Klöckner : Sustainability Reporting 2020

SUSTAINABILITY REPORTING

of Klöckner & Co SE

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Sustainability reporting 2020 of Klöckner & Co SE2

Employees action area7

Responsible Conduct action area13

Environment action area21

Digitalization action area23

Customers action area26

Independent Auditor's Limited Assurance Report29

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KLÖCKNER & CO SE ANNUAL REPORT 2020

Klöckner & Co SE sustainability reporting 2020

Klöckner & Co is one of the largest producer-independent distributors of steel and metal products worldwide.

As we are not tied to any particular steel producer, customers benefit from our centrally coordinated procure-ment and wide range of national and international sourcing options from around 60 key suppliers across the globe. These include the world's largest steel producers and their distribution arms. Responsible conduct plays a central role in relation to our business model and our self-perception as a tradition-rich company. For us, re-sponsibility means aligning our entire enterprise around good ethical behavior, social responsibility, environ-mental compatibility as well as commercial success. This ethos is enshrined in our Group-wide Klöckner & Co Principles, which ensure that we share a common understanding and provide specific guidance for our conduct on a day-to-day basis. Sustainability is an issue of special importance at every link in the steel value chain. Alt-hough the steel industry's large environmental impact has already shrunk considerably in recent years, produc-tion in particular is still associated with high levels of resource use. However, we as a distributor and important link in the value chain also see it as our duty to continuously improve processes in order to minimize the ad-verse effects of our business activities. This was among the reasons we committed to the UN Global Compact "Business Ambition for 1.5°C," where we are in the target-development phase. The participants in this initiative measure their greenhouse gas emissions and plan reduction targets that are in line with limiting the rise in global temperatures to 1.5°C by 2050.

Our approximately 7,300 employees apply their skills and enthusiasm every day to meeting our customers' needs and wishes. We provide customers with an optimized, end-to-end solution from procurement through logistics to prefabrication, including individual delivery and 24-hour service - processes we are increasingly mi-grating to digitalization. For example, we use a variety of digital tools and portals to enable us to provide our customers and business partners with a broader spectrum of steel and metal products as well as services.

Through our distribution and logistics network comprising around 140 sites in 13 countries, both in Europe and in the USA, we serve more than 100,000 customers. Concentrated mainly in the construction as well as the machinery and mechanical engineering industries, our customer base consists primarily of small to medium-sized steel and metal consumers (for more in-depth information about Klöckner & Co's business model, see page 33 of the management report).

Group non-financial report in accordance with Section 315b of the German Commercial Code

The following sustainability reporting for 2020 includes the Group non-financial report of Klöckner & Co SE in accordance with Section 315b of the German Commercial Code (HGB). In the Group non-financial report, we present the non-financial issues of major relevance to our business activities together with the impact of those activities on aspects comprising environmental matters, employee matters, respect for human rights as well as anti-corruption and bribery. This includes the chapters of the Employees, Responsible Conduct and Environ-ment action areas. In addition, we provide transparent reporting in the following on our broader engagement with regard to sustainability. This includes the chapters relating to the Digitalization and Customers action ar-eas.

TO OUR	GROUP MANAGEMENT	SUSTAINABILITY	FINANCIAL
SHAREHOLDERS	REPORT	REPORTING	STATEMENTS

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SERVICES

The reporting period for the Group non-financial report is fiscal year 2020. Unless otherwise specified, the in-formation covers all fully consolidated companies of the Klöckner & Co SE Group. Following re-evaluation, we decided against using a framework in the preparation of the Group non-financial report, as we do not require a framework to present the relevant information in a structured and stringent manner. In addition, such frame-works build upon different definitions of materiality and result in a choice of topics that is not appropriate for our representation of non-financial aspects. However, verification of the use of a framework is regularly carried out.

PricewaterhouseCoopers GmbH was engaged to provide a limited assurance review of the information items in the German PDF version of the sustainability report, which contains the Group non-financial report, for the pe-riod January 1, 2020 to December 31, 2020.

Materiality analysis

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Review and identification of our topics 2

Analysis of external expectations regarding material reporting topics

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The topics to be included in the Group non-financial report are specified and formulated within the context of our sustainability management. Our definition of sustainability comprises all the areas that contribute to secur-ing the long-term success - i.e. the future viability - of Klöckner & Co. We review the reporting topics on an on-going basis in order to ensure that we are advancing the key issues that are material to a sustainable, forward-looking strategy in a dynamic market environment. In 2020, we again conducted an extensive materiality anal-ysis based on the results of the 2017 materiality analysis. We approached the material topics using 14 process steps that were individually tailored to Klöckner & Co. First, we reviewed the topics from the previous material-ity processes in terms of their currentness. Additionally, we examined which further industry-specific topics should be included. We identified 26 topics that are significant for our corporate responsibility management and reporting, and weighted them according to their relevance. The prioritization of the issues reflects their im-portance in terms of business relevance (net assets, financial position and results of operations, innovation and reputation) as well as the impacts of our business activities and the upstream supply chain on the environment and on society. The Sustainability Committee then discussed, validated and approved the findings.