Company-wide Sustainability Management

Stakeholder Dialog

Important information on "Company-wide Sustainability Management" can also be found in our Annual Report.

We are committed to an active, open and constructive dialog with our – whether at a regional, national or global level. In order to identify and address current developments and sustainability- related opportunities and risks at an early stage, we periodically review whether there are any new findings relevant to opportunity and risk management.

Main Stakeholder Groups and Dialog Formats

Main Stakeholder Groups and Dialog Formats (graphic)

We focus on a transparent and open communication approach. Depending on the relevance of a particular issue, our various departments identify and prioritize key stakeholders and select appropriate channels for communication. We also update our materiality analysis every year by conducting surveys among selected internal and external stakeholders to determine the key sustainability issues for Covestro.

Partners

Collaboration with customers, employees and suppliers is crucial for the long-term success of the company. We also greatly value cooperation and active participation in industry associations and scientific institutions. We maintain close contacts with all these groups, both at senior management level and through various departments.

Customers

We are in constant contact with our customers worldwide, primarily through our sales and marketing staff across the Group. At the technical level, our application technology specialists work closely with our R&D departments. Furthermore, we routinely evaluate customer satisfaction as a core component of our Integrated Management System and use this feedback for continual improvement, including the development of sustainable products.

In this context, we received the “Sustainability Award” from Henkel Adhesive Technologies on November 6, 2018. This award honors our ongoing commitment to the development of alternative technologies for purposes such as replacing hazardous materials in production or expanding our polyurethane portfolio to include biobased materials. Covestro is therefore instrumental in the production of sustainable products at Henkel.

At regular intervals, we conduct branding and market research in-house or hire independent consultants. Existing and potential customers from all industries relevant to Covestro are interviewed in these surveys. We use the findings to continually improve our performance and customer-focused market positioning in relation to sales and marketing, innovation, product management, supply chains and communication. An example from 2018 is a market study conducted with an external partner on the use of rigid polyurethane foams in the construction industry.

Suppliers

To ensure the smooth running of production processes and adherence to sustainability requirements, Covestro works closely with suppliers. As a founding member of the “Together for Sustainability” (TfS) initiative, Covestro maintains a regular dialog with suppliers and assesses their performance regarding the sustainability issues that are relevant to us. The initiative aims to introduce its global audit and sustainability assessment program internationally and already cooperates worldwide with several organizations and associations.

Covestro regularly organizes sustainability events with suppliers. In 2017, a major supplier day was held in Düsseldorf under the motto “Pushing Boundaries Together”. During this supplier event, the groundwork was laid for new and more intensive partnerships with Covestro’s primary suppliers with regard to issues such as costs, reliability, innovation and sustainability. In the reporting period, several follow-up workshops were conducted with suppliers to advance these four strategic areas of interest. As promoters of sustainability in the supply chain, Covestro employees gave various presentations at conferences and association workshops, for example at the annual European Industrial Packaging Association (EIPA) conference in Milan, Italy.

Employees

Covestro aims to be an attractive employer in order to recruit and retain motivated and talented employees. We regularly update our workforce about current business developments and seek their active involvement through dialog. We inform our staff promptly and fully about any upcoming changes as required by the applicable national and international regulations. Covestro regularly holds town hall meetings with members of the Board of Management and senior executives at all its major sites around the world. As well as business performance and the company’s strategic goals, specific topics such as workplace safety and global or regional issues are discussed. Covestro also disseminates news through presentations, its employee newsletter “C³”, occasional mailings, plus the company’s intranet and social media. The Board of Management is in regular dialog with the Works Council and trade unions. Additionally, managers can exchange information about industry and department-specific issues with staff at round-table events and “Lunch & Learns”. In 2018, we launched the “Wir sind 1” (“We are 1”) campaign to boost employee motivation, show our appreciation and strengthen the sense of solidarity at Covestro. It was promoted with a series of posters by employees from various divisions.

In conjunction with the United Nations Environment Programme, Covestro launched the Young Champions of the Earth initiative in April 2017 to assist young people aged 18 to 30 in realizing their ideas for protecting the environment. Covestro was once again the primary sponsor of the initiative in 2018 and will continue this partnership in 2019. Covestro employees can participate actively in the initiative by helping the participants as experts or mentors.

Associations

Covestro is currently an active member of more than 360 national and international associations. In addition, Covestro participates in many different committees in these organizations which are concerned with sustainability, energy and climate issues.

Our CEO Dr. Markus Steilemann has been active on the Board of Trustees of the Fonds der Chemischen Industrie since 2016. He joined the Steering Board of PlasticsEurope in July 2017, and he has served as President of the European Technology Platform for Sustainable Chemistry (SusChem) since October 2017. Dr. Steilemann is also head of the Programme Council for Innovation of the European Chemical Industry Council (CEFIC), a board member of the International Council of Chemical Associations (ICCA) and was elected to the board of the German Chemical Industry Association (VCI).

Chief Technology Officer Dr. Klaus Schäfer is a board member of VIK, the federation of power consumers from industry and business in Germany, as well as a board member of the North Rhine-Westphalia regional association of the German Chemical Association (VCI NRW). He was also elected chairman of the DECHEMA Gesellschaft für Chemische Technik und Biotechnologie, taking up office on January 1, 2019.

In the United States, Covestro participates in the American Chemistry Council (ACC), in which Jerry MacCleary, Chairman and CEO of Covestro LLC, was Chairman of the Executive Committee in 2018.

In addition, Covestro is active as a company in the International Council of Chemical Associations (ICCA) as well as other associations with particular relevance to sustainability issues important to the company, such as the World Energy Council Germany (member of the Presidium), the Forum für Zukunftsenergien (member of the Board of Trustees), the Innovationsforum für Energiewende of German industrial trade union Bergbau, Chemie, Energie (IG BCE), and econsense – Forum for Sustainable Development of German Business.

Scientific institutions

Research and development is the central plank that enables Covestro to combine economic success with community involvement and environmental stewardship. These activities are therefore extremely important, both for the financial stability of the company as well as for our contribution to society and the environment.

For more information, see our Annual Report, Group Management Report, section "Innovation", sub-sections "Strategic partnerships".

Covestro maintains long-standing, national and international collaborative relationships with leading universities and public research institutions; for instance it cooperates closely with the Technical University of Berlin on materials development and cost estimation. In the United States, Covestro maintains partnerships with several universities and university-affiliated institutes such as Carnegie Mellon University’s College of Engineering as part of a joint project with the Pittsburgh Penguins ice hockey team. The goal of the collaboration is to make ice hockey safer through the use of innovative materials. In China, Covestro and Covestro-Tongji Eco-Construction & Material Academy (formerly Bayer-Tongji Eco-Construction & Material Academy) have a long-term collaboration at Tongji University in Shanghai. The Academy was founded jointly by the School of Materials Science and Engineering, the School of Architecture and Urban Planning of Tongji University and Covestro. The Academy promotes innovation and sustainability in construction and in materials science through teaching, research and the development of programs for young talent.

Covestro is a member of the UNEP-Tongji Institute of Environment for Sustainable Development (IESD).

Since 2016, Covestro has been a partner to the Solar Impulse Foundation (SIF), and also a member of the World Alliance for Efficient Solutions founded by SIF since 2017. The latter aims to help the spread of resource-efficient solutions on a wide scale.

In addition, Covestro participates in many international industry trade shows. In the reporting period, this included major events such as Chinaplas, an international plastics and rubber expo; JEC World, an international composites trade show; UTECH Europe, the polyurethane industry’s trade fair; plus the in-cosmetics trade show. Covestro additionally participated in the Plastics in Automotive Engineering congress organized by the Association of German Engineers (VDI); Fakuma, the international trade fair for plastics processing; and Light + Building, the world’s premiere trade show for lighting and building services technology. At eMove360° Europe 2018, the international Mobility 4.0 trade fair, Covestro received the MATERIALICA Design + Technology Award 2018. This honor in the “CO2 Efficiency” category was bestowed for Covestro’s development of the world’s first biobased hardener for lightfast polyurethane coatings.

Financial market participants

Intensive dialog with capital markets is a high priority for Covestro. As well as with investors and lenders, we actively exchange information with rating agencies and analysts on an ongoing basis. In this way, we aim to contribute to achieving a fair share price and an appropriate credit rating. These efforts are focused on ensuring a comprehensive, consistent and timely exchange of information between the company and the financial markets.

Investors, lenders and analysts

In addition to the Annual General Meeting and the publication of four quarterly reports, an investor teleconference was held every quarter in 2018. In June of the reporting period, Covestro held a Capital Markets Day event in London. Along with the business performance of the individual segments, important financial data and key investments were presented. Covestro attended other face-to-face investor meetings at various locations worldwide during the year under review.

In order to further raise awareness of the importance of sustainability, each year Covestro participates in one or two investor conferences focusing on environmental, social and governance (ESG) issues. In October 2018, Covestro attended the dbAccess ESG Engagement Days conference in Frankfurt and answered questions. As in the previous year, Covestro also participated in the Exane BNP Paribas SRI forum at the end of November of this reporting year.

https://investor.covestro.com

Rating agencies

Sustainability ratings not only help institutional investors make decisions, they also provide an opportunity to continually review sustainability activities and adjust them where appropriate. Rating agencies’ criteria include both the expectations of our relevant stakeholders as well as new issues that could be of relevance for Covestro in the future.

In 2018, Covestro again qualified to remain in major sustainability indexes such as the FTSE4Good Index and the Euronext Vigeo Index (Eurozone 120).

In addition, external rating agencies (e.g. ISS-oekom, Sustainalytics) assess the sustainability and climate protection achievements of companies and support investors in developing and implementing sustainable investment strategies.

In 2018, Covestro received special recognition from rating agencies such as ISS-oekom, in whose survey Covestro again did extremely well, achieving “Prime” status with an overall score of B–. This puts Covestro in the top 10% of companies in the chemical industry. With a score of 75 out of 100 points, Sustainalytics classified Covestro as an “outperformer” in 2017. Here Covestro ranked 10th overall out of the 133 chemical companies analyzed. Sustainalytics’ updated rating for 2018 is expected in the first quarter of 2019.

The assessments by the main rating agencies were compiled and analyzed in detail in 2018 to systematically identify potential areas for improvement. Covestro then prioritized the results according to an internal list of criteria and passed the most important ones on to the relevant managers. By leveraging the information provided to us by rating agencies, we can drive continuous improvement.

FTSE4Good (icon)
Euronext (icon)
Oekom Prime (icon)

Regulators

The focus of Covestro’s representation of its public policy interests in 2018 was on chemicals and energy policy, the low-carbon , transportation, and environmental and climate protection. Specific examples of engagement with government agencies and political representatives are given in the Group Management Report.

Societal stakeholders

Covestro is in active contact with all relevant societal , including the general public, local neighbors, non-governmental organizations (NGOs) and the media. Engaging with various societal stakeholder groups through a number of different channels and forums is a key component of our communications strategy.

The public, neighbors, non-governmental organizations

We are committed to open and constructive dialog between our sites and their immediate neighborhood. The specific forms this dialog takes are described in the Group Management Report.

For more information, see our Annual Report, Group Management Report, section "Company-wide Sustainability Management", sub-sections "Stakeholder dialog" and "Social engagement".

Covestro supports a number of projects in the vicinity of its German sites with a transparent donation strategy. The company promotes initiatives that advance digitalization, especially in schools, and projects that make cities more livable (“brighter places”). Covestro backs up this commitment with financial assistance of approximately €200,000, thus underscoring the company’s role as a reliable partner and good neighbor to the communities located near its sites.

We also maintain relationships with various organizations and NGOs as part of our wider engagement with society, for instance with the United Nations Environment Programme (UNEP) and Habitat for Humanity. Covestro is a signatory to the UN Global Compact (UNGC), a pact between the United Nations and corporations which aims to shape the social and environmental impact of globalization. Furthermore, Covestro was also honored for outstanding commitment and named a LEAD company at the 2018 Leaders’ Summit at the UN’s New York headquarters. In addition, Covestro actively participates in several UNGC action committees: Breakthrough Innovation for the SDGs, Reporting on the SDGs, Sustainable Ocean Business, and Business for Humanitarian Action.

Media

Another key component of stakeholder dialog is our relationship with the media. Our media work comprises press releases, press conferences, background discussions, individual interviews and journalist visits, as well as communication through social media channels such as LinkedIn, Twitter, Facebook and YouTube. We also regularly inform the media and all other stakeholders about current developments via our website. In addition to press releases, we publish financial information, such as annual and quarterly reports, as well as presentations and speeches from conferences and meetings.

Stakeholders
Internal and external interest groups which are directly or indirectly impacted by the company’s corporate activities and/or may be so in the future
TfS/Together for Sustainability
An initiative undertaken by various companies in the chemical industry to standardize supplier assessments globally in order to improve sustainability practices in the supply chain
Circular economy
A regenerative economic system in which resource input, waste production, emissions and energy consumption are minimized based on long lasting and closed material and energy cycles
Stakeholders
Internal and external interest groups which are directly or indirectly impacted by the company’s corporate activities and/or may be so in the future
UN Global Compact
The world’s largest responsible corporate governance initiative. The member companies undertake to implement ten universal principles and regularly document their progress.