WHAT WE DO

Covestro is among the world's largest polymer companies. Business activities are focused on the manufacture of high-tech polymer materials and the development of innovative solutions for products used in many areas of daily life.

The main segments served are the automotive, construction, wood processing and furniture, and electrical and electronics industries. Other sectors include sports and leisure, cosmetics and health.

Together with our partners and customers, we are taking big steps to tackle a fundamental challenge: Shifting towards a Circular Economy.

To achieve this bold goal, we are innovating efficient ways to close energy and material cycles. We are pushing boundaries in polymers.

WHAT WE STRIVE FOR

PurposeVision

ValuesGoals

€12.4bn

Sales 2019

17,200

Employees (in FTE) 2019

#1

Global producer of PU and its derivatives as well as PC(a)

Products

Polyurethane rigid foam is an excellent insulation material and adds to high energy efficiency in cooling units and buildings.

As soft foam polyurethane provides comfort, for example in mattresses, car seats and upholstery.

Covestro develops and produces the components of this versatile material.

Key customer industries:

Sample applications

3.1%

Core volume

CAGR in 2015 - 2019(a)

€5.8bn

Sales 2019

€648m

EBITDA 2019

Products

As a true high-tech material, polycarbonate is not only very robust, break-proof and light-weight, but also offers a high degree of design flexibility.

Polycarbonate is available in all colors ranging from crystal clear to deep black. It is an excellent substitute for traditional material such as glass or metal.

This allows for a wide variety of application possibilities ranging from vehicles to smartphones and laptops as well as lenses or large roofs.

Key customer industries:

Sample applications

5.2%

Core volume

CAGR in 2015 - 2019(b)

€3.5bn

Sales 2019

€536m

EBITDA 2019

Products

There is a vast application range of coatings and finishes made of Covestro polyurethane raw materials. They are used for protection and decoration.

In addition, the company produces pre-products for adhesives and sealants as well as for specialty films and elastomers.

Coating, Adhesives, Specialties (CAS) also supplies materials for cosmetics, textiles and medical goods.

Key customer industries:

Sample applications

2.1%

Core volume

CAGR in 2015 - 2019(b)

€2.4bn

Sales 2019

€469m

EBITDA 2019

Polyurethanes

Increasing energy efficiency of buildings through materials and technologies for insulation

CO2-based polymers used in mattresses saving crude oil, e.g. cardyon®

Food preservation along the cool chain

Polycarbonates

Enabling electro-mobility with materials for battery housings, housings for charging stations

Recycled content grades on a virgin performance level

Use in protective gear and medical applications, e.g. drug delivery devices

Coatings, Adhesives, Specialties

Waterborne coatings and adhesives, replacing solvent

Bio-based raw materials to improve CO2 footprint, e.g. Baycusan® eco

Fully recyclable shoes made from thermoplastic PU powder and filament

related to climate change:

• Alternative energy sources

• Zero emission concepts

• Low-energy buildings

related to increasing mobility:

• Energy-efficient mobility

• E-mobility

• Autonomous driving

related to growing population and prosperity:

SAMPLE APPLICATIONS

DEMAND OUTLOOK

Core volume growth

Polyurethanes(b)

~4% CAGR 2019-2024

Polycarbonates

~4% CAGR 2019-2024

related to increasing urbanization:

• Sustainable fashion

• Food preservation

• Medical applications

• Energy-efficient lighting

• Affordable housing

• Public infrastructure

Coatings, Adhesives,

Specialties(c)

~4% CAGR 2019-2024

Covestro industry demand outlook assumes global GDP CAGR of 2 - 3% in 2019 - 2024e

Topics with high stakeholder relevance and

WE INNOVATE high impact and influence of Covestro that require innovation of management approaches

Solutions contributing to UN SDGs

• Sustainable innovation portfolio
• UN SDG conform product portfolio
• Social business

Circular and climate-neutral economy

• Alternative raw materials
• Business models
• Green house gas emissions
• Recyclability and end of life solutions
• Renewable energy

Corporate culture

• Employer attractiveness
• Equality, diversity and inclusion

Topics with high stakeholder relevance and

WE MANAGE high impact and influence of Covestro for which management approaches are in place

Environmental impact of own Operations

• Air quality
• Waste
• Water and wastewater

Health and safety

• Health and safety of workforce
• Process and plant safety
• Product safety

Responsible business practices

• Community engagement
• Compliance
• Human rights due diligence
• Sustainability in sourcing
• Transparency and trust

• Research & Development activities aligned with the People Planet Profit principle since 2013
• Focus on the UN Sustainable Development Goals (UN SDGs)
• Capture promising growth opportunities with innovative sustainable solutions

R&D

€266m expenditure in 2019

1,217 R&D

employees

(FTE) in 2019

Patent

284 applications in 2019

of 2019 net

~17% sales with new products

(not >5 years)

No1Non-financial target

By 2025, 80% of project expenditures for research and development will go toward areas that contribute to reaching the UN SDGs

Achievement: Global evaluation process established; first status to be reported in Annual Report 2020

Solar dryer domes

• Polycarbonate sheets- based solutions for smallholder farmers
• Avoid food wastage after harvest, benefitting farmers economically
• Locations: Thailand, Vietnam, Myanmar, India, Indonesia, Cambodia, Malaysia, Philippines
• About 1,500 units installed

Hygenic sanitation

• Toilets based on polyurethane rigid foam (PIR)
• Community and school toilets as the next step
• Locations: India, Malaysia
• About 170 units installed

Affordable houses

• Constructions based on polyurethane rigid foam (PIR)
• Affordable building material with outstanding insulation and mechanical properties
• Locations: Iraq, Malaysia, Philippines, India
• About 80 units installed

"Our Inclusive Business activities positively contribute to 13 out

of 17

UN SDGs

We want ten million people in underserved markets to benefit from our solutions by 2025

Achievement: 650,000 people by end of 2019

Electro

Global industry challenges of a circular economy

Provide a solution for the end of life of any

1 material

Extract target molecules from waste streams and

Waste

management

& sorting

New waste

streams

Processing steps

2 secure continuous access to waste-based feedstock as raw material

Covestro-related industries (PU, PC and others)

• Represent less than 10% of global plastic production, dominated by PE, PET, PP, PVC, PS
• Materials mostly not applied in single-use applications
• Offer few established collection streams
• Recycling technologies at early stage except some mechanical recycling; incineration no preferred option
• Covestro already commercializes products that contain alternative feedstock (bio-/CO2-/waste-based)

Bio-based

• 13 products commercialized
• 40 running R&D projects

Example PUR

CO2 as raw material

• CO2 replaces up to 20% of crude oil-based feedstock of polyols
• New production plant at Dormagen site and product brand cardyon® launched
• Recticel promotes foam mattresses with more than one-seventh of oil content replaced by CO2- based chemicals
• Sports flooring producer Polytan installed first elastic subfloor using cardyon® as binder

Example PCS

Recycled polycarbonates

• New polycarbonate grades from post-consumer recycled (PCR) content, e.g. water bottles, CDs and auto-motive lighting
• Closed loop recycling system to collect, sort, shred and clean material
• Recycled granules are finally compounded with virgin resins
• PCR grades are used in various electrical applications for a second life

Example CAS

Bio-based car top coat

• Enabling customers to optimize the CO2 footprint of their products
• New hardener for automotive coatings with carbon basis up to 70% from renewable raw materials
• No compromises with regards to protective functions and appearance
• Collaboration with automotive group Audi and the coating experts at BASF Coatings

• Key objectives of this 3-year project, initiated in October 2017:
• • Reduce carbon footprint of polyurethane intermediates by 20-60% compared to today's polyurethane products manufactured from crude oil
  • Save 70% of process energy compared to conventional chemical processes
  • For the first time, provide higher value novel polyols from waste CO or CO2 for the production of new, sustainable polyurethane applications (rigid foam and coatings) as an example of high value polymers
• Industrial-scale :Carbon in form of mixed waste gases from the ArcelorMittal plant in Fos-sur-Mer, France, could undergo catalytic transformations in the nearby Covestro plant to become a chemical feedstock for polyols
• Project results expected in 1H 2021

Pan-European project partners

Academic and institutional partners:

• Covestro, Goldwind and LZ Blades develop world's first 64-meter polyurethane (PU) wind turbine blade
• Wind turbine blade from the spar cap to the shear web and the shell made entirely of PU infusion resin
• PU resin displays better mechanical properties compared with traditional epoxy resin;
• Lower viscosity and faster infusion speed of PU resin system can greatly improve the efficiency of blade production

• At this time world's largest corporate supply contract for offshore wind energy entered by Covestro and Ørsted in December 2019
• Starting in 2025, Ørsted to provide 100 MW of electricity for 10 years
• Newly built wind farm in North Sea, implemented without public funding
• Supply to cover c. 10% of electricity consumed by Covestro in Germany

Underway to halve specific greenhouse gas emissions

Material topic Circular and climate neutral economyGHG emissions

Reduction by 36%

Reduction by 46%

No3Non-financial target

By 2025, specific greenhouse gas emissions per metric ton of product manufactured to be reduced by 50%

• Specific energy consumption improved by 36%; goal to reduce by 50% until 2030
• STRUCTese energy efficiency system contributed lasting reductions of 2.22 mio. MWh of primary energy since 2008
• STRUCTese compares and bridges Covestro-wide actual energy consumption with the potential optimum
• 2019 examples: Optimized polycarbonate plant in Map Ta Phut, Thailand, cuts steam usage by c.15,000 MWh; Optimized chlorine plant in Baytown, USA, lowers electricity requirement by c. 20,000 MWh

• Specific GHG emissions reduced by 46%
• Improvement of energy efficiency is key lever to significantly lower our specific GHG emissions (scope 1+2)
• Continued investments in process innovation improve production efficiency and specific energy use

from the 2005 benchmark

Achievement: -46.1% by end of 2019 vs 2005 benchmark

Seeking ways of transition from current linear lifecycle of polyurethane (PU) products to a circular economy model

Consortium as an end-to-end collaboration spanning the entire PU reprocessing value chain

Target: Recovery over 90% of end-of- life PU with the goal of converting it into valuable inputs for new products

EU-funded project running 4 years, started in January 2019, including 9 partners from 6 countries

Covestro is industry partner in the project consortium, coordinated by the Belgian company Recticel

Recycling of PU foam

Cross-industry collaboration: PUReSmart

• Circularise, Porsche, Borealis, Domo Chemicals and Covestro launched blockchain traceability project in November 2020
• By digitizing materials, a digital thread through the whole supply chain leads to tracing materials and sustainability metrics like CO₂ footprints or water use

Mission

• Trace polymers from raw materials to consumer application

Challenge

• Overcome inherent complexity of the supply chains and multitude of suppliers
• Establish transparency while granting trust, privacy and confidentiality

Solution in development

• Creating blockchains - batches of materials are digitized on the blockchain, creating a digital copy called digital twin
• Digital twin carries all relevant information of the batch, such as its environmental footprint and origin, resulting in a digital thread along the supply chain
• Verification of product claims is granted through third party auditing
• All supply chain parties update the digital twin mimicking the physical supply chain and reflecting the manufacturing processes

Potential applications

• Circularise technology able to trace plastics from raw material to the final car
• "Smart Questioning" allows to trace materials and sustainability metrics while preserving everyone's privacy and protecting confidential information
• Helping car manufacturers to make better decisions for the next generations of vehicles and support end-of-life recycling approaches
• Helping consumers in making sustainable decisions through increased transparency of a product's environmental impact

• Cross generational and multi-national engagement within our labor markets
• Brief recruiting agencies for gender balance
• Consequent posting of open positions
• Diverse interview panels*
• Building a diverse STEM workforce pipeline

• Design inclusive workspaces and office concepts like in Shanghai, Leverkusen
• Support employee resource groups, e.g. UNITE, Compass,
• Create part-time working and job/top share positions
• Facilitate parental leave
• Non-traditionaland flexible work hours
• Adoption assistance
• Tuition reimbursement / student loan relief program

• Establish partnerships with a wider range of (international) colleges / universities and networks (e.g.
  UNITECH)
• Global Covestro D&I team cooperation and alignment with corporate culture
• Community engagement and partnership efforts
• Operate Inclusive Business, e.g. temporary housing for refugees
• Supplier Diversity Program rollout (US)

Risk

Measure

Growing world population and climate change will lead to changes in the global water situation:

• Water scarcity may limit water access for manufacturing companies which may not be sufficient for 100% production
• Flooding may impede production by destroying transport routes, supply chains or production facilities
• Initial analysis for water stress and flooding risks conducted for all Covestro sites
• Site evaluation by occurrence probability and economic loss
• Implementation of information management system
• Best practice sharing between sites

Covestro relies on water supply, ~80% of water usage is cooling water

Risk-based approach improves management of water-related aspects

Our objective: develop a holistic corporate water approach across all sites

Occupational safety

Recordable Incident Rate RIR(a)

Plant & process safety

Loss of Primary Containment Incident Rate, LoPC IR(b)

• Continuous improvement of a safe work environment as key component of corporate responsibility and corporate culture
• Integrated management system implemented throughout Covestro to report and process work incidents and potential hazards
• Active safety and incident awareness and prevention campaigns, e.g. CEO Safety Award awarded for 12th time in 2020 during global Covestro Safety Day
• We aim for safe processes and plants that avoid unacceptable risks to our employees, neighbors and the environment
• Long-termwe aim to prevent workplace accidents and occupational illnesses entirely

6 Covestro Policies

Innovation People

HSEQ Compliance

• Define our mindset, how we want to act

CFO chairs Group Compliance Committee

11 Corporate Commitments

To underline our mission as a sustainable company, we take a clear stance on key issues and are committed to adhering to standards.

1. UN Sustainable Development Goals
2. Ten Principles of UN Global Compact
3. Responsible Care
4. Human Rights
5. Slavery and Human Trafficking (Modern Slavery Act statement)
6. Water
7. Handling Products Responsibly
8. Corporate Compliance
9. Responsible Lobbying
10. Responsible Marketing & Sales
11. Tax Transparency

Responsible Care Global Charter

of the International Council of Chemicals Associations

1. A Corporate Leadership Culture that proactively supports safe chemicals management through the global Responsible Care initiative
2. Safeguarding People and the Environment by continuously improving our environmental, health and safety performance; the security of our facilities, processes and technologies; and by driving continuous improvement in chemical product safety and stewardship throughout the supply chain
3. Strengthening Chemicals Management Systems by participating in the development and implementation of lifecycle-oriented,sound- science and risk-basedchemical safety legislation and best practices
4. Influencing Business Partners to promote the safe management of chemicals within their own operations
   Engaging Stakeholders, understanding and responding to their
5. concerns and expectations for safer operations and products and communicating openly on our performance and products
6. Contributing to Sustainability through improved performance, expanded economic opportunities and the development of innovative technologies and other solutions to societal challenges

29ESG @ Covestro │ 2020

Sample to illustrate the implementation of a public charter into Covestro corporate policies and directives

Policy "HSEQ", directive "HSEQ Leadership and Commitment"

Policy "HSEQ", directive "HSEQ Leadership and Commitment", directive "Product Stewardship", directive "Plant and Process Safety", directive " Incident Notification and Investigation",

Directive "Product Stewardship", directive "Covestro Integrated Management System for HSEQ", additionally active contribution in associations like VCI, ACC, CEFIC, PlasticsEurope

Directive "Transportation Safety", directive "Product Stewardship"

Directive "HSEQ Leadership and Commitment"

Policy "Sustainability "

Head of HSEQ Management System commissioned by Board of Management

Dr. Richard Pott Chair

Presidial Committee,

Chair

Human Resources

Committee, Chair

Nominations

Committee, Chair

Dr. Christine

Bortenlänger

Audit Committee

Regine Stachelhaus

Presidial Committee

Human Resources

Committee

Nominations

Committee

Ferdinando Falco Beccalli

Nominations

Committee

Prof. Dr. Rolf

Nonnenmacher

Audit Committee, Chair

Patrick W. Thomas

Audit Committee

Supervisory Board

Duties and composition

• Advises and oversees the Board of Management
• Activities governed by rules of procedure (published)
• Composed of at least 30% women and at least 30% men(1)
• 75% of members and more than half of shareholder representatives are to be independent
• Not more than two former members of the Board of Management

Supervisory Board

Membership

• Co-determinedwith 12 seats, thereof six shareholder and six employee representatives(1)
• Not serve more than three full terms
• Not serve beyond AGM following 72nd birthday

Gender

structure

42% women

Supervisory Board

33% women

Shareholder

representatives

50% women

Employee

representatives

Supervisory Board

Skills

• At least two members with function-specific knowledge in each of the following areas:
• 1. Accounting and/or auditing
  2. Strategy, mergers and acquisitions, capital markets
  3. Marketing, sales, supply chain
  4. Research and development, innovation
  5. Technology, digitalization
  6. Human resources, change management
  7. Corporate governance, compliance
• At least two members with Covestro-relevant experience in industries, sales markets and/or divisions, e.g. polymer chemistry, production and technology
• At least three members should have managerial experience in an international enterprise and/or experience serving on other supervisory boards or supervisory bodies
• The Board shall strive to ensure sufficient diversity among its members

Key features of "Prisma"

Ending Share Price + Cumulated Dividends

Starting Share Price

= TSR Factor

Outperformance

Payout percentage

Solutions contributing to UN SDGs

• Sustainable innovation portfolio

• UN SDG conform product portfolio

• Social business

Circular and climate-neutral economy

• Alternative raw materials

• Business models

• Green house gas emissions

• Recyclability and end of life solutions

• Renewable energy

Corporate culture

• Employer attractiveness

• Equality, diversity and inclusion

Responsible business practices

• Community engagement

• Compliance

• Human rights due diligence

• Sustainability in sourcing

• Transparency and trust