Information on environmentally sustainable economic activities according to the EU Taxonomy Regulation

According to the Regulations (EU) 2021/2139 of the European Commission as of June 4, 2021, (EU) 2021/2178 of the European Commission as of July 6, 2021 and (EU) 2020/852 of the European Comission as of June 18, 2020, the Lenzing Group is required to disclose three key performance indicators (turnover, CAPEX and OPEX) associated with the Lenzing Group’s economic activities that are eligible under and aligned with the EU Taxonomy. The Lenzing Group designed an EU-Taxonomy accounting guideline for describing the methodology for reporting the three KPIs by following the time sequence and requirements as outlined in the Delegated Act dated January 1, 2022.

To determine the Taxonomy-eligible activities, the Lenzing Group assessed all economic activities listed in the EU-Taxonomy for all consolidated group companies. The European industry classification system (NACE codes¹) was used as a framework to capture all economic sectors. Due to the current state of EU legislation, not all economic activities and industries are covered by the two currently applicable environmental objectives. As a consequence, the Lenzing Group’s core business activities (wood-based fiber production, dissolving wood pulp production and supporting activities) are currently not included. Thus, the information on Taxonomy-eligible economic activities for 2022 covers only a very small portion of activities within the Lenzing Group. The following activities are identified as Taxonomy-eligible: Transmission and distribution of electricity, cogeneration of heat/cool and power from renewable non-fossil gaseous and liquid fuels, cogeneration of heat/cool and power from bioenergy. Future developments in legislation may change the Scope of the Taxonomy-eligible activities.

Taxonomy-eligibility refers to an economic activity that is described in the EU-Taxonomy regulation. Taxonomy-alignment goes beyond eligibility and implies a positive assessment of the applicable technical screening criteria. This includes a substantial contribution to at least one of the Taxonomy’s environmental objectives, no significant harm to any other objectives and compliance with the minimum safeguards.

For the identified economic activities that are considered material in terms of the key performance indicators, an assessment for Taxonomy-alignment was performed. The Lenzing Group began the alignment assessment by screening the technical critieria, including the substantial contribution, the Minimum Safeguards and DNSH (Does Not Significantly Harm) criteria. During the screening, the Lenzing Group came to the conclusion that the requirements of Annex A (climate risk and vulnerability assessment) as well as other elements can not yet be fullfilled. As a consequence of this assessment, no full DNSH-alignment was obtained. All identified economic activities are reported as Taxonomy-eligible, but not Taxonomy-aligned.

The Lenzing Group avoids any double counting by evaluating the data for each key performance indicator independently. All identified economic activities only count once for the environmental objective of “Climate Change Mitigation”. The Lenzing Group has assessed the turnover, CAPEX and OPEX according to the definition of Taxonomy-eligible and Taxonomy-aligned activities as set out in the Taxonomy.

The total turnover covers the revenue recognized pursuant to International Accounting Standard (IAS) 1.82 (a), as adopted by Commission Regulation (EC) 1126/2008 and is reported in the consolidated financial statements for 2022 (see consolidated income statement line “revenue”). The turnover derived from products or services, including intangibles, associated with Taxonomy-eligible economic activities, is presented in relation to the total turnover.

The total CAPEX covers book (not cash-effective) additions to property, plant and equipment, intangible assets, biological assets and right of use assets. The CAPEX related to assets or processes associated with Taxonomy-eligible economic activities, is presented in relation to the total CAPEX.

The total OPEX covers direct non-capitalized operating expenses that relate to research and development, building renovation measures, short-term leasing, maintenance and repair. Maintenance and repair expenses relate to the day-to-day servicing of property, plant and equipment assets (including maintenance material and cleaning services). Operating expenses associated with taxonomy-eligible economic activities are presented in relation to total operating expenses.

¹ NACE (Nomenclature statistique des activités économiques dans la Communauté européenne) is the classification of economic activities in the European Union