enviornmental footprint. Lenzing responds to potential negative media coverage of the fashion and textile industry by proactively and transparently 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 or other physical hazards of varying severity. From a supply chain perspective, for example, climate change related impacts such as heavy rainfall or forest fires could affect Lenzing’s key pulp supplies or 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. For Lenzing’s own production facilities, for example, water scarcity could also mean, 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 decline in production. The effects of climate-related physical risks on Lenzing’s own production facilities as well as on Lenzing’s supply chain covering a few important suppliers were taken into account in the climate risk analysis presented in table “Projected Climate Risk Potential”. |
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. |
In order to benefit from the expected higher demand for responsibly produced and low-emission products, Lenzing has embarked on an ambitious growth strategy. With the commissioning of the new lyocell fiber plant in Thailand and the new pulp plant in Brazil in 2022 as well as the conversion to LENZING™ ECOVERO™ viscose fibers at the Indonesian site with lower emissions leading to EU Ecolabel and the switch to modal fiber production as well as shifting from coal to natural gas based energy at the Nanjing (China) site in 2023, and aquision of a new biomass power plant in Heiligenkreuz (Austria), Lenzing is making an important contribution to reducing greenhouse gas emissions and strengthening the Group’s low emission products portfolio. |
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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 a lower 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 SBTs. Furthermore, Lenzing aims to reach net-zero greenhouse gas emissions by 2050. |
Lenzing’s SBTs are approved by the Science Based Targets initiative, making Lenzing one of the first regenerated cellulose fiber producer to have approved SBTs. 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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