SGL Carbon : CSR Report 2023

CSR Report 2023

2 SGL Carbon CSR Report 2023

CSR Report

Sustainability at SGL Carbon - an overview

SGL Carbon is a global technology company and expert in the production and processing of materials and products made from carbon-based solutions. As an energy-intensive company, employer in many countries and regions, and international partner, sustainable management and action is an integral part of our corporate strategy. That is why we present our sustainability ambitions and goals in the following chapters. We report on our developments in regard to ESG aspects that are material to us and our stakeholders. By publishing our targets, measures and key figures, we make our ambitions measurable and hold ourselves accountable.

Basics of the report

This CSR report constitutes the non-financial consolidated statement of SGL Carbon pursuant to Section 315b of the German Commercial Code (HGB) and complies with the content requirements as per Section 315c in conjunction with Section 289c-e HGB. Unless stated otherwise, the report covers the activities in the 2023 fiscal year of the entire SGL Carbon Group with the business units Graphite Solutions, Process Technology, Carbon Fibers and Composite Solutions. This year's report structure is based on the three ESG categories Environmental (including environmental and climate aspects), Social (including employee and social issues as well as respect for human rights) and Governance (including supply chain responsibility, compliance and combating corruption and bribery), which are also integrated into the mandatory reporting according to Section 315 c HGB. Furthermore, this report contains all information required by the EU Taxonomy Regulation ((EU) No. 2020/852).

In preparing the report, we have oriented ourselves to the standards of the Global Reporting Initiative (GRI). Additional key performance indicators (KPIs) were developed to better reflect the specific requirements of SGL Carbon. The KPIs in use correspond to those of the previous year. We reviewed and updated the materiality analysis to determine the ESG aspects that are material for SGL Carbon in the 2023 fiscal year with the involvement of our stakeholders. The results are not only important for reporting, but also help us to better understand the requirements of our stakeholders and, if necessary, to derive strategically relevant topics for our corporate strategy. As part of the update in 2023, we checked whether new topics had arisen or whether the significance of topics had changed significantly since the last materiality analysis. We based this process on the European

Sustainability Reporting Standards (ESRS) (EU No. 2013/34/EU amended by (EU) 2022/2464). The business model is described in detail in the "Group fundamentals" of the Group Management Report.

The non-financial reporting of SGL Carbon uses the nomenclature of Environmental, Social and Governance and assigns the aspects to be presented in accordance with Section 289c(2) HGB to the three umbrella terms of Environmental, Social and Governance. When the Corporate Social Reporting Directive (CSRD) goes into effect, SGL Carbon will change the structure of the CSR report to the terms and definitions of the CSRD.

The updated materiality analysis from 2023 already takes into account the dual materiality required by regulation from 2024 and was reviewed and approved by the Executive Board, the highest decision-making body for ESG issues. The ESG topics resulting from this analysis (dual materiality) form the basis for the preparation of the material topics in accordance with Section 289c (3) HGB. The following overview shows the allocation of the primary ESG aspects according to the 2023 materiality analysis (in accordance with the CSRD) to the aforementioned umbrella terms Environmental, Social, and Governance. Individual ESG topics listed in the overview are grouped into chapters. For example, information on the management of hazardous substances can be found in the subchapter "Environmental concerns and waste management."

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Environmental concerns = Environmental

• Adaptation to climate change
• Climate protection measures incl. GHG emissions (CO2)
• Energy use and consumption
• Resource use and circular economy incl. waste

Social concerns and Human Rights = Social

• Working conditions including occupational health and safety
• Equal treatment and equal opportunities
• Employee retention / development incl. training and continuing education
• Other work-related rights incl. human rights

Governance

• Compliance incl. protection of whistleblowers
• Corruption and bribery incl. political engagement
• Management of supplier relationships

In the previous year 2022, the CSR Report also included additional sub-topics that were no longer identified as material to our business model following the new double materiality analysis in 2023. To ensure continuity in reporting, we continue to report on the following topics voluntarily in this CSR Report: water management, product quality and safety, information security and corporate governance. We would also like to continue to emphasize the topic of social commitment. In the Group Management Report, we also provide information on the topics of sustainable product innovations (research and development

section) and data protection (Opportunities and Risks Report). We will not report further on the topics of sustainable financing and transparency and reporting. Corporate ethics and the ethical behavior of companies play an important role in almost all ESG topics.

Review of the content of the separate non-financial Group report was performed by KPMG AG Wirtschaftsprüfungsgesellschaft as part of an external limited assurance engagement.

Our ESG ambitions, strategy and goals

Our mission is to positively shape the future by developing cutting-edgecarbon-based products - for all industries and areas of life. With its sophisticated and in some case customized solutions, SGL Carbon serves many industries that are shaping future trends: mobility (especially electromobility), semiconductor technology, LED, solar and wind energy, as well as the battery industry and manufacturers of fuel cells. Our aspirations include growing the company with products and technologies that benefit society and reduce our impact on the environment.

We strive to offer products that contribute to greater sustainability, but we also want to ensure that our manufacturing and management processes and our supply chains meet ambitious environmental, social and corporate governance standards.

For more than 10 years, SGL Carbon has reported on its own sustainability efforts by a separate Corporate Social Responsibility Report (CSR Report) and measures, among other things, its own energy and water consumption, waste volumes and provides information on occupational safety, employee concerns and compliance issues. We regularly reviewed and revised our sustainability strategy (also known as our ESG strategy). We monitor our progress and the set targets and adjust these when we reach them in order to continuously improve. Our work in the 2023 fiscal year focused on the implementation and further development of our ESG activities and goals as well as preparing for the implementation of the new Corporate Sustainability Reporting Directive (CSRD). In addition to complying with all legal requirements, we want to make even more strategic use of opportunities and positive sustainability effects of our activities as well as further reduce negative impacts. In doing so, we also consider our support for the United Nations' Sustainable Development Goals (SDGs) (more on this in the section "Our contribution to the implementation of the Sustainable Development Goals").

The following tables show our ESG targets and the current status of target achievement.

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Target		Achievement New or updated target			KPI / explanation		Highlights
Year 2023				Year 2024	2023	2022	2023
ENVIRONMENTAL
50% reduction CO2 emissions (scope 1 & 2) by				ongoing		295 kt			326 kt		10% CO2-Reduction Scope 1 and 2
2025 (base year 2019)

Support

SDGs1

Affordable, clean Energy / Climate Action

Climate neutral (scope 1 & 2) by 2038

Development of measures for Scope 3 reduction together with relevant suppliers

Energy intensity reduction by 1% p.a.; 10% until 2027 (base year 2017)

1 SDG 7 Affordable and Clean Energy | SDG 13 Climate Action

						Installation Biomass system in Lavradio site
						(Portugal) - reduction potential CO2 approx. 40
						kt
ongoing		295 kt		326 kt		Increase share of renewable energies e.g.
			electricity from renewables, biomass system
ongoing		367 kt		399 kt		Calculation of Scope 3 upstream emissions
ongoing	-7%	-4%		ISO 50001 re-certification of material sites

longer duration, target ongoing

target achieved

target not achieved or at risk

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Target

Year 2023

SOCIAL

Achievement New or updated target			KPI / explanation		Highlights		Support
		Year 2024		2023			2022		2023		SDGs

Lost-time injury frequency rate annual reduction of 5% by 2026 (based on 2022 target)

Maintain women's quota of 20% in senior management

Improvement of the SGL Performance Culture Index

Training of all production employees worldwide on Code of Conduct and Human Rights Policy until end of 2024

ongoing	1.6	2.3		Reduction of LTI FR from 2.3 to 1.6 compared
	with the previous year
						Continuation of the annual Safety Day to
						further increase safety awareness
Maintain women's quota of 20%	22%	20%		Target of 20% women's quota achieved
in senior management

Improve SGL Performance						Semi-annual employee survey on value-based
Culture Index to target range		not satisfactory		not satisfactory		performance culture and employee
"good"						engagement. Improvement of the index
						Implementation of various initiatives
						worldwide to strengthen SGL Carbon's
						company values
						Approval of the new leadership development
						program "Leadership4Performance" to start in
						January 2024
						Development of SGL's new Purpose Statement
						& Slogan
				100% training of		Start online training for production employees
ongoing		17% trained		admin. workers		on Code of Conduct and Human Rights after
				wordwide		creation of digital access for target group
						Appointment Human Rights Officer

Decent Work and Economic Growth

Gender Equality

Quality Education / Decent Work and Economic Growth

longer duration, target ongoing

target achieved

target not achieved or at risk

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Target

Year 2023

GOVERNANCE

Achievement New or updated target			KPI / explanation		Highlights		Support
		Year 2023		2023			2022		2023		SDGs

Maintaining a Business Partner Code of Conduct signing rate of 100%

Continuation of supplier screening on ESG issues and immediate remediation based on risk assessment

No tolerance of compliance violations, supported by investigation and sanctioning

Maintain ISO 37301 certification

Maintaining a Business Partner

Code of Conduct signing rate of 100%100% Update Business Partner Code of Conduct 100%

Around 12% increase in number of suppliers

ongoingsurveyed via standardized online ESG- questionnaire

Investigation of all reported potential

ongoingviolations. No confirmed violations of fraud, bribery and corruption

Re-certification Compliance						Expansion of the CMS ISO certification with
Management System (CMS) in
accordance with ISO 37301 incl.		ISO Certification		ISO Certification		additional certification of the anti-corruption
anti-corruption and bribery						and bribery system
system

Decent Work and Economic Growth

Peace, Justice, Strong Institutions

longer duration, target ongoing

target achieved

target not achieved or at risk

ESG Governance structure

To track and further develop our ESG goals and ambitions, we implemented a ESG governance structure for the Group in the 2022 fiscal year. The highest operational decision-making body of SGL Carbon is the Board of Management of SGL Carbon SE. Due

to its strategic importance, we have made the topic of sustainability the responsibility of the highest operational decision-making level. The Board of Management is supported in this area by an ESG Sounding Board made up of the heads of our four business units and various experts in ESG-relevant areas.

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ESG Governance structure:

ESG Sounding Board

Module Environmental

Workstreams		Green energy
	GHG emissions scope 1&2
		GHG emissions scope 3
		Energy management
		Water management
		Waste management
		Circular economy
		Sustainable products

ESG Steering Committee

Board of Management

ESG Coordination Team

Module Social

Workstreams		Occupational safety
	Organizational & leadership culture
		Employee concerns & development
		Diversity & equal opportunity
		Human rights

ESG Controlling & Reporting

Module Governance

Workstreams		Compliance
	Responibility in the supply chain
		Corporate governance
		Data protection
		Information security

Also part of the ESG Steering Committee is the ESG Coordination Team, which consists of those responsible for the three ESG modules. We expanded the supporting "ESG Reporting and Controlling" working group in 2023 to include colleagues from Group Accounting and IT to meet the new requirements of the European Sustainability Reporting Standards (ESRS) in the future. On the operational level, ESG measures and goals are driven by the three ESG

working groups (Environmental, Social and Governance modules). Workstreams for all relevant ESG topics with clear responsibilities have been defined below the three ESG working groups. Furthermore, dedicated individuals responsible for ESG have been appointed in all four business units to carry ESG ambitions through to the operating units. These experts work closely with colleagues from Environment, Health & Safety Affairs

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(EHSA), workstream leaders, and the ESG Coordination Team. The ESG governance structure therefore ensures both the strategic realization and development of our ESG ambi- tions, as well as operational implementation in the business units.

Identification of material ESG aspects (materiality analysis)

In the 2023 fiscal year, we again identified and updated the material ESG aspects for SGL Carbon, taking into account the materiality analysis from 2021. The materiality analysis was performed in accordance with the requirements of the Corporate Sustainability Reporting Directive (CSRD) and on the basis of the European Sustainability Reporting Standards (ESRS), considering the principle of double materiality. This includes two central perspectives:

a.) Ecological and social materiality (inside-out perspective - "impacts"): Consideration of the impact of SGL Carbon's business on the environment and society. This analyzes the impact of the company's activities on various interest groups and stakeholders (inclu- ding the stakeholder "nature").

b.) Financial materiality (outside-in perspective - "risks and opportunities"): Consideration of the influence of ecological and social factors on SGL Carbon. The risks and opportunities arising from external developments that could potentially have a financial impact on the company are examined.

The materiality analysis performed is based on a structured methodology comprising the following steps:

▪ Collection of potential ESG topics that may be relevant for SGL Carbon (longlist).

In addition to the standards applied (ESRS), the desktop analysis also included ESG topics relevant to the industry sector, a competitive analysis, current trends and developments and the results of the materiality analysis performed in 2021. Information from various sustainability ratings such as MSCI, ISS and Sustainalytics was also included in the collection of topics.

• Elimination of duplicate topics and ESG issues that are not applicable to the business model of SGL Carbon and therefore not relevant (such as animal testing). The exclusion

of non-relevant ESG issues is also based on double materiality, i.e. the analysis of potential impacts of the business model of SGL on the environment and society (inside- out perspective) and potential financial opportunities and risks for SGL Carbon (outside- in perspective).

Topics that were below the relevance threshold, but which SGL Carbon wanted to report on a voluntary basis for reasons of continuity, for example, remained in the medium list (e.g. freedom of association). This medium list is the basis for the additional steps of the materiality analysis, including the identification and assessment of potential impacts, risks and opportunities for each ESG topic identified.

▪ Identification and assessment of potential impacts, risks and opportunities.

In a first step, relevant positive and negative, actual and potential impacts of SGL Carbon's business on the environment and society were identified for all topics on the medium list. In a second step, financial risks and opportunities were identified for these topics on the basis of the ESRS standards.

In addition, specific risks and opportunities arising from SGL Carbon's specific business model have been added. All identified impacts, risks and opportunities were classified according to relevance levels to ensure that the material environmental and societal impacts as well as financial risks and opportunities for SGL Carbon are adequately conside- red. The relevance levels were classified from low to high and were assigned to the respective topics by the ESG team after joint consideration.

In a next step, those ESG topics that identified at least one impact, risk and/or opportunity that were rated as having medium or high relevance were transferred to a shortlist. ESG topics with impacts, risks and opportunities of only minor relevance were not pursued. This way, ESG topics could be excluded that neither have a serious impact on the environment and society nor represent a risk or an opportunity for SGL Carbon's business.

▪ Expert workshops for the final validation of impacts, risks and opportunities

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The impacts, risks and opportunities previously identified by external and internal ESG experts for the topics on the shortlist were validated again in various specialist workshops. The impact of SGL's business model on the environment and society was assessed and the financial risks and opportunities for SGL Carbon were once again evaluated by the subject experts. At the same time, the specialist workshops served as an opportunity to record and elaborate on impacts, risks and opportunities that had not been considered in the preselection process. The original ESRS terminology for assessing impacts, risks and opportunities was retained and explained to all participants.

Impacts were assessed by scope, extent, likelihood and mitigation, with mitigation assessed only for negative impacts and likelihood only for potential impacts. A time horizon was also defined for all impacts. Risks and opportunities are assessed based on SGL Carbon's internal risk management approach to classify ESG risks and opportunities within the company's risk management system. The assessment included the financial impact and likelihood of occurrence for all identified risks and opportunities.

▪ Identification of the material ESG topics for SGL Carbon

In a final step, the severity of the impacts, risks and opportunities was assessed, with a severity level of ≥ 3 being set as the relevant threshold. The degrees of severity were determined as follows:

1. Impacts: The severity level for the impacts was developed based on the corresponding recommendations of the draft "Implementation Guidance for the Materiality Assessment" of 8/23/2023 of EFRAG.
2. Risks and opportunities: The severity of the risks and opportunities was assessed using the SGL Carbon risk matrix. The potential financial impact and the probability of occurrence were considered.

As soon as a defined impact, risk and/or opportunity reached or exceeded the defined relevance threshold (≥ 3), the corresponding ESG topic was classified as "provisionally material".

The final confirmation of the ESG topics that are "provisionally material" for SGL Carbon took place in a workshop of the company's highest decision-making body. The Board of Management confirmed:

1. The validation of the ESG topics that are material for SGL Carbon in accordance with the Corporate Sustainability Reporting Directive (CSRD)
2. The selection of topics on which the company reports voluntarily. These are ESG topics that are not reportable for SGL Carbon under the CSRD, but are of interest to the company's stakeholders because of reporting continuity,
3. and the topics identified as immaterial for SGL Carbon in terms of the CSRD were confirmed.

Stakeholder engagement

SGL Carbon strives to make sustainable use of human, natural and financial resources. We remain in close dialogue with our stakeholders throughout the year. In addition to regular communication with our stakeholders, a stakeholder survey was also conducted in the 2023 fiscal year as part of the materiality analysis. The goal of this survey was to confirm the ESG topics identified as material for SGL Carbon and to make additions where necessary.

Relevant stakeholders for SGL Carbon are institutions or persons with whom we have a direct or indirect relationship through our business activities and who therefore have an interest in our actions, including those whose interests are particularly affected by our actions ("affected stakeholders"). Our most important stakeholder groups are therefore our customers, employees, suppliers, owners and banks, media, all neighbors of our locations and the representatives of associations, academia, public authorities and nongovernmental organizations (NGOs). We engage in dialogue with them on a regular basis to promote mutual understanding and we also seek to continuously identify topics that are important from the perspective of the context in which we operate.

For the stakeholder survey conducted in the 2023 fiscal year, we identified the various external and internal stakeholder groups along our value chain, taking the ESRS guidelines into consideration. In an online survey, stakeholder representatives were asked about the impact of SGL Carbon's business on the potentially material ESG topics identified by the materiality analysis and presented to the representatives in the shortlist. The relevance of

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the topics was rated on a scale of 1 to 6, with the rating options ranging from (1) no relevance to (6) serious. The evaluation was performed by ranking ESG topics according to relevance.

The stakeholder survey confirmed the material topics identified in the materiality analysis for SGL Carbon.

Our contribution to the implementation of the Sustainable Development Goals

Based on the ambitions, goals and measures we have initiated and planned, our commitment to a culture of values and compliance and our innovative nature should benefit the environment as well as society.

Our contribution:

Core SDGs

SDGs where SGL Carbon has most significant & direct contribution

SDG 8: Decent work and economic growth

SDG 9: Industry, innovation and infrastructure

SDG 13: Climate action

SDG 16: Peace, justice and strong institutions

We intend to use these points of leverage based on our business model to make our contribution to achieving the United Nations' Sustainable Development Goals within the scope of our business capabilities. Our membership in the UN Global Compact will also support further progress in these areas. We defined eight SDGs in 2021 for which we believe that we can make the greatest possible contributions to their implementation with our business model. These have remained unchanged in 2022 and 2023.

The overviews at the beginning of the chapter entitled "Goals, Highlights 2022, and Contribution to the SDGs" also show key measures for achieving the goals and the contribution to supporting the focus SDGs of SGL Carbon.

Supportive SDGs

SDGs where SGL Carbon can leverage its influence to reach SDGs

SDG 4: Quality education

SDG 5: Gender equality

SDG 7: Affordable and clean energy

SDG 12: Responsible consumption and production