The objective in setting up and continuously developing the Compliance Management System is to prevent, detect and respond to compliance violations against the interests of the company, to avoid liability risks and damage to the company’s reputation, to advise and safeguard the company’s management, executives and employees, and to increase efficiency by coordinating existing compliance activities.
The Compliance Management System corresponds to the following structure (figure “Elements of the Lenzing Compliance Management System”):
Elements of the Lenzing Compliance Management System
Compliance is based on the corporate values of the Lenzing Group and its measures promote integrity within the company. Formal structures, such as the assignment of responsibilities, ongoing monitoring and structures for communication, evaluation and documentation are essential components of the Compliance Management System.
The ongoing compliance program is based on the following pillars:
- Measures to prevent misconduct
- Measures to detect compliance risks and weaknesses
- Measures to respond to misconduct and identified weaknesses in order to avoid them in future.
At the meetings of the Supervisory Board’s Audit Committee on March 1, 2022, September 7, 2022 and November 16, 2022, the Compliance Officer reported on the content, objectives and status of the compliance organization, the structure of the Compliance Management System, training, internal and external investigations and various compliance measures (communication, surveys) in a separate agenda item.
Directives
Anti Money Laundering Directive (AML Directive)
Lenzing Group is committed to the highest standards of ethical business principles and commits to fight money laundering and terrorist financing (ML&TF). Money launderers aim to introduce money from illegal transactions into legal circulation. Terrorists aim to obtain money from illegal and also legal transactions for terrorist activities. Lenzing avoids business with criminals and uses a series of preventative measures to ensure that money laundering and terrorist financing are not unwittingly aided and abetted. The “AML Directive” describes the processes and control mechanisms implemented at Lenzing. The directive was introduced in 2020. In 2022 tools for the KYC (Know Your Counterpart) process were introduced to identify Lenzing counterparties and verify their identities. Furthermore counterparties can be checked for adverse media, Politically exposed persons (PEP) and sanctions to mitigate the risk of business relationships with illegitimate business activities.
Antitrust Directive
Lenzing does not tolerate or participate in any business conduct, transaction or activity that violates the antitrust and competition laws applicable to it. The company respects applicable trade laws and restrictions as imposed by the United Nations or other national or supranational bodies or governments. To ensure that all relevant antitrust regulations are known and adhered to within the Lenzing Group, Lenzing’s internal Antitrust Directive serves as a supplement to the Lenzing Global Code of Conduct. It applies to all business activities and operations in accordance with applicable competition law. It informs all employees how to behave correctly when dealing with business partners and shows which activities may pose an increased risk of antitrust violations. Furthermore, this directive helps to promote trust in business dealings, preserve Lenzing’s reputation and avoid or reduce costs, risks and damages resulting from a violation of antitrust law.
Anti-Bribery and Corruption Directive (ABC Directive)
The Anti-Bribery and Corruption Directive (“ABC Directive”) supplements Lenzing’s Global Code of Conduct by providing global minimum standards to ensure that Lenzing’s activities are conducted ethically and with integrity. The goal of this Directive is to ensure that all relevant anti-bribery and corruption regulations are known and observed across the Lenzing Group. The Directive applies to all operations and activities in compliance with all applicable anti-corruption laws, including the Austrian Criminal Code, the United Kingdom Bribery Act 2010 and the US Foreign Corrupt Practices Act. It clearly defines what bribery, corruption and acceleration payments mean and provides guidelines on what is considered acceptable behavior. Receiving and giving gifts, as well as accepting and giving hospitality or invitations, require – depending on the monetary value – specific approval within the Compliance Register Tool. Country-specific limits have been defined for all legal entities.
Know-How Protection Directive
Specialization and innovative strength are key factors for the worldwide success of Lenzing. In today’s economy, information and Know-How as a result of R&D investments, creativity and business initiatives have become the most important factors for developing and maintaining competitive advantages. Lenzing’s Know-How is a central asset that must be preserved and protected using all the protective measures at Lenzing’s disposal. The protection of know-how relates not only to Lenzing’s leadership in technology, but also extends to its many different activities worldwide, including business secrets. Every employee is a key factor in Lenzing’s future know-how protection program and is directly affected by the Know-How protection process described in this directive.
Detective measures
[GRI 2-16; ESRS S2-3]
Lenzing takes the complaints seriously and takes immediate action once it becomes aware of potential negative impacts. Lenzing has established grievance mechanisms. There are various internal reporting channels for employees. Externally, there is the possibility to submit indications via an online tool, which is not only available to all employees of the Lenzing Group, but also to customers, suppliers and other third parties throughout the world. The online tool is also accessible through the Lenzing webpage: Compliance – Lenzing – innovative by nature.
Whistleblower directive
The purpose of Lenzing’s Whistleblower Directive is to encourage all employees to speak up in good faith against potential violations of laws, the Global Code of Conduct or Lenzing’s internal rules and principles. The directive aims to provide all employees with more concrete guidance and information on how to report compliance concerns about actual or potential rule violations. It emphasizes that for reports which were made in good faith (i.e. with a reasonable suspicion that a potential violation has occurred, is occurring, or is likely to occur), the parties involved are protected from subsequent punishment, discrimination, retaliation, disadvantage, harassment or termination for making reports. Lenzing takes all concerns raised under the Whistleblower Directive serious and defines clear processes in this Directive on how reports are handled internally, who is involved in any necessary investigations, and what the consequences are for identified violations.
Whistleblower system
In order to enable all employees and other stakeholders to report concerns in connection with topics such as corruption, bribery, conflicts of interest, antitrust laws and capital market law, an online-based whistleblower system was established in 2017. Grievances can be reported in-house in person, by phone or email, e.g. to supervisors, the works council or the Group Compliance Officer. In addition, the BKMS® whistleblower system (“Tell us”) is freely accessible for everyone on the webpage of Lenzing to express any concerns anonymously (available in all languages relevant to production sites: English, German, Czech, Chinese, Indonesian, Thai, Portuguese). Reporting an incident does not only relate to Lenzing’s employees, but also to customers, suppliers, and other third parties around the world. Reported incidents are assessed by lawyers (if necessary in cooperation with local partners), and forwarded to the Group Compliance Officer or to the Local Compliance Officer. Recommendations as to whether the investigation should be deepened or terminated are provided. Concerns can be reported anonymously and without fear of retaliation worldwide thanks to this system. The professional handling of the information protects both the whistleblower and the person affected. 14 reports were filed during the reporting period, which were processed in a targeted manner in accordance with the internal Investigation Directive. The Audit Committee is informed about the reported incidents once a year.
Communication of critical concerns
To remain compliant with all policies and react swiftly to any violations, the communication of critical concerns to the highest governance body are important. For more information on this, please see the Lenzing Group’s Annual Report 2022 (Corporate Governance Report).
Risk assessment
In June 2022, Group Compliance initiated a risk assessment aiming to identify possible risks and improvement options. These assessments will be conducted regularly as part of a monitoring scheme for the effectiveness of the compliance measures.
Compliance trainings
Understanding rules and regulations is a fundamental requirement for “correct” behavior. Hence the eLearning program was continuously expanded during the reporting year to efficiently convey the most important content of the compliance directives to the relevant target groups. New employees receive welcome folders and onboarding training on the Global Code of Business Conduct and on the topics of “Bribery and Corruption” and “Issuer Compliance”. In addition, every employee receives training on data protection, whistleblowing and Know-How protection in the form of eLearning. Roughly, 1,300 employees (approx. 15 percent of the total workforce) completed the training on anti-bribery and corruption, while some 3,400 employees (approx. 40 percent of the total workforce) completed training on whistleblowing1. Due to COVID-19, this training took place primarily via eLearning program and online meetings.
Legal complaints and investigations
[GRI 205-3; ESRS G1-4]
Compliance violations via the whistleblower system are collected in the Legal, IP and Compliance department. One case of corruption and two cases of alleged corruption were reported at Lenzing in 2022. There were no public complaints in connection with corruption brought against the company or its employees during the reporting period.
Social and environmental compliance
[GRI 2-27]
Conflicts of interest and production-related circumstances, such as noise, unpleasant odors, and environmental pollution, can result in disputes with local residents. Procedures are in place at all sites to ensure that complaints are handled fairly and impartially. All complaints are reviewed monthly and reported directly to the Lenzing Group’s senior management teams.
Complaints were registered at the sites in Lenzing (Austria), Purwakarta (Indonesia), Nanjing (China) and Prachinburi (Thailand) in 2022, and appropriate remedial measures were taken following the investigation and review process. In Nanjing (China), high COD values exceeding the thresholds led to a permit breach and will result in a fine. As the incident investigation is still ongoing the amount of the fine is not defined yet. In Grimsby (United Kingdom), there were two permit breaches related to waste water values. One on total suspended solids, the other one on AO, both breaches received EPA recorded action and timeline. Paskov (Czech Republic), received a conclusion from the ministry of the environment to have committed a misdemeanor. Because of that conclusion a small fine of 1,000 CZK (~42 EUR) to cover the proceeding was issued.
1 For technical reasons training data as of January 10, 2023. Percentage data based on total workforce as of December 31, 2022.