Key Sustainability Issues: Transparent and Fact-Based

This report contains relevant information on issues during the reporting period (fiscal year 2023 and an outlook on effects and issues of future material aspects

In 2022, we already began to align our materiality analysis with the requirements of the European Sustainability Reporting Standards (ESRS). More information can be found here.

The central element of the ESRS materiality analysis is Dual Materiality. This approach assesses the topics from two perspectives:

1. Impact Materiality (Inside-out perspective): What impact do our business activities have on people and the environment? (Inside-out perspective).
2. Financial Materiality (Outside-in perspective): How do sustainability issues influence our business activities? What are the financial impacts, opportunities, and risks for the company? (Outside-in perspective).

The material aspects of this report were identified in a company-wide report team. Team members are employees in key positions who are concerned with sustainability issues and have contact with our stakeholder groups (e.g. human resources, environmental management officer, sustainability communication, product line implementation).

For each topic, sub-topic, or sub-sub-topic, we analyzed and evaluated the following questions to determine materiality. We generally conducted evaluations at these levels unless the specifics of a topic required a more detailed assessment. Topics that are not relevant to our business model were excluded from the materiality assessment. In the next materiality analysis, we will review to see if there are any additional significant impacts beyond those listed.

• Positive/Negative: Is the impact positive or negative?
  We spent a long time on this question. According to the ESRS definition, the benchmark for impacts is the contribution to sustainable development, meaning absolutely protected goods and values. Comparisons with previous years’ results or competitors are not relevant.
  
  From our perspective, the benchmark is a reference state, a "zero value," such as air that is not polluted by emissions. Negative impacts are anything that causes pollution or destruction in the environment. In many cases, we already reduce these negative impacts through comprehensive measures. However, this does not mean they disappear, so we cannot yet speak of a positive impact.
  
  An impact can only be considered positive if we eliminate pollution caused by others, such as recycling materials from old tires. Due to this strict interpretation, we have no positive impacts in the environmental area, even though our measures to reduce or avoid pollution are comprehensive and far-reaching.
  
  In the social area, it is much more difficult to find a "zero value." In some cases, we used legal regulations. Since our practices often exceed the usual standards, we found a positive impact for some topics, although these impacts mostly fall below the materiality threshold.
  

• Potential/Actual Impact: Is the impact potential or actual?
  We classified impacts as potential if they could occur but are rare or have not occurred yet. For these topics, we also assessed the likelihood of occurrence. Effective management systems can reduce this likelihood. We classified impacts as actual if they are measurable or noticeable.
  
  
• Magnitude: How significantly negative or beneficial is the impact for the affected stakeholders? We decided not to evaluate the size of our influence on a topic but rather to focus on the impact on people or the environment. Therefore, many topics in the environmental area have a high magnitude of impact.
  
  
• Scope: How many people are affected? In how many countries or regions do the impacts occur? When evaluating the scope, we considered our direct influence, meaning which people and regions are directly affected by our impacts. For topics that cannot be reasonably confined to specific regions, such as the impacts of emissions and microplastics, we chose the highest evaluation level.
  
  
• Irreversibility: Can the impacts be undone. Irreversibility was only assessed for negative impacts.
  

The likelihood of occurrence, magnitude, scope, and irreversibility were rated on a scale of 0-5.

For topics related to human rights, the severity (magnitude, scope, and irreversibility) of the impacts is decisive, not the likelihood of occurrence.

All topics where at least one of the aspects scored at least 4 are considered material.

For each aspect, we evaluated:

To identify sustainability-related risks and opportunities that have or could have financial impacts, we made an initial assessment and collected topics based on expert experiences in 2022. This part of the materiality analysis will be further developed over the next two years to meet the information requirements of the ESRS.

This part of the materiality analysis is currently being conducted to provide the information required by ESRS.

The assessments are largely based on the experiences of those responsible and group discussions, as well as feedback from stakeholders. We verified individual aspects using data, such as expenditures on local suppliers. Additionally, for each aspect, we evaluated whether the impacts occur within the company or in the upstream or downstream value chain.

The results of the materiality analysis are incorporated into our strategy development process. We have aligned the identified material aspects with our corporate goals. These key issues are reflected in our strategic priorities and objectives—see "Our Goals in Detail" for more information.

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