Sustainability Analysis of the Business

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.

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

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.

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.

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.

The results will be considered in our Strategic Management Process.

2021 findings

In the reporting period, our sustainability analysis was applied to our entire portfolio for the second time. We examined 463 PARCs, covering the total sales generated by Evonik with chemicals in fiscal 2020. That was a significant increase compared with the previous year when 326 PARCs were examined, because many PARCS were subdivided into different applications and regions to improve the quality of the analysis. The main findings of our sustainability analysis 2021 were:

  • Evonik generates 91 percent of sales with products and solutions whose sustainability performance is at least in line with the market reference (leader, driver, or performer category)
  • Evonik generates 37 percent of sales with products and solutions with a clearly positive sustainability profile that is above or even well above the market reference level (leader and driver categories)

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.