Material impacts, risks and opportunities

Climate models indicate that rising global mean temperatures will lead to an increase in chronic physical climate hazards. Lenzing’s operations and supply chain could be increasingly affected by extreme weather events, water scarcity and other physical hazards of varying severity. All identified risks arising are managed by Lenzing through comprehensive supplier diversification and holistic inventory and resource management.

As wood is one of Lenzing’s most important raw materials, risks of wood unavailability rise due to forest degradation (diseases, pests, etc.) as a direct consequence of higher average temperatures can affect its core business.

Wood is the most important natural resource for the Lenzing Group as it is needed 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 and growing competition for biomass and land use.

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 (such as energy efficiency improvements and 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.

The Lenzing Group considers rapid decarbonization as a major business opportunity to derisk its operations, build resilience, launch products with lower climate impact and realize energy efficiency gains. Lenzing will substantially reduce its GHG emissions in the coming years through a set of measures under its decarbonization strategy and SBTs. Furthermore, Lenzing aims to reach net-zero GHG emissions by 2050.

By using non-renewable energy sources or inefficient energy conversion technologies, Lenzing generates GHG emissions which contribute to global climate change.

Risk of not achieving energy transformation in line with the Lenzing Group’s science-based targets.

Lenzing’s reputation could be damaged if the sustainability requirements with regard to energy sources are not met. Lenzing has energy-intensive processes that result in GHG emissions and is facing increasing pressure from customers and EU directives to address its carbon footprint, which poses a risk for Lenzing if expectations are not met.

Commodity prices (e.g. wood, pulp and chemicals) could increase due to the availability of energy and price volatility as a result of climate change. For example, an increase in the price of wood due to increasing demand for renewable energy sources, zero deforestation trends and/or more frequent pests and diseases (e.g. pest infestations) due to changing weather patterns as a result of climate change.

With the Renewable Energy Directive (RED II/III) biomass could be reclassified and no longer count as renewable.

Unforeseen energy shortages could compromise Lenzing’s operations, which can pose a financial risk.

Lenzing identifies an opportunity to position itself favorably by proactively addressing environmental challenges. In addition, energy costs can potentially decrease in the long term by using renewable energy sources and new technologies. This can lead to a market advantage if the transition is done quickly.

Lenzing contributes to air pollution and could potentially negatively impact health and environment. To prevent pollution Lenzing actively monitors and manages the environmental impact of its operations.

Lenzing could lose its license to operate (LTO) due to regulatory changes, e.g. by failing to meet more stringent emission levels in the EU BAT. This could result in the loss of the EU Ecolabel and failure to meet customer demands.

Showing leadership in pulp and fiber manufacturing with low environmental and social impacts.

Textile production is estimated to be responsible for about 20 percent of global clean water pollution from dyeing and finishing products.¹

Lenzing discharges water in its own operations and therefore potentially impacts water bodies. In the unlikely case of a leakage, the consequences would be fatal for the ecosystems. Lenzing commits itself to comprehensively monitor, control and report direct and indirect interactions with water resources.

Showing leadership in pulp and fiber manufacturing with low environmental and social impacts with low-emission products. For example spun-dyed Lenzing fibers.

Potential for severe negative health and environmental impacts in the event of accidents or leakage. Substances of concern are still used within Lenzing’s own operations and within the industry. Lenzing’s fibers are controlled for residues by certifications and testing schemes.

Securing business by fulfilling stakeholder requirements and going beyond them. Developing industry benchmarks and contribution to multi-stakeholder initiatives such as Zero Discharge of Hazardous Chemicals (ZDHC).

Pulp and fiber production as well as textile manufacturing can be water-intensive. Water withdrawal by Lenzing and its downstream value chain partners can contribute to increasing water scarcity.

Lenzing’s fibers products are produced with a lower water footprint compared to generic regenerated cellulose fibers. This can help value chain partners to meet their water conservation targets and secure Lenzing’s business. This strategy promotes efforts to reduce overall water usage across the supply chain.

Wood scarcity due to non-resilient forests can lead to business losses as there might be no wood available or only at a high price. As biodiverse ecosystems are more resilient to outside stresses, biodiversity loss poses a great risk for Lenzing.

Sourcing of conventionally produced chemicals relies on the use of virgin resources and does not enhance circular economy.

Lenzing contributes to circular value chains by producing fibers with recycled content and renewable raw materials thereby reducing reliance on virgin inputs and lowering lifecycle emissions. These practices support broader environmental goals by minimizing resource extraction, promoting reuse and reducing waste across the textile supply chain.

Lenzing’s leadership in circular fiber innovation positions it to capture growing market demand for low-impact, resource-efficient and biodegradable materials. Through the use of recycled content, renewable wood and closed-loop production processes, Lenzing supports downstream partners in achieving sustainability targets while aligning with emerging regulatory frameworks such as the EU Textile Strategy. This strategic positioning enhances customer loyalty, opens new market segments, and reinforces Lenzing’s role as a sustainability frontrunner in the textile sector.

Recycling processes are energy-intensive, potentially resulting in higher greenhouse gas (GHG) emissions and a larger carbon footprint for products compared to using virgin materials. Whether the impact is negative, depends on the availability of future technologies, as well as the scale of recycling and recovery of chemicals.

Maintaining employer attractiveness during workforce reductions and economic challenges, with an emphasis on transparent communication.

Lenzing sees a growing requirement for social certificates from its customers. By being certified, Lenzing secures business by being listed as a preferred supplier.

The implementation of flexible working time models, comprehensive leave options, and employee benefits supports a healthier work-life balance for the workforce. These measures are designed to reduce stress, enhance job satisfaction, and enable employees to better manage personal and professional responsibilities, contributing to overall well-being and retention.

Inadequate safety precautions can impact and potentially expose its workforce at operated assets to potential health and well-being impacts.

A poor working climate can lead to employee turnover or reduce their productivity. (Due to mental health.)

Lenzing has challenges in the area of equal pay for equal work due to cultural issues and unconscious bias. Lenzing recognises the importance of gender equality and equal pay for equal work and is committed to continuous improvement in this area.

Insufficient quality in succession planning can lead to a recline in productivity.

A lack of support of diversity can lead to exclusion, isolation as well as discrimination and can have psychological consequences for employees.

Diversity drives innovation and performance. Diverse and inclusive workplaces are linked to better talent retention, innovation and market competitiveness.

Child labor remains a significant issue in the textile industry, where children are stripped of their rights, exposed to health and safety risks, denied access to education, and trapped in a cycle of poverty and inequality. Given the prevalence of child labor in textile manufacturing, there is a possibility that it could exist within the value chain of Lenzing.

Forced labor remains a persistent issue in the textile industry, where individuals’ basic rights and freedoms are violated, often resulting in physical and psychological harm while perpetuating cycles of poverty and inequality. Given its prevalence in textile manufacturing, there is a potential risk of forced labor being present in Lenzing’s value chain.

Non-compliance, such as non-compliance with health and safety standards, can lead to lawsuit, monetary loss and reputation loss.

The absence of ongoing efforts, training, reaction and clear procedures can lead to termination of employment and retaliation against the whistleblower, ultimately undermining overall business conduct efforts and compliance activities.

While a compliance program is in place, incidents may still occur if individuals engage in non-compliant behavior.

There is a risk of non-compliance with the Corporate Supply Chain Due Diligence Directive (CSDDD) if internal processes are not implemented.