Evonik Industries : Declaration on Corporate Governance Fiscal Year 2022

DECLARATION2022 ON CORPORATE GOVERNANCE

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Declaration on corporate governance 1

EVONIK DECLARATION ON CORPORATE GOVERNANCE  2022

The following report on the principles of corporate management at Evonik (sections 289f and 315d of the German Commercial Code [HGB]) and corporate governance at the company in accordance with principle 23 of the German Corporate Governance Code is issued jointly by the executive board and supervisory board of Evonik Industries AG.

1. Principles of corporate governance

and corporate structure

Corporate governance comprises all principles for the management and supervision of a company. As an expression of good and responsible corporate management, it is therefore a key

element­ in Evonik's management philosophy. The principles of corporate governance relate mainly to collaboration within the executive board and supervisory board, between these two boards, and between the boards and the shareholders, especially at shareholders' meetings. They also relate to the company's ­relationship with other people and organizations with which it has business dealings.

Evonik is committed to the German Corporate Governance Code

Evonik Industries is a stock corporation established under

German­ law. Alongside compliance with the provisions of the relevant legislation, the basis for ensuring responsible management and supervision of Evonik with a view to a sustained increase in corporate value is our commitment to the German Corporate Governance Code in the version dated April 28, 2022. This code, which was adopted by the Government Commission on the ­German Corporate Governance Code, contains both key statutory

provisions on the management and supervision of publicly­ listed German companies and recommendations and suggestions based on nationally and internationally recognized standards of responsible corporate governance.

The executive board and supervisory board of Evonik Industries AG are explicitly committed to responsible corporate governance and identify with the goals of the German Corporate Governance Code. According to the foreword, in the interest of good and proactive corporate governance, a company may depart from the recommendations set out in the code if this is necessary to take account of company-specific characteristics.

2. Information on corporate management

and corporate governance

2.1 Declaration of conformity with the German Corporate Governance Code

pursuant­ to section 161 of the German

Stock Corporation­Act (AktG)

Under section 161 of the German Stock Corporation Act (AktG), the executive board and supervisory board of Evonik Industries AG are required to annually submit a declaration that the company has been, and is, in compliance with the recommendations of the Government Commission on the German Corporate Governance Code, as published by the Federal Ministry of Justice in the official section of the Federal Gazette (Bundesanzeiger), and which recommendations have not been, or are not being, applied, together with the associated reasons. The declaration has to be made permanently available to the public on the company's website.

The executive board and supervisory board of Evonik Industries AG (hereinafter the company) hereby submit the following declaration pursuant to section 161 of the German Stock Corporation Act:

Since submitting its last declaration of conformity in December 2021, the company has complied with the recommendations of the German Corporate Governance Code in the version dated December 16, 2019, which was published in the Federal Gazette on March 20, 2020, with the following exceptions. The company complies with the recommendations of the German Corporate Governance Code in the version dated April 28, 2022, which was published in the Federal Gazette on June 27, 2022, with the following exceptions, and will continue to do so in the future.

According to recommendation C.5, members of the management board of a listed company should not hold more than two supervisory board mandates in non-group listed companies or comparable functions. Ms. Angela Titzrath is the chief executive officer of the listed company Hamburger Hafen und Logistik Aktien­ gesellschaft. In addition to her mandate on the company's supervisory board, she has other mandates covered by the recommen- dation. The supervisory board has satisfied itself that Ms. Angela Titzrath has sufficient time to perform her mandate. In addition, her extensive experience in corporate management and her high level of economic and international expertise make valuable ­contributions to the fulfillment of the profile of skills and the effective work of the supervisory board. Taking into account all relevant aspects, the deviation from recommendation C.5 is therefore considered justifiable.

1 The declaration on corporate governance also forms an integral part of the combined management report for Evonik Industries AG (sections 289 ff. HGB) and the Evonik Group (sections 315 ff. HGB). In accordance with section 317 paragraph 2 sentence 6 of the German Commercial Code (HGB), the disclosures are not included in the audit.

2	EVONIK DECLARATION ON CORPORATE GOVERNANCE  2022

According to recommendation C.5, members of the management board of a listed company should not accept the chairmanship of the supervisory board of a non-group listed company. Mr. Christian Kullmann, chairman of the company's executive board, has also been chairman of the supervisory board of ­Borussia Dortmund GmbH & Co. KGaA since September 25, 2021. He is familiar with the special nature and challenges of professional soccer within the framework of a listed company and is also familiar with the tasks entailed by the position of chairman of the supervisory board. In addition, the company is linked to Borussia Dortmund both through a shareholding and through the current sponsorship agreement and therefore has an interest in Mr. Kullmann exercising this mandate. The company's supervisory board has also examined the time requirements and strategic aspects of this mandate. Taking into account the above aspects, the deviation from recommendation C.5 is therefore considered justifiable.

According to sentence 1 of recommendation G.7, the supervisory board should establish the performance criteria for each management board member for the forthcoming financial year, covering all variable remuneration components; besides operating targets, the performance criteria should be geared mainly towards strategic goals. In keeping with the remuneration system adopted by the annual shareholders' meeting in 2022, and in view of the cluster of various unforeseen developments (the war in Ukraine, the energy crisis, the coronavirus crisis, supply chain disruption, inflation, the threat of recession, the impact of climate change), at its meeting in December 2022 the supervisory board decided

that when calculating the STI 2022, inflation-adjusted sales should be taken into account for the target "adjusted EBITDA margin." For this fiscal year, the supervisory board has therefore corrected the calculation of one of the performance criteria established in order to ensure appropriate remuneration of the executive board and, in this way, to take account of the altered circumstances. In light of this, as a precaution, the company hereby declares a deviation from G.7 sentence 1. Furthermore, with regard to the LTI, the supervisory board resolved to reduce the lower limit for relative performance (comparison with the external share price index) for the current LTI plans, which have not yet expired, from 70 percent to zero percent. Together with the STI, this should ensure appropriate target remuneration of the executive board that withstands market comparison.

Recommendation G.8 states that subsequent changes to the ­targets or comparison parameters should be excluded. In view of the aforementioned cluster of various unforeseen developments (the war in Ukraine, the energy crisis, the coronavirus crisis, supply chain disruption, inflation, the threat of recession, the impact of climate change), the basic conditions taken into consideration when establishing the targets for the short- and long-term remuneration of the executive board members no longer prevail. As a result, the targets set for the two variable remuneration components no longer represent an appropriate benchmark for target attainment and, if they were to be retained, could act as false incentives. The company's supervisory board has therefore resolved that, for the calculation of the STI 2022, inflation-­ adjusted sales will be used for the "adjusted EBITDA margin"

target and that for the outstanding exercise periods for the LTI plans 2018 through 2022, with effect from January 1, 2023, i.e., for the first time for the payment in 2023, the lower limit for relative performance should be set at zero percent instead of 70 percent, as defined for the LTI plans from 2023 in the remuneration system approved by the annual shareholders' meeting. Without these corrections, the value of the LTI tranche 2018 would be reduced to zero; there would also be a significant loss of value for the LTI tranches 2019 through 2022 and the STI parameter "adjusted EBITDA margin," which would not be justified by the performance of the executive board. The supervisory board considers these corrections to the remuneration of the executive board within the framework of the approved remuneration system to be appropriate in order to pay the executive board members remuneration that is commensurate with their tasks and performance and to set the right incentives for the ­benefit of the company. Particularly high commitment is required from the executive board members in these times of crisis. The supervisory board considered it necessary, in particular, to wait for the opportunity to assess the economic impact on the com- pany, which only became sufficiently clear late in the year.

Essen, December 2022

The Executive Board

The Supervisory Board

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EVONIK DECLARATION ON CORPORATE GOVERNANCE  2022

2.2 Relevant information on corporate management practices

Corporate governance

The company is explicitly committed to good corporate governance and complies with the recommendations of the German Corporate Governance Code, apart from the exceptions set out in subsection 2.1 p. 1 f .

Compliance

Evonik understands compliance as all activities to ensure that the conduct of the company, its governance bodies, and its employees respect all applicable mandatory standards such as legal provisions, statutory requirements and prohibitions, in-house directives, and voluntary undertakings.

House of Compliance

The most important external and internal principles and rules are set out in Evonik's group-wide code of conduct. This is binding for both the executive board and all Evonik employees, both internally in their treatment of one another and externally in ­contact with shareholders, business partners, representatives of authorities and government bodies, and the general public. It requires all employees to comply with the applicable laws, regu- lations, and other obligations. Evonik does not do business at any price. All employees worldwide receive regular training on the code of conduct and specific issues. Systematic action is taken to deal with any breach of the code of conduct.

The compliance areas identified as being of specific relevance to our company are bundled in a House of Compliance. Failure to observe the applicable laws and regulations in these areas leads

C36

to substantial risks for the company, its legal representatives, and holders of protected legal positions. To ensure a risk-based approach and take account of similarities between topics, the areas covered by the House of Compliance therefore comprise antitrust law, fighting corruption, money laundering, and fraud, as well as the code of conduct, foreign trade and customs law, capital market law, data protection, taxes, human resources, and, as a new addition, human rights. Group Audit has an advisory role. Environment, safety, health, and quality, including compliance-related aspects, are also very important topics and are managed and monitored by a separate function.

The role of the House of Compliance is to define minimum group-wide standards for the compliance management systems (CMS) for these areas and ensure that they are implemented. The process of forming a consensus, sharing experience, and coordinating joint activities takes place in the compliance com- mittee, which is composed of the heads of the respective units, who have independent responsibility for their areas, and the head

Executive Board

Compliance Committee

Chief Compliance Officer

Head of

Head of

Head of

Group

HR Business Management

Taxes

Audit a

Human Rights

Antitrust

Fighting Corruption, Money Laundering, and Fraud

Code of Conduct

Foreign Trade and Customs Law

Capital Market Law

Data Protection

Human Resources

Taxes

Group Audit

Compliance Management System

of Group Audit. The compliance units are responsible for the appropriateness, efficacy, and continuous improvement of the CMS for the compliance topics allocated to them.

For information relating to principle 5 of the German Corporate Governance Code on the fundamental aspects of the CMS and its topics, please refer to the above presentation. There are no indications that the CMS for the compliance issues bundled in the House of Compliance are not appropriate or effective in all key respects (the human rights CMS is currently being estab- lished, see below). The necessary elements of the CMS are structured and implemented throughout the Evonik Group on a risk-oriented basis reflecting the content required by the standards for the respective issue. By and large, the established ­standards and processes are put into practice in the company.

1. Advisory role.

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Regular efficacy checks identify individual weak points relating to specific aspects and suitable measures to remedy them are integrated into a continuous improvements process. In the same way, the CMS is adapted and aligned to changes in the basic framework (for example, due to changes in the relevant legislation or internal requirements or policies) and the actual circumstances (for example, due to changes in (corporate) structures or business models).

For instance, the human resources departments in the Evonik Group have been restructured in recent years and new personnel management software has been introduced. In this context, the responsibilities within the area of human resources were re-­ allocated­ and aligned more strongly to individual HR processes. The reorganization of the HR function made it necessary to revise internal policies to bring them into line with the new situation. This revision has not yet been completed.

EVONIK DECLARATION ON CORPORATE GOVERNANCE  2022

Compliance Management System (CMS)					C37
			Responsibility of Management
			Values and Objectives
	Prevention		Detection		Response
Effectiveness						Improvement
• Risk Analysis		• Whistleblower System		• Corrective Measures
	• Standards		• Investigations		• Sanctions
	• Processes		• Monitoring & Audits		• Lessons Learned
Adequacy,	• Training					Continuous
• Sensitization/Communication

• Advice & Support

Compliance Reporting

Compliance Organization

The CMS for human rights is currently being established. The content is based on the requirements of the German Act on Corporate Due Diligence Obligations in Supply Chains (LkSG) and audit standard IDW PS 980 in order to take account of further international requirements. Since the new German legislation came into force on January 1, 2023, all elements of a CMS have been set up. In some cases, concrete implementation or operationalization of individual standards, processes, and measures has not yet been completed. These aspects will be introduced and rolled out stepwise from 2023. Consequently, a full efficacy check has not yet been established.

Based on the present stage of development, there are no indications that this CMS is not appropriate in all material respects.

The compliance issues and the appropriateness and efficacy of the relevant CMS are examined at regular intervals through internal and external audits. Here are some examples:

• External audit of fighting corruption based on audit standard IDW PS 980 (KPMG 2020)
• Internal audit of the anti-money laundering measures (Group Audit, 2022)
• Internal audit of antitrust law (Group Audit)
• External readiness check in the area of data protection based on IDW PS 980 (Luther law firm, 2022)
• External readiness check on the German supply chain legisla- tion (KPMG, 2022)
• External audit of the tax compliance management system of Evonik Industries AG and other Group companies in Germany covering the areas of income tax, wage tax, value-added tax, transfer pricing, and withholding tax pursuant to IDW PS 980 (KPMG, 2021)
• Internal audit of the tax compliance management system (Group Audit, 2021)

• Regular internal audits of internal export controls
• Official audits of customs and export control processes in con- nection with export permit processes, customs and foreign trade audits, and certification as an "Authorized Economic Operator" (AEO)
• Inspection of chemical weapons controls by the Organisation for the Prohibition of Nuclear Weapons (OPNW).

The above comments on the CMS are based on self-assessments by the relevant functional areas, which are prepared in good faith on the basis, in particular, of the references cited.

Further information on Evonik's compliance management system and the corresponding areas of focus, as well as the action taken in the year under review, can be found in the sustainability report.

 www.evonik.com/sustainability-report