covestro.com

Partnering with Suppliers

for a Competitive Edge

Kathy Limper

Procurement Sustainability Lead – NAFTA

Covestro LLCOctober 24, 2018

Agenda

2

• Covestro – at a glance

• Sustainability impacts

• Why we do it

• United Nations Sustainable Development Goals / Covestro goals

• Approach to sustainability

• Together for Sustainability

• What we do

• How we do it

• Our approach to engaging suppliers

• Summary

• Q&A

October 24, 2018

Covestro – leading in the world of plastics

October 18 │ Corporate Profile3

Highly innovative

• 1,000 employees

in research and

development

• 80 years of ideas

and inventions

Global player

• 30 sites

worldwide

• Close to

markets,

customers and

suppliers

Large portfolio

• Products and

solutions for

many

industries

• €14 bn in sales

• 16,200

employees1

• Listed on the DAX

stock exchange

Financial year 20171calculated as full-time equivalent (FTE)

Portfolio

October 18 │ Corporate profile

At a glance

+

Polyurethanes Polycarbonates Basic ChemicalsCoatings, Adhesives

& Specialties

Raw materials

for rigid and

flexible foams

Granules and

sheets for a

wide variety of

applications

Raw materials

for coatings,

adhesives and

specialties

4

Environmental, social and ethical problems require solutions from

many industries …

October 2017 │ Sustainability in Procurement

Environmental, social and ethical problems require solutions from

many industries …

Sustainability

performance

&

Business

development

CO2 Emissions

and

Burning Coal

Plastics

in Ocean

Using CO2 as Raw

Material

Zero-Pallets

Loss Initiative

October 24, 20186

• Our suppliers directly influence Covestro’s

quality and reputation for sustainability

• With our partners along the supply chain we can

have a much bigger positive impact on

sustainability topics

• Jointly we have the moral obligation to solve

environmental, social and ethical challenges in

the industry across the world

• Together, we have the responsibility for moving

from ‘do no harm’ to ‘do well’

October 24, 20187

Using our extensive network of

suppliers is a great opportunity to

serve PEOPLE, reduce impact on

the PLANET and enhance PROFIT

Sustainability is more than

an ambitious target to us

Sustainability cannot be achieved by Covestro in isolation, but

requires collaboration across the supply chain.

Covestro sustainability goals 2025

Aligned with UN SDGs

Research & Development

Procurement

Production

Our R&D project portfolio aligned with UN Sustainable

Development Goals

100 % of suppliers compliant with our sustainability

requirements

Reduce specific CO2 emissions by 50%

Products on the market

10 million people in underserved markets reached through

our business solutions

We aim to get the most value out of the carbon employed

Across the value chain

8October 24, 2018

Covestro Policies

Sustainability is integrated in all Covestro policies and specified in its own policy

We believe in the principle of the “three Ps”: “People, Planet and

Prosperity”

We always consider the product life cycle in its entirety

We are committed to finding ways of contributing towards reaching the United

Nations Sustainable Development Goals (SDGs)

We develop and foster collaborations with external partners

We set high standards that are applicable globally

Value creation Sustainability Innovation People HSEQ Compliance

9

http://covestro.net/sites/BMSON/news/news/Pages/29689456_EN.aspx

http://corporate-policy.covestro.net/view.aspx?id=09e2en011003ed22

October 24, 2018

Sustainability requirements of any company derive from

international and national standards…..

Content of any sustainability request is always the same or similar

ENVIRONMENT

HEALTH & SAFETY

• Emissions

• Energy

• Land use

• Water

• Hazardous materials

• …

LABOR & HUMAN RIGHTS

• Child Labor

• Forced Labor

• Working Conditions

• Occupational Health &

Safety

• …

COMPLIANCE

• Business Integrity

• Corruption & Bribery

• Responsible Marketing

• Intellectual property

• Fair competition

• …

SUPPLY CHAIN

• Sustainable Procurement

Processes

• Conflict Minerals

• Sustainable Material

Sourcing

• …

Customers request Covestro to sign their “Supplier Code of Conduct”, fill out a questionnaire or undergo

an on-site audit. Those requests always include e.g.

National LawsUN Global

Compact

Industry specific

Standards e.g.

Responsible Care

Initiative

International

Labor

Organization (ILO)

International

Organization for

Standardization

(ISO)

Others

October 24, 201810

We use TfS to meet the requirement for supplier evaluation to ensure we do business with like

minded companies.

This was cited as a best practice during our certification audit.

Responsible Care metrics include sustainability aspects such as GHG, energy intensity, and

waste reuse/recycle.

Sites that have certified to RCMS or RC14001 receive credit for this during a TfS audit, reducing

the latter audit time by up to 75%.

We sponsor new Responsible Care Partners and advise them on how to embed these principles

into their operations.

Responsible Care and Sustainability Intersect

Together for Sustainability Metrics

Audits Supply Chain11

Overview Together for

Sustainability (TfS)

12

What we do from internal Operations to including the Supply Chain

Sustainability

The Chemical Initiative for Sustainable Supply Chains

in own operations,

own business,

solutions and products,... Complex global supply chains and global interdependency

Multiple challenges in the supply chain e.g.:

- Social issues

- Environmental issues

- Governance practices

Sustainability

in the Supply Chain

Multiple Risks for customers e.g.:

- Supply security

- Reputational risk

- Regulatory risk

Sustainability

13 October 24, 2018

October 24, 201814

How we do it: Together we have already started to lay the

foundation of sustainable success in our business…

Strategic Commodities

Intermediates & Additives

Inorganics & Energy

Technical Goods &

Engineering

Site Services

Business Services

Logistics & Packaging

Contribution to…

Covestro wide

sustainability

projects in close

collaboration with

our suppliers!

Eco Friendly Packaging

…”Make the world a

brighter place.”

FSC Certified Paper

Renewable Resources

Recycled Materials

Renewable Energy

RECS Certificates

Sustainable IT

Bio-Based

Green Fleet

Green Travel

Full Truckload

Warehouse Safety

Alternative Energy

Logistics Footprint

Recycled Packaging

Transp. Distrib. Safety

…

TfS adds sustainability to supply chains’ focus

TfS strives to drive and foster resilience, efficiency,

and sustainability of global supply chains in the

chemical industry.

TfS aims to build the industry’s standard for

sustainable supply chains.

Sustainable supply chains build upon strong

partnerships and commitment of its participants

to protect the environment and the safety and health

of workers, provide fair working conditions,

contribute positively to the livelihoods of workers and

communities, and operate in full compliance with

applicable laws.

15 The Chemical Initiative for Sustainable Supply Chains

Price

Product

Quality

On-time

Delivery

Sustainability

► Management

► Environment

► Health & Safety

► Labor & Human Rights

► Governance

Our approach to engaging suppliers…..

Joint Vision

To improve sustainability

practices in the supply

chain

Key Success Factors for improving Sustainability in the Supply Chain

Key factors to engaging suppliers…..

The Chemical Initiative for Sustainable Supply Chains

Standardized Processes

System designed to manage

multiple challenges and

complexity

Cooperation

Strong partnerships and

commitment of participants

The purpose of

TOGETHER FOR

SUSTAINABILITYis to develop and

implement a global

assessment and audit

program to assess and

improve sustainability

practices within the supply

chains of the

chemical industry.

Cross company

cooperation on

Sustainability in the

Supply Chain of the

Chemical Industry

16 October 24, 2018

TfS is steadily growing

• 21 members as of June 2018

• Global Turnover of TfS companies

in the chemical industry1: € 320 billion

• Global Spend of TfS companies

in the chemical industry2: € 231 billion

1 According to companies’ published financial reports2 Estimated figures

Members

17 October 24, 2018

Summary

18

Moving forward in sustainability leads to substantial benefits for

our suppliers and us.

October 24, 201819

Value

Time

Stay in business today

• Maintain “license to operate”

• Safeguard sustainable

standards for People, Planet

and Profit

• Protect reputation

Lay solid foundation

Advance sustainability

performance further

Ensure competitiveness tomorrow

• Continuously integrate

sustainability in operations

• Continuously improve

sustainable business practices

• Readiness and continuous

anticipation of upcoming

sustainability challenges

Build a competitive edge

Increase profits and

competitiveness

Foster revenue, growth, and

profitability by:

• Collaborating to develop new

business models, products and

services

• Entering new markets

• Anticipating and preparing for future

sustainable requirements

material scarcity, emerging

legislation etc.

Covestro’s approach

Full life-cycle thinking

Our

operations

Our

logistics

Customer

operations

Use of

product

End-of-life

Our raw

materials

PEOPLE

PLANET

PROFIT

Reduce impact from …

Reduce impact from …

Enable our partners

Reduce impact from …

CO2

CO2

Foster Life Cycle Thinking

Drive development of PPP product

solutions (People, Planet, Profit)

20 October 24, 2018

October 24, 201821

Our ambition is to push sustainability performance further

and to develop sustainable solutions by doing business

with our partners along the supply chain.

Building a competitive edge with sustainability.

Backup

22

10,000+ TfS

Assessment

by

TfS

Assessment

Corrective

Action Plan

450+ TfS

Audit

by auditor

TfS Audit Corrective

Action Plan

TfS

Follow-up

Assessment or

Audit

Supplier

Code of

Conduct

Spend &

Risk

Analysis

Follow-up and

manage

business

relationship

Sharing of sustainability assessment and audit reports with all other TfS

members

TfS Member TfS Member

Industries started collaboration to harmonize their sustainability supplier

assessments and audits….

October 24, 201823

Together for Sustainability (TfS) is the Industry Initiative of the chemical industry with today

officially 21 chemical companies as members

It remains each TfS

member’s individual

responsibility to embed

expectations in business

relationships

TfS offers the infrastructure that supports a high quality of third party

sustainability assessments and audits as well as efficient and web-based data

sharing of audit and assessment results.

Sustainability Rating

used as criterion for

individual purchasing

decisions

More information: 1 Pager on TfS or TfS Website

A holistic approach

│ Corporate Profile24

Covestro looks at value creation cycles in their entirety – keeping sustainability in mind at all times.

Especially important to us is to:

▪ Enable improvements for our

partners

▪ Enable savings and increase

benefit

▪ Increase reusability

Focusing on the whole cycle

October 18

PEOPLE

PLANET

PROFIT

Increasing reusability

Enabling improvements for

our partners

Our logistics

Our operations

Our raw materials

End-of-life

Utilization phase

Customer operations

Enabling savings and increasing benefit

… in order to

• mitigate the negative impact

of our actions on the

environment,

• advance society

• and at the same time create

value

Together we can make an impact!

• Contribute to UN Sustainable Development Goals

• Ensure future economic growth

• Enhance durability of products

October 24, 201825