Sustainability Statement – Social Matters

Employees

Covestro’s employees are the company’s most valuable resource. The multifaceted abilities, personal efforts, and ability to change of all employees are the basis for Covestro’s success, now and in the future. Covestro operates in an ever changing environment with numerous external and internal factors. To master these challenges, we aim to create a working environment that enables all employees everyone to act and contribute in line with the company’s targets, values, and culture. Covestro thus promotes unconventional thinking, the effective exchange of knowledge, creative problem-solving, constructive feedback, and collegial cooperation.

Human rights are the foundation of our social responsibility as a company and employer. We are fully committed to maintaining and promoting these rights within our area of influence and to always treating each other with respect. At Covestro, our social responsibility as a company and employer also includes creating fair working conditions that are based on mutual respect and appreciation among employees and in particular attach value to safety, health, and wellbeing in the workplace.

Also, our sustainable human resources (HR) policy features a strong social responsibility for our employees. We are aiming at a working environment in which different skills, talents, experiences, and points of view are welcome, and everyone is treated with dignity and respect, both within and outside of our company. It is therefore of particular importance to us to practice diversity, equity, and inclusion as central components of our corporate culture in our day-to-day HR work.

• See “Business Conduct (Compliance).”
• See “Human Rights.”
• See “Diversity, Equity, and Inclusion of Our Workforce.”
• See “Working Conditions.”

Strategy

Corporate Values and Corporate Culture

Covestro is proud of its corporate values, summarized as C³: curious, courageous, and colorful. Curiosity drives us to think further and allows us to create innovative and unexpected solutions for our customers. Courage helps us identify opportunities where others see limitations. Diversity promotes employee engagement and creativity; different perspectives make us successful. These values are a guiding principle for all the Group’s employees and are ideally reflected in their thoughts and actions.

Our corporate “We Are 1” culture is based on Covestro’s values and behaviors, and is an integral part of our strategy. Our employees influence and shape this corporate culture. A culture that is lived by our employees enables us to pursue our strategy and therefore contributes to Covestro’s success now and far into the future. Our corporate culture empowers all employees to always act responsibly, to strive for continual improvement, to nurture collaborative teamwork, and to be good leaders.

Constructive cooperation with the employee representative body on a basis of trust is an integral part of our corporate culture. It allows us to come to important decisions jointly, some of which can be difficult for the company, after considering all perspectives. Employees at all sites around the world have the right to elect their own employee representatives. Topics that affect more than one European country are dealt with in the Covestro European Forum.

Human Resources Guiding Principles and Strategy

Megatrends, such as digital transformation, artificial intelligence, demographic change, or continuous transformation in all areas of life and work, and the trend toward individualization – freedom of choice and self-determination – are changing the nature and substance of the work environment. With the overarching people strategy, the corporate human Resources (HR) function creates a link between these global trends and the targets of Covestro’s business strategy. The main focus is on the development and implementation of initiatives that sustainably support our business success in view of these trends and at the same time encourage professional development and engagement by all employees. In keeping with a holistic people strategy, Covestro’s Board of Management is dedicated to promoting diversity, equity, and inclusion as well as ensuring our employees are appropriately qualified. Workplace health and safety is a fundamental requirement for our work.

Our people strategy is derived from these key topics and the targets of our corporate Sustainable Future strategy. It provides guidance for enhancing the HR product portfolio and prioritizing projects, initiatives, and activities of the corporate HR function. It breaks down into five action areas: “Place to be,” “committed to perform,” “ready to grow,” “enabled to perform,” and “proud to belong.”

Covestro’s people strategy and its action areas

Governance

Organizationally, the corporate HR function reports to the Chief Executive Officer (CEO). The Global Head of HR is responsible for all activities of the HR function.

Our HR governance refers to a complete set of policies, processes, and practices to ensure that the corporate HR function is managed effectively and efficiently. Our HR governance ensures that personnel decisions and actions are consistent, meet the relevant requirements, and contribute to the company’s long-term success.

Several HR steering committees, consisting of regional and global management teams, deal with operational and strategic issues in relation to our workforce. In addition, the Board of Management is involved in HR-relevant decisions that are of strategic relevance to Covestro. The Supervisory Board is consulted on matters such as compensation-related decisions. On compensation issues, Covestro follows the consistency principle.

• See Compensation Report.

The policies relevant for the corporate HR function are embedded in the corporate policies. Relevant HR-related risks are considered in the Group-wide risk management.

The corporate HR function is aided in all its work by Group Health, Safety and Environment; Law; Intellectual Property & Compliance; and Corporate Audit. They ensure that all internal policies and all relevant standards and labor law requirements are met.

Actions

Working Conditions

New, Flexible Working Environments for Improved Contact and Communication

Work environments, work content, and working methods are undergoing constant changes due to digital transformation and the increasing speed of change and complexity at our workplace. In order to meet these ever-changing requirements, Covestro aims to ensure a working environment that meets work requirements and thus promotes flexible ways of working and turns our offices into genuine meeting points.

At the center of our C³ work philosophy is the conviction that all our employees, regardless of their status in the hierarchy, need working environments suitable to their tasks and responsibilities to be able to work effectively. In this way, we want to enable changes in perspective, promote cooperation, and drive creativity in the company.

The mobile working concept, which allows working from home and on the move, gives employees a wide variety of new options, depending on operational requirements, to spend up to 80% of their working time, calculated on a monthly basis, working remotely in accordance with the company-wide works agreement and agreement with the representative committee of executive employees on “Mobile Working in Germany.” However, we continue to believe that personal interaction on site is very important for ensuring lasting collaboration and maintaining our innovation capability.

Work-Life Balance

We support work-life balance for our employees. For instance, partnerships with daycare centers and financial support for vacation care for school-age children are among the solutions we offer to make combining work with family responsibilities easier. The programs offered can differ, depending on the particular Covestro site. Provided it is compatible with operational requirements, Covestro allows employees to take extended leave from work for personal projects such as scientific research, university studies, or other personal reasons. Employees around the world take advantage of this offer.

Designing Healthy Working Conditions and Work Models

Covestro is aware that the company’s future depends on the health and performance of its employees. For this reason, preventive healthcare is a key component of our corporate “We Are 1” culture and also forms part of our people strategy. Workplace health management is primarily aimed at enabling health-appropriate and health-promoting working (environmental prevention) and at strengthening the health resources and potential of individuals (behavioral prevention). This is intended to improve the work environment and health and wellbeing in the workplace and to prevent risks to health at work.

Health targets and actions are derived by identifying needs of Covestro’s employees. Concrete health targets are formulated on the basis of information, obtained through health surveys, on the health situation relating to the requirements imposed on employees and their ability to meet them (resources). The focus here is on those indicators for which the analysis has identified a clear need for action. Targeted actions are offered to improve the health situation, such as the “Healthy management” seminar for managers, workshops for analyzing the causes of high workloads, or stress management courses. All actions are therefore tailored to the prevention requirement identified on the basis of health data; they are organized holistically as required by environmental and behavioral prevention. Our basic principles include the constant improvement of working and organizational conditions and the identification of factors that either promote or are detrimental to health.

• See “Health and Safety.”

Our management staff has a significant influence on the performance and wellbeing of our employees. Against this backdrop, we ensure that our managers are qualified to the best possible extent for healthy management at Covestro and receive advice on their duties.

We continually strive to create working conditions that take account of any burdens on individuals in a continually changing working environment. In many countries, we exceed our legal obligations, e.g., by offering solutions such as flexible working hours, part-time work, working from home, and remote work, if this is compatible with operational requirements. Direct dialogue with our employees is particularly important to us. The nature and scope of our health promotion programs differ around the world with regard to the respective country-specific need for development and access to national health systems.

Employee Compensation

We offer competitive and fair working conditions, compensation, and additional benefits in accordance with market conditions and our social responsibility. This is an essential prerequisite for recruiting, retaining, and motivating qualified employees.

Covestro combines a base salary reflecting the duties of a position with performance-related compensation components and extensive additional benefits to create an internationally competitive pay package, about which employees are informed transparently. Tasks and responsibilities are classified on the basis of a job evaluation conducted without considering the individuals in the positions. For management functions, a standardized evaluation method is used if the job evaluation has not already been stipulated by a local collective agreement. Based on this classification, the amount of the base salary in all countries is aligned with standard compensation levels in the respective region. Regular compensation benchmarking is conducted to ensure this is maintained for the long term.

In accordance with our corporate “We Are 1” culture, the compensation structure follows standard rules and regulations. The variable compensation is based on a clearly documented system with identical criteria; differences occur only in the percentages related to fixed compensation.

• See Compensation Report, “Long-Term Variable Compensation” section.
• See Compensation Report, “Short-Term Variable Compensation” section.

Furthermore, a global budget is available from which management-level staff can promptly grant what are referred to as individual performance awards to recognize outstanding conduct, commitment, and the performance of their employees in regard to our corporate values.

Due to the challenging economic conditions and the need to prioritize spending to focus on the essentials, the Covestment share-based participation program was temporarily suspended in the year 2023. As a result, employees were unable to buy any Covestro shares at a discount. The program is to be resumed as soon as possible.

Employee Training and Continuing Development

Well educated and trained staff is crucial for our company’s continuing development and success. We want to promote talent and encourage employees to try out new possibilities for personal development.

We continued and further optimized the concept of self-directed learning in the year 2023 to meet the personal needs of our employees. In particular, we focused on the opportunities of leadership and professional development. The system of strategic training and development will concentrate on organizational learning in future and emphasize two key initiatives. Firstly, team resource management training to improve safety behavior at Covestro was pursued further. This training has its origins in the aviation industry. It has been developed on the basis of the finding that many disasters in an industry environment can be attributed to errors in human performance and teamwork. Together with experienced airplane pilots, Covestro has adapted this program to its own needs and those of the chemical industry. Key components of the program are interactive, experience-oriented, and self-directed learning as well as a defined transfer process to retain the lessons learned. Team resource management training is thus aimed at improving the safety culture at Covestro in a sustainable manner.

• See “Health and Safety.”

Moreover, the Expedition C transformation program was launched as an internal further training initiative in the reporting year. The initiative, which concentrates on people in processes of transformation, was developed by Covestro employees for Covestro employees. Under this program, we encourage exchanges around the six core goals of the transformation: “Sustainability,” “financial awareness,” “digital transformation” “artificial intelligence,” “C³ ways of working,” and “intrapreneurship.” A mix of knowledge transfer and tools has been compiled by internal experts to give Covestro employees the knowhow that is critical to shaping the successful transformation of the company.

Employer Attractiveness

Covestro aims to recruit qualified employees for the company, ensure their professional and personal development, and retain talent in the long term. We strive to be perceived as an attractive employer worldwide, to reinforce our employer brand, especially through diversity in the workforce, and to raise awareness of our company among our target groups.

Since skills shortages continue to dominate the global labor market, we make efforts worldwide to recruit new talent and inspire young people to pursue a career in our company. We take responsibility worldwide for students entering the workplace and bring in university students to take part in professional internships each year. This gives them insight into our company’s operations as well as personal experience with Covestro as an attractive employer. In fiscal 2023, we offered 448 internships around the globe.

In addition to opportunities to join the company after studying, Covestro offers alternative routes into working life. In Germany, for example, 185 young people were able to start their careers with Covestro in the year 2023. We offer vocational training in a number of scientific, technical, and commercial professions and guarantee trainees a position with the company if the training is completed successfully. Our particular interest in schools is aimed at raising awareness of professions in science, technology, engineering, and mathematics (STEM) and making them more attractive to young people. For example, in the year 2023, we presented career opportunities available at Covestro to a number of different (partner) schools in Germany and invited interested learners on tours of the plant.

Employee Engagement

A key aspect of attaining our target of becoming a place to be is to get a better understanding of the factors that our employees consider important to increase their engagement. To identify these factors and keep track of trends, we use the global ENGAGE survey to measure and improve employee engagement. All employees worldwide can provide feedback several times a year by filling out a voluntary, anonymous online survey on key issues in their work environment. The results are then shared transparently with the employees and appropriate improvement actions are agreed jointly by employees and line managers. Three survey rounds were conducted in the year 2023, each with a participation rate of around 70%, similar to the previous year.

Apart from conducting global employee surveys, we provide employees with the opportunity to give feedback at any time and to submit queries on individual matters. This feedback is collected and regularly addressed and answered by the Board of Management in video messages and virtual global and local employee events (e.g., WeAre1 talks and town halls meetings).

Diversity, Equity, and Inclusion of our Workforce

Diversity, equity, and inclusion (DEI) is a key component of our corporate culture. We also believe that a diverse workforce and inclusive environment are important drivers of innovation, sustainability, employee engagement, and business success. Our target is to create an environment at Covestro in which all employees can give their best each and every day.

Covestro’s DEI strategy is derived from our values and based on three core principles: Colleagues, Company, and Community. These are three essential factors for building a strong, diverse, equitable, inclusive, and innovative work culture at our sites. Our corporate targets and the culture we need for diversity, equity, and inclusion are driven by our employee networks and councils and supported by management and all members of Covestro’s Board of Management.

Our diversity, equity, and inclusion strategy

The first principle, “Colleagues – build, engage and develop a strong, diverse workforce” encompasses all activities that aim to make Covestro’s workforce more diverse. Employee networks are a key factor in involving our staff in driving diversity. We want to bring people together in these networks, and promote an exchange of inspiration and ideas. Covestro has many global and regional employee networks with different focus areas worldwide. The global UNITE network focuses on all issues of concern to the LGBTIQ (lesbian, gay, bi, trans, intersex, queer) community, and the global Compass network is for employees interested in gender equity. These networks create opportunities for learning and cooperating at a regional and global level. In the year 2023, a large number of such learning opportunities were created by these networks worldwide. In addition to the employee networks, some sites also have DEI Councils, which provide support for implementing the strategy and for the activities of the employee networks.

Under the “Company – establish an inclusive, supportive work environment and culture” principle, we have bundled all efforts and initiatives aimed at promoting inclusion. Covestro is aware that companies are more successful it they encourage diversity in their workforce. We strive to promote diversity and equity for all employees at all levels. For example, Covestro is committed to gender equity worldwide and the Board of Management has therefore undertaken to reach a proportion of 40% women in Covestro’s total workforce by the year 2029. At the end of the reporting year, women made up 23.2% of our worldwide headcount (previous year: 23.4%). The above ambition is underpinned further by the target for the proportion of women in the first two management levels below the Board of Management for the period through June 30, 2027.

• See “Promotion of Equal Participation of Women and Men in Leadership Positions.”

The “Community – achieving business targets through community engagement, supplier diversity, and customer interaction” principle summarizes how we, together with our partners, intend to create the basis for greater diversity in society. Covestro actively promotes diversity, equity, and inclusion in pursuing its own activities and by working shoulder-to-shoulder with outside parties. This is the only way these targets will be permanently integrated into the company as well as society. For this reason, we are further expanding our cooperation with various partners.

Metrics

As of December 31, 2023, Covestro had 17,520 employees worldwide (previous year: 17,985). At the reporting date, the Group also had 572 employees in vocational training worldwide (previous year: 575).

• See note 9 “Personnel Expenses and Employee Numbers” in the Notes to the Consolidated Financial Statements.

Employees by division¹