Sustainability Analysis of the Business 2.0

Extensive transparency and soundly based analyses are our response to the growing interest shown
by our stakeholders in corporate sustainability.

The sustainability analysis of our business plays an important role in establishing sustainability in our strategic management process. The methodology is based on the chemical industry standard for portfolio analysis. The signal categories examined in this process will facilitate continuous review and development in the future using the EU-wide classification system (taxonomy) for sustainable business activity.

The extensive evaluation of these sustainability signals gives us additional insights for the foresighted management of individual products and entire business areas. We are currently integrating the conclusions drawn from this analysis into our strategy process to allow integrated management using both financial and nonfinancial indicators. We expect this to further improve the assessment of alternative courses of action, investment decisions, and the allocation of funds in our planning and portfolio management processes. For the first time, stakeholder requirements - grouped in the signal category “sustainability ambitions along the value
chain” - can now be integrated directly into the planning process. The findings will be taken into account in the future in the regular review of our materiality analysis.

Methodology

The market signals identified as being significant for Evonik form the heart of our sustainability analysis. These include, for example, anticipated regulatory trends, environmental and social performance compared to alternative solutions, and sustainability ambitions in our markets. All market signals are based on the World Business Council for Sustainable Development’s framework for portfolio sustainability assessments (PSA), which Evonik was involved in developing from the outset. One special feature of this approach is the differentiated assessment of the relevant products in specific product-application-region combinations (PARCs). For each PARC, we identify the benefits of using the product and will gradually be quantifying these in greater detail.

We set high standards for the sustainability analysis of our businesses and have therefore arranged for external validation of the methodology through a limited assurance review.

Step 1: Defining objectives, scope, and processes

As a first step, we define Product - Application - Region - Combinations (PARCs).

Step 2: Defining Assessment Segments

Then, the PARCS are prioritized by for example sales. The prioritization and selection are undertaken by our operating units on the basis of their significance for sustainability and the business.

Step 3: Detecting Market Signals

We examine the PARCs using various signal categories. These categories include, for example, expected regulatory trends, relative ecological and social sustainability performance — such as energy and water savings, reductions in CO2 emissions — and contribution to the SDGs.

Step 4: Categorizing the Portfolio

The findings are used in a structured overall evaluation of the sustainability performance of our businesses, resulting in allocation to the performance category Leader (A++), Driver (A+), Performer (B), Transitioner (C-), or Challenged (C--) 1 on the basis of the PARCs analyzed.

STEP 5: Reporting and using results

The results will be considered in our Strategic Management Process.

Overall view of the methodology

Here you find a complete chart of the Sustainability Analysis.

Short version of our sustainability Analysis 2.0 Methodology

Here you can download the Sustainability Analysis 2.0 Methodoloy

2022 findings

For fiscal 2022, we examined 534 PARCs (2021: 507 PARCs), covering the total sales generated by Evonik with chemicals in the fiscal year. The number of PARCs increased year-on-year because we take an increasingly differentiated view of applications and regions. That further enhances the quality of our portfolio
overview. The most important findings are:

Evonik generated 91 percent of sales with products and solutions whose sustainability performance was at least in line with the market reference level (leader, driver, or performer category. The figure for 2021 was 91 percent.
43 percent of Evonik’s sales came from Next Generation Solutions. These are products and solutions with a clearly positive sustainability profile that is above or even well above the market reference level (leader and driver categories). In 2021, the proportion was 41 percent.
Weak negative market signals were identified for 7 percent of sales (transitioner category), and strong negative signals were identified for 2 percent (challenged category) (2021: 8 percent transitioner, 2 percent challenged). We are addressing these in dialogue with our customers through innovation or active portfolio management.

We call these our Next Generation Solutions. They have attractive growth rates and stand out positively in their markets because of their clear sustainability benefits. We aim to achieve a substantial increase in the proportion of sales generated by our Next Generation Solutions by 2030.

Life cycle assessments

Life cycle assessments are a focal area of our sustainability analysis. The high expertise and extensive operational networking of our internal life cycle management group play an important part in continually enhancing our knowledge of the impact of our business activities. A broad spectrum of life cycle assessments is used for this. We use the findings for selective improvements such as more product-oriented measures to reduce our carbon footprint or improve water management at our sites worldwide.