Annual Report 2023

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Creating tomorrow’s solutions

EU Taxonomy Regulation

The European Union’s Action Plan on Financing Sustainable Growth set out to establish a classification system for sustainable economic activities, formalized in the EU Taxonomy Regulation. This system is intended to help companies subject to the obligation to publish a non-financial report to identify environmentally sustainable activities and standardize their reporting. The taxonomy is intended to play a role in the transition to sustainable finance by strengthening the reliability and comparability of sustainability information. EU delegated acts governing fiduciary duties, and investment and insurance advice are designed to advance the European Green Deal’s goal of achieving net zero by 2050 by directing capital toward sustainable activities. In its Taxonomy Regulation, the EU has defined six environmental objectives which, in the EU’s view, companies can use to determine which of their economic activities may be classified as sustainable. This section addresses the first two objectives that are obligatory for disclosure in the reporting year, namely “climate change mitigation” and “climate change adaptation,” together with the four environmental objectives that need to be reported for the first time during the reporting year (“Substantial contribution to the sustainable use and protection of water and marine resources,” “Substantial contribution to the transition to a circular economy,” “Substantial contribution to pollution prevention and control” and “Substantial contribution to the protection and restoration of biodiversity and ecosystems”).

In the 2021 reporting year, we already made these additional disclosures as required by the EU Taxonomy Regulation in line with our obligation to prepare and publish a non-financial report as defined in Sections 289c and 315c of the German Commercial Code (HGB). In accordance with Article 8 (2) of the EU Taxonomy Regulation, we disclosed the proportion of sales (in the sense of turnover as per Regulation (EU) 2021/2178), capital expenditure and operating expenditure classified as environmentally sustainable.

The methodology for the classification of economic activities follows Annex I of Commission Delegated Regulations (EU) 2021/2139, (EU) 2023/2485 and (EU) 2023/2086, Commission Delegated Regulations (EU) 2022/1214, 2023/3850 and (EU) 2023/3851 supplementing Regulation (EU) 2020/852, with the aid of the NACE codes cited.

The economic activities we have identified fall under the environmental objective “climate change mitigation.” In the course of publication of four additional environmental objectives during the reporting period, we also identified activities under “environmental pollution.” We did not identify any activities under “climate change adaptation,” “water,” “circular economy” or “biodiversity.”

Because we identified only those eligible activities falling under the “climate change mitigation” and “pollution” objectives, there is no duplication of taxonomy-eligible sales, CapEx or OpEx in other environmental objectives. In addition, because these KPIs relate to consolidated figures, there is also no duplication across various economic activities.

Economic activities identified as taxonomy-eligible under the “climate change mitigation” objective included, in particular, those from the “Manufacture of plastics in primary form” category. This category covers economic activities performed by WACKER POLYMERS (finished products based on polyvinyl acetate), WACKER SILICONES (silicone-based products such as silicone sealants and pyrogenic silica as insulation material) and WACKER BIOSOLUTIONS (the sale of PVAc-based gum base for chewing gum). In this reporting period, we are also reporting the “Manufacture of active pharmaceutical ingredients” as an additional taxonomy-eligible economic activity in relation to the “pollution prevention” objective. This category covers activities in the BIOSOLUTIONS and SILICONES business divisions, which manufacture active pharmaceutical ingredients (APIs) as end products.

In addition to the above-mentioned economic activities that we classify as our core business — the production of chemical-pharmaceutical products — we have identified production-related services that can be attributed to the following activities defined in the EU Taxonomy: “Construction, extension and operation of waste water collection and treatment ,” “Electricity generation from hydropower,” “Electricity generation using solar photovoltaic technology,” “Construction, extension and operation of water collection, treatment and supply systems,” “Collection and transport of non-hazardous waste in source segregated fractions,” “Treatment of hazardous waste,” and “Remediation of contaminated sites and areas.” A cost-benefit analysis found all these production-related services to be insignificant and as a result they have not been reported on. By analogy, we have classified the only activity – “High-efficiency co-generation of heat/cool and power from fossil gaseous fuels” – identified in accordance with Commission Delegated Regulation (EU) 2022/1214 in relation to economic activities in certain energy sectors as being immaterial based on a cost-benefit analysis. That is why we will not be reporting on this separate template.

In the case of activities identified as taxonomy-eligible under the “climate change mitigation” objective, we assessed the taxonomy alignment of these activities, during the 2023 review period, using defined technical screening criteria. In this context, a company must prove, firstly, that the relevant activity makes a substantial contribution to “climate change mitigation.” If this substantial contribution can be demonstrated, the activity must meet additional DNSH (Do No Significant Harm) criteria to ensure that the activity does no significant harm to any other environmental objectives. The minimum safeguards defined in Art. 18 of Regulation 2020/852 could then, furthermore, be demonstrated. In accordance with Art. 18 (1), appropriate due diligence and remedy procedures must be implemented to ensure alignment with those CSR standards cited in the OECD Guidelines for Multinational Enterprises and the UN Guiding Principles on Business and Human Rights. In accordance with Art. 18 (2), it must be demonstrated as part of these due diligence and remedy procedures that account is taken of the principal adverse impact indicators on Employment and Social Affairs, Respect for Human Rights and Combating Bribery and Corruption.

For the new environmental objective “pollution prevention,” in line with Commission Delegated Regulation (EU) 2023/3850 supplementing Art.10 of Commission Delegated Regulation 2021/2178, we are reporting only the proportion of sales, as well as capital expenditure and operating expenditure, attributable to taxonomy-eligible business for the current reporting year.