Welcome to LANXESS Annual Report 2012!

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Ecological responsibility

We view the continuous improvement of environmental performance as a key corporate goal. As LANXESS sees it, conserving natural resources – for example, through the most efficient possible use of raw materials and energies – and identifying further potential for reducing emissions and waste are an ongoing mission and an inherent part of our ecological responsibility to which we must apply our expertise.

It is an established part of our strategy to equip all new production sites in line with state-of-the-art environmental standards, taking into account local requirements. This often sets us apart from many local competitors. One example of this approach was the opening of our water treatment plant in Nagda, India.

Environmental protection in proximity to our production sites

The areas around our European sites contain many protected areas that fall under the European Habitats Directive. No significant effects on biodiversity are to be expected when our production facilities are running normally or during either scheduled or unscheduled downtime. Although no measures are currently required that go beyond the respective local permitting requirements, we are conducting further detailed evaluations, initially at our European sites. Any information about protected areas near our sites outside Europe was included in the necessary permit processes.

Our industrial sites themselves do not contain any protected or restored natural habitats since, as a rule, these areas continue to be used for industrial purposes. Some unused areas outside the sites are near-natural, for example at La Wantzenau, France, or Duque de Caxias, Brazil. There are isolated cases of protected species, such as the capybara, living on land and in waters at our sites. Landfill sites are recultivated in line with legal requirements but do not necessarily revert to natural habitat. The provisions made by LANXESS for environmental protection primarily relate to contaminated soil and groundwater in areas that were used industrially and not those with protected status.

Progress in climate protection

As a driving force in the chemical industry, we are helping to reduce or even eliminate greenhouse gas emissions using a range of cutting-edge technical solutions.

Our aim is to reduce each segment’s specific energy consumption and specific CO2e emissions by 10 percent by 2015 (base year: 2010). Our measures are applied in all value creation processes – from energy generation through manufacturing processes and transportation to waste disposal.

Systematic energy management

Resource and energy efficiency are key factors in our company’s energy efficiency and in climate and environmental protection. Against this background, we began implementing an energy management system based on ISO 50001 in 2010. The consistency and transparency of a well-structured operational energy management system are aimed at helping us conserve resources, cut energy costs and thereby significantly improve our competitiveness.

Initially, we focused on those production units in Germany which we integrated into the ISO 50001 internal audit management system in 2012. The LANXESS Energy Management Directive that came into force in February 2012 defines the standards to be applied in our global operations. We successfully completed implementation of the energy management system in the German production units at the end of 2012. The first LANXESS production facility to be certified to ISO 50001 was IAB GmbH in Bitterfeld in 2012. Our other German facilities are to follow in 2013. We have also begun introducing the energy management system in our production units outside Germany and will continue with this in 2013.

To implement the energy management system at operational level, an energy officer with global responsibility was appointed for each business unit, and energy teams were established for the German production units.

Against the backdrop of our energy target and building on the structures of the LANXESS energy management system, we continued refining our systematic approaches to increasing energy efficiency across the company in 2012. For example, the business units evaluated existing and potential efficiency improvement measures in terms of their possible contribution to reducing indirect greenhouse gas emissions and energy costs, the investment needed and their technical feasibility.

Since 2012, all our savings measures have been combined in the LANXESS Energy Efficiency Program (LEEP), aimed at creating a Group-wide overview of potential savings, the cost of their implementation and their impact on our energy goals. A newly established team of energy experts from the Innovation & Technology group function is supporting the identification of new measures. Typical improvement measures concern operating procedures, existing technologies, and also the engineering redesign of plant sections.

We still see substantial potential for improving our energy efficiency, particularly by increasing our accuracy at coordinating production capacities with demand, improving the use of residual heat, optimizing refrigeration and, generally, by propagating best practices throughout the company. For example, in 2010 alone, we started up four highly efficient cogeneration plants at our sites in Porto Feliz, Brazil; Nagda and Jhagadia, India; and Zwijndrecht, Belgium.

Energy Consumption in Relation to Volumes Sold
Chart: Energy Consumption in Relation to Volumes Sold

In 2012 we increased volumes sold by around 2.5 percent, resulting in an increase of about 3 percent in absolute energy consumption (see also Environmental and Safety Performance Data table). By contrast, the specific energy consumption (energy consumption in relation to volumes sold) declined slightly.

Energy Consumption by Segment
Chart: Energy Consumption by Segment

Our efforts to reduce the specific energy consumption in each segment yielded only slight progress over the previous year. One substantial reason for this is the continuing expansion of our product portfolio by way of acquisitions.

Reduction of climate gas emissions

Having succeeded in largely neutralizing our emissions of particularly harmful nitrous oxide for several years, we reduced CO2 equivalents by 1.6 million tons in 2012 alone (compared to 2007). In the same period, we succeeded in reducing our direct greenhouse gas emissions by around 45 percent worldwide. In 2009, we had already met the target we set for our operations in Germany of reducing the emission of climate gases by 80 percent in 2012 and we have been able to maintain this level to date.

In the European Union, trading in CO2 emissions rights – or allowances – is a cost-effective way of reducing harmful CO2 gas emissions. 18 LANXESS facilities in Europe are subject to emissions trading (EU-ETS). Three trading periods were defined for emissions trading in the European Union. The second trading period that ran from 2008 to 2012 has now been concluded without us having to purchase additional allowances. Since all of our facilities are at the cutting edge of technology and participate in international competition, we expect to receive an adequate number of free allowances for 2013 to cover our anticipated CO2 emissions.

Scope 1 emissions cover direct emissions from production and our own energy generation operations. Scope 2 emissions are indirect emissions associated with the procurement of energies. The graphics below show the development of LANXESS’s specific Scope 1 and Scope 2 emissions.

Greenhouse Gas Emissions (Scope 1) in Relation to Volumes Sold
Chart: Greenhouse Gas Emissions (Scope 1) in Relation to Volumes Sold
Greenhouse Gas Emissions (Scope 2) in Relation to Volumes Sold
Chart: Greenhouse Gas Emissions (Scope 2) in Relation to Volumes Sold
Greenhouse Gas Emissions (Scope 1) by Segment
Chart: Greenhouse Gas Emissions (Scope 1) by Segment

Compared with the base year (2010), Scope 1 emissions in our Advanced Intermediates and Performance Chemicals declined slightly. In the Performance Polymers segment, the base year level was restored after a slight increase in 2011.

Sustainable logistics

We aim to minimize the environmental impact of our logistics operations. We view the intelligent combination of road, rail, river and sea transport as a key to achieving this.

We select our transport solutions on a case-by-case basis, applying the principles of safety, punctuality, cost-effectiveness and CO2 reduction. A CO2 monitoring dashboard introduced in 2012 enables us to compare the costs and potential CO2 savings of a transport solution, and thus develop an effective strategy for reducing emissions in our supply chain. The dashboard also visualizes our transport-related CO2 emissions for our employees responsible for logistics procurement and planning, thus raising their awareness of the issue.

In our collaboration with external service providers, we focus on their ability to master the particular challenges of chemical logistics and give preference to those who share and develop our goal of sustainable and cost-effective transport concepts. Measures include the use of lightweight and fuel-saving equipment and the development of concepts to minimize transport volumes. In addition, we participate actively in various national and international initiatives concerning sustainable logistics and infrastructure.

In Germany, we continue to use the TÜV SÜD-approved Eco Plus solution offered by logistics provider DB Schenker Rail logistics company for transporting our products by rail. The electricity required for transport is obtained from renewable energy sources. In this way, we can reduce the CO2 emissions from our German rail transport operations by almost 75 percent. In the reporting year, Dormagen joined Krefeld-Uerdingen as the second site we have linked to our rail-shuttle network. We use this to transport our products to various seaports for shipping worldwide and it now saves us some 2,000 truck transports annually. Each year, LANXESS transports a total of around 375,000 tons of chemicals and bulk materials by rail in Europe.

Carbon Disclosure Project

We again participated in the Carbon Disclosure Project (CDP) in 2012, sharing data and information on climate protection and the reduction of emissions. The Carbon Disclosure Project is an organization representing international institutional investors who have joined forces in order to improve transparency for the financial market on questions linked to climate change and the requisite corporate guidelines. In 2012, we were included in the Carbon Disclosure Leadership Index (CDLI) for the first time. Our transparent reporting on climate protection puts us in the top 36 of 350 companies assessed in German-speaking countries. The CDP Climate Change Report singled out LANXESS, along with six other companies, as being exemplary in the field of active climate protection.

Carbon footprints

We are systematically compiling carbon footprints for selected products so we have reliable information about greenhouse gas emissions throughout the life cycle of these products, and thus gain new insights regarding further potential reductions. We are also continuing the life-cycle assessments of specific products for the same reason. The analysis covers criteria such as CO2, primary energy consumption, and greenhouse and eutrophication potential.

Other atmospheric emissions

The European Union’s NEC (National Emission Ceiling) Directive has set maximum national limits for the release of the atmospheric pollutants sulfur dioxide (SO2), nitrogen oxides (NOX), ammonia (NH3) and volatile organic compounds. Since 2011, these limits may no longer be exceeded. We have specifically inspected sites that release relevant emissions in support of the respective national air quality improvement programs.

VOC Emissions in Relation to Volumes Sold
Chart: VOC Emissions in Relation to Volumes Sold

In the year under review, our VOC emissions decreased further in relation to the volumes sold. This was due to, among other things, various measures taken to achieve our environmental protection target of cutting VOC emissions by 30 percent through 2015 (base year: 2010). The significant increase in our VOC emissions between 2008 and 2009 was attributable to the portfolio expansion undertaken at that time, especially in Brazil.

Solutions for clean water

Our innovative products and technologies help our customers worldwide to clean, treat and conserve water. We also take measures to ensure the efficient use of water at our own sites.

All wastewater and surface water discharges at our sites are subject to legal and permitting requirements. We use both technical (wastewater treatment) and organizational (monitoring) measures to comply with these requirements.

Before issuing an operating permit, the authorities assess the possible economic, social and environmental impacts of water extraction on the surrounding area. At all LANXESS sites, this takes place under approved conditions. The issue of water extraction is also addressed by our environmental protection compliance program.

During the reporting period, we commissioned a new wastewater treatment plant at our site in Nagda, India. It treats the water from the existing wastewater treatment plant so that hardly any wastewater needs to be discharged from the site. On the contrary – we can use the water recovered from the wastewater treatment plant in our production processes, thus compensating any water shortages in the summer months.

Water Consumption in Relation to Volumes Sold
Chart: Water Consumption in Relation to Volumes Sold

Overall, total water consumption in relation to volumes sold increased slightly year on year. This was primarily attributable to an increase in the amount of cooling water used. Since this is not contaminated, it can be discharged without treatment. By contrast, the amount of process water used was reduced slightly.

Wastewater in Relation to Volumes Sold
Chart: Wastewater in Relation to Volumes Sold

With respect to the amount of wastewater requiring treatment, we have achieved a relatively stable level over the past years in relation to volumes sold.

Sustainable waste management

LANXESS attaches great importance to the careful use of resources. The company aims to employ a consistent material flow management process – from the use of raw materials to the manufacture of the final product – so as to use resources as efficiently as possible and minimize the amount of waste we produce. Some forms of waste can be used as secondary raw materials and are thus a valuable resource. Sustainable waste management therefore involves systematically avoiding waste and, if this is not possible, using waste as a raw material or energy source. In order to minimize the amount of waste requiring disposal, we seek to continuously improve our production processes.

Total Waste in Relation to Volumes Sold
Chart: Total Waste in Relation to Volumes Sold

The total amount of waste generated worldwide in relation to volumes sold has decreased by approximately 16 percent compared to 2007. Some 47 percent of our waste is used in material or energy recovery. Year on year, we increased the material recovery rate by five percentage points. Worldwide, slightly more than half our waste is classified as hazardous.

Waste for Disposal
Chart: Waste for Disposal

Systematic recording of key performance indicators

We use an electronic system for the systematic global recording of KPIs in the areas of safety and environmental protection. This proprietary system enables us to define a broad range of HSE performance indicators for each business unit and location worldwide. These provide a valid database for internal and external reporting and map the progress we are making towards achieving our globally applicable HSEQ objectives (see table on page 60 f.). Data for all indicators except the lost time injury frequency rate (LTIFR) are collected only at those of our production sites in which LANXESS has a holding of more than 50 percent.

We are aware of the great challenge involved in defining and ensuring the use of uniform indicators for all sites and regions. We were able to further improve the quality of the data in 2012 by introducing standard documentation of the data collection processes.

In the year under review, PricewaterhouseCoopers AG Wirtschaftsprüfungsgesellschaft assessed our data collection processes and system in the course of a business audit. Our HSE indicators for 2012 were audited with a view to achieving a “limited assurance” rating. The audit certificate is part of the Annual Report.

Environmental and Safety Performance Data
       
  2010 2011 2012*), c)
       
Safety      
Occupational injuries to LANXESS employees resulting in at least one day’s absence (per million hours worked)1) 2.3b) 2.7b) 3.4c)
       
Volume sold2) in thousand tons/year 6,404a) 6,434a) 6,596c)
       
Energy in petajoules (1015 joules)3) 52.0b) 54.5d) 56.0c)
Direct energy sources (EN3)      
Non-renewable 15 14 14
Renewable 0 0
Indirect energy sources (EN4)      
Non-renewable 35 38d) 40
Other direct energy sources      
From biomass 2.0a) 2.5 2.0
       
Water in million cubic meters/year      
Total water consumption (EN8) 292b) 292b) 309c)
Surface water 127 135
Groundwater 8 7
Rainwater 0 0
Wastewater 1 2
Other water sources 155 165
Cooling water in total water consumption4) 235b) 239b) 257c)
Process water in total water consumption 57b) 53b) 52c)
       
Emissions into air in thousand tons CO2e/year      
Total greenhouse gas emissions (EN16) 4,556 4,804d) 4,981c)
Direct (Scope 1)5) 1,906b) 1,937d) 1,913
Indirect (Scope 2)6) 2,708 2,867d) 3,068
Ozone-depleting substances (EN19) 0.00041 0.00071d) 0.00231c)
NOX, SOX and other emissions (EN20)      
NOX7) 2.6 2.8 2.4
SO28) 1.7 1.9 1.2
CO 2.1 3.0 2.1
NH3 0.2 0.2 0.1
NMVOC9) 8.0 7.8 7.6
       
Wastewater in million cubic meters/year      
Total wastewater discharge (EN21) 266b) 272b) 291c)
Cooling water (uncontaminated, without treatment)4) 235b) 239b) 257
Production wastewater (with treatment) 31b) 33b) 34
Emissions in wastewater (after treatment)      
Total nitrogen 0.54b) 0.54b) 0.53c)
Total organic carbon (TOC) 2.1b) 2.2b) 2.2c)
Heavy metals10) 0.0047a) 0.0045a) 0.0060c)
       
Waste in thousand tons/year      
Total weight of waste (EN22) 259b) 267b) 283c)
Incineration with energy recovery 70 68
Incineration without energy recovery 89 24 22
Landfilling 96 93 111
Material recovery 47 64
Other forms of disposal 33 18
Type of waste      
Hazardous 141b) 143b) 153c)
Non-hazardous 118b) 124b) 130c)
Explanations concerning our environmental and safety performance data
*) The aggregate data refer to all LANXESS production sites in which the company holds an interest of more than 50 percent. The sites at Little Rock and Gastonia, U.S.A., and Brilon, Germany, are not included because they were only recently acquired by LANXESS. 2010/2011: On account of limited recording and control options and the resulting estimates, the base data contain some inherent uncertainties. 2012: The data are based on actual values for the period January through October. Appropriate estimates were used for November and December.
Further details on data quality:
• The emission factors used for fossil fuels are based on calculations by the U.S. EPA (AP-42 from 1998) and on the IPCC Guidelines for National Greenhouse Gas Inventories (2006).
• In accordance with the GHG Protocol (2004), the factors for calculating CO2e are based on the global warming potential (time horizon: 100 years) defined in the IPCC Second Assessment Report (SAR 1995).
1) LTIFR: accident rate per million hours worked resulting in one workday or more lost following the day of the accident, calculated for all employees (including subcontract workers) at all sites
2) Volume sold of goods manufactured by LANXESS and sold internally to another LANXESS company or externally (excluding commercial products)
3) The energy volumes given were calculated on the basis of simplified assumptions and typical substance values. They do not include other forms of imported energy (e.g. the energy contained in raw materials).
4) Equivalent to circulating cooling water
5) All Scope 1 greenhouse gases are calculated as CO2e. In accordance with the GHG Protocol, the CO2 emissions from the combustion of biomass are shown separately and are not included in the Scope 1 emissions. The following emissions were produced during the reporting period: 2010: 153 kt CO2, 2011: 240 kt CO2, 2012: 225 kt CO2
6) All Scope 2 greenhouse gases are calculated as CO2e. The conversion factors used were provided by the energy producers for 2008 or 2009. Where these were not available, factors from the IEA (International Energy Agency) for 2009 were used for fiscal years 2010 and 2011 and the factors from 2010 were used for fiscal year 2012.
7) Nitrogen oxide (NOX) calculated as NO2 (excluding N2O – nitrous oxide)
8) Sulfur dioxide (SO2) + SO3 calculated as SO2
9) Total VOC (volatile organic compounds) excluding methane and acetone
10) Heavy metals (arsenic, cadmium, chromium, copper, mercury, nickel, lead, tin, zinc)
a) Indicator was assessed (limited assurance) by KPMG AG Wirtschaftsprüfungsgesellschaft in the course of a business audit
b) Indicator was assessed (reasonable assurance) by KPMG AG Wirtschaftsprüfungsgesellschaft in the course of a business audit
c) Indicator was assessed (limited assurance) by PwC AG Wirtschaftsprüfungsgesellschaft in the course of a business audit
d) Value corrected compared to the value published in the prior year

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