Partnering for systemic change

[ESRS 2 SBM-2; GRI 2-29]

The world is more interconnected today than ever before. Improving access to technology and knowledge is an important way to share ideas and foster innovation. The complex global sustainability challenges society is facing call for a collaborative approach to designing systemic solutions.

Engaging in a dialog means respecting stakeholders, contributing Lenzing’s expertise and knowledge, and taking the opportunity to learn from partners’ perspectives. Transparency is a prerequisite for fostering trust and long-term relationships. Each dialog starts with providing transparent information, supporting stakeholders to form an educated opinion and assess risks, and avoiding misunderstandings by building trust. Furthermore, stakeholder relationships built on mutual respect and openness help solve existing tensions and avoid potential conflicts. The ongoing dialog may take place in a variety of formats, including but not limited to meetings, working groups, answering inquiries/surveys, conferences etc.

The main stakeholders involved in the engagement process are shown in figure  “Key stakeholder groups”. For further information on the main stakeholders, please see the “Stakeholder engagement” focus paper.

Various business functions are involved in reaching out to individual stakeholders. In addition to the Lenzing Corporate Sustainability team, the Managing Board and managers of the different business functions are all important players who drive the company’s proactive approach towards an ongoing stakeholder dialog.

Key stakeholder groups

Key stakeholders in 2024

The Lenzing Group’s key stakeholders are the people and entities who are potentially affected by its operations, business conduct, and strategic targets or who could support Lenzing in reaching these targets. Lenzing regards them as strategic partners who have a significant interest in and impact on areas that matter the most to Lenzing. The most important stakeholder group is Lenzing’s staff. Their achievements, and transparency and collaboration make them a clear testimony to the Lenzing Group’s credible sustainability performance. The main topics discussed in 2024 are as follows:

• Energy security and reducing reliance on fossil fuels
• Climate change, GHG (greenhouse gas) emission targets, science-based targets (SBT)
• Equity, diversity and inclusion
• Responsible sourcing, in particular Supply Chain Due Diligence and (verification of) scope 3 emissions
• EU policies (e.g. EU Taxonomy, Empowering Consumers Directive, Corporate Sustainability Reporting Directive (CSRD))
• ESG risks
• Governance and business conduct
• Net-benefit concept
• Biogenic emissions, land use change
• Circular economy, recycling technologies and innovative business models
• Waste, emissions and water management
• Transparency and traceability of supply chains
• Environmental assessment and communication of products
• Biodiversity and conservation of ecosystems
• Benchmarking tools (Textile Exchange Preferred Fiber and Material Matrix)

For further information on the stakeholder dialog in 2024, please see the “Stakeholder engagement” section in each topical standard. For information on how the outcome of stakeholder dialog is taken into account in the strategy and business model, please see the “Double materiality analysis” section of this chapter.

The Supervisory Board and Managing Board are partly informed about the views and interests of affected stakeholders with regard to sustainability-related impacts. The views of its own workforce are communicated by the works council as well as the Lenzing Climate survey. The views of consumers and end-users are indirectly gained through Lenzing’s customers and communicated by Lenzing commercial teams. The views and interests of value chain workers are not actively communicated to the Boards.

Stakeholders’ own workforces and their influence on Lenzing’s strategy

[ESRS S1 ESRS 2 SBM-2]

In its “Better Choices” corporate culture, the Lenzing Group places a high priority on people as a strategic focus, forming an integral part of its holistic sustainability approach. It is increasingly viewed as a compliance topic within the industry.

Labor rights are subject to national laws. Employees at all Lenzing sites receive fair wages thanks to a highly regarded internal global grading system, collective bargaining, the activities of union representatives, and national protections for human rights. The Lenzing Group’s own labor practices are also evaluated through the yearly assessment that is conducted by EcoVadis.

The Lenzing Group’s corporate culture is characterized by long-term partnerships, close collaboration, and mutual respect based on open dialog and transparency. Communication with employees and employee representatives is regular and varied to ensure a good understanding of the business strategy, goals, performance, market conditions, financial situation and policies as well as any matters relating to contractual terms, conditions and benefits. Information is shared through different channels such as onboarding events, notice boards, townhalls, ERGs, internal mail and internal news.

To prepare for the current challenging times and volatile market environment, Lenzing has developed a strategic approach, the People Plan, which was introduced and implemented for the first time in 2024. The People Plan focuses on four key areas: organizational performance, diversity and culture, leadership development and talent management.

1. Organizational performance: The organization defines and tracks organizational, financial, and individual performance KPIs. Disciplined monitoring and robust reporting tools and processes are implemented to ensure accurate tracking. Additionally, the organization constantly monitors personnel expenses and variable pay based on performance.

2. Diversity & culture: The company continues to create an engaging, inclusive, and performance-driven work environment. It also focuses on fostering cross-functional collaboration across all geographies, supported by climate surveys and action planning to address any areas for improvement. This is complemented by global EDI (Equity, Diversity, and Inclusion) initiatives.

3. Leadership development: The organization aims to enhance accountability, inclusive behavior, and functional expertise. Leaders lead talent development is a key focus, supported by executive training programs and individual & standardized development assessments.

4. Talent management: The organization drives transparency in talent identification and assessment through robust talent management processes and systems. It supports cross-functional and cross-business division movement, builds and maximizes the internal succession pipeline, and conducts people conferences. Performance management plays a crucial role in ensuring continuous development and improvement.

Stakeholders’ workers in the value chain and their influence on Lenzing’s strategy

[ESRS S2 ESRS 2 SBM-2]

The Lenzing Group strongly supports globally recognized human rights, and vehemently opposes any form of violations. The commitment extends to safeguarding the rights of all workers within its sphere of influence, aligning with the Universal Declaration of Human Rights, UN Global Compact (UNGC), OECD Guidelines for Multinational Enterprises and the International Labour Organization’s (ILO) Declaration on Fundamental Principles and Rights at Work. These principles, which protect employees and workers as far as possible throughout the value chain, are fully respected and followed by the Lenzing Group.

The textile industry continues to face persistent and systemic challenges related to human rights and labor rights. Across the production process, workers frequently experience inadequate working conditions, particularly in factories located in Asia, Latin America, and Eastern Europe. These challenges can significantly impact the wellbeing and rights of workers within the value chain, highlighting the importance of integrating their interests, views, and needs into the company’s strategy and business model.

In relation to workers in the value chain, Lenzing relies primarily on available information from proxies, e.g. NGOs, NPOs, trade unions, risk databases and governments as well as internal expertise to identify and assess impacts. Lenzing’ has a direct impact on the rights of workers in the value chain in its sphere of influence. Lenzing’s sphere of influence is mainly limited to its suppliers and partially to its downstream business partners in relation to the distribution, transport and storage of Lenzing products. ’Lenzing’s influence is limited to reviewing working conditions through audits, and relying on ratings and standards such as the EcoVadis rating.

Stakeholders’ consumers & end-users and their influence on Lenzing’s strategy

[ESRS S4 ESRS 2 SBM-2]

Lenzing continuously interacts directly with its customer base through its customer facing organization and indirectly with consumers and end-users, by participating in international associations, conferences, forums, discussion groups and industry interest groups with a focus on product safety and regulatory aspects, in addition to voicing customer expectations.

Consumers are becoming increasingly conscious when making purchasing decisions, requiring more transparency on products’ environmental and social impact, functional performance, safety classification and production traceability throughout the value chain.

This trend is supported by governmental authorities, non-governmental organizations (NGOs) and industry/consumer associations via regulations, and mandatory and/or voluntary certification schemes.

Lenzing has an extensive product and services portfolio and operates in several market segments. Its products can be a supportive component in industrial applications (e.g. filtration systems, insulation material and food packaging applications), and a (key) component in consumer goods (e.g. textiles, wipes, and hygienic products). This results in a complex landscape of functional and regulatory requirements, requiring a holistic approach.

This holistic approach is based on Lenzing’s “Better Growth” strategy of focusing on sustainability, innovation, excellence, and premiumization. More specifically, Lenzing holistically addresses consumers’, authorities’ and associations’ expectations by providing public commitments (e.g., policies, white papers, Lenzing’s Global Code of Business Conduct and Lenzing’s Global Supplier Code of Conduct) in its efforts to continuously improve its offering, proactively complying with the latest and forthcoming requirements, and providing adequate transparency on its activities.