Climate Neutrality

Along with governments, non-governmental organizations, and other private-sector companies, Covestro supports implementation of the results of the 21st UN Climate Change Conference, which took place in Paris in 2015, and is committed to the UN Sustainable Development Goals (SDGs). For instance, Covestro participates in the German Chemical Industry Association’s (Verband der Chemischen Industrie, VCI) In4Climate NRW and Chemistry4Climate initiatives to proactively develop solutions to master the challenges posed by climate change and bring about the industrial transformation necessary to do so. Our long-term corporate vision of becoming fully circular can only be successful if, at the same time, total greenhouse gas (GHG) emissions are continually reduced in order to contribute to achieving a climate-neutral economy. Covestro’s climate program includes this transformation as a strategic component. In the reporting year, the global CO₂ roadmap was updated as part of the climate program to bring Covestro’s existing goal of reducing greenhouse gas emissions in alignment with our corporate vision and regulatory requirements. The roadmap is a pillar of our climate program intended to support our efforts to set new GHG emissions targets as well as contribute to continually cutting emissions in the short, medium, and long term. It will serve as the foundation for prioritizing specific initiatives for reducing GHG emissions and for aligning our climate-related targets with the Group’s vision going forward. In this process, the roadmap will fundamentally be used to address and analyze direct and indirect sources of emissions in accordance with the Greenhouse Gas Protocol (GHG Protocol). Covestro already has a regular reporting system in place for Scope 1 and Scope 2 GHG emissions. In the reporting year, a system was established for reporting on Scope 3 GHG emissions based on the GHG Protocol.

Covestro’s GHG emissions along the value chain

Scope 1 and Scope 2 GHG Emissions

Covestro calculates greenhouse gas emissions according to the internationally recognized standards of the GHG Protocol. Direct emissions, e.g., from burning fossil energy sources and from our production processes (Scope 1), as well as indirect emissions from the provision and use of energy produced outside the company (Scope 2) at all environmentally relevant facilities, i.e., all production facilities and relevant administrative facilities with a significant impact on the environment, are included in the calculations. In addition to CO₂, Scope 1 emissions comprise all relevant greenhouse gases, including nitrous oxide (N₂O), methane (CH₄), and partly fluorinated hydrocarbons.

Scope 2 emissions are reported using the location-based and market-based methods. Market-based emissions factors were mostly used when calculating specific Scope 2 greenhouse gas emissions; wherever these were not available, the calculation was based on location-based emissions factors from a generally accepted source (e.g., International Energy Agency* (IEA) emissions factors).

OUR CLIMATE NEUTRALITY GOAL

Status 2021

–53,9%

Greenhous gas emissions

2020: –46,2%

2019: –46,1%

Specific greenhouse gas emissions per metric ton of product manufactured are expected to be reduced by 50% from the 2005 benchmark by the year 2025.

The Covestro Group has set the sustainability goal of cutting specific greenhouse gas emissions by 50% from the 2005 benchmark by the year 2025. This is calculated by dividing the absolute Scope 1 and Scope 2 GHG emissions by our production volume at our main production sites, which are those responsible for more than 95% of our energy usage. In fiscal 2021, specific emissions totaled 0.3338 metric tons of CO₂ equivalents per metric ton of product. Compared with the base year 2005, this corresponds to a cumulative drop of 53.9%, and a 14.2% decrease compared to the previous year. We were therefore early in meeting our target of halving GHG emissions from the 2005 baseline. In the reporting year, we began to develop new targets for reducing our GHG emissions.

The decline during the year was mainly due to technical improvements in nitrous oxide (laughing gas) purification at our sites in Baytown (Texas, United States), and Shanghai (China). Furthermore, previously reported steam volume and related GHG emissions had to be corrected for one of our US sites. In total, this led to a decrease in the calculated GHG volumes.

Changes in specific GHG emissions at main production sites

(cumulative annual change in specific GHG emissions per metric ton of product compared with 2005 benchmark – presented in %)¹

In addition to main production sites, absolute Scope 1 and Scope 2 GHG emissions are also monitored for other environmentally relevant sites. In the year 2021, the Group’s GHG emissions declined by 2.8% year over year. Direct GHG emissions dropped 21.5% and indirect GHG emissions increased by 2.5%.

Energy Usage

Covestro is an energy-intensive company. For this reason, energy usage and GHG emissions are closely linked. Covestro’s energy usage includes the primary energy used in production and during electricity and steam generation by the company as well as additionally acquired quantities of electricity, steam, refrigeration energy, and process heat (secondary energy). The secondary energy is calculated back to arrive at the equivalent primary energy usage required to generate them. This takes into account the energy lost while distributing these forms of energy. All told, these figures make up Covestro’s equivalent primary energy consumption. In the interest of setting accurate targets, we track the energy usage of the sites we define as main production sites. These account for more than 95% of our total energy usage.

The use of energy and materials and the level of greenhouse gases emitted are closely related to the quantity of materials we produce. In fiscal 2021, total energy usage in the Group rose by 2.6%, and the equivalent primary energy usage at main production sites also grew by 1.5% – while production volumes increased by 11.7%. The equivalent primary energy usage for a given production volume (energy efficiency) improved accordingly, by 9.1%. The decrease in specific energy usage in the reporting year can therefore be mainly attributed to the cyclical improvement in plant capacity utilization. In our experience, a better utilized production facility leads to improved efficiency in terms of energy usage for a given production volume (specific energy usage). Furthermore, previously reported steam volume and related GHG emissions had to be corrected for one of our US sites, where the figure previously recorded had been too high. This also affected the calculated energy usage accordingly.

In addition, by the year 2030 we also want to halve the specific energy usage of our production facilities compared with the same base year 2005. This energy efficiency boost will contribute to further reducing specific GHG emissions. Our continued long-term positive trend indicates an overall 40.2% improvement in energy efficiency compared to the base year 2005 as shown in the following figure.

Changes in specific energy usage at main production sites

(annual change in specific primary energy usage per metric ton of product compared with 2005 benchmark – presented in %)¹

Covestro’s STRUCTese® (Structured Efficiency System for Energy) system played a key role in permanently improving our specific energy usage. The energy efficiency system developed by Covestro compares actual energy usage in production with the realistic potential optimum. Eliminating inefficiencies results in permanent energy savings. STRUCTese® includes various steps that enable the identification of improvement measures – from analysis to monitoring to benchmarking. These measures are known at Covestro as STRUCTese® projects. The system, which has been gradually rolled out since the year 2008, is now used in many of our energy-intensive production facilities around the world and will be implemented in other facilities going forward.

In fiscal 2021, for instance, we invested in oxygen-depolarized cathode technology in our electrolysis operations at the Krefeld-Uerdingen (Germany) site. This is more efficient than conventional processes. Primary energy usage was therefore cut by more than 16,800 MWh, which is the equivalent of reducing emissions by some 4,400 metric tons of CO₂.

Moreover, Covestro carried out various other projects in fiscal 2021, resulting in annual savings of 29,600 MWh of primary energy, or 8,000 metric tons of CO₂ emissions. In addition, pro-rated savings from projects completed in the previous year (2020) amounted to 61,800 MWh of primary energy and 13,900 t of CO₂ and were realized in fiscal 2021. Combined, all the projects implemented since the introduction of STRUCTese® in the year 2008 have resulted in lasting reductions totaling 2.43 million MWh of primary energy and around 730,000 metric tons of CO₂ per year. In addition to main production sites, energy usage is also documented for other environmentally relevant Covestro sites.

Renewable Energy

In the future, Covestro intends to meet all of its energy needs with renewable energy. Actions we have taken toward this goal include developing new supply plans and signing purchase contracts for renewable energy, particularly electricity. In the reporting year, we signed an agreement with our energy supplier at the Antwerp (Belgium) site to procure 97 GWh of green electricity each year to cover 45% of our electricity needs at the site with wind energy. Another agreement for 60 gigawatt hours (GWh) of green electricity per year was signed for the sites in North Rhine-Westphalia (Germany) as part of our strategy of supplying our European sites with more than 400 GWh of electricity annually from renewable sources in the period from 2022 to 2026. Our site in Shanghai (China) obtained around 460 GWh of green electricity from the Three Gorges Dam in the reporting year and covered more than 40% of its electricity needs with renewable energy. This bolsters Covestro’s sustainability strategy. Likewise, it contributes to shrinking the carbon footprint of production, our products, and our customers’ applications.

Moreover, hydrogen is expected to contribute substantially to reducing GHG emissions both through use as energy and as a material, for instance, as part of CO₂ conversion in the chemical industry.

Scope 3 GHG Emissions

Upstream and downstream greenhouse gas emission data along the entire value chain (Scope 3) has been collected and reported at Covestro since the 2021 reporting period. Scope 3 emissions are determined for all environmentally relevant Covestro sites according to the categories and methods of the GHG Protocol and the Guidance for Accounting & Reporting Corporate GHG Emissions in the Chemical Sector Value Chain by the World Business Council for Sustainable Development (WBCSD). All categories were reviewed for relevance under the guidelines of the GHG Protocol in order to quantify all emissions associated with Covestro’s business activities as completely as possible. Based on this analysis, we report the emissions resulting from the nine categories considered relevant to us. The basis for calculating the other indirect GHG emissions (Scope 3) are internal activity data and emissions factors from commercially and publicly available sources, or sources recommended by the GHG Protocol. The emissions for each Scope 3 category are based on individual calculations, which are described in detail in the Carbon Disclosure Project (CDP) questionnaire we completed. By continually improving the data basis and calculation methods used, we will further advance the accuracy and completeness of our Scope 3 emissions reporting.

The other indirect GHG emissions (Scope 3) represent 80% of the Group’s total GHG emissions.

Covestro Group GHG emissions (Scope 1, Scope 2, and calculated Scope 3) in million metric tons of CO₂ equivalents

Scope 3 emissions calculated in fiscal 2021 amounted to 21.84 million metric tons of CO₂ equivalents. Most of our Scope 3 emissions are attributable to categories upstream in our value chain. The categories of “purchased goods and services,” “end-of-life treatment of sold products,” and “fuel- and energy-related activities” are the main source of our other indirect GHG emissions. Biogenic CO₂ emission equivalents stemming from the value chain totaled 99,052 t CO₂ equivalents in the reporting period in absolute terms and are disclosed separately from the gross volume of Scope 3 emissions in accordance with the GHG Protocol and the WBCSD.

Total Scope 1, Scope 2, and calculated Scope 3 emissions in the reporting period amounted to 27.26 million metric tons of CO₂ equivalents. There is no comparable prior-year value available for Scope 3 emissions, since this is the first year Covestro is calculating this figure.

Composition of Scope 3 emissions categories according to the GHG Protocol in million metric tons of CO₂ equivalents¹