Collage of 2 pictures: LXS ID 1499 (left), Adobe Stock (right)

Reporting on the EU Taxonomy

A central element in the European Union’s Green Deal is the strategy for sustainable financing.

It aims to channel financing flows into investments that support sustainable development in the future. In this context, a classification system for economic activities – the EU taxonomy (Regulation (EU) 2020/852) – is to help investors assess whether investments contribute to political targets and obligations such as the Paris Agreement on climate change at the same time as meeting specified environmental and social standards. To this end, the EU has defined six categories, or objectives:

  1. Climate change mitigation
  2. Climate change adaptation
  3. Sustainable use and protection of water and marine resources
  4. Transition to a circular economy
  5. Pollution prevention and control
  6. Protection and restoration of biodiversity and ecosystems

The relevance of an economic activity for one of these environmental objectives depends on how the activity influences the respective environmental objective.

In order to assess an economic activity, a two-step analysis must be performed with regard to eligibility and alignment. To determine alignment, an EU taxonomy objective is to be used to assess whether all of the technical screening criteria are met for each activity. It must make a substantial contribution to an environmental objective while doing no significant harm (DNSH) to any of the other objectives.

Moreover, minimum safeguards for compliance with human rights including labor and consumer rights and in the fields of bribery and corruption prevention, taxation and fair competition must be guaranteed for each activity.

Companies that fall within the scope of the EU taxonomy must disclose the defined sales, capital expenditure (CapEx) and operating expenditure (OpEx) ratios for their share of taxonomy-eligible or taxonomy-aligned economic activities. These ratios must be itemized according to the respective taxonomy-eligible or taxonomy-aligned economic activity. The disclosures must specify the environmental objective to which this activity contributes and whether it is a transitional or enabling economic activity.

Taxonomy-eligible activities at LANXESS 

With regard to the environmental objectives “climate change mitigation” and “climate change adaptation,” the Taxonomy Regulation covers activities of selected economic sectors that have the greatest potential for helping significantly reduce greenhouse gas emissions. These activities are described as “taxonomy-eligible.” With regard to the “climate change mitigation” objective, the chemical industry is a “transformative industry” because, among other things, basic chemicals and plastics that are produced in very large quantities are labeled as transitional activities. This means that the activities make a relevant contribution to the EU’s GHG emissions and thus have significant reduction potential. LANXESS – as a specialty chemicals company – is not focused on such products. In terms of the other four environmental objectives, the activities covered by the Taxonomy Regulation relate to the chemical industry only to a very limited extent.

Reportable ratios for the fiscal year 2023

Sales

LANXESS generated 8.2% of its external sales with products allocable to taxonomy-eligible activities. The remaining 91.8% of sales relate to products that are not included in the taxonomy’s activity categories

As LANXESS’s taxonomy-eligible sales result exclusively from production, the company’s main business activity, we disclose the figures at Group level and do not otherwise present them in clusters. In the reporting year, LANXESS generated total sales of €548 million classified as taxonomy-eligible. The taxonomy-aligned sales in the reporting year were 2.3%.

Capital expenditures and operational expenditures

We report the proportion of expenditures and expenses incurred in connection with the operation of our plants in order to manufacture taxonomy-eligible or taxonomy-aligned products as taxonomy-eligible or taxonomy-aligned capital expenditures and operational expenditures.


Capital expenditures

The share of taxonomy-eligible capital expenditures was 12.7%, with investments in buildings accounting for the majority. Therefore, the share of taxonomy-non-eligible activities in our capital expenditures is 87.3%. The share of taxonomy-eligible capital expenditures amounts to 1.0% of our capital expenditures. All taxonomy-aligned capital expenditures comprise additions to property, plant and equipment.

Operational expenditures

The relevant value chain begins with the manufacture of products that are taxonomy-eligible according to the Taxonomy Regulation. Relevant operating expenditures are direct non-capitalized costs relating to research and development, building renovation measures, short-term leases, maintenance and repair. These must be covered by the ratio’s denominator. Any other direct expenditures relating to the day-to-day servicing of assets of property, plant and equipment by the company itself or by third parties must also be included.

The share of operational expenditures for taxonomy-eligible products amounted to 9.7% of the total operating expenditures. Therefore, the share of taxonomy-non-eligible operating expenditures is 90.3%. The share of taxonomy-eligible operational expenditures amounts to 2.7% of our operating expenditures.

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